Tag: banks

Banks roll out special schemes to protect, treat employees amidst Covid surge

Banking & Finance

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With bank employees continuing to service customers at branches amidst surging Covid-19 cases, banks have initiated special measures to ensure their safety and provide medical help.

With daily Covid -19 caseload at over three lakh, lenders have rolled out more measures this time around, than last year beyond, rostering of employees and limiting banking hours to 10 am to 2 pm.

“We are using a lot of analytics to identify containment areas, high risk areas and are using Artificial Intelligence and Machine Learning for rostering of employees. We are shifting transactions digitally. We have to understand that the number one priority is to keep everybody safe,” said Anup Bagchi, Executive Director, ICICI Bank.

HDFC Bank has converted three of its training centres based out of Bhubaneswar, Pune, and Gurugram into isolation facilities for Covid positive employees.

“These facilities have been equipped with first line assistance and will have round the clock nurses and visiting doctors. Immediate medical help from a nearby hospital will be made available if required,” it said in a recent statement.

Last week, Axis Bank released a detailed four-page document ‘With You’ that lists helpline numbers, resources, and confidential counselling services for employees and their dependents.

“Our current focus is on employee health and safety. At the start of the crisis last year, we had taken a call that we would transition to a hybrid work model. In regions we are calibrating presence in response to regulatory guidance and implementing rostering where WFH is not feasible,” said Rajkamal Vempati – EVP and Head, Human Resources, Axis Bank.

Bankers point out that while banking is an essential service, bank employees are not treated as frontline workers.

“It is an extremely unfortunate situation. Had bankers been able to get vaccinated, many of the deaths would have been prevented,” Soumya Datta, General Secretary, All India Bank Officers’ Confederation.

Industry estimates peg that there have been about 1,000 Covid-19 related deaths and lakhs bank employees being infected.

“We are an essential services… we are all exposed (to customers). We don’t have the luxury. But we are not allowed vaccinations, not allowed to board trains, not allowed to board buses. So, what kind of essential services we are? More push should be there,” Bagchi had told reporters in a media call on April 29.

The Indian Banks’ Association has advised banks to curtail working hours and also said that they should only carry out essential services at branches including cash deposits and withdrawals, clearing of cheques, remittances and government transactions.

But Datta said many states are yet to allow this move. He also pointed out that about 30 per cent bank branches in the country are single officer branches. In such branches, it is difficult to do rostering as there is no back up officer available.

Earlier this month, the Finance Ministry had written to the Ministries of Home Affair and Health and Family Welfare for vaccination against Covid-19 of employees of all banks and the National Payments Corporation of India, irrespective of their age, on an urgent basis.

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RBI article calls for monitoring movement of funds between banks and ARCs

Banking & Finance

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It may be necessary to monitor if there is a circuitous movement of funds between banks and Asset Reconstruction Companies (ARCs), according to an article in the Reserve Bank of India’s latest monthly bulletin.

This observation comes in the backdrop of banks being not just major shareholders of and lenders to ARCs but also sellers of non-performing assets (NPAs) to them, it added.

Attracting ‘new money’ will be a challenge for the ARC

A movement of this kind can have implications for the genuine sale of NPAs and the overall growth of the ARC industry, said RBI officials Amarnath Yadav and Pallavi Chavan from the Department of Supervision, in the article.

The authors emphasised that given the private character of ARCs, they have tended to rely heavily on borrowings, particularly from banks, as a major source of their funds.

The article underscored that the capital base of ARCs is made up largely by domestic sources, particularly banks and financial institutions, with foreign sources remaining weak.

Being private sector entities, the key shareholders of ARCs are banks (29 per cent) and other financial institutions (37 per cent).

RBI set up 6-member panel to review working of ARCs

In order to boost their capital base, ARCs were allowed to accept 100 per cent of foreign direct investment (FDI) through the automatic route in 2016.

Notwithstanding the liberalisation relating to FDI, foreign entities account for a small portion (10 per cent) of the total capital of ARCs, the authors said.

Highly concentrated business

Although the number of ARCs has increased over time, their business has remained highly concentrated.

