Asset risks for banks will rise in most parts of ASEAN (the Association of Southeast Asian Nations) and India as the region battles new waves of coronavirus infections amid low vaccination rates, according to a report by Moody’s Investors Service.
However, continued policy support and strong loss-absorbing buffers mitigate the negative impact for banks in ASEAN and India, coronavirus outbreaks triggering strict containment steps will impede economic recovery and erode borrowers’ debt repayment capacity, increasing their asset risks, said the report.
The buffers
It further said that banks’ strong loss-absorbing buffers, policy support and the virus impact focused on a few segments will keep their credit strength intact.
“Banks in Thailand (Baa1 stable), the Philippines (Baa2 stable), and Indonesia (Baa2 stable) are particularly vulnerable as their economies struggle with elevated numbers of virus cases, spiking uncertainties regarding their economies reopening. Yet, policy support for borrowers and the concentration of the impact on a few economic segments will limit the deterioration in banks’ overall asset quality,” said Rebecca Tan, a Moody’s Vice President and Senior Analyst.
For India (Baa3 negative), Moody’s projects the economy will return to growth in the fiscal year ending March 2022 (fiscal 2021), but the severe second coronavirus outbreak will delay improvements in asset quality.
Boosting trade
By contrast, the resumption of global economic activity will boost trade growth in Vietnam (Ba3 positive), Malaysia (A3 stable) and Singapore (Aaa stable). This will help offset domestic economic disruptions from the pandemic, although slow deployment of vaccines is a risk for Vietnam, the report noted.
Continued policy support for borrowers from governments and central banks will prevent sharp increases in defaults on bank loans. And the financial impact of a prolonged pandemic is concentrated on a few economic segments, which will limit the deterioration in banks’ overall asset quality.
More fundamentally, various regulatory measures implemented in the past decade to strengthen banks’ balance sheets have led banks to face the pandemic on a strong footing. Since the onset of the pandemic, most banks in the region have built sufficient loan loss buffers to cover likely increases in nonperforming loans, it added.
The second Covid-19 wave has impacted the recovery and lending activities of commercial banks. From tackling scattered lockdowns to managing recovery and collections, banks are expecting a recovery phase in the coming quarters.
Private lender Federal Bank recorded the highest ever operating profit of Rs.1135 Cr with 22% Y-o-Y growth in Q1FY22. The total business of the bank reached Rs. 299158.36 Cr registering Y-o-Y growth of 8.30% as of 30th June 2021.
Shyam Srinivasan, Managing Director, and CEO, Federal Bank said in a statement, “The external environment continues to be challenging however we have managed to keep our operating momentum intact by delivering our highest ever operating profit, for the quarter. Our CASA ratio is at an all-time high and we continue to build a granular liability franchise with more than 90% of our deposits being retail in nature. Our relationship with the NR diaspora continues to blossom with our share in personal inward remittances increasing to 18.20%. We have also managed to keep asset quality in check with only a marginal uptick in GNPA and NNPA.”
Shyam Srinivasan (File Pic)
On similar lines, IDFC FIRST Bank in its Q1FY22 financial results announced the highest ever core pre-provisioning operating profit at Rs. 601 Crore. Total Income grew by 36% YoY basis to reach Rs. 3,034 crore in Q1FY22.
V Vaidyanathan, Managing Director, and CEO, IDFC FIRST Bank, said in a statement, “Our CASA ratio is high at 50.86% despite reducing savings account interest rates by 200 bps recently. Because of our low-cost CASA, we can now participate in prime home loans business, which is a large business opportunity.”
“Regarding the loss during the quarter, we have made prudent provisions for COVID second wave, and expect provisions to reduce for the rest of the three quarters in FY 22. We guide for achieving pre- COVID level Gross and Net NPA, with targeted credit loss of only 2% on our retail book by Q4 FY 22 and onwards, assuming no further lockdowns.” Vaidyanathan added. South-based lender CSB Bank in its First Quarter results announced a profit after tax at Rs 61 Cr in Q1FY22 as against Rs 53.56 Cr in Q1FY21 and Rs 42.89 Cr for the sequential quarter. Net profit increased by 14% YoY. The operating profit of the bank is Rs 179.78 Cr with a Y-o-Y -growth of 39%.
