Tag: Covid-19 pandemic

Outward remittances under LRS rose 31%

Banking & Finance

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Outward remittances under the Liberalised Remittance Scheme (LRS) for individuals rose about 31 per cent year-on-year (yoy) in July 2021 to $1.31 billion, mainly on the back of increase in expenses towards studies and travel, according to Reserve Bank of India (RBI) data.

The remittances were $995.16 million in the year ago period.

This comes even as the global economy seems to be gradually recovering from the unprecedented disruption caused by the Covid-19 pandemic.

As per RBI norms, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

The Scheme was introduced on February 4, 2004, with a limit of $25,000 and revised in stages.

In July 2021, remittances towards studies abroad jumped about 53 per cent y-o-y to $423 million; towards travel by 41 per cent to $347 million;gift was up about 35 per cent to $175 million; and towards investment in equity/debt by 48 per cent to $50 million.

Remittance towards maintenance of close relatives was almost static at $243 million.

T Rabi Sankar, Deputy Governor, RBI, in a recent speech, observed that LRS for individuals, while it is open for both current and capital account transactions, is largely (more than 90 per cent) in current account transactions such as travel and studies.

“As the LRS Scheme has operated for some time, there may be a need to review it keeping in mind the changing requirements such as higher education for the youth, requirement of start-ups etc.

“There might even be a case for reviewing whether the limit can remain uniform or can be linked to some economic variable for individuals,” he said.

Outward remittance under LRS had come down about 32 per cent yoy (or by $6.08 billion) in FY21 to $12.68 billion ($18.76 billion in FY22) as the pandemic raged.

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Crisis-hit Sri Lanka seeks World Bank Covid loan, BFSI News, ET BFSI

Banking & Finance

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COLOMBO: Sri Lanka will seek an emergency loan of $100 million from the World Bank for a coronavirus vaccination drive, officials said Wednesday, as the country struggles with an acute currency crisis.

The Covid-19 pandemic has claimed more than 12,000 lives and infected over half a million people in Sri Lanka, which is also suffering food shortages because of the cash crunch.

The government said in a statement that the cabinet had “granted approval to the resolution furnished by the Minister of Health for obtaining the relevant supplementary financing facility” from the international lender.

The statement said the World Bank had indicated willingness to provide the money to buy 14 million doses of the Pfizer vaccine and finance “other costs pertaining to vaccination”.

Sri Lanka has double-jabbed more than half of its 21 million people, mostly with Chinese vaccines, but has remained in the grip of a major Covid-19 wave since April.

Medical experts say the death toll is much higher than the official figure.

The economy, shorn of its key tourism sector by the pandemic, shrank by an unprecedented 3.6 percent last year.

President Gotabaya Rajapaksa declared a state of emergency on August 31 to deal with food shortages, as most banks have run out of dollars to finance imports.

But he has resisted calls to secure a bailout from the International Monetary Fund as the country faces what Finance Minister Basil Rajapaksa recently described as a “dangerous foreign exchange crisis”.

Central bank governor Ajith Cabraal has said the IMF would want Sri Lanka to depreciate its currency in return for a bailout, but Colombo cannot accept that.

Sri Lanka’s foreign reserves stood at $3.55 billion at the end of August while the country has to repay about $2 billion in foreign debts before the end of the year.

The main opposition SJB party has led calls for the government to seek IMF cash to avoid a sovereign debt default next year.

Struggling to raise domestic revenue, the government on Wednesday raised its debt ceiling by 400 billion rupees ($2.0 billion) so it can meet its expenses in the next three months.



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Report, BFSI News, ET BFSI

Personal Finance

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Mumbai, A majority of Indian companies (57 per cent) believe there is a need to revive the micro, small and medium enterprises (MSMEs) sector, which has been hit due to the COVID-19 pandemic, in order to boost rural employment, according to a report. According to the report by Genius Consultants, titled the ‘Sudden Rise of Rural Unemployment‘, the country’s economy was adversely affected by the pandemic and almost all sectors and industries were impacted, especially the MSME sector that faced a huge set-back.

The report, which is based on a survey, said most of the respondents believed that the reason behind the high unemployment rate is the lack of employment opportunities available in the areas concerned.

The survey is covered 1,100 business leaders between August 1 and September 10. They include those in sectors such as banking and finance, construction and engineering, education/ teaching/ training, FMCG, hospitality, HR solutions, IT, ITeS, and business processing outsourcing, logistics, and manufacturing, among others.

The report further showed that more than 57 per cent of the total respondents strongly agreed that the revival of MSMEs would aid in improving the current employment situation.

About 14.3 per cent of the respondents believe that the reason behind the rural unemployment was the lockdown restrictions, and another 14.3 per cent said it was due to the rise in the COVID-19 cases, according to the report.

The remaining respondents believed that it is a result of all reasons mentioned above that led to a spike in unemployment in rural areas, it added.

Meanwhile, the report found that over 85 per cent of respondents stated that the manufacturing sector, which has been witnessing a slowdown, has been a major contributor to the rise in unemployment in the rural areas.

As factories and production are one of the major contributors of rural employment and with the pandemic halting businesses, the manufacturing sector has majorly impacted rural unemployment compared to the service sector, it said.

Genius Consultants Chairman and Managing Director R P Yadav said, “Rural unemployment has always been a major concern even before the pandemic. With businesses and manufacturing slowing down, the situation has deteriorated even further.”

Yadav added that there is a dire need to bring in a swift course of action to elevate employment opportunities in the rural parts of the country.



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Covid-19 pandemic considerably accelerated adoption of digital payments in India: RBP Finivis

Banking & Finance

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Sam Gupta, Director & CEO, RBP Finivis

Amid the Covid-19 pandemic in the country, fintechs have been at the forefront of India’s financial inclusion efforts. Among the new crop of fintechs in the country, Panchkula-based RBP Finivis is rapidly expanding its footprint. In an interaction with Financial Express (Online), its director & chief executive officer Sam Gupta shared his views on Covid-19’s impact on the fintech industry, the importance of financial inclusion, and RBP Finivis’ growth and expansion plans. Edited excerpts:

India has a strong banking system. Why do you think fintechs are crucial for financial inclusion in India?
The implementation of financial inclusion held in the 1960s kept an eye on the economic development in India with the nationalisation of banks. The regulator advised all banks to include financial inclusion in their business outreach. Since then, its progress was monitored by the Reserve Bank of India (RBI) through the implementation of Financial Inclusion Plans (FIP) in terms of predetermined parameters. The key role of fintechs in financial inclusion is by making changes in the traditional business model of banks and financial institutions; it can deliver financial products and services to the financially excluded population in a more accountable and efficient manner in the least possible time.

How has Covid-19 impacted the Indian fintech industry and your business?
The pandemic has considerably accelerated the adoption of digital payments, and seen lending solutions grow at a breakneck speed, resulting in the mass inclusion of factions of the society that were ill-served by traditional financial methods. The usage of digital and contactless payments surged during the pandemic, as people opted for safer ways to transact financially. Our business and employees have been impacted, too, by the pandemic. In terms of business, we have seen more digital transactions during this period.

Amid the pandemic, when do you see revival in the fintech industry?

We do not see the pandemic as a lost opportunity; rather it has generated unexpected revenues that were never imagined. The fintech industry has seen a steep rise in the number of transactions amid the lockdown. The year 2020 is seen to be a boom for the industry and things are happening at a fast pace. To an extent, the pandemic has proved beneficial for the fintech industry players to execute their plans and try to maximise reach with their offerings.

There are already established players like Paytm and PhonePe, etc. present in the Indian fintech market. What makes RBP Finivis different from others?

