Tag: Covid-19

Housing loan demand from informal sector is back on track, BFSI News, ET BFSI

Personal Finance

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Housing loan demand from the informal, self-employed lower income group is back to pre-covid level as economic activity resumed after the second wave, according to housing finance company who provide housing loan only to such sectors.

Agrim Housing Finance Company (Agrim HFC), and Religare Housing Development Finance Corporation Limited (RHDFCL) have plans to raise more fund, expand to more cities in order to cater to the growing demand from informal sector.

“By March 2021, we had a order book of close to Rs 500 crore. Due to the issues with parent company, we have not been able to disburse loan but we are in talks with bank to raise more fund and by Q4 FY 22 we expect to start disbursing again. In the next three years, we are looking to take our order book to Rs 3,000 crore,” said Rahul Mehrotra, Managing Director and CEO, RHDFCL.

50% of RHDFCL’s customers are salaried while the other 50% are self employed.

“The Covid pandemic did impact our customers and we had given rebate as per RBI’s guideline. Close to 50% it our customers availed moratorium. We have already started receiving queries for fresh loans and we expect to start disbursing from the fourth quarter of the financial year,” said Mehrotra.

The company has plans to expand to more cities of UP and Haryana and enter Uttarakhand as part of its deeper reach to tier 2 and 3 cities.

Agrim HFC that provide home loan only to informal sector, said that it has plans to take its order book from Rs 10 crore to Rs 100 crore this year.

“We plan to add 18 cities in the next 18 months. Covid has accelerated the digitisation and even those working in informal sector, use digital medium to avail loan,” said Malcolm Athaide, co founder and CEO, Agrim Housing Finance Company.

The company has funding commitments from CEOs of global and Indian companies. The company has presence in 4 cities, Mumbai, Pune, Bangalore and in Indore. Agrim HFC plans to expand its network to 18 locations in 7 states and expects a revenue growth of 30%, in the next 12 months.

“Adopting new age technology to provide easy and quick access to home loans Agrim HFC aims to fulfil the home ownership dream of the millions of Indians who have thus far faced difficulties accessing finance. Agrim HFC is able to provide easy housing finance solutions to individuals who are unable to prove their creditworthiness under the formal financial matrix,” he added.

India has more than 400 million households, with more than 160 million households in urban areas. There currently is demand for 3.1 million houses by the informal households of which only 0.7 million manage to obtain finance.

“Favourable demand dynamics driven by need for independent living spaces and growing financial inclusion of consumers in the informal sector have accelerated demand for mass housing. Participation from global developmental financing institutions for development of affordable housing projects and improving infrastructure connectivity with Tier 2 and 3 cities have emerged as strong supply side catalysts in this space,” said Sumeet Abrol, M&A and REI sector leader and Partner, Grant Thornton Bharat.



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Not one PSU bank in the top 5 lenders with lowest NPAs, BFSI News, ET BFSI

Banking & Finance

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Among Indian banks, HDFC Bank has stayed on top of the list of lenders with the lowest non-performing assets.

However, there is not a single public sector bank in the top five banks with the lowest NPAs.

HDFC Bank, which has reported more than 20 per cent YoY profit growth every quarter for over 40 quarters, has never crossed 0.5 per cent of loans in net non-performing assets. In its latest quarterly results, the bank’s net NPA ratio stood at 0.48%.

For retail loans, the bank relies on the model of wide franchise and low-cost deposit base, which ensures good pricing power and sustainability of above average net interest margins.

IndusInd Bank

The second number is held by IndusInd Bank. In its latest quarterly results, the bank’s gross non-performing assets (GNPAs) stood at 2.88 per cent as it was impacted by the second wave of Covid-19 while the net NPA ratio rose 15 basis points sequentially to 0.84 per cent.

The bank leads in certain retail asset classes with a pan India franchise which gives it strength to manage the asset quality in those segments.

ICICI Bank

The third bank on the list is ICICI Bank, which despite a rise in slippages, saw the net NPAs staying lower at 1.14 per cent as on March 31, 2021, against 1.54 per cent as on March 31, 2020. In its latest quarterly results, the bank reported a net NPA ratio of 1.16 per cent.

