Tag: hdfc bank

RBI’s current account rule kicks in, hits small firms, BFSI News, ET BFSI

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Small businessmen and firms are hit as banks rush to meet the July 31, Reserve Bank of India deadline for not opening current account for borrowers who have loans with other banks

Banks are freezing current accounts of firms with more than 10% loans with other banks. Mostly small firms are hit as large corprates have their loans spread across banks.

The circular

In its August 6, 2020, circular, the regulator had mandated that no bank shall open current accounts for customers who have availed credit facilities in the form of CC/OD from the banking system, and all transactions shall be routed through the CC/OD account. The RBI moved was targeted to ensure greater discipline and transparency in the way large borrowers move funds.

Banks can have current accounts for that bank which accounts for at least 10% of its loans, according to RBI rules.

It had said that in the case where a bank’s exposure to a borrower was less than 10% of the banking system’s exposure to that borrower, debits to the CC/OD account can only be for credit to the CC/OD account of that borrower with a bank that has 10% or more of the exposure of the banking system to that borrower.

The circular was to be implemented by January this year. However, with banks dragging their feet, the central bank has imposed July 2021 as a final deadline.

However, small borrowers who use one bank to borrow and another for transactions will no longer be able to do so.

Several entrepreneurs, who do banking with private banks for their superior service, but have loans with public sector banks have been hit by the circular as their accounts are frozen.

Big banks gain

The Reserve Bank of India’s (RBI) insistence on companies opening current accounts with banks is among the factors that have helped large lenders such as HDFC Bank, ICICI Bank and SBI raise their shares of the competitive corporate banking market in 2020, according to a report.

The RBI had come up with the circular that specified which bank can open a current account for a borrower, in order to check any misuse through multiple current accounts.

A fourth of the large and medium corporates said they were banking with at least one among ICICI Bank, Axis Bank and HDFC Bