Tag: fy2021

SIDBI’s net profit up 3.6% in FY2021, BFSI News, ET BFSI

Banking & Finance

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The operating profit (before provision) of SIDBI has recorded a Year-on-Year (YoY) growth of 8.0% in FY21 over FY20 to Rs. 4,063 crore. The net profit witnessed a growth of 3.6% to Rs. 2,398 crore in FY21, from Rs. 2,315 crore in FY20. Net Interest Income (NII) grew by 11.5% to Rs. 3,678 crore in FY21, from Rs. 3,299 crore in FY20. Total advances marginally declined by 5.6% (YoY) to Rs. 1,56,233 crore as of March 31, 2021, from Rs. 165,422 crore as of March 31, 2020. Earnings Per Share improved to Rs. 45.09 in FY 21 from Rs. 43.51 in FY 20

Sivasubramanian Ramann, Chairman and Managing Director, SIDBI, said, “SIDBI has been responsive to the COVID-19 challenges faced by the MSME sector. Besides channelizing the Government of India / Reserve Bank of India (RBI) support to partner lending institutions, SIDBI has launched several schemes like SAFE, SAFEPLUS, AROG, and TWARIT to directly enable MSMEs to revive and thrive. To respond to the emerging needs of the MSME sector, SIDBI continued with its developmental engagements including inter alia powering national missions through digital portals, setting up project management units in 11 states for strengthening the ecosystem, supporting 1700 Women Homepreneurs in 7 states, setting up 100 Swavalamban Connect Kendras to kindle the aspirations of youth / displaced population, as also setting up of Swavalamban Crisis Responsive Fund for MSMEs. I can assure you that besides growing its topline and bottomline, SIDBI shall rise to the occasion for implementing national priorities and continue to contribute to an inclusive AtmaNirbhar Bharat.”



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Icra survey, BFSI News, ET BFSI

Personal Finance

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Around 42 per cent of non-banking financial companies (NBFCs) expect a growth of more than 15 per cent in their asset under management (AUM) in fiscal 2021-22, says an Icra Ratings survey. The findings are based on a survey of 65 non-banks, constituting around 60 per cent of the industry AUM.

The agency conducted the survey to understand the impact of the second wave of COVID-19 on these entities and their expectations going forward.

It said NBFCs growth expectations have moderated vis-a-vis the expectations six months earlier. This follows the possible impact of Covid 2.0 on business in Q1 FY2022.

“While 42 per cent of the issuers (NBFCs by number) are expecting a more than 15 per cent growth in AUM in FY2022, the proportion based on AUM weights is much lower at 8 per cent, indicating that larger players in the segment expect a relatively moderate growth in FY2022,” the agency’s Vice President (Financial Sector Ratings) Manushree Saggar said.

With most of the lenders (74 per cent in AUM terms) indicating an up to 10 per cent AUM growth, the agency expects the growth for the overall industry to be about 7-9 per cent for FY2022.

Within the non-bank finance sector, segments like MFIs, SME-focussed NBFCs and affordable housing finance would continue to record much higher growth than the overall industry averages, supported by good demand and lower base, she said.

The survey said with gradual easing of lockdowns and moderation in fresh cases of Covid and with increased vaccination coverage, the lenders are optimistic on growth pick-up in balance part of FY2022 and expect it to be higher than the growth seen in FY2021.

However, the non-bank finance companies are expecting the asset quality related pain to persist in the current fiscal as well, it showed.

“Overall, 87 per cent of issuers (by AUM) expect reported gross stage 3/ NPAs to be either same or higher than March 2021 levels, which in turn will keep the credit costs elevated,” it said.

Over 90 per cent of lenders (by AUM) expects the credit costs to remain stable or increase further over FY2021 levels.

On the restructuring front, while lenders are expecting marginally higher numbers as compared to the last fiscal, the overall numbers are expected to be low, the agency said.