Our unique offering in the market for the B2C segment is a key differentiator from other existing players. We have a qualified technology team with 10 years of experience. Digital India success is our main mantra which we leverage in our services and offerings. The launch of MEGO will be path-breaking in the fintech industry. And, an important factor that the products such as AEPS (Aadhaar Enabled Payment system) and Micro ATMs are not operated by Paytm and PhonePe like brands.

What is MEGO Pay ATM? How is it different from other bank ATMs?
MEGO conceptualises the key digital offering of RBP Finivis. Micro ATM is one of the core components of our offerings. The device includes a card reader with features of deposit, balance inquiry, and cash withdrawal from all bank debit cards. It is a mini version of large ATMs with a POS (point of sales) terminal. Micro ATM facilitates the feature of a swipe machine to connect with the core banking system. With our micro ATM services also known as mini ATM services in India, we are determined to change a common man’s life.

What is your present market share and who are your competitors in the market?
Our market share is minimal at present. By 2021-end and 2022 we would have a percentage in the overall market share as we operate in both B2B and B2c segments. Our competitors are Paytm, GooglePay, Mobikwik, and PhonePe.

How many states/markets do you have a presence in now? Any expansion plan?

We are currently based out of Panchkula (Haryana) and have a research team operating from Kolkata. We have plans to expand our branches and services to a number of states which include Delhi NCR, Assam, Mizoram, Tripura, Arunachal Pradesh, Himachal Pradesh, Jammu & Kashmir, Punjab, and Haryana.

What is the size of your customer base, and its growth rate?
With the introduction of artificial intelligence (AI) which will increase the efficiency of digital payments, and during the pandemic, the trend has seen an immense upsurge in terms of usage of it (digital payments). It will change the complete dimensions of the Indian economy. Our target segments are school and college students, unemployed youth, rural people, and consumers who are market smart and look for discounts and offers in their spending. In our B2C offerings, we provide unique and advanced technology-enabled features to our consumers to redeem their offers and cash backs via web app and cards. Bringing digital banking to rural India is our main target to achieve by acquiring 15% of the rural subscribers base.

Where do you see RBP Finivis in the next two years, in terms of company size (number of employees), revenue, and growth?

We are driving on 12% steep growth and plan to accelerate it in the second half of the year. In the next two years, we are aiming to enroll 500+ employees on the payroll. And in terms of growth, we are considerably aiming at a gross turnover of Rs 4,000 crore in 2021 and Rs 9,000 crore in 2022.

When are you expecting to break even?

We expect our break-even by July 2022 with a turnover of over Rs 200 crore. We could have achieved break-even much earlier but due to Covid-19 things got slow after the lockdown.

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SBI Chairman, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: Although the second wave of the Covid-19 pandemic again brought businesses and economic activities to a standstill, Chairman of the State Bank of India (SBI), Dinesh Kumar Khara has expressed hope that the country’s economy would recover in the ongoing financial year.

The Chairman noted that the global economy contracted by 3.3 per cent in 2020 with the pandemic causing significant loss of lives and livelihood.

The GDP in India contracted by 7.3 per cent in FY2021 and the country experienced a second wave of infections with cases rising rapidly since March 2021, he said while addressing the 66th Annual General Meeting of the bank.

He, however, said that policy measures and the coordinated efforts of the Reserve Bank of India (RBI) and the Centre were directed towards enabling growth on a more durable basis during these difficult times.

“Notwithstanding the second wave of Covid-19, Indian economy, through its resilience, is poised for a recovery in FY2022,” the SBI chief told the shareholders of the bank.

Speaking on the performance of the bank in FY21, he said that although the last fiscal was an exceptionally challenging year for the entire world, the state-run bank was able to function against all odds with minimal disruption for the customers.

“The business continuity plans that were chalked out have worked well for the Bank and this is reflected in various parameters of the Bank’s performance in FY 2021.”

Notably the bank has achieved high level of digitization with share of Alternate Channels in total transactions increasing to 93 per cent in FY2021, thereby converting a challenging situation into an opportunity, the Chairman said.