The authors assessed that of the total assets under management (AUM), about 62 per cent and 76 per cent was held by the top three and top five ARCs in March 2020, respectively.

Furthermore, in terms of the capital base of the industry, 62 per cent was held by the top three ARCs; the corresponding share was 67 per cent for the top five ARCs.

When it comes to acquisition of assets by ARCs, over time, although the average acquisition ratio (acquisition cost to book value of assets) has gradually risen, it remains in the range of 30-35 per cent, the article said.

There is a wide variation in the acquisition ratio also across sectors, it added.

Iron and steel, and power sectors are the two sectors having a relatively high concentration in acquired assets, as they are also ridden with NPAs. The acquisition ratio in these two sectors has been much lower (roughly about 45 per cent).

By contrast, hospitality (acquisition ratio: about 85 per cent) and real estate (about 70 per cent) account for a smaller share in total assets acquired, but their acquisition ratio has been relatively high.

Limited trading of SRs

Going by the resolution methods, ARCs prefer the method of rescheduling of the payment obligations (32 per cent as of March 2020) over other methods — enforcement of security interest (26.6 per cent); settlement of dues of borrower (26 per cent); by sale of business (13.9 per cent); and taking possession of assets (1.5 per cent).

The authors said banks continue to hold close to 70 per cent of the total Security Receipts (SRs) despite a change in the regulation disincentivising them from holding SRs above a specific threshold.

The authors observed that dominance of selling banks in holding SRs has often been described as a reason for limited secondary trading of SRs, despite the regulatory push to incentivise listing and trading of these instruments.

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Covid-led delays for infra projects a worry for banks, BFSI News, ET BFSI

Banking & Finance

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It’s not just retail loans that banks may have to worry about.

The big infrastructure projects, which are already undergoing slow progress, may face more stress as the new Covid wave intensifies restrictions.

The government has unveiled an infrastructure push in the Union budget, which may be hit due to the renewed vigour of the pandemic.

Developers hit

Developers are facing issues of transporting labour and construction material to sites due to the new restrictions. With oxygen supply to steel and cement industries diverted to medical use dropping there may be bottlenecks in input supplies. Also, the government has indicated it may borrow more from the market, which would raise funding costs for the projects.

If the Covid wave continues for long, the infrastructure projects will face a setback and lead to their re-rating.

Cost overruns

Already projects are lagging even before the new Covid wave hit

As many as 448 infrastructure projects, each worth Rs 150 crore or more, have been hit by cost overruns totalling

more than Rs 4.02 lakh crore, according to a report. The Ministry of Statistics and Programme Implementation monitors infrastructure projects worth Rs 150 crore and above.

Of the 1,739 such projects, 448 reported cost overruns and 539 were delayed. “Total original cost of implementation of the 1,739 projects was Rs 22,18,210.29 crore and their anticipated completion cost is likely to be Rs 26,20,618.44 crore, which reflects overall cost overruns of Rs 4,02,408.15 crore (18.14 per cent of original cost),” the ministry’s latest report for January 2021 said.

The expenditure incurred on these projects till January 2021 is Rs 12,29,517.04 crore, which is 46.92 per cent of the anticipated cost of the projects.

Project delays

However, the report said the number of delayed projects decreased to 401 if delay is calculated on the basis of the latest schedule of completion.

Further, for 941 projects neither the year of commissioning nor the tentative gestation period has been reported.

Out of 539 delayed projects, 106 projects have overall delays in the range of 1-12 months, 131 projects have delays of 13-24 months, 187 projects reflect delays in the range of 25-60 months and 115 projects show delays of 61 months and above. The average time overrun in these 539 delayed projects is 44.65 months. Reasons for time overruns as reported by various project implementing agencies include delay in land acquisition, delay in obtaining forest and environment clearances, and lack of infrastructure support and linkages.

Delay in tie-up for project financing, delay in finalisation of detailed engineering, change in scope, delay in tendering, ordering and equipment supply, and law and order problems, among others, are the other reasons, the report said.



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How banks are strengthening their technology prowess to provide hyper-personalised banking services

Personal Finance

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In this new age, customisation isn’t just another box to tick but the very key to engagement with the end user.