Saggar said with no blanket moratorium and reflecting the stress on the cash flows of the underlying borrowers, mid-sized lenders (AUM between Rs 5,000-Rs 20,000 crore) are expecting a higher share of restructuring under Restructuring 2.0.

“Overall, the restructured book of non-bank finance entities is expected to double to 3.1-3.3 per cent in March 2022 from 1.6 per cent in March 2021,” Saggar added.

The agency said a significantly higher number of issuers (56 per cent) are expecting to raise capital in FY2022 as compared to the earlier survey, wherein only 28 per cent of the issuers were expected capital raise in FY2022.

It expects the pre-tax profitability for non-bank finance companies in FY2022 would remain similar to the last fiscal which was around 30 per cent lower than the pre-Covid levels.



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With just 24% recovery rate, IBC lags other mechanisms, BFSI News, ET BFSI

Banking & Finance

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The Videocon resolution, which yielded less than 10% for lenders, has brought back recovery woes in the Insolvency and Bankruptcy Code mechanism in the spotlight.

Bankers have lost over Rs 40,000 crore in the Videocon account, as Anil Agarwal’s Twin Star snapped the company for less than Rs 3,000 crore.

While RBI has pointed to a recovery rate of 45% in IBC so far, barring the recovery rates in the top nine accounts, recoveries in other accounts average 24%. The top nine accounts were from the steel sector which led to good recoveries, while accounts in the power and infrastructure sectors struggle for buyers.

Recoveries from earlier resolution mechanisms resulted in a loss of nearly 70%.

Fiscal 2021 drop

The realisation for financial creditors from IBC declined significantly in FY2021 with a total resolution amount of around Rs 26,000 crore, almost a quarter of the realisations in fiscal 2020.

The pandemic has increased operational challenges for the various parties involved in a CIRP, which resulted in limited cases yielding a resolution plan. The suspension of new proceedings under the IBC for the entire FY21 resulted in a sharp slowdown in the resolution process.

Out of the total 4,300 cases that have been admitted to bankruptcy courts since FY17, only 8% has been resolved and nearly 40% of the cases are still pending. About 30% of the cases have seen liquidation.

From its commencement in December 2016, 4,376 CIRPs have been admitted, of which 2,653 were closed till March 2021,

About 40% of the cases admitted by the NCLT were closed on appeal or settled or withdrawn under Section 12A which highlights that at least some promoters have been more willing to pay their dues to keep the IBC proceedings at bay. The extent of cases being referred to liquidation remains high at about 40% and only a quarter of such cases have seen the liquidation process come to a conclusion. The average realisation through liquidation has been a mere 3% of the claim amount.

Fiscal 2022 hopes

Although rating agency ICRA estimates that financial creditors could realise about Rs 55,000 crore to Rs 60,000 crore in FY2022 through successful resolution plans from the IBC. The higher realisation by the financial creditors would depend on the successful resolution of 8-9 big-ticket accounts, as more than 20% of ICRA’s estimated realisation for the year could be from these alone.



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HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones, BFSI News, ET BFSI

Banking & Finance

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It was not corporates but retail borrowers who rushed to avail the debt recast scheme announced by the Reserve Bank of India to alleviate pandemic stress last year.

Retail loan restructuring by top three private banks, HDFC Bank, ICICI Bank and Axis Bank, at Rs 6,600 crore, was three times the Rs 2,100 crore restructured loans by corporates, according to a report.

However, while the retail loan restructuring ended by March 31, corporate loan recasts are allowed till June end.

Fresh concerns

With a fresh surge in Covid infections and subsequent lockdowns, lenders are staring at renewed stress in loan accounts.

Sameer Narang, Chief Economist of Bank of Baroda, recently told ETBFSI that the salaried segment is still alright but the informal sector will be impacted. “Banks may not be that impacted as banks do not cater the informal sector in a big way as NBFCs does. There will be an impact on NBFCs, and they would require some degree of support. It also depends upon the pace of the second wave. We should wait and see how things pan out. If it is a phenomenon for 6-8 weeks then most of the segments will ride it over. If it lasts longer then this might be an issue for segments. It is very difficult to create a policy in an uncertain environment.”

