State Bank of India has entered into a co-lending agreement with Capri Global Capital Ltd (CGCL) to boost MSME lending. The two parties have signed a Memorandum of Understanding to create multiple co-lending opportunities for the financial empowerment of the MSMEs, which aims to provide further impetus to financial inclusion in the country, the bank said in a release.
Dinesh Khara, Chairman, SBI said, “To improve the credit to the underserved and unserved, we are happy to associate with Capri Global Capital. We believe this collaboration will provide the nimble footedness of NBFC and quality credit to the right set of the population which will further deepen lending to MSMEs through the last mile connect.”
RBI had issued guidelines on the co-lending scheme for banks and NBFCs for priority sector lending to improve the flow of credit to unserved and underserved sectors of the economy, and make funds available to borrowers at an affordable cost.
State Bank of India has entered into a co-lending agreement with U GRO Capital to offer financing solutions to the unserved and underserved MSMEs of the country in line with RBI guidelines.
Dinesh Khara, Chairman, SBI said, “This collaboration will further enhance our distribution network, as we aim to extend our credit reach to more MSMEs. Such partnerships align with our commitment to accelerate effective and affordable credit to MSMEs in India and contribute to the country’s financial inclusion imperative towards building an Atmanirbhar Bharat.”
RBI had issued guidelines on co-lending schemes for banks and NBFCs for Priority Sector Lending to improve the flow of credit to unserved and underserved sectors of the economy and to make funds available to borrowers at an affordable cost.
India is ready to move into the next orbit of growth with the hugely successful implementation of the COVID-19 vaccination program, State Bank of India (SBI) Chairman Dinesh Kumar Khara said on Saturday.
The kind of vaccine drive the country has seen makes all the Indians proud, especially because the domestically produced vaccine is being used in a big way, Khara said at the India Pavilion at EXPO2020 Dubai.
“Actually, it (rapid vaccination) has enhanced the confidence level of the common man as well as the economy,” he said.
India recently achieved a major milestone in its vaccination programme against COVID-19 as the cumulative vaccine doses administered in the country surpassed the 100-crore mark.
“The country has lived through one of the most challenging times and has come out of it in a very successful manner that gives the confidence that going forward, the journey should be rather easy, and we should be having a huge opportunity for growth… which I am sure will go a long way in terms of meeting the common man’s aspirations,” he said.
The credit growth in the economy was quite muted for almost two years, he said, expressing hope that the capacity utilisation will improve, and help revive investment demand in the corporate sector.
“The government has done a wonderful job by continuing its focus on infrastructure investment, which has gone a long way in terms of giving a push to the core sectors of the economy. And with private corporate sectors coming with the investment, the economy will certainly move to the next orbit of development,” he added.
On the India Pavilion, Khara said it is presenting the real India, which is full of opportunities, to the whole world in an impressive manner.
SBI Chairman Dinesh Kumar Khara sees significant improvement in India Inc’s capacity utilisation by the next quarter saying that major additions are expected in sectors like iron, steel, oil and metals.
“There is a clear availability of demand. Demand (is) coming in and capacity augmentation is happening. And I hope by the end of the current quarter or next quarter, there should be significant improvement in capacity utilisation…The major (capacity addition) is in the iron and steel sector. Oil companies might also start availing working capital limits, and the metal sector is also seeing an uptick, so capacity addition is expected in that sector,” said Dinesh Khara, Chairman SBI in a virtual press conference following SBI’s Q2 financial results.
Khara shared that the lender has currently unutilised term loans to the corporate to the extent of 27 per cent,and while working capital limits in large corporates is unutilised to the extent of 50 per cent. Khara said it is not possible to articulate when corporate book growth will come back but he added he expects unutilised capacity to reduce to roughly 30 per cent in the subsequent quarters.
SBI Chairman also said the lender is not losing any such business to mutual funds due to prevailing excess liquidity in the system, indicating corporates in the present low interest rate environment would prefer banks when scaling up their investments.
Mumbai: SBI chairman Dinesh Khara has said that the bank has full confidence in the judiciary and that former SBI chairman Pratip Chaudhury would be released unconditionally soon. He also said that the banking community, through the Indian Banks’ Association, has taken up the matter with the government.
