Tag: covid

RBI to strengthen risk-based supervision of banks, NBFCs, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.

The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

“It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks.

In case of UCBs and NBFCs, the Expression of Interest (EOI) for ‘Consultant for Review of Supervisory Models’ said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

“It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all SEs,” it said.

Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).

The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors’ interests and financial stability.

The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

In case of Urban Cooperative Banks (UCBs) and NBFCs, it conducts the supervision through a mix offsite monitoring and on-site inspection, where applicable.

A technical advisory group consisting of senior officers of the RBI would examine the documents submitted by the applicants in connection with EOI.

EOI said the consultant would be required to work in close co-ordination with officers of RBI’s Department of Supervision in Mumbai.



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HDFC Bank unveils organisational changes to power future growth

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The country’s largest private sector lender HDFC Bank on Friday unveiled organisational changes under ‘Project Future – Ready’ for its next wave of growth.

“The bank is reorganising itself into three clear areas of Business Verticals, Delivery Channels and Technology/ Digital to further build its execution muscle and be ready for the future,” it said in a statement, adding that the creation of focused business verticals and delivery channels will enable it to capitalise on the opportunities across customer segments in the time to come.

HDFC Bank will re-double its efforts on its business verticals that include corporate banking, retail banking, private banking, government and institutional banking, retail assets and payments as well as commercial banking or the MSME vertical, it further said.

‘Engines of growth’

“We are creating engines of growth with top tier talent backed by technology and digital transformation to capitalise on opportunities that will accrue in the coming time,” said Mr Sashi Jagdishan, MD, HDFC Bank

Kaizad Bharucha, Executive Director, will continue to drive the wholesale bank including corporate banking group, capital and commodities markets group and financial institutions, HDFC Bank said.

Rahul Shukla, Group Head, will now be responsible for commercial banking (MSME) and rural vertical while Rakesh Singh, Group Head – Investment Banking and Private Banking will also be responsible for marketing, retail liability products and managed programmes.

Parag Rao, Group Head – Payments Business, will now drive the technology transformation and digital agenda, the bank said, adding that he will continue to be responsible for the payments vertical. Ramesh Lakshminarayanan, Chief Information Officer and Mr Anjani Rathor, Chief Digital Officer will report to Rao, the bank said.

Ravi Santhanam, CMO, will now be also responsible for driving digital marketing as a stand-alone delivery channel. He will also be additionally responsible for the retail liability products and managed programmes.

Sampath Kumar, Group Head – NRI will now be in charge of all tele-service relationships, including VRM delivery channel of the Bank.

“The role of Credit, Risk, Control and enabling functions continue to be critical as we scale up further in size and reach,” HDFC Bank said, adding that the current leadership would continue in these roles and support in the transformation journey to realise the vision of ‘Project Future Ready’.

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Shriram Housing Finance to provide free vaccination to customers, BFSI News, ET BFSI

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In an industry first, mortgage lender Shriram Housing Finance has decided to provide free vaccination to its 20,000 affordable housing customers. The company would roughly spend Rs 1000 per loan as vaccination cost and would cover two members in a family. It estimates to spend nearly Rs 2 crore to provide free vaccination to its customers.

The mortgage lender had earlier announced that it would bear the vaccination cost of its employees.

“Customers in the affordable housing space are not very well off and for them even the small sum to be incurred in vaccination through private players can become a big deterrent, this in turn can derail the vaccination drive,” said Ravi Subramanian, MD, Shriram Housing Finance. “We would be reaching out to all customers with details of this program.”

Several banks including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank have said that they would bear the vaccination cost of employees.

State Bank of India has set up an internal task force to extend immediate assistance to its members.

A Quick Response Team (QRT) headed by a General Manager has been set up at Corporate Centre for monitoring the COVID position at the whole Bank level,” said Rana Ashutosh Kumar Singh, DMD (HR) & Corporate Development Officer, SBI. “Similar teams headed by Deputy General Managers have been set up in all 17 Circles for monitoring the COVID situation in their area and providing assistance to staff and their family members.”

HDFC Bank has converted its training centres in Pune, Bhubaneswar and Gurgaon into isolation centres to deal with Covid-19-related emergencies for employees with symptoms. The bank has also tied up with hotels across the country for rooms.