Federal Bank

The next on the list is Federal Bank that saw gross NPAs rise to 3.5 per cent and net NPAs increase marginally to 1.23 per cent largely due to the Covid-19 related challenges faced by borrowers in the latest quarterly results.

In fiscal 2021, Federal Bank exhibited a decline in NPAs due to diligent selection of borrowers, while its slippage ratio fell to 1.6%, lower than 1.7% in 2020.

Kotak Mahindra Bank

Kotak Mahindra Bank, the third largest Indian private sector bank by market capitalisation, has seen net NPAs consistently below 1.5 per cent. In its latest quarterly results, the bank’s asset quality weakened as gross NPAs stood at 3.56 per cent. However, net NPAs still came in below 1.5 per cent. The bank’s loan book has grown at a CAGR of over 25% over the past decade, which has been supported by a healthy contribution of low-cost deposits.



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NARCL may not hit this year’s fiscal outgo, says DBS Research, BFSI News, ET BFSI

Banking & Finance

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India’s bad bank is unlikely to impact this year’s fiscal outgo, according to a report by DBS Research.

The transfer of assets from banks to the National Asset Reconstruction Company Ltd (NARCL) will be in the form of ‘contingent liability’, which will be invoked when there is a shortfall upon resolution or liquidation.

Also read: Banks may sell Rs 1 lakh crore of fraud-hit loans to NARCL, ARCs

The transfer is likely to free up capital for banks, and price discovery is likely to be addressed by bad assets being bought at net book value, the report said

However, gross Non Performing Assets are likely to correct to the scale, while net NPAs will be a little changed.

Reform fine tuning, such as the announcement of the bad bank, strong external buffers, domestic equity outperformance and improving fiscal math have been positive for India’s economic narrative.

Also read: What are NARCL and IDRCL? How do they work and what is the plan?

India’s financial markets, including rupee, are no longer a part of the fragile five pack of economies, even as the US Federal Reserve prepares to taper its purchases of securities and bonds.

During the taper tantrum episode in 2013, India was part of the “Fragile Five,” representing a group of emerging market economies which were running weak external accounts and had poor cover for the external funding.

Compared with 2013, the rupee will be more resilient when the US Fed tapers asset purchases this time. The brokerage expects the Indian Rupee to hold its COVID-19 range of Rs 72-77 per US dollar into 2022.

India’s fiscal performance has been surprising this year, with the deficit reaching only 21.3% in April-July of the budgeted estimate, lower than 103% in April-July 2020, DBS Research said.

Revenues are outpacing expenditure, with net tax revenues at 34% in April-July, against 12.4% a year ago, and non-tax revenues at 58%, against 6.4% last year.

The onset of the third COVID-19 wave is likely to be less fatal as the economy seems to be having a better shock absorption capacity, the research said.

According to the report, employment, power consumption, and other indicators have reached pre-pandemic levels, benefiting from lower curbs but levelling off at highs into September.

However, this is unlikely to upgrade India’s overall sovereign rating. DBS Research expects ratings to be status quo.



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Terms and conditions, eligibility, charges, BFSI News, ET BFSI

Banking & Finance

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To help those borrowers who have been finding it difficult to pay back loans, the Reserve Bank of India (RBI) had lent a helping hand in the form of loan restructuring.

In 2020, the RBI had announced a loan restructuring program. And then in May 2021, due to the second wave of Covid-19, it announced a second resolution framework for many borrowers including individual borrowers.

Various banks have announced the terms and conditions for availing their loan restructuring 2.0.

Here is a look at the FAQs of HDFC Bank‘s loan restructuring policy 2.0 as per the lender’s website.