CVR Rajendran, Managing Director & CEO at CSB Bank said in a statement, “COVID second wave coupled with the LTV management of gold loans did pose some challenges in the first quarter of FY 22. Lockdowns, alternate holidays, slowing down of economic activity, controlled movements due to strict social distancing norms, lack of transport, etc restricted the customer access to branches which in turn impacted both the fresh pledges and releases. Thankfully, the worst seems to be over now and recoveries are happening in full swing. The portfolio LTV that was at 83% has been brought down to 75%. The aggressive vaccination push and controlled localised lockdowns have helped in managing the second wave to a great extent and we are optimistic to catch up the business opportunities on a larger scale from this quarter. Bandhan Bankalso announced its Q1FY22 results with pre-provision Operating Profit (PPOP) at 9.3%; up from 8.6% in the Q4FY21.
Chandra Shekhar Ghosh, Managing Director, and CEO of Bandhan Bank said in a statement, “Despite the challenging environment due to covid second wave, we have delivered the best-ever quarter in terms of operational performances. Collections continue to improve with covid restrictions getting relaxed. Typically, the second half of the financial year is always better for the bank in terms of growth and collections. With the easing of the covid second wave and upcoming festive season, we are confident of achieving better performance going forward.” While Axis Bankreported a 94 percent year-on-year rise in standalone net profit at Rs 2,160 crore as against Rs 1,112 crore reported in the same quarter of last year (Q1FY21).
Amitabh Chaudhry, MD & CEO, Axis Bank said, “Despite second wave headwinds, we made tremendous progress this quarter on our strategy of building a high-quality granular franchise, increasing our relevance in the lives of the customers and the communities we serve, and building the best digital bank in the country,”
“The journey we started two years back is gathering momentum with a strong balance sheet, conservative provisions, and a steady operating performance supporting our aspirations. We have also set a bold mandate for our long-term ESG goals. We continue to monitor the macroeconomic environment closely and we remain confident about our strategy and the road ahead,” Chaudhry said.
Amitabh Chaudhry (File Pic)
The country’s largest lender, The State Bank of India recorded its highest-ever quarterly profit at Rs 6,504 cr. in Q1FY21. This implied a 55-per cent year-on-year (YoY) rise in net profit compared to Rs 4,189.34 crore in the year-ago period. Dinesh Khara, chairman of SBI said, “Around 50% of our home loan book is to non-salaried customers which belong to the SME segment,” “The slippages are largely because of the disruption in the SME segment.” He also said, “SBI is expecting a credit growth of 9% during this financial year. The under-utilization of credit lines by borrowers in our corporate clients group has dropped to 25%,” Khara said. “That’s a positive,” he added.
SBI says that the bank is gearing up on several fronts to mitigate all the challenges posed by the spread of the COVID-19 pandemic.
The outbreak of Covid-19 ushered in accelerated digitisation in the insurance industry as well as rapid acceptance and adoption by customers.
The industry introduced many features including telemedicine. Life insurance, which was predominantly done offline, largely moved to online channels.
Digital insurance or ‘InsurTech’ has disrupted the entire insurance sector and is bridging the insurance gap in the country. With smartphones and cheap internet, customers can use various platforms like social media, website, email, apps to interact with the insurers and get help in terms of selection, purchase, and filing for claims.
Ease in claim settlement
Digital tools like mobile applications have been helping consumers across the entire policy life cycle, starting from purchasing policies, intimation of claim incidents, processing claims through submission of documents online to claim settlement across all categories.
For example, if a car gets damaged today, the customer can share the photo of the damaged car with the insurer. Once the proof of the damaged car has been submitted, the insurance company can automatically verify it using AI and telematics and after verification, the amount of the claim will be paid to the customer’s bank account, usually within 24 hours.
Personalised insurance
Online channels have made insurance a personalised experience, much like the e-commerce virtual platforms. Advancement in technology including big data, artificial intelligence and machine learning have helped insurers to understand personalised consumer behaviour, their family needs and help them reach out with more accurate need-based insurance solutions.
For example, based on the information provided including health history of the individual and his/her family, insurer can guide the customer with the right policy and the right cover amount.
Disease specific optional cover (such as diabetics) or need based cover (such as maternity) will also be recommended.
Options to compare and choose the best
Digital platforms of aggregators or insurers provide unbiased comparisons and analysis of various insurance products based on price, quality and other features.