Some banks have started tying up with doctors who could guide employees in dealing with their Covid-19-related fears. About 1.5 million people are employed across Indian banks.



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Banking is an essential service; allow vaccinations for bankers on priority, asks ICICI Bank, BFSI News, ET BFSI

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ICICI Bank on Thursday said it is “much better” prepared to restrict the impact of the second coronavirus wave on its operations because of last year’s experience but appealed for banks’ employees to be allowed to take vaccinations on a priority basis as they are rendering an essential service. The second largest lender warned that if banking services were to fail, it can have an adverse impact on the economic activity, and hence it is pertinent for ensuring that at least the branch staff is allowed to take vaccinations.

The comments come at a time when localised lockdowns are being announced across many pockets of the country in view of the rising COVID infections, which are breaching the 3 lakh mark daily and also resulting in over 2,000 officially counted deaths.

“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,” its executive director Anup Bagchi told reporters.

He warned that if banking operations get affected, we may have to face an economic crisis as well after the ongoing health crisis, and cited the case of a single automated teller machine shutting down for seven days to illustrate his point.

There is a case for “higher sensitivity” when classifying essential services, Bagchi said, stressing that there are other essential services also and bankers exposed to customers in branches should be allowed to vaccinate because they are exposed to walking-in customers.

Starting May 1, the central government has allowed every adult the chance to get vaccinated. However, concerns are being raised about the efficacy of such a move because of lack of vaccine stocks.

Meanwhile, Bagchi said the bank is much better prepared to take on the second wave of the pandemic because it had a system in place to take care of the disruptions coming because of the lockdowns as compared to last year’s experience, where it had to overhaul things.

Bagchi said an end-to-end digital journey where there is no need for a physical touch at all is essential while extending banking services and after the announcement of the national lockdown last year, it had to work on ensuring the same.

Further to the same, the bank on Thursday launched a ‘merchant stack’ which will help deliver seamless banking services, including a zero-balance current account, instant credit, a digital store management, a loyalty programme and other value added services to the 2 crore merchants nationally.

Bagchi compared the new services akin to a master switch where the customers will not be forced to come to the bank repeatedly for newer services, and added that the bank has put in place a refined data analytics back-end which will take care of loan decisions based on dynamic data points such as the transactions happening at the merchant’s end, inventory before giving the working capital credit of over 6 months.

From a risk perspective, Bagchi said the bank has built a strong portfolio in the business banking side, where its ability to make use of the data it possesses has ensured that the credit costs are less than 1 per cent as against double-digit figures for some lenders.

Declining to give a target of the number of customer relationships they are looking at, Bagchi said the fintechs cannot offer an end-to-end service like banks can.

For ICICI Bank, revenues from the stack can flow from fees, interest on credit offtake, float on balances in the accounts and merchant discount rate, he said.



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L&T Finance Holdings Q4 net profit down 31%

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L&T Finance Holdings reported a 30.9 per cent decline in its consolidated net profit to ₹266.85 crore in the fourth quarter of the fiscal year as against ₹386.15 crore in the same period in the previous fiscal. For the full fiscal 2020-21, its consolidated net profit fell 42.9 per cent to ₹970.94 crore as compared to ₹1,700.17 crore in 2019-20.

For the quarter ended March 31, 2021, its profit before exceptional items and tax was much higher at ₹718.24 crore as against ₹455.94 crore. Its total revenue from operations increased by 1.8 per cent to ₹3,415.16 crore in the fourth quarter of 2020-21, from ₹3,353.7 crore a year ago.

“Highest quarterly net interest margin (NIM) and fees in 2020-21 reached 8.17 per cent in the fourth quarter led by a strong growth in rural. In 2020-21, NIMs and fee was at 6.95 per cent,” L&T Finance said in a statement on Thursday. It maintains a strong capital adequacy of 23.8 per cent. In the fourth quarter, it had raised about ₹3,000 crore through a rights issue.

“As a prudent measure, LTFH is carrying additional provisions of ₹1,033 crore (1.2 per cent of standard book) as of the fourth quarter 2020-21,” it further said.

Its total lending book however, dropped by four per cent to ₹94,013 crore in the fourth quarter of the fiscal versus ₹98,384 crore a year ago.