  1. What is the restructuring 2.0 scheme approved by RBI?
    RBI has provided a framework to banks & lending institutions for implementation of resolution plans for addressing the economic fallout due to the COVID-19 pandemic which has led to significant financial stress for customers. Basis the framework and regulatory guidelines, your bank has framed its policy for the restructuring of the loan/s of individuals and entities that have been impacted due to the COVID-19 pandemic.
  2. Who is eligible for restructuring?
    a) Individuals and Entities that are classified as Standard with the bank as on April 1, 2021. b) The customer has to be impacted financially by COVID-19 pandemic in the form of reduction/ loss of income or cash flows. c) Only those accounts, which are on the bank’s book as on April 1, 2021 will be eligible. c) The reduction of income and its financial impact on the customer will be reviewed by the bank basis the documents / information provided which does show the drop in cash flow due to the COVID-19 impact. The bank will assess the viability of the customer to pay the restructured EMIs basis the documents provided, before granting the restructuring. Apart from the viability calculations, the repayment track record of the customer, credit bureau records, and the responses given by the customer while availing moratorium earlier will also be factored in the restructuring decision.
  3. Which are the products covered under the regulatory restructuring relief package.
    * Credit Card receivables* Auto Loans and Two-wheeler Loans * Personal Loans (both for personal use and for business / commercial purposes)* Personal Loans to professionals * Education Loans* Loans given for creation/ enhancement of immovable assets (e.g., housing loans)* MSME loans with Udyam certificate (The borrower should be classified as a MSME on March 31, 2021 in terms of Gazette Notification S.O. 2119 (E) dated June 26, 2020)
  4. What type of loans are not eligible for restructuring?
    Loans to the following entities/individuals are not eligible for restructuring: -* individuals/entities for agricultural purposes and classified as agricultural loans by the bank * agricultural credit societies * financial service providers* Central, State and local government bodies * HDFC Bank employees* Exposures to housing finance companies which have already been rescheduled* Loans which have been already restructured once
  5. How do I avail the restructuring benefit on my loan?
    You may visit the bank’s website for the application link, fill the application form and submit the relevant details.Login to the application form with your Loan Account Number / Credit Card Number / Email ID registered with the bank and the OTP sent on your registered mobile number/ Email. If you have changed your number, please give a written request for change in number at the nearest branch, and apply post the number has changed on system.Alternatively, you may contact your Relationship Manager (RM).
  6. Can I apply multiple times?
    No. You can apply for restructuring only once.
  7. What are the restructuring options that are available to me?
    The balance tenure of the loan can be extended by a further period of maximum 24 months, including the moratorium period at the bank’s discretion to ease your monthly EMI repayment burden.
  8. Do I need to submit any documents to avail of the restructuring benefit?
    The bank will require you to submit documents giving details about the current status of your employment or business. For salaried borrowers:* Salary slips for the month of March 2021 and latest salary slip for last 2 months* A declaration of estimated salary/income immediately after the end of the desired restructuring period (Maximum 24 months).* Letter of discharge from job (in case of job loss)* Bank account statements of the account where salary is credited in case of salaried employees from Oct 2020 to date For self-employed borrowers/ entities:* Current / CC account bank statement from 1st April 2020 till date * GST returns Oct-2020 till date * Income tax returns for FY-19 & FY-20 and FY-21 (if filed) * Profit and loss statement / Balance sheet for the last 2 years* Udyam certificate * Declaration by self-employed professionals/ businessmen declaring that their business is affected by Covid-19.Please do keep these documents ready before you apply on the link, as incomplete applications are unlikely to be processed.
  9. Will opting for the restructuring package have an impact on my credit bureau report?
    As per regulatory guidelines, your loan/credit facility will be reported to the credit bureau as “Restructured”.
  10. I hold multiple loans/credit facilities with the bank. Do I have to apply separately for each of these loans?
    The restructuring application form shall have the option to apply for one or all the loans by a single application on the bank’s website. The bank shall assess the application on regulatory guidelines, on the COVID-19 impact and the viability of the repayment plan before decisioning the same.
  11. I have a credit card with EMI plans within my credit limit. Can I opt for restructuring of only the card outstanding and not the EMI plans?
    The entire credit card balance including the loans within the credit limit will be restructured and converted into a separate loan account.
  12. I have a Jumbo Loan facility on my credit card. Is it mandatory to convert the Jumbo Loan if I choose to restructure the credit card?
    You may choose to restructure either the card balance or the Jumbo Loan or both the facilities.
  13. Will my credit card be blocked or deactivated if I avail of the restructuring scheme?
    Your credit card will be deactivated without any further notice once the restructuring is approved for any of the loans / credit cards you have with the bank. The bank may choose to reinstate fresh limits at its discretion on the card after 12 months basis the repayment behaviour on the loan EMIs.
  14. Is there a minimum outstanding requirement for availing the restructuring facility?v
    Minimum outstanding balance required to convert the card/loan outstanding is Rs. 25,000.
  15. I am self-employed/ entity having my small-scale unit. Am I eligible for relief?
    Self-employed individuals/entities are eligible for relief for both under the MSME category as well as the Non-MSME category. The Bank would request its self-employed customers to register themselves as MSME through the Udyam portal of the Government wherever applicable. Udyam portal link: https://udyamregistration.gov.in/Government-of-India/Ministry-of-MSME/online-registration.htm
  16. Can I apply for restructuring now as I was not able to apply for moratorium before?
    The scheme for restructuring is open to all customers of the bank irrespective of the moratorium applied status subject to the borrower meeting the regulatory guidelines of restructuring.
  17. I have already availed of restructuring. Can I avail this once again?
    If you have already availed restructuring, you are not eligible for restructuring under this scheme. However if you have not availed of the full benefit of 24 month tenor extension in the earlier scheme which ended on 31st Dec, the bank can evaluate and provide relief to the extent of overall tenor extension of 24 months.
  18. My loan was taken along with a co-borrower/s. Will all the co-borrowers of the original Loan agreement be required to sign the revised restructuring agreement?
    As per regulatory and legal requirements, all borrowers/co-borrowers of the original loan need to agree and sign on any changes in the loan structure including the restructuring agreement.
  19. What is the last date of making applications through the portal.
    The link on the portal will be live till 20th September 2021 for customers with single loan or overall exposure less than 25 Lacs.
  20. How much time will it take for me to know the status of the restructuring application.
    The bank will process and communicate the status of the application to the customers in 10 to 14 working days.
  21. How will I get the approval and communication for acceptance?
    The bank will communicate the status of the restructuring request vide text message or email on the registered phone number or email address.
  22. Will I need to do further documentation for restructuring?
    For all loans, you would have to sign the restructuring agreement post approval for the bank to effect restructuring. If you are sole borrower, bank will provide digital options for signing the agreements. In case there are two or more applicants on the loan structure, then all applicants will be required to accept the terms by putting physical signatures on the application and revised agreement, and this agreement will need to be submitted at the nearest customer service desk. The customer will get a copy of the revised terms and amort schedule on their registered mail id / by regular post.

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Securitisation pool collections improve as restrictions ease: Crisil Ratings

Banking & Finance

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With the gradual phasing out of social restrictions, there has been an improvement in the monthly collection ratios of securitised pools rated by Crisil Ratings.

These had declined between April and June 2021 following the second wave of the Covid-19 pandemic.

₹1 crore, minimum ticket size to issue securitisation notes: RBI

“The trend in improving collection efficiencies has been seen across asset classes and in a number of segments the levels are quite close to pre-pandemic levels.

Resilience across cycles

Collection ratios in mortgage-backed securitisation (MBS) pools have rebounded to near-100 per cent ― their pre-pandemic normal ― in the pay-out months of July and August 2021,” Crisil Ratings said on Monday.

Securitisation volume improves in Q3 on revival in economy: Crisil

MBS pools, with home-or property-backed loans as underlying, have shown extremely high resilience across economic cycles.

Says Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings, “In asset-backed securitisation (ABS) pools, collection ratios are set to reach January-March 2021 pay-out levels after dipping to 84 per cent in the first quarter this fiscal.”

Median collection ratios for vehicle loan pools for August pay-out reached 100 per cent, just a tad short of the March collection ratio of 101 per cent, he further said.

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Emerging Asia-Pacific markets incline towards cashless payments, shows McKinsey survey, BFSI News, ET BFSI

Banking & Finance

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The number of users in emerging markets in Asia-Pacific, which includes India, has increased from 65% in 2017 to 88% in 2021, according to a survey by consultancy firm McKinsey.