He said that in the current financial year, SBI will continue to accelerate its digital agenda, adding that the scope and reach of YONO will be expanded further.

“With the rollout of pre-package insolvency for resolution, resumption of courts and formation of National Asset Reconstruction Company, efforts will be in full force to keep the momentum in stressed asset recovery in the current financial year.”

The bank is comfortably placed in terms of growth capital. Opportunities for lending in promising sectors will be explored to diversify the portfolio and contain risk.

“In conclusion, the bank adjusted to the challenges posed by the Covid-19 pandemic and is better positioned to tackle any subsequent wave. I am cautiously optimistic that the performance trajectory of FY2021 will continue in FY2022 as well.”



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PNB on track to achieving proit of ₹ 2,000 crore this fiscal despite Covid-19 challenges

Banking & Finance

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Punjab National Bank, Inida’s second largest public sector bank, is confident of recording profits in the fourth quarter as well as achieving the overall indicated profit of ₹2,000 crore for the current fiscal despite pandemic induced challenges, Ch. SS Mallikarjuna Rao, Managing Director & CEO, has said.

The public sector bank is also confident of keeping the gross NPA level as a percentage of advances below 14 per cent and net NPA level below 5 per cent by end-March this fiscal, Rao told a virtual press conference on Saturday, after the announcement of the Q3 financial performance.

It maybe recalled that PNB senior management had at end of September this fiscal guided for gross NPA of less than 14 per cent and net NPA of 5 per cent by end March 2021.

“We still retain that (guidance). While challenge has been there for Q3 and SC judgement is holding back on identification of NPA, January 2021 appears to be better in terms of collections. We are very confident we will be able to control. Our effort will be to maintain at the same level as we have declared today…but the stress in the system for which we have done provisioning, we would like to see that stress removed in Q4,” he said.

Although the Supreme Court is yet to pronounce final judegment on the NPA recognition matter, PNB has made an assessment, and based on that made adequate provisioning in the financial statements for the quarter ended December 31, 2020, he said.

As of end December 2020, PNB had gross NPA of 12.99 per cent and net NPA of 4.03 per cent. This was lower than the gross NPA of 13.43 per cent and net NPA of 4.75 per cent in September 2020.

On Friday, PNB reported a net profit of ₹506 crore for the third quarter ended December 31, 2020. For the first half this fiscal, PNB had reported a net profit of ₹929 crore.

“We are looking at market conditions to optimise the profitability in terms of credit and treasury,” he said, exuding confidence of good fourth quarter performance. “If you look at the performance of PNB in last three years, it is slowly and steadily coming to profitability in terms of business and strengthening of asset quality,” he said.

Bad bank

Rao said that the concept of a bad bank was welcome initiative. He that the proposed initiative is going to be a facilitator to bring all the approvals for the bidder at one go and that it is going to be a single window process.

In his view, the bad bank at the initial stage will only see “transfer” of assets from the lender and will not be a “purchase” transaction. “Because this is only a transfer of assets, I don’t expect any bottlenecks. Within one year bad bank will get settled and attain maturity,” he said.

Although the Finance Ministry has categorically said that government will not infuse any capital in the bad bank, Rao felt that capital requirement will only be moderate and the banks themselves will be able to fork this out. “Capital requirement will arise only when bad bank purchases from the banks. It will not be a purchase as I understand it will be a transfer which will not require capital at the higher level. It will require moderate capital,” he said.

Engaging with investors

Rao indicated that PNB would begin engaging with investors to gauge the appetite for further qualified institutional placement (QIP) from Monday. It maybe recalled that PNB had in December 2020 raised ₹3,788 crore via QIP, which fell short of the announced targeted mop up of ₹7,000 crore. “We will do the remaining portion of QIP at an appropriate time. It could happen even before this fiscal end,” he said.

Rao also said that PNB would raise Additional Tier 1 (AT-1) capital of ₹2,500 crore before end March.