Dinanath Dubhashi, Managing Director and CEO, L&T Finance Holdings, said, “With normalcy returning in the latter half, our focused businesses have witnessed continued momentum in disbursements, with increased market share across desired businesses (15 per cent in farm and 11 per cent in two-wheeler finance).”

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Bank of Maharashtra’s Q4 net soars

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Bank of Maharashtra’s (BoM) net profit soared 187 per cent year-on-year (yoy) in fourth quarter to ₹165 crore on the back of a large recovery in a technically written-off account and a robust growth in net interest income.

The Pune-headquartered public sector bank reported a net profit of ₹58 crore in the year ago quarter. The higher net profit in the reporting quarter comes despite a 92 per cent rise in loan loss provisions.

Interest income

Net interest income was up 35 per cent yoy to ₹ 1,383 crore (₹ 1,023 crore). Non-interest income, comprising fee-based income, trading income and other income, skyrocketed 215 per cent to ₹1,235 crore (₹392 crore).

MD & CEO, AS Rajeev, said recovery of ₹508 crore from the Bhushan Power (technically written-off) account bumped up the other income. Loan loss provisions, including Covid-19 related, increased to ₹1,376 crore (₹717 crore). Provision coverage ratio improved to 90 per cent as at March-end 2021 against 84 per cent as at March-end 2020.

As of March-end 2021, the total deposits rose 16 per cent yoy to ₹1,74,006 crore and total advances were up 13 per cent yoy to ₹1,07,654 crore.

Within deposits, the proportion of low-cost current account, savings account (CASA) deposits rose to 54 per cent from 50 per cent a year ago.

Within total advances, retail advances were up 26 per cent; mico, small and medium enterprises advances (35 per cent); and agriculture (13 per cent). However, corporate & other advance de-grew about 2 per cent.

Rajeev expects 14-15 per cent growth in deposits and 15-16 per cent growth in advances in FY22. Further, the proportion of CASA deposits could go up to 55 per cent and the loan mix between retail:wholesale could change to 65:35 from the current 63:37.

Net interest margin improved to 3.11 per cent in the reporting quarter against 2.41 per cent in the year ago quarter.

Gross non-performing asset (NPA) position improved to 7.23 per cent of gross advances against 12.81 per cent in the year ago quarter. Net NPAs declined to 2.48 per cent of net advances against 4.77 per cent

Meanwhile, the Bank said it is planning to raise up to ₹5,000 crore via equity and bonds.

Last year, out of the enabling provision for raising up to ₹3,000 crore, BoM could raise only ₹505 crore via Tier-II bonds. The market then was not conducive for tapping Tier-I (equity) issuance, the Bank’s chief said.

Rajeev said, in FY22, BoM could raise the resources via follow-on public offer, rights issue, qualified institutions placement issue, preferential issue and via Basel III compliant bonds.

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SBI earmarks Rs 30 crore to set up makeshift hospitals for COVID patients, BFSI News, ET BFSI

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As part of the CSR initiative, the country’s largest lender State Bank of India has decided to set up makeshift hospitals with ICU facilities for COVID-19 patients in some of the worst affected states. The bank has already earmarked Rs 30 crore and is engaging with non-governmental organisations (NGOs) and hospital management for setting up medical facilities on an emergency basis for the treatment of COVID-19 patients, SBI Chairman Dinesh Kumar Khara told .

He said the bank intends to put in place 1,000 beds with 50 ICU facilities in the states that are the worst affected.

So, he said, it could be 120 beds at some places, while 150 at others with adequate healthcare facilities, depending on a hospital’s capacity to scale up.

It is to be noted that the Ministry of Corporate Affairs last week permitted makeshift hospitals and temporary COVID care facilities to be treated as an eligible Corporate Social Responsibility (CSR) activity.

India is reeling under the impact of the second wave of COVID-19 with over 3 lakh cases being reported for the past 8 days in a row. With each passing day, the death toll is rising.

The country witnessed a record single-day rise of 3,79,257 new coronavirus infections pushing the total tally of COVID-19 cases to 1,83,76,524, while active cases crossed the 30-lakh mark, according to the Union Health Ministry data updated on Thursday.

Speaking about various initiatives taken by the country’s largest lender in its fight against COVID-19, Khara said SBI is also collaborating with hospitals and NGOs to provide oxygen concentrators for the patients.