The shift to digital banking was likely accelerated by existing trends such as increasing use of digital channels, including banking, broader use of video calls in place of face-to-face meetings, etc. These trends have intensified during the COVID-19 pandemic, and high levels of digital adoption are likely to hold even as the pandemic subsides, the survey suggests.

In emerging markets, FinTech apps and e-wallet penetration reached 54% in 2021, compared with 43% in developed Asia–Pacific. In 2017, the penetration was just 38% in emerging markets.

More than half of the respondents in most Asia–Pacific markets report that cash is used for less than 30% of weekly spending, the survey said.

The survey results indicate that banks can expand their digital offering, by leveraging existing assets. According to McKinskey, banks will need to reinvent its business and delivery models by focusing on three key areas – value of branches, customer engagement, and overall competitive positioning.

Approximately 97% of all Asia–Pacific consumers favour mobile and online banking, and 2% of consumers in developed Asia–Pacific and 3% in emerging Asia–Pacific continue to conduct most of their bank business at the branch.

With digital banking becoming more and more popular, the question of functionalities of bank branches arises. However, despite these numbers, McKinsey says that bank branches will continue to be consumers’ primary partner in managing money. Banks can make sure that branch staff have time to concentrate on activities like advising on loans, insurance, or investments to customers, and digitise other processes, it said.

To further engage customers in digital banking, McKinsey’s research suggests that banks should urge customers to buy banking products online. Even though 70% of respondents expressed openness for using digital channels for services beyond transactions, only 20-30% said they were comfortable to buy online banking products like savings accounts, loans, or credit cards.

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India needs 4-5 more large banks of SBI’s size: Finance minister Nirmala Sitharaman

Banking & Finance

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The minister asked the IBA to conduct a digitised mapping of bank branches in each district of the country. (File)

Finance minister Nirmala Sitharaman said on Sunday India requires at least 4-5 more large banks like State Bank of India (SBI) to support the growing credit appetite of a fast-recuperating economy in the post-Covid world.

Addressing the 74th annual general meeting of the Indian Banks’ Association (IBA) in Mumbai, the minister said the economy is on a reset mode after the devastation caused by the pandemic. Banks, being the backbone of the financial system, would have to continue to play a critical role in supporting the economy’s resurgence, the minister said. Non-food credit growth remained far from satisfaction and stood at 6.2% in July 2021, against 6.4% a year earlier.

Already, the wide-scale consolidation exercise in the public-sector banking space in recent years has created some large lenders with strong balance-sheet to lend to big projects. Thanks to the amalgamation exercise, the number of state-run banks has come down from 27 in 2017 to 12 now.

She also asked lenders to firm up models to better focus on exporters.

“Be nimble, agile, adaptive, it is a must for attaining $2-trillion export (both goods and services) target for 2030,” she told bankers.

As for funding infrastructure projects, the minister said the proposed development financial institution is coming up soon.

Banking activities need to be scaled up substantially to ensure all business centres in the country are covered with physical or digital banking presence.

In the post-pandemic world, banks need to change the way they undertake their businesses. Since digitisation has changed the way of doing businesses, banks will have to innovate and keep pace with evolving technology, she said.

The minister asked the IBA to conduct a digitised mapping of bank branches in each district of the country. This would help identify the areas that need greater banking presence.

Sitharaman said: “Not necessary to have physical banking presence everywhere. The country’s optic fibre network has covered two-third of about 7.5 lakh panchayats. This could be used to deliver banking services in unconnected areas as well.”

“If we look at post-Covid scenario, India’s banking contour will have to be very unique to India, where there has been an extremely successful adoption of digitization. While banks in many countries could not reach out to their clients during the pandemic, the level of digitization of Indian banks helped us to transfer money to small, medium and big account holders through DBT and digital mechanisms,” she said.

The minister appreciated the efforts of the public-sector banks in implementing the amalgamation exercise even during the pandemic period and completing it without causing any inconvenience to customers.

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Rana Kapoor’s daughter seeks exemption from personal appearance before the trial court, BFSI News, ET BFSI

Banking & Finance

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Rakhee Kapoor-Tandon, the daughter of jailed banker Rana Kapoor has filed a petition before the Bombay High Court (HC) seeking exemption from in-person appearance before the trial court.