By Neeraj Sinha

In this new age, customisation isn’t just another box to tick but the very key to engagement with the end user. Like all other services, with this new age of personalisation and enhancement in platforms, banking might fast become a commoditised service. 

Welcome to the world of hyper-connectivity and hyper-personalization. Welcome to the World of Smart Banking! A world where data is emerging as the new oil, and attention as the new gold. The new-age banking has been at the crossroads of these extremes. Banking – traditionally considered a privilege and being accessible to a few – has, in time, expanded its realm of dominance and should now be a privilege of all and accessible online. 

Riding on surging ambitions, customer behaviour and access to technology, banking has become a service by escaping the confines of locations & physical infrastructure to evolve as an ‘always on’ solution available at one’s mobile phone screen. At the same time, technology empowering businesses and services to be accessible online, has accelerated adoption of digital financial transactions, investments and payments. This has further led to the humble bank account becoming the port of sustained call – thereby offering multifaceted usage to serve diverse financial objectives both in the physical and digital realms. 

Considering all this can be traced back to the previous decade, is a testament that the user behaviour is fairly nascent and demands handholding up the steep learning curve. In doing so, customisation or personalisation serves as key leveller. At the onset, personalisation or customisation means offering relevant options at the fingertips of the users. 

 Imagine a five-star hotel’s restaurant – where the frequent visitors are greeted with their preferred salutation, served their favourite starters or given recommendations based on what they have been ordering during their previous visits, etc. This culture of personalisation has always been associated with premium services, which banking ought to be in an otherwise ‘one size fits all’ world. 

In doing so, technology has emerged as a great enabler. In the past few years, customer-facing industries such as banking have strengthened their technology prowess to provide hyper-personalised services – regarded as many as uber customisation. 

Banks, owing to their importance, have already got access to real-time behavioural customer data from online and offline purchases, website sessions, engagements, and interactions via kiosks, email, and mobile applications. Over the years, banks have invested heavily in newer technologies such as Artificial Intelligence (AI) to improve customer services. Today’s AI and machine learning capabilities automatically create self-learning models – efficiently and in real-time – so that customers get the simplest possible contextual experience with each interaction. By understanding the individual needs of consumers, banks can create experiences that are more compelling and interesting.

Shifting the mind-set from product-push to personalized notifications supported needs can improve customer satisfaction and drastically increase engagement. But the same is also a tightrope walk when it comes to asking for attention vs. infringing on privacy. The experience of hyper personalisation is usually designed to improve process efficiency by predicting, suggesting and constantly learning from user habits and preferences. At the same time, it means not pushing a barrage of information to further confuse or impair decision making at the user’s end. Sample this, if one is a credit card customer, the relevant options around the present solution (pay the dues, redeem rewards, block or report the card, request limit enhancement, etc.) has to be at the top of one’s home screen. At the same time, other products can too be added but in an order that suits the behaviour or trend of either the customer or the segment comprising of a collection of similar users. In doing so, the other layer is security and privacy – which in a data led world are essential to cultivate trust and respect in an otherwise bits and bytes world of technology led interface.  

AI helps you make sense of all that data, as it helps predict what customers might want and then use that information for inventory, product development, and many more things. In a world that is emerging as ever-connected and solutions interacting with one another – thereby defining a comprehensive consumer personality, hyper-personalisation has fast become the foundation stones of super app revolution – a characteristic usually associated with a device or platform till now. This would not only open doors to declutter user experience; but more importantly strengthen a personalised bond between customers and bank to tide over the faceless layer of technology and data. All this, without infringing upon the privacy of the customers. 

(Neeraj Sinha is the Head of Consumer & Retail Banking at SBM Bank (India). The views expressed by the author are personal)

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Banks to limit branch operations in Covid areas, BFSI News, ET BFSI

Banking & Finance

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Banks are planning to limit footfalls to prevent the spread of infections in areas where Covid cases are on the rise. On Wednesday, the Indian Banks’ Association convened a meeting of bank chiefs to assess the current situation.

The services that branches will provide will be determined by state-level bankers’ committees (SLBCs). The SLBC will also provide the specific standard operating procedures (SOPs) for branches. Bank branches, being classified as essential, have been exempted from the lockdown.

During the same period last year, bank branches cut down on several activities to reduce footfalls. In 2020, HDFC Bank reduced its operating hours and stopped the sales of foreign currency. SBI had restricted services like account opening, cash withdrawals, passbook printing and currency exchanges. in the first phase of the lockdown, last year.

Banker present at the meeting said, “Customers can obtain their balance or statement through a variety of digital channels. Customers can use missed call banking, WhatsApp banking, mobile applications, and ATMs to avail most of the services without having face-to-face interaction.”



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Can banks weather the new second Covid wave?, BFSI News, ET BFSI

Banking & Finance

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Indian banks were gearing up for an upcoming credit boom in the second half, but they may have to look at the dire warning of RBI‘s fiscal stability report unveiled in January.

Most of the banks are set to report good fourth-quarter results, but the recovery may give way to despair in the coming months. An uncontrollable spike in Covid cases has raised the prospects of lockdowns and strict curbs being extended to May, at least. This may nip the nascent recovery and lead to the closure of many businesses, which are already reeling from revenue crunch. The lockdowns may also lead to unemployment, hit repayments and lead to defaults by companies and individuals out of job.

“In the first year we did not see any impact as 20% additional money was given. Guaranteed loans were given so no bank gave a second thought in giving the loans. In many cases, my customers went to other banks and got loans. Problems were not revealed on the first wave. In the second wave no such support is given so naturally, the impact of the second wave will be much larger on the bank,” a senior banker said on the condition of anonymity.

The unemployment rate in urban India is rising in the current months. From 7.21% on April 4, it jumped to 9.81% for the week ended April 11 and further to 10.72% for the week ended April 18, according to CMIE.

Early signs of rising stress are visible; HDFC Bank has reported a rise in cheque bounce cases in April. The rate is back to January level after improving in March.

Also, with lockdown in states like Maharashtra, which account for 24% of all loans, banks are in a double whammy. About 80 per cent of the new infections are being reported in six states which account for 45 per cent of banking sector loans.

Another banker said that credit growth is going to be muted. “Due to this unexpected wave, no investment is going to be placed right in any industry because of this uncertainty. Even though the government says there is not going to be a complete lockdown, like last time but still the impact can be easily known because of people’s fear,” the banker said.

“So those who want to invest, they’ll take a backseat that let’s wait and see. And the money circulation is going to be impacted. Moreover, the stay on NPA classification, which was lifted by Supreme Court, is going to add soon many NPAs to the banking sector. These things will definitely impact. Banks are kept out of the purview of this lockdown but people should come to banks you know and do their activity,” he added.

RBI stress test

Bank NPAs may rise to 13.5% under the baseline stress test scenario by September, the highest in more than 22 years, according to the RBI’ financial stability report in January this year.

The gross bad loan ratio of banks which stood at 7.5% as of 30 September, could almost double to 14.8% under a severe stress scenario, RBI warned. Under the severe stress scenario, RBI has assumed a 7.6% economic contraction in the six months to 31 March and a tepid 3.8% growth in the first half of the next fiscal. However, uncertainty over vaccines and the severity of the Covid wave hobbles the 3.8% growth projection.

The last time banks saw such stress was in 1996-97 when the bad loan ratio rose to 15.7%.

No cover this time

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das said after the central bank’s monetary policy review.

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” rating agency Icra had said in a report.

On top of it, banks may have to foot the bill for compound interest waiver relief to borrowers. HDFC Bank has already provisioned Rs 500 crore for the waiver.



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Banks may skip dividend payments for the second year, BFSI News, ET BFSI

Banking & Finance

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After HDFC Bank, it may be the turn of other private sector banks including ICICI Bank, IndusInd Bank, Axis Bank and Yes Bank to skip dividends for the second year in a row.

HDFC Bank, the country’s most valuable lender, has already announced its stand that it will skip dividends.