“We have put in place an action plan. We have earmarked Rs 70 crore plus out of which we are giving Rs 21 crore to 17 circles for COVID-19 related initiatives,” he said.

Last year, the bank had donated to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund. SBI had contributed 0.25 per cent of annual profit, while employees collected over Rs 100 crore for the fund. In addition, Rs 11 crore contribution was towards supporting vaccination drive.

For the safety of employees and their families, he said, the bank has tied up with hospitals across the country to facilitate treatment of those who have fallen sick on a priority basis.

“We are also ensuring the supply of important medicines etc. so that the staff are not put to inconvenience. Various teams of medical officers are active at Local Head Offices and Zonal Offices, to oversee and coordinate COVID-19 support activities in the area under their jurisdiction,” he said.

A quick response team (QRT) headed by a general manager at the corporate centre is monitoring the COVID position at the entire bank-level and providing assistance at the shortest possible timeframe, he added.

With regard to vaccination, Khara said, the bank has collaborated with various hospitals for the jab.

“So far, 70,000 staff have been vaccinated out of 2.5 lakh. We are closely monitoring this number and this is expected to go up post-May 1 when it will be opened for all beyond 18 years,” he said.

The bank has decided to bear the cost of vaccination for its employees and their dependent family members. In case of unfortunate death of employees, he said, it is very difficult to replace the loss but some assistance is being provided immediately.

“We have also liberalised appointments on compassionate ground as part of assistance to dependents of those who have lost their life due to this pandemic,” he said.

The bank pays an ex-gratia lump sum amount of Rs 20 lakh to the family of the employee who dies due to COVID-19 infection.

At the same time, Khara said, the bank is sensitive to the health of its customers.

The bank has been doing customer awareness campaigns on digital banking amid pandemic, he said, adding local level engagements of distributing hand sanitisers, masks, PPE kits, donation of ambulances, etc are being undertaken.



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Axis Bank says collections may slow in the coming weeks, BFSI News, ET BFSI

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Axis Bank which swung to profit in the January-March quarter sees collections slowing in the coming weeks as Covid curbs restrict movement.

“We see corporates adopting wait and watch and given the sudden surge, the focus is on employee health and safety. We have not seen any slowdown in early bucket collections, but it is likely to get impacted in the coming weeks because people are not able to meet customers,” Managing Director and Chief Executive Officer Amitabh Chaudhry said. “Our balance sheet is strong and we have taken provisions upfront and have more than decent buffers built in.”

Chaudhry said there will certainly be an impact of the second wave on the economy in the short term but hoped that the wave gets contained quickly with the various strategies being adopted by the government. He said the bank will have to change its policies on risk as per the evolving scenario. He said the bank grew in FY21 as well despite the adversities on the overall economic front and would continue with the same strategy as it believes that the crisis also creates opportunities.

The Q4 results

Beating analyst estimates, Axis Bank reported a net profit of Rs 2680 crore in January-March as compared to a loss of Rs 1,390 crore a year ago. Net interest income rose 11% on year to Rs 7,560 crore, while other income rose 17% at Rs 4,670 crore. Trading income rose nearly three-fold to Rs 790 crore. Axis Bank’s loan book grew 12% on year to Rs 6.4 lakh crore. Domestic loans grew 10% on year, higher than the industry average growth of around 6%.

It disclosed that it had received Rs 3,004 crore of restructuring requests under the special COVID-related window, of which Rs 1,848 crore have been invoked and Rs 623 crore have been implemented.

The bank will take a call on the rest by the June deadline.

The metrics

The total Covid-related provision buffer stood at Rs 5,000 crore (0.8% of loans), while the total additional provision buffer (Covid, standard and restructured) stood at 2% of loans.

Gross slippages were in line with expectations. About 64% of gross slippages were from the retail book. Thus, the annualized retail slippage ratio stood at 3.7%.

The loan book grew 7% sequentially with strong growth across segments. This was led by retail loans growing at 5% sequentially and retail disbursements rising at an all-time high of 44% quarter on quarter (QoQ). Also, the corporate/SME portfolio grew 9%/9%. On the liability front, deposits were up 8% QoQ, led by 13% QoQ growth in CASA deposits; thus, the CASA ratio improved to 45% (quarterly avg. CASA stood at 42%).