Till date, PNB has raised ₹8,283 crore out of the ₹14,000 crore capital that it last year set out to raise from the market. Rao also said that PNB is not looking to seek any capital support from the government and would look to “stand on its own legs” and mobilise capital from the market.

As regards plans for life insurance companies which it has invested in and whether the bank would review shareholding now that FDI limit has been raised to 74 per cent in budget, Rao said that no such immediate plans are there on this front.

PNB chief pointed out that both PNB MetLife (PNB holds 30 per cent) and CHOICE (PNB holds 23 per cent) are unlisted companies, and would first be required to be listed to discover the right enterprise valuation.

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RBI FSR, BFSI News, ET BFSI

Banking & Finance

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Banks‘ gross non-performing assets may rise to 13.5% by September 2021, from 7.5% in September 2020 under the baseline scenario, according to the Financial Stability Report (FSR) released by the Reserve Bank of India. The GNPA ratio of PSBs may increase from 9.7% in September 2020 to 16.2% by September 2021; that of PVBs (private banks) to 7.9% from 4.6% in 2020; and FBs’ (foreign banks) from 2.5% to 5.4%, over the same period. Under the baseline scenario, it would be a 23-year-high. The last time banks witnessed such NPAs was in 1996-97 at 15.7%, showed the RBI data.

These projections are indicative of the possible economic impairment latent in banks’ portfolios, with implications for capital planning, noted the report.

“While the RBI has strongly cautioned about a likely surge in NPAs in the coming months, it may not be a surprise given the current economic scenario. Banks that maintain high CRAR should be on a distinctly better footing. Meanwhile, the signs of tapering in fresh Covid-19 infections, and positive developments on the development of vaccines can help faster normalisation of economic activities. Also, it is heartening to note that the RBI remains committed to nurture growth recovery,” said Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank.

In case of severe stress scenario, the GNPA ratios of PSBs, PVBs and FBs may rise to 17.6%, 8.8% and 6.5%, respectively, by September 2021. The GNPA ratio of all SCBs may escalate to 14.8%. This highlights the need for proactive building up of adequate capital to withstand possible asset quality deterioration, said the report.

Stress tests gauge the adequacy of capital and liquidity buffers with financial institutions to withstand severe but plausible macroeconomic and financial conditions. In the face of a black swan event such as the COVID-19 pandemic, it is necessary to tweak regular stress testing frameworks to accommodate the features of the pandemic.

“In view of the regulatory forbearances such as the moratorium, the standstill on asset classification and restructuring allowed in the context of the COVID-19 pandemic, the data on fresh loan impairments reported by banks may not be reflective of the true underlying state of banks’ portfolios. This, in turn, can underestimate the impact of stress tests, given that the slippage ratios of the latest quarter for which data is available are the basic building blocks of the macro-stress testing framework. To tide over this limitation, it is necessary to arrive at reliable estimates of slippage ratios for the last three quarters, while controlling for the impact of regulatory forbearances,” the report said.

The stress tests results also indicated that four banks might fail to meet the minimum capital level by September 2021 under the baseline scenario, without factoring in any capital infusion by stakeholders. In the severe stress scenario, the number of banks failing to meet the minimum capital level may rise to nine

At the aggregate level, banks have sufficient capital cushions, even in the severe stress scenario facilitated by capital raising from the market and, in case of PSBs, infusion by the Government. At the individual level, however, the capital buffers of several banks may deplete below the regulatory minimum.

Hence going forward, mitigating actions such as phase-wise capital infusions or other strategic actions would become relevant for these banks from a micro-prudential perspective, the report stated.



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Why you shouldn’t delay repaying loans anymore

Personal Finance

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For many of us, the outbreak of Covid-19 pandemic has been quite a drain on our finances.The six-month moratorium on loan repayments provided by banks eased the pain of those who opted for the relief.