“The arrest of Mr Chaudhury is extremely unfortunate. There have been several reactions in the public space of the banking community as well as previous chairmen. It appears that an opportunity was not given to him to be heard before the arrest. We have utmost faith in the country’s judicial system and are confident that he will be released unconditionally at the earliest,” Khara told reporters here on Wednesday.
Banking sources said that the complainant in the same case had filed a false FIR against the resolution professional (RP) who had been appointed to take charge at the defaulting company. This had resulted in a landmark judgment that said a case against the RP can be filed only with the Insolvency and Bankruptcy Board of India (IBBI).
Khara denied that there were any irregularities in the sale of the loan by SBI. “As far as SBI is concerned, we adhere to the best practices in corporate governance and there has been no irregularities in the instant case and the prescribed rules and process were followed by the bank in dealing with this account.” Khara indicated that the decision on the sale of the NPA was unlikely to have been taken by Chaudhury. “Issues of this magnitude are invariably dealt with at a local level and the top management of the bank, including the chairman, are not involved in decision making. We have got the structure in place and we are confident that people across the hierarchy can take decisions in such matters,” Khara said.
Banking sources said that the complainant in this case was politically connected. They said that it appeared to be a premeditated case as most of the higher courts are on vacation for Diwali.
Meanwhile, SBI sources said that the valuations mentioned in the order are irrelevant as the properties were not sold by the bank. They said that the bank had sanctioned a term loan of Rs 24 crore and a cash credit limit of Rs 1 crore was sanctioned in 2008 and the loan had to be restructured within a year itself. Despite restructuring, the loan turned into a non-performing asset in 2010. This prompted the bank to send a recall notice for Rs 34 crore in 2012 and a suit was filed in the debt recovery tribunal in 2013 for Rs 40 crore.
As the bank was not successful in attaching the property under the Securitisation Act, the loan was sold to Alchemist Asset Reconstruction Company (ARC) for Rs 25 crore in 2014. The ARC too could not recover the loan and finally invoked the IBC.
The promoters had filed an FIR against the RP, who was arrested. It was in this case that the landmark order was passed requiring complaints against the RP to be filed only with the IBBI. Banking sources said that both NCLAT and the Supreme Court have passed strictures against the promoters.
The State Bank of India, India’s largest lender, today reported a standalone net profit of Rs 7,626 crore, up 67% on year, the highest ever for the bank.
A year ago, the bank reported a net profit of Rs 4,574 crore. On a sequential basis, the profit rose 17% from Rs 6,504 crore in the June quarter.
The bank’s asset quality has significantly improved, chairman Dinesh Khara said at the earnings announcement.
Gross non performing assets came in at 4.90% in the September quarter, lower than 5.32% in the June quarter and 5.28% in the year ago quarter.
Meanwhile, the net NPA ratio stood at 1.52% for the quarter.
The net interest income (NII) – the difference between interest earned and expended – rose 10.6% to Rs 31,184 crore in Jul-Sep.
The non interest income fell 3.7% to Rs 8,207 crore compared with Rs 8,527 crore a year ago.
Khara highlighted that the capacity utilisation of manufacturing is still very low. Advances rose by just 6.17% over last year, driven by personal retail advances, up 15.17% on year, and foreign office advances, up 16.18% on year.
Domestic advances grew 4.61%, with home loans, which constitute 24% of domestic advances, rising 10.74% on year.
Total deposits grew nearly 10% on year, current account deposits grew 19.2% and saving bank deposits grew 10.55%.
MUMBAI: Availability of cheap funds in the money markets through commercial papers is prompting financial intermediaries to arbitrage and chase higher returns. While broking firms are raising funds for funding of initial public offers (IPOs), bankers fear that the money might find a way into riskier assets.
The surplus liquidity in the money market has resulted in the heightened issuance of commercial papers. The average monthly outstanding during the first half of the current financial year has been over Rs 4 lakh crore. However, according to bankers, concerns are emerging on the nature of issuers with some borrowing at high rates.