As Covid cases surge and ravage the economy, cash conservation would be the foremost on the agenda of banks, which are likely to see huge defaults.

Dividend payments

Last year the Reserve Bank of India had barred banks from paying dividends for the fiscal year ended March 2020 so that they conserve capital in view of the economic shock caused by the Covid-19 pandemic.

In his address, which included other policy measures, RBI governor Shaktikanta Das said the ban on dividend payment will help banks conserve capital.

Covid woes: Banks may skip dividend payments for the second year

“It is imperative that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty,” Das said.

“It has, therefore, been decided that in view of the Covid-19-related economic shock, scheduled commercial banks and cooperative banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions.” Though there is no RBI restriction yet on dividend payments, banks are likely to skip payments this year too to conserve cash.

In respect to dividend payments, Yes Bank, and HDFC Bank are ahead of other banks. Their dividend yields since FY2011 are in the range of 0.65-1.93%. Banks including Axis, IndusInd, ICICI come next in line in rewarding investors.

For HDFC Bank, this is the first time in the last one decade at least that the lender, of its own, did not offer any dividend. Even in FY20, it had offered an interim dividend before the RBI barred banks from announcing dividends.

Acute stress


Given the second Covid wave all over the country, non-performing assets (NPAs) or bad loans of public sector banks (PSBs) could cross 18 per cent if there is deterioration in economic activity due to the pandemic, former RBI deputy governor has H R Khan said.

As per the Financial Stability Report released by the Reserve Bank of India (RBI), the NPAs of the banking sector were projected to surge to 13.5 per cent of advances by September 2021, from 7.5 per cent in September 2020, under the baseline scenario.

The report had warned that if the macroeconomic environment worsens into a severe stress scenario, the NPA ratio may escalate to 14.8 per cent.

With regard to public sector banks, Khan said the latest Financial Stability Report indicates that NPAs can go up to 16 per cent in severe case scenario but extreme case scenario has not been portrayed this time.
“Given the second wave all over the country, I think the extreme case scenario is something which one has to factor in. So, 18-20 per cent NPL (non-performing loan) is not ruled out for public sector banks.

“So, systemic risk is something which the government does not want to take upon its shoulder,” he said.

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FinMin asks State-run banks, insurers to consider postponing promotion process

Banking & Finance

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The finance ministry has asked all public sector financial intermediaries to take cognisance of the prevailing Covid-19 pandemic situation and take appropriate steps to ensure that the promotion process factors in the constraints likely to be faced by their officers and staff.

The ministry emphasised that the officers and staff of the public sector financial intermediaries — public sector banks (PSBs), public sector insurance companies (PSICs) and financial institutions (FIs) — may be given adequate opportunity for participating in the promotion process.

Postponement of the promotion process may also be considered, it added.

The promotion process has coincided with a spike in Covid-19 cases across the country, along with lockdown/curfew and increase in micro-containment zones.

There also cases of bank employees or their family members being hospitalised due to Covid-19 infection.

When the Covid-19 pandemic set in last year, some of the public sector financial intermediaries went online for conducting promotion interviews.

Sanjeev K Bandlish, Convenor, United Forum of Bank Unions (UFBU), in a letter to the finance ministry, said: “In the current wave that is sweeping across the nation, we are distressed to note that already several bank employees and officers have died. It is shocking to note that some of them could not even get admitted to hospitals due to the dearth of beds.”

Govt should usher in five-day week

Bandlish sought reduced working hours, five-day banking and exemption from duty to employees with existing comorbidities, pregnant employees/officials, persons with disabilities (Divyangjan), among others.

Referring to the Centre recently declaring every Saturday as a public holiday for the Life Insurance Corporation of India (LIC) in the run up to its initial public offer, KS Krishna, General Secretary, All India SBI Employees’ Association, observed that bank employees too should get relief in the form of five-day week amid the raging pandemic.

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Market share of banks in individual housing loans up: NHB report

Banking & Finance

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The market share of banks in individual housing loans has gone up from 62 per cent in 2017-18 to 67 per cent in 2019-20, while that of housing finance companies (HFCs) has come down from 38 per cent to 33 per cent.

According to the National Housing Bank’s latest Trend and Progress of Housing in India report, the pace of growth of banks remained higher than that of HFCs, partly supported by portfolio buyouts, leading to increase in their market share in individual loans.

In 2018-19, the market share of banks and HFCs in individual housing loans (IHLs) was at 64 per cent and 36 per cent, respectively. The overall growth in IHLs of banks and HFCs combined stood at 10 per cent in 2019-20 compared to 16 per cent in 2018-19.

The report said: “The real estate and Housing Finance Sector in India began to witness a moderation in growth after the IL&FS crisis in September 2018. However, with proactive measures and various other initiatives of the Government, RBI and NHB, the sector started to gain momentum.”

The total outstanding IHLs of HFCs and banks combined was around ₹20-lakh crore as at the end of March 2019-20 compared to around ₹18-lakh crore in 2018-19.

Outstanding IHLs of Banks and HFCs registered year-on-year growth of 8.5 per cent and 3 per cent, respectively, NHB said.

Slab-wise analysis

Slab-wise analysis of total IHLs of scheduled commercial banks (SCBs) and HFCs combined shows that around 44 per cent of the total IHL as on March 31, 2020 (against 47 per cent as on March 31, 2019) was towards 124 lakh housing units (119 lakh as on March 31, 2019) within IHL slab of ₹25 lakh.

Fifty six per cent of the total IHL (53 per cent as on March 31, 2019) was towards 30 lakh housing units in the IHL slab of over ₹25 lakh, the report said.

Referring to growth in the number of housing units financed within IHL slab of ₹25 lakh, NBH observed that affordable housing continues to grow on account of robust demand and various support measures towards this segment.

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CRISIL, BFSI News, ET BFSI

Personal Finance

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Over the last six months, the gold price has corrected 10% on a 30-day rolling basis, although it has dropped double that amount on an absolute basis.

According to CRISIL Ratings, the recent drop in gold prices is unlikely to have a significant effect on the asset quality of non-banking financial companies (NBFCs) that lend against gold. However, Banks that disbursed gold loans aggressively during the previous fiscal year may see an impact on their asset quality.

In addition to receiving interest on a regular basis, NBFCs have ensured that the disbursement loan-to-value (LTV) is held below 75 percent over the past few fiscals. The average portfolio LTV for NBFCs was 63-67 percent as of December 31, 2020, while the average LTV on incremental disbursements in the October-December 2020 quarter was 70 percent. Interest receivables have remained at just 2-4 percent of the loan book over the last few years, demonstrating the LTV discipline.

Banks, on the other hand, had a higher incremental-disbursement LTV of 78-82 percent than NBFCs. Most of their book’s growth occurred in the third quarter of last fiscal year, when gold prices were soaring. In the 11 months through February 2021, Bank loans against gold increased by 70% to over Rs 56,000 crore. Announcement made by Reserve Bank of India (RBI), August 2020 that the LTV limit would be relaxed to 90% (only for banks), contributed to this growth.

Krishnan Sitaraman, Senior Director & Deputy Chief Ratings Officer, CRISIL Ratings, said, “Without periodic interest collections, banks’ books can be vulnerable to asset-quality issues to some degree, given that gold prices have fallen 18-20% from their August peaks on an absolute basis. However, with the LTV dispensation period ending in March 2021, incremental lending would have more LTV cushion.”

Cushion available with lenders in terms of the value of gold provided as collateral relative to the loan outstanding is influenced by LTV and timely interest collection. As a result, reliable risk management systems and timely auctions are critical for mitigating gold price fluctuations and eventual credit loss.

Ajit Velonie, Director, CRISIL Ratings, said, “While gross non-performing assets (GNPA) could rise, ultimate credit cost – a more appropriate indicator of asset quality for gold loans – is not expected to. Although NBFCs’ GNPAs had risen to as high as 7%, credit costs were still low at 10 to 80 basis points. This demonstrates sound business judgement and timely auctions. Given the rapid growth that banks have experienced, tracking LTV, and remaining agile is critical for avoiding possible asset-quality issues.”



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