Kapoor-Tandon who is a non-resident Indian (NRI) and a resident of the United Kingdom has expressed her inability to travel to India owing to restrictions imposed due of Covid-19 pandemic, the plea stated.

On September 2, a special Prevention of Money Laundering Act (PMLA) court rejected Kapoor-Tandon’s plea seeking exemption from personal appearance.

“… the petitioner is a NRI, residing permanently outside India since 2016. At present, she is a resident of London, residing with her two minor children. The petitioner is unable to travel in view of various travel restrictions imposed by Govt. of UK, Govt. of India, civil aviation department and other agencies in the prevailing Covid-19 factors,”

The petitioner through the plea filed by her counsel Vijay Aggarwal has also appealed that her application be considered as she hasn’t been chargesheeted by the Central Bureau of Investigation (CBI) in its recently filed supplementary chargesheet in the Yes Bank scam. “…no specific allegations regarding laundering against the petitioner in ED complaints,”it adds.

Last week, a special CBI court here observing that Kapoor’s family members including his wife and two daughters are ‘beneficiary’ of the fraud caused to Yes Bank Ltd (YBL) and have caused a wrongful loss of Rs 4,000 crore of public money, remanded them to judicial custody.

The The court had also observed that the accused showed ‘complicity’ with co-accused Rana Kapoor and are the ‘beneficiary of the amount fraudulently and dishonestly obtained by Kapoor’. “… they have received fraudulently and dishonestly the illegal amount pending to be a corporate loan of Rs 300 crore, Rs 300 crores and Rs 600 crores, so actual beneficiary of the said amount,” the order accessed by ET states.

Meanwhile, in a separate plea, Rana Kapoor has contested his police custody granted by the lower court. The HC in its earlier order had rejected the production application sought by CBI.

“…The special judge vide the impugned order dated August 14, passed on the remand application filed by the CBI… Seeking to declare the CBI remand and custody and all subsequent proceedings including the further custody of the petitioner as illegal and void ab-initio,” the plea seen by ET reads.

Last month, the CBI had filed a supplementary chargesheet against Kapoor, his family members and four former junior employees of the bank in connection with the corruption case, which pertains to the loans given to the now bankrupt financial firm DHFL. The accused were summoned and the hearing in the matter was scheduled for Saturday.

According to the CBI’s first chargesheet filed last year, in June 2018, Kapoor, then the head of Yes Bank’s management credit committee, sanctioned a loan of Rs 750 crore on an application by DHFL promoters, Dheeraj Wadhawan and his brother Kapil Wadhawan, in the name of Belief Realtors Pvt Ltd for development of a Bandra Reclamation Project. This amount was advanced to RKW Developers, a company controlled by Dheeraj Wadhawan although the bank’s risk management team had pointed out multiple and serious issues in the proposal.

The agency’s probe revealed that the loan of Rs 750 crore was not utilised for the stated purpose.

Simultaneously, Kapil Wadhawan is said to have paid a kickback of Rs 600 crore to Kapoor and his family members in the garb of a builder loan from DHFL to DOIT Urban Ventures (India) Private Ltd (DUVPL). Roshini Kapoor, the youngest daughter of Rana Kapoor, is one of the directors of DUVPL.

After deducting a processing fee, an amount of Rs 632 crore was transferred to RKW Developers. This amount was then routed to other entities controlled by the Wadhawans—KYTAAdvisors and RIP Developers—to settle a loan obtained from DHFL for the same Bandra Reclamation Project in November 2015.



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RBI study, BFSI News, ET BFSI

Banking & Finance

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The uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy, said an article published in the RBI’s latest bulletin. Bank credit growth has witnessed significant fluctuations in the past one and a half decades.

The period between 2007-08 and 2013-14 could be characterised as a bank credit boom period in the Indian economy, as non-food credit registered double-digit growth, primarily driven by robust credit growth to the industrial sector, the article said.

“Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors,” it said adding that within industries, infrastructure, and basic metal and metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.

Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.

The article said that during 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by a reversal in credit growth to the industrial sector.