Commercial papers, although debt instruments like bonds, are for very short tenures (usually three months), because of which issuers can get better ratings than they would for longer-term bonds. These are issued by corporates as well as finance companies and, in recent times, mutual funds have turned out to be major investors in this segment.The share of non-banking financial companies (NBFCs) in total commercial paper issuances increased to 43.2% in H1 of 2021-22 from 21.9% in the corresponding period of the previous year, while that of corporates moderated to 46.2% from 64.9% over the same period. Top-rated borrowers can raise funds at close to the reverse repo rate of 3.35%, which is the rate at which banks lend to the RBI. However, yield-chasing fund managers make small investments in high-yield papers and there have been outlier issuers at 12-13% as well.
According to bankers, there is a likelihood that the availability of cheap funds might prompt some intermediaries to arbitrate with more risky investments such as stressed assets. Although companies dealing in stressed assets do not borrow directly from money markets, they can raise money through intermediaries who have access.
Last month, SBI chairman Dinesh Khara said that the drop in credit deposit ratio has resulted in the mispricing of credit risk by banks. “There is a temptation on the part of lenders to go down the risk curve and misprice the risk. We are starting to see this,” he said. While bank deposits rose 3.2% to Rs 156 lakh crore in FY22 up to September 24, advances grew only 0.1% to Rs 109.5 lakh crore in the same period.
The RBI’s monetary policy report noted that commercial paper issuances increased to Rs 10.1 lakh crore during H1 2021-22 from Rs 7.9 lakh crore in H1FY21. Their rates were on an average 46 basis points (100bps = 1 percentage point) higher than the repo rate. However, the yields have risen due to increased issuances by NBFCs, partly to mobilise resources for investment in IPOs, but moderated subsequently, the report said.
State Bank of India will soon roll out its Environmental, Social, and Governance structure, with an aim to increase its exposure to climate-change-mitigation companies, such as renewable energy, by extending credit relaxations, said Chairman Dinesh Khara.
For loans exceeding Rs 50 crore, borrowers are assigned scores on the basis of their performance on various ESG parameters, Khara said at the ESG India Leadership Awards 2021 on Thursday.
“The bank acknowledges the increasing risk of climate change that is embedded in its credit portfolio, and is in the process of devising a framework for climate risk management. We are also in the process of identifying and managing risk arising out of ESG practices, to increase our exposure to climate-change-mitigation companies, which includes relaxation in extending credit facilities to borrowers in the renewable energy sector,” Khara said.
Unless banks are able to provide adequate credit to green projects and measure risk in their portfolio, the bank’s depositors and shareholders will continue to carry ESG risk that can erode returns, Khara said.
According to experts, ESG investors are likely to face risks of small cap and single stock investments, and interest rate and inflation.
Khara spoke of the bank’s plan to embrace ESG investments.
SBI aims to be carbon neutral by 2030, and in line with this target the bank has taken a number of initiatives to reduce its carbon impact, including installation of solar power plants, tree plantation, organic farming and banning the use of single use plastic, Khara said.
The bank has taken a two-fold approach to reach its 2030 goal – managing the impact of its own operations and directing its funding to climate-change-mitigation sectors, he added.
On India’s approach towards sustainable growth, Khara said the banking sector should accelerate green lending and report their ESG portfolio performance. India should define its green finance by combining international practices, developing its set of principles, and obtaining stakeholders’ views.
“To support acceleration in green financing, a number of structural changes will be needed in the traditional lending approach, including evaluation and certification of the green credentials of each project, understanding of the corporate roadmap to achieve net zero, and how projects will contribute to the achievement of net zero emissions,” he said.
Meanwhile, at the award function, Infosys emerged as a ESG leader across industries, while Axis Bank led the pack in transparency and disclosures, said ESGRisk.ai, the organiser, in a note.
Inter-creditor agreements (ICAs) for all the assets identified for transfer to the National Asset Reconstruction Company (NARCL) in the first round have been signed, State Bank of India (SBI) chairman Dinesh Khara told FE in an interview.