Consumers can evaluate the pros and cons of each product. Digital tools have made the process of insurance transparent, credible, seamless, personalised, and less time consuming.
NEW DELHI: The Governor of the Reserve Bank of India, Shaktikanta Das, said last year that the Covid-19 crisis is the sort of event that occurs once every 100 years. Policymakers from North Block to Mint Street have been attempting to find an adequate response to a crisis of this magnitude.
The Chief Economist, South East Asia and India at ANZ Bank, has a contrarian view.
In a chat with ETMarkets.com, Sanjay Mathur, a veteran economist, said the need of the hour is not capital spending that generates long-term gains. “Rather, what is important now and for years to come, is to lift people out of poverty, as that would have a larger impact on the economy,” he said.
“Let me take a controversial stand here. Our thinking on the fiscal has become somewhat stereotyped – capital spending is good and revenue spending is bad. And for FY22, the focus has been on capital spending. But the nature of the current crisis is different: it is a humanitarian crisis that calls for more massive welfare measures. A large section of our population has slipped into poverty, income and wealth disparities are rising,” Mathur said.
The government and RBI have unveiled various spending schemes since the pandemic struck last year; the flagship programme being the ‘Atmanirbhar Bharat’ scheme, which essentially prioritises import substitution.
However, out of the Rs 20 lakh crore announced by Prime Minister Narendra Modi, the actual fiscal outgo is very small. A bulk of the programmes are reflective of RBI’s liquidity infusion in the banking system, while the rest are mostly credit guarantees.
One cannot exactly blame the government, as its finances have been under strain since well before the pandemic.
In the last Budget, the government put aside the prescriptions of the Fiscal Responsibility and Budget Management Act and announced a fiscal deficit of 6.8 per cent of GDP for this financial year. The Centre had earlier set a target of 3.0 per cent fiscal deficit by 2017-18 (Apr-Mar).
However, it will not be accurate to say that the entire strain was on account of the pandemic. A year before Covid-19 wreaked havoc on the economy, the government had already skipped the targets it had set for itself under the FRBM Act, as tax collections fell short of targets.
Mathur said the government and the central bank together have done what they could within their constraints. “There was very little fiscal headroom to start with,” he said.
“So while I do acknowledge that asset creation has a larger multiplier on growth, this crisis is also unique and requires a different response,” he added.
Overall recruitment activity witnessed an 11 per cent growth during April-June, as the job market began showing signs of recovery from the COVID-19 second wave, says a survey. According to the Indeed India Hiring Tracker, which maps quarterly job market activity to June 2021, hiring increased by 11 per cent over the previous quarter, with standout growth in Information Technology (61 per cent), financial services (48 per cent), and BPO/ITeS (47 per cent).
This survey was conducted by Valuvox on behalf of Indeed among 1,500 employees and 1,200 businesses across nine cities in the month of June 2021.
“As businesses continue to find a rhythm of working through multiple pandemic challenges, the tracker reflects the resilience of India’s labour market,” Sashi Kumar, head of sales, Indeed India said.
Kumar further noted that “with hiring activity seeing a month-on-month increase, it was interesting to see businesses pivot their hiring priorities from operation roles to sales roles. It’s also clear that paying attention to employee expectations will enable them to thrive, so ongoing conversations around wellbeing and hybrid work are vital.”
According to the survey, receding COVID cases and partial lockdowns in the first quarter of the financial year 2021-22 allowed businesses to operate, focussing employers on roles driving sales and revenue — a shift from the focus on operational roles to stabilise business operations in the fourth quarter of the financial year 2020-21.
The widespread impacts of the second wave resulted in understaffed teams and increased employee burnout.
As many as 76 per cent of the job seekers surveyed did not receive COVID-related benefits/compensation packages or mental health support.
Appraisal plans were also impacted. 70 per cent of employees said they did not receive any promotion or pay increase this quarter, with only 11 per cent of employers promoting or offering salary increases, the survey said.
Employers and employees aren’t on the same page when it comes to future work models. Employers preferred a hybrid work model (42 per cent) to remote work (35 per cent), while jobseekers favoured remote working (46 per cent) over a hybrid approach (29 per cent).
Moreover, 51 per cent of women compared to 29 per cent of men said they wanted to continue working from home, while 52 per cent of senior management preferred working from home, compared to 36 per cent of middle level and 31 per cent of junior level employees.
Jobseeker priorities also shifted, with 25 per cent saying salary was their primary focus, followed by career growth (19 per cent), learning opportunities/challenges/responsibilities (16 per cent), and company reputation (14 per cent), the survey said.
Mumbai:RBL Bank slumped to a loss in the quarter ended June 2021 as the bank jacked up provisions to deal with current and future stress as it prepared to clean up its balance sheet to prepare for opportunities in the next four years.
The bank reported a net loss of Rs 459 crore largely due to almost a threefold rise in provisions to Rs 1,426 crore from Rs 500 crore a year earlier on a sharp surge in slippages from the bank’s microfinance and credit card portfolios.
Total slippages at Rs 1,342 crore included about Rs 450 crore each from microfinance and credit card loans where collections were hit due to the second wave of the pandemic.
Provisions also included Rs 604 crore of extra provisions as the bank decided to increase cover for bad loans and improve the coverage ratio to 61% from 52% in March. Gross NPAs increased to 4.99% up from 3.45% a year ago.
CEO Vishwavir Ahuja said the bank has consciously decided to bite the bullet as it wants to double down on the opportunities in the near future.
“We have pressed the reset button. As economic activity and growth revives, vaccinations gather pace and health infrastructure improves we wanted to have a clean slate to launch a 2.0 transformation based on vectors like branch banking, credit cards and micro banking which we are already ahead,” Ahuja said.
RBL expects the market to resume normal operations by the third quarter. It has set itself a target of increasing its customers base threefold from the current 4 million in the next four years.
Ahuja said the immediate target is to increase its return on assets to 1% by the end of March 2022 from negative 1.8% at the end of June.
“Our retail loan growth will be more in line with the GDP growth at 7% to 10%. Our corporate book is solid after the cleanups in the last couple of years so corporate growth will also be led by high-quality clients. There has been a significant opening up in the markets, especially in the urban areas as shown by the high-frequency data. But of course, it all depends on the Covid third wave,” Ahuja said.
A strong increase in other income helped revenue to double to Rs 695 crore led by a 137% growth in retail fee income.
The growth in other income masked a 7% fall in net interest income year on year to Rs 970 crore.
The bank has appointed four new directors —Vimal Bhandari as a non-independent director and Somnath Ghosh, Chandan Sinha and Manjeev Singh Puri as independent directors subject to shareholder approval.
NAINITAL: Nainital Bank celebrated its 100th foundation day on Saturday and organised several events to pay tributes to its founding fathers, including Bharat Ratna Pt. Govind Ballabh Pant Ji.
A havan was organised in its head office in Nainital on July 30 while saplings were planted on Saturday. All Covid protocols were followed during the celebrations, said bank officials.
On the occasion, Dinesh Pant, MD & CEO of the bank, inaugurated its regional office, Haldwani, in a new premises. He mentioned that the bank was on a growth trajectory. Nainital Bank aims to open 25 new branches during the current financial year.
While addressing the gathering of the bank’s customers, shareholders, stakeholders and staff members, Pant informed that the bank had already started the process for implementation of Finacle 10x platform, a state-of-the-art technology to compete with other tech-savvy banks. He added that the bank will increase its branches to 250 and its total business to Rs 20,000 crore by March 2025.
Gross goods and service tax (GST) revenue collected in July stood at Rs 1,16,393 crore showing a revived uptrend in business activity and economy during June as states eased restrictions.
The collections crossed the Rs 1 lakh-crore mark again after dipping from the level in June due to lockdowns or restrictions imposed by states amid the Covid second wave.
“With the easing out of Covid restrictions, GST collection for July 2021 has again crossed Rs 1 lakh crore, which clearly indicates that the economy is recovering at a fast pace,” the finance ministry said in a statement Sunday.
“The robust GST revenues are likely to continue in the coming months too,” it added.
The revenues for the month of July are 33% higher than the GST revenues in the same month last year.
During the month, revenues from import of goods were 36% higher and the revenues from domestic transaction, including import of services, are 32% higher than the revenues from these sources during the same month last year, the ministry added.
Experts said the sharp increase in the collections for June 21 indicates the resumption of economic activities in June and will raise expectations of better collections in the coming months.
”The improvement in GST collections both on domestic transactions and imports, accompanied by the fact that major producing states have shown significant increases, would indicate that the economic activities have resumed across the country,” said MS Mani, senior director at Deloitte India.
”If the country is able to resist the third wave, the GST collections should increase from here on,” said Rajat Bose, partner at Shardul Amarchand Mangaldas & Co.
Of the GST revenue collected in July, central GST is Rs 22,197 crore, state GST is Rs 28,541 crore, integrated GST is Rs 57,864 crore, including Rs 27,900 crore collected on import of goods, and cess is Rs 7,790 crore, including Rs 815 crore collected on import of goods.
The above figure includes GST collection received from GSTR-3B returns filed between July 1and 31 as well as integrated GST and cess collected from imports for the same period.
The GST collection for the returns filed between July 1-5, of Rs 4,937 crore had also been included in the GST collection in the press note for the month of June 2021 since taxpayers were given various relief measures in the form of waiver or reduction in interest on delayed return filing for 15 days for the return filing month June for the taxpayers with the aggregate turnover upto Rs 5 crore in the wake of Covid pandemic second wave.
The government has settled Rs 28,087 crore to central GST and Rs 24,100 crore to state GST from integrated GST as regular settlement. The total revenue of Centre and the States after regular settlement in the month of July 2021 is Rs 50,284 crore for central GST and Rs 52,641 crore for the state GST.
The Reserve Bank of India–Digital Payments Index for March 2021 rose to 270.59 as against 207.84 for March 2020.
“The RBI-DPI index has demonstrated significant growth in the index representing the rapid adoption and deepening of digital payments across the country in recent years,” the RBI said on Wednesday. The index stood at 217.74 for September 2020.
The composite RBI-DPI with March 2018 as base aims to capture the extent of digitisation of payments across the country. The index was launched on January 1 this year.
It comprises of five broad parameters that enable measurement of deepening and penetration of digital payments in the country over different time periods.
Public sector lender Canara Bank has restructured loans of over Rs 13,000 crore as MSME and retail loans took a beating due to the second Covid wave. Fresh slippages came at Rs 4,253 crore which fell sharply on a sequential basis, 19% of the slippages came from the retail segment and 56% came from MSMEs. The bank also restructured loans worth Rs 13,234 crore under the Covid 2.0 recast scheme, out of this Rs 7,610 crore worth of loans were recast from the retail sector while Rs 3,331 crore came from MSMEs. Special mention category loans or which are due beyond 0-90 days stood at Rs 23,985 crore.
“For the retail and MSMEs borrowers who we have assisted with the Covid recast scheme a part of them have started to pre-pay and we are hopeful that as business momentum recovers a large part of these accounts will normalise,” said L.V. Prabhakar, MD, Canara Bank. “As of June 30, our collection efficiency is 91%, which means instalments are coming. There was stress which was duly addressed by giving them recast benefit.”
Profits nearly tripled to Rs 1,177 crore at the end of the June quarter as fee income and treasury gains grew sharply. The lender had reported profits of Rs 406 crore in the corresponding period last year. Though it’s net interest income was flat at Rs 6,147 crore from Rs 6,096 crore in Q1FY21.
Non-Interest Income which includes fees and treasury gains was up by 67.47% to Rs 4,438 crore in the June quarter versus Rs 2,650 crore a year ago.
The bank reported improvement in asset quality metrics. It’s GNPA ratio came at 8.50% for the quarter under review from 8.84% a year ago. Net NPA ratio was at 3.46%.
Total provisions rose nearly 18% to Rs 4574 crore at the end of the June quarter versus Rs 3880 crore a year ago. This included a one time income tax provision of Rs 845 crores. The bank also holds Covid related provisions of Rs 842 crore.
It’s total loans grew by 5.94% to Rs 6.6 lakh crore, out of which retail loans grew at 9.57% while agriculture loans rose 17.03%. The bank said it is targeting an annual credit growth rate of 7-8%.
Net Interest Margin for the reporting quarter fell to 2.71 per cent for Q1FY22 as against 2.84 per cent for Q1FY21.
The bank’s asset quality profile improved with gross non-performing assets down to 8.5 per cent in June 2021 from 8.84 percent during Q1FY21. The net NPA also dipped to 3.46 per cent during the quarter from 3.95 per cent in June 2020.