The moratorium on loan EMIs expired on August 31. The Supreme Court is currently hearing a matter regarding waiver of interest on loan moratorium. Hence more clarity on the moratorium and interest that banks have been charging on your loan under moratorium is awaited. However, it is advisable that you prepare yourself to resume your loan repayments and know your options. If you have given an auto debit mandate, then your bank will start debiting your EMIs from your account on the same day of the month as agreed upon earlier.

Will your EMIs remain the same as it was before opting for the moratorium? Can you pay a lump sum amount to clear your dues post moratorium period? Will the bank grant any additional relief if you are still unable to meet loan commitments ?

Here, we attempt to answer these queries based on our interactions with banks and FAQs put out on certain websites. These may of course change, post the SC’s final order.

No change in EMI amount

If you availed of the moratorium relief, you must remember that your bank would have continued to charge you interest on the outstanding loan amount at the rate applicable for the respective loan during the moratorium period (this is currently under review by the SC). This interest has been added to your principal amount–essentially the unpaid EMIs along with the accrued interest have been added to your loan outstanding.

This will result in the increase in the tenure (residual) of your loan and not your EMIs. Hence your EMI would remain the same but the tenure of your loan would have increased. For instance, if you had taken a home loan from SBI of ₹30 lakh with a remaining tenure of 15 years, the additional interest payable would be about ₹4.54 lakhin case you availed moratorium for six months. This would lead to increase in tenure of your loan by 16 months (additional 16 EMIs). The revised repayment schedule will be mailed to your registered email ID. You can also login to NetBanking and download the repayment schedule.

As has been communicated by various banks before and advised earlier (https://www.thehindubusinessline.com/portfolio/personal-finance/go-for-emi-moratorium-only-if-you-are-cash-crunched/article31235150.ece), deferment of big-ticket loan payments can pinch you quite a bit, given the substantial increase in the overall interest and loan tenure. But if you have still opted for the moratorium, owing to your financial situation, start making payments right away.

Can you pay the entire EMIs pertaining to the moratorium period at one go to lessen the pain? If you have ample funds, that would seem a prudent move but it is likely that your bank may not allow such repayments. According to HDFC Bank website, the unpaid EMIs cannot be paid in lump sum. But you can contact your bank to see if any option is available for you to settle payments in lump sum. Also, you can foreclose your loan if you have sufficient funds. Do check for foreclosure charges though.

Track your credit score

If you opted for the moratorium, remember that it would not have qualified as a default and hence your credit score should not have been affected. But it is advisable that you run a check on your credit score to ensure that there has not been any adverse impact on it because of opting for the the moratorium. Credit scores are given by credit bureaus such as CIBIL and Experian. You can approach them if you notice any change in your credit score during the moratorium period.

But note that any delay in payment of dues after the expiry of the moratorium could qualify as default and impact your credit score. Hence, if you have the necessary funds, clear your dues on time now onwards to avoid a negative impact on your credit score which can affect your loan-taking ability in future (may also lead to higher loan rates in future).

Restructuring is an option

All of the above mentioned points apply only if you are comfortable paying your EMIs. What if you are still cash-crunched and are unable to resume EMI payments ?

In a bid to provide some relief to borrowers amid the pandemic-induced crisis, the Reserve Bank of India (RBI) had allowed banks to restructure loans across the board — auto, credit card, housing, personal loans, education and loans given for investment in financial assets such as shares, debentures etc.

Restructuring normally involves rescheduling of EMIs (maybe lower outgo), grant of additional moratorium or extension of loan tenure to allow borrowers some breathing space. However, individual banks may or may not grant such relief based on their assessment of the borrower’s income stream, past record or other parameters. Hence, check with your bank on what they can offer you.

In any case, the maximum period by which the loan can be extended (if restructured) is two years, according to the RBI regulations. Also, you are eligible for a loan restructuring only if your account was ‘standard’— not in default for more than 30 days as on March 1, 2020.

Above all if you are able to source additional funds and repay your EMIs that would always be a better option than going in for restructuring, which can increase your burden over a period of time and may impact your credit score too.

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