In terms of the shareholding of NARCL, private-sector banks have come forward and they are in the process of obtaining the requisite approvals in order to invest in the entity, Khara said.
“So they are fully on board and in all those accounts where ICAs have been signed, there is a consensus among banks that all such accounts will move into NARCL,” Khara said, adding that irrespective of ownership, assets would get aggregated. “All those who have signed ICAs would be happy to have the assets aggregated and move them towards resolution,” he said.
An ICA is an agreement signed between the lenders to a company as a sign of their commitment to ensure a common resolution of the stress built up in that company.
The NARCL has been set up with a paid-up capital of Rs 149 crore, all of which has come from eight public-sector banks. Banks are understood to have identified 22 accounts with a total outstanding of Rs 89,000 crore for transfer to the NARCL in the first tranche. Eventually, the bad bank is expected to acquire assets worth Rs 2 lakh crore from lenders. Sector analysts say that the aggregation of the exposures of several lenders is the chief advantage of the NARCL.
“The chances of resolution improve when you club together all the piecemeal exposures of each bank into a single asset. The assets identified in the first tranche are very old ones where private banks have anyway made an exit. So aggregation shouldn’t face too many challenges,” said an analyst.
“One of the challenges for resolution was that each bank had a different kind of charge attached to the same asset. Aggregation through the NARCL takes care of that problem,” said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services (APAS). “We must hope now that the NARCL is steered competently by the management so that there is actual resolution of stress,” he added.
Dinesh Khara, Chairman, SBI said, “The RBI policy is pragmatic and strikes a fine balance between stance and strategy. While the policy stance continues to be accommodative to continuously support growth, a strategy of careful recalibration of liquidity management is clearly indicated with the roll out of VRRR.
Dinesh Khara
The policy has also nudged banks to shift to an alternate reference rate with the discontinuation of LIBOR. The extension of the on-tap TLTRO scheme and the deferral of the deadline for meeting the operational parameters for stressed entities will help corporates navigate through the pandemic with a degree of certainty.”
Rajni Thakur, Chief Economist, RBL Bank said, “MPC announcements were pretty much on expected lines with key rates held constant and upward revision of inflation forecasts for the current fiscal year.
Policy bias in favour of nurturing growth continues and there was a strong denial of any urgency to scale back monetary support on account of higher inflation or potential global normalisation.
While enhanced VRRR quantum and one voice of dissent can be seen by market as mildly dovish, in all likelihood, RBI has kept its options open to support growth should the third wave disrupt nascent momentum or to use monetary tools to begin normalisation if growth -inflation dynamics start to get complicated.”
Rajni Thakur
On similar lines, Siddhartha Sanyal, Chief Economist and Head – Research, Bandhan Bank said, “While the status quo on rates with a 6-0 voting and continued “accommodative” stance were on expected lines, the split voting as regards the policy stance was a modest surprise. Still, the overall tone of policy continued to focus clearly on supporting growth recovery.”
“Given higher global commodity prices, sticky food inflation and rise in domestic fuel prices, inflation may stay higher than for the RBI’s comfort. However, with the tentative and uneven nature of recovery, one expects the MPC to continue prioritizing supporting growth in the coming months.”
Sidharth Sanyal
Indranil Pan, Chief Economist – YES BANKsaid, “RBI has attempted and managed to balance the contradicting objectives of managing inflation expectations while also communicating the need for sustained policy accommodation.
Even as the inflation forecasts for the current FY have been raised, the communication continues to be that the hump in inflation is supply-led and thus ‘transitory’ wherein the demand side push for inflation is almost absent. This is the reason for RBI to have been able to see-through the current high inflation levels.
RBI continues to highlight that any pre-emptive tightening can kill the nascent and hesitant recovery that is taking shape. In cognizance with an extremely uncertain growth climate, we think that the RBI will maintain its accommodative policy and not move on any form of tightening – be it on the rates side or on the liquidity side – till the end of the current FY.”
Yes Bank
While A. K. Das, Managing Director & CEO, Bank of Indiahas a positive outlook. He said, “Continued accommodative stance of RBI is expected to catalyze growth in real segments in a strong, broad based and sustained manner”.
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