Analyst view

Axis Bank has delivered a strong performance and appears well-positioned to report robust earnings traction. Moreover, moderation in fresh slippages, coupled with improved underwriting and an increasing retail mix, would help maintain strong credit cost control. On the business front, retail disbursements reached an all-time high during the quarter, with strong disbursements seen in home loans (+45% QoQ) and LAP (+51% QoQ).

“The bank delivered strong sequential growth across segments. On the asset quality front, total restructuring stood at 0.3% of loans. Furthermore, the bank has an estimated 72% coverage on GNPL and also holds an additional provision buffer of 2% to protect the balance sheet against any potential stress,” Motilal Oswal Securities said in a note.

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Despite pandemic, TMB registers impressive performance in FY21

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Tamilnad Mercantile Bank (TMB) has reported an impressive performance on many parameters in FY21 that include strong growth in net profit, good asset quality and higher business.

The Tuticorin-based bank’s net profit grew 48 per cent at ₹603 crore in 2020-21 as compared to ₹408 crore in 2019-20.

“While higher net interest income and other income, and lower provisions are major factors for profit growth, this performance is truly on account of the efforts of branches. Our strength lies in relationship banking and today if at all we are cut above the rest, it is because of field level staff and their connect with the customers,” said KV Rama Moorthy, Managing Director & CEO, TMB told Businessline.

Operating profit

The operating profit of the company grew 21 per cent at ₹1,202 crore in FY21 when compared with ₹995 crore in previous fiscal, on the back of 17 per cent growth in net interest income that stood at ₹1,538 crore as against ₹1,320 crore. The interest expenditure decreased to ₹2,072 crore from ₹2,147 crore.

TMB had a gross NPA of ₹1,085 crore as of March 31, 2021, up from ₹1,021 crore a year ago. Its gross NPA as a percentage of total advances reduced to 3.44 per cent in FY21 from 3.62 per cent in FY20. Net NPA was marginally up to 1.98 per cent from 1.80 per cent. NPA and restructured advances of the bank is only 3.93 per cent.

The bank has made additional Standard Asset Provision of ₹50 crore for the pandemic. Total advances grew 12 per cent to ₹31,541 crore from ₹28,236 crore. Total deposits stood at ₹40,970 crore from ₹36,825 crore. The company achieved its total business target of ₹72,500 crore at ₹72,511 crore, up 11 per cent from ₹65,061 crore in FY20.

Credit to MSME sector grew 18 per cent to ₹12,036 crore (₹10,170 crore in FY20).

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‘Q1 is a cautious phase as customers are on wait-and-watch mode’

Banking & Finance

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The first quarter of the fiscal year 2021-22 will be a cautious phase with customers on a wait-and-watch mode amid localised lockdowns and surging Covid-19 cases, believes Ramesh Iyer, Vice-Chairman and Managing Director, Mahindra Finance.

“Customers have money but they want to wait for a month to see how things pan out. Up to mid-May one would be on the wait-and-watch situation and if things were to come under control, there would be a sudden spurt of demand. The pent-up demand will get capitalised. Customers are not averse to buying but they want to wait for some time,” he said.

In an interaction with BusinessLine, Iyer said he expects growth in segments like vehicle sales to revive in coming quarters.

“Going forward, trend will be a growth curve but it may not be the first quarter. At least April and May will not be so. Last one week has been tough. We will have to wait till May 15,” he said, adding that the festival season, post-monsoon, would see a substantial growth potential.

In terms of disbursements, Iyer said Mahindra Finance will focus on areas which are less impacted by Covid infections.

“We have mapped across the country pockets which are least, moderately and severely impacted. So, in the severely impacted pockets, we will focus on collection efficiency and asset quality while the least and moderately impacted ones will be an opportunity for us,” he said.

The NBFC has also added about 150 branches in the last quarter and it is mapped on the basis of new economic activity and agri support in the current scenario.

“We said it even last year that when there are unknowns around, it is better to be cautious and finance people who genuinely want to use the vehicle and not use it as an opportunity. In difficult times, they can’t survive. We need experienced operators,” Iyer said.

However, in terms of collection efficiency, the fourth quarter of 2020-21 was even better than the fourth quarter of 2019-20 for Mahindra Finance. Collection efficiency was at 110 per cent.

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