Asset quality

HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones

Ratings agency Icra too had raised concerns over the asset quality of retail loans.

The rising Covid cases have again raised concerns on the asset quality of retail loans from non-banking financial companies (NBFCs) and housing finance companies (HFCs), according to investment information agency ICRA.

The restrictions on movement will have a bearing on the collection efforts of NBFCs especially for microfinance loans where cash collections still remain dominant, it said in a report.

Commercial vehicle loans can also face stress if the inter-state restrictions are re-imposed, though even the current restrictions put in place in key geographies like Maharashtra and Delhi where non-essential services are closed will lead to lower fleet utilisation for operators.

However, said ICRA, housing loans are expected to remain most resilient as was seen even last year given the secured nature of asset class and priority given by borrowers to repay them.

No relief measures

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.
“In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das had said after the central bank’s monetary policy review.

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” Icra said in a report.

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ICICI Bank’s digital outreach nets 15 lakh users from other banks, BFSI News, ET BFSI

Banking & Finance

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India’s second largest private bank, ICICI Bank’s iMobile Pay has onboarded 15 lakh users who are non-ICICI Bank customers since the launch in December 2020 and has seen high customer engagement through repeat usage of features like Pay2Contact, scan to pay and among other options.

Apart from this it has also invested in expanding its merchant ecosystem and has put in place a payment stack. The transactions with Eazypay have increased four times between June 2020 to March 2021.

On FASTag it also partnered with PhonePe to issue FASTag using UPI on PhonePe’s application.

The lenders digital channels across internet, mobile banking and PoS accounted for 90% of savings account transactions in FY2021 and volume of mobile banking transactions increased by 61% year-on-year in Q4-2021.

ICICI bank also witnessed the value of merchant acquiring transactions on UPI increasing by 149% and its electronic toll collection also grew by 51% year-on-year with a market share of 37% by value in Q4-2021.

The bank said its micro market strategy to tap opportunities based on the market potential and 360-degree customer coverage using ICICI STACK has played a significant role in expanding their franchise and deepening relationships with their customers. The bank is also looking to participate both through directly their own platforms and partner with third party players in the P2P and P2M space of the UPI ecosystem.

The bank also sold 33% of the term life insurance policies online and 56% of fixed deposits and 64% of mutual fund SIPs were done digitally in FY2021.

The bank is also building a vast data lake to derive insights into customer behavior, build new use cases to improve their product penetration, increase customer stickiness and improve net promoter scores.

ICICI bank said it is investing in new journeys and innovating existing journeys for high value transactions through NEFT and RTGS which are at the core of high value financial transactions.



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Small finance banks see loan collections drop as Covid rages, BFSI News, ET BFSI

Banking & Finance

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With the Covid pandemic spreading fast into the hinterland, small finance banks are feeling the heat.

The second Covid wave is resulting in a delay in collections this month, though banks are much prepared than last time when they were caught unawares by the pandemic.

The impact is more in smaller towns rather than the rural areas which have seen good monsoon. Also, several bank employees are down with Covid, hampering collection efforts.

As per a report by Emkay Global, the first fortnight of April 2021 has been weak in terms of business activity which is down by 20% across various segments due to lower working days and onset of an aggressive second wave of Covid-19 infections. This is expected to fall further with far stricter enforcement of localised lockdowns.

Cautious lenders

According to experts, credit appetite is likely to remain intact but lenders may turn cautious, which could hurt growth in the near term.

The collection efficiencies were improving from August-September onwards on a month-on-month basis across asset classes. However, a year back, the restrictions announced so far are lower in trajectory or intensity. So while there will be an impact on collections and delinquencies, the impact should be lower than what we saw in Q1 of last year.

But if there was a rise in the intensity of cases accompanied by containment measures and restrictions, it could further impact collections.