The overall non-food credit growth during 2014-15 to 2020-21 was almost entirely driven by the expansion of credit to the non-industrial sectors, particularly lending to the retail segment in the form of personal loans.

Active participation of both the dominant-group and the other-group of banks is driving credit growth to the non-industrial sectors, the article said.

The sharp slowdown in industrial credit warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the government and the RBI, could de-freeze the credit market for the industrial sector. It can help in reviving the growth momentum derailed by the COVID-19 pandemic, it said.

“After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second COVID-19 wave, which augurs well for the economy,” the article said.

Another article published in the bulletin titled ‘Private Corporate Investment: Growth in 2020-21 and Outlook for 2021-22′ said the investment intentions of the Indian private corporates remained sluggish as reflected by lower numbers of new announcements and completions of projects.

The article highlighted that the pandemic uncertainties adversely impacted appetite for new projects during 2020-21 and posed impediments to the timely completion of pipeline projects.

In 2021-22, demand for new projects would shape the private investment outlook, along with the progress of the projects already in the pipeline, it added.

The central bank, however, said the views in the articles are of the authors and do not represent the views of the Reserve Bank of India.



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Things should return to normal with economy back on track: Bajaj Allianz General chief Singhel

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Bajaj Allianz General Insurance Company Limited (BAGIC), the country’s largest private general insurer by revenue and profits, sees the company’s overall business operations returning soon to pre-pandemic level with the economy getting back on track, a top official said.

As in previous years, this 20-year old private general insurer is hopeful of outdoing overall industry growth (estimated at 12-15 per cent) even during this fiscal with the recent uptrend in business led by health insurance followed by growth in motor and property insurance, Tapan Singhel, Managing Director & Chief Executive Officer, told BusinessLine in an interview.

“I can comfortably say, with no further waves withstanding, things should return to normal with the economy getting back on track. The growth of the economy and insurance industry is directly proportional to each other. Hence the better the Indian economy does, the better the insurance industry does “, he said when asked if business operations had returned to pre-pandemic level..

As of end August this fiscal, BAGIC recorded gross direct premium of ₹ 6468 crore, up 18 per cent over ₹ 5471 crore in same period last fiscal. The overall industry stands at about 14 per cent growth for all general insurance companies.

Singhel also hoped to see government playing an even bigger role in improving the healthcare system in the coming days and noted that a “holistic” approach that covers aspects like need to reduce GST on health insurance ( from current 18 per cent to say 5 per cent) and putting in place a regulator for hospitals was the need of the hour to solve the current problem of absence of an efficient healthcare system in the country.

Asked how had Covid-19 impacted BAGIC’s business, Singhel said that the impact of Covid on general insurance industry was predominantly on health space. BAGIC too felt the heat with loss ratios going up just as it happened for the industry. “Loss ratio for health has not been very good for us and that is for the entire industry. While Covid created awareness and sales of health policies went up, claims also got created. The good part is that the industry supported Covid 19 claims. You must also understand health reinsurance was not available internationally for Covid. Industry settled nearly ₹ 30,000 crore claims on its own internal resources.

Every industry affected by Covid has asked for government relief. Did you hear insurance industry asking for any such relief from the government inspite of paying so much claims?”, Singhel asked.

Singhel asserted that it would not be right to describe 2021-22 as a “bad year” for BAGIC, noting that settling claims was part of the business.

Medical inflation

Asked about customers anxiety over increase in health insurance premiums in the current pandemic times, Singhel asserted that Covid is not the reason why health insurance premiums will go up. “People are not understanding this. There is no regulator for hospitals. Premium increase on health policies is very natural phenomena because of the dichotomy in the system. The problem is you can’t increase health premium for three years. It’s a kind of lock-in. Every premium increase has to go to regulator and IRDAI allows this only once in three years. With average medical inflation of about 12-15 per cent per annum, price rise in premium translates to cover 45 per cent medical inflation over three years. Insurance premiums is locked for three years, while medical bills are moving up every year. Premium increase will have to happen to match the previous inflation”, he said.

Singhel said that General insurance industry had already approached the insurance regulator seeking yearly adjustments to insurance premiums rather than once in three years.

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