The spread intensity and duration of the pandemic, how long the lockdown and curbs last and vaccine trajectory will decide the severity of hit to the SFBs.

Microfinance hit

The mainstay of small finance banks, the microfinance loans are likely to face asset quality pressures in the near term due to the recent surge in Covid infections.

However, a majority of microfinance institutions (MFIs) will be able to withstand any stress due to their improving collection efficiency and good on-balance sheet liquidity, Icra Ratings said.

“We estimate asset quality pressures for the MFI industry to continue in the near term and the same may get accentuated with the recent increase in Covid-19 infections and localised restrictions/lockdowns,” the agency’s Vice President and Sector Head (financial sector ratings) Sachin Sachdeva said.

The agency noted that even though the near-term outlook for MFIs is clouded given the Covid induced disruptions, the overall long-term growth outlook for the domestic microfinance industry, including MFIs and micro finance-focused small finance banks (SFBs), remains robust.

The collection efficiency (total collections/scheduled demand) of the sector improved to around 102 per cent in December 2020.

The disbursements also started picking up from Q2 FY2021 onwards, which is expected to help the MFI industry achieve growth of 9-11 per cent in its assets under management (AUM) in FY2021, it said.

Collection efficiency

Sachdeva said the improvement in collection efficiency and pickup in growth in AUM in H2 FY2021 has helped the industry witness marginal improvement in the overdue portfolio (0+ days past due (dpd)) to 16.7 per cent as on December 31, 2020, which had earlier increased to 18.1 per cent as on September 30, 2020 after the lifting of the moratorium.

There has been further improvement in Q4 FY2021 as well. However, overdues remain significantly higher than pre-Covid levels, he said.

“We estimate the credit costs to rise significantly to 6-7 per cent (spread over two years: FY2021-FY2022) from 1.5 per cent in FY2020, he said.



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Banks are without a raft in Covid storm, BFSI News, ET BFSI

Banking & Finance

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Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

“In today’s conditions, there is no need for a moratorium”RBI governor Shaktikanta Das

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” ratings agency Icra said in a report.

No standstill

Banks enjoyed a standstill on classifying loans as non-performing last fiscal and also accounted for interest accrued despite not receiving payments during the quarter. Both these leeways will no longer be available after the final SC order in March.

As a result, bank NPAs are likely to spike and they may have to reverse some interest earned on loan accounts above Rs 2 crore as the SC order has directed banks to charge simple and not compound interest on loans between March and August 2020.

It is estimated that banks could face a hit of between Rs 7,000 crore to Rs 10,000 crore due to the reversal of interest as it is unclear whether the government will reimburse this waiver – as it earlier did for small-ticket advances.

Analysts will watch out whether banks will provide for the write-back on compounded interest as directed by the ape court or adjust it through their Covid 19 provisions already accounted for.

Fourth quarter

The banking sector had got back to some sense of normalcy in the fourth quarter as collection efficiency came close to or at pre-Covid levels and loan growth recovered.

However, a resurgence in Covid cases, leading to localised lockdowns in various states will force banks to look out for risk mitigation.

There is a likelihood of delayed recovery in credit offtake after the Covid spike. Analysts expect the banking sector loan growth to recover to 6% to 7% in the fiscal ending March 2021 mainly due to a growth in retail loans in the second half of the year. Large lenders with a wider network are expected to clock in a higher year on year increase with a double-digit increase in credit growth.

While banks may not have any impact on margins as they have not cut deposit or MCLR based rate, higher liquidity on the balance sheet could decline. Treasury income may also drop on sequential basis as 10-year Gsec has risen by about 28 basis points during the quarter.

The silver lining

The only respite for banks is their gross non-performing assets may not jump as estimated by RBI’s fiscal stability report.

Icra sees the NPA ratio at 9.5-9.7% as of March-end, lower than RBI’s estimate of 12.5% for the same period.
The RBI’s Financial Stability Report (FSR) of December 2020 has stated that banks’ gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, and escalate to 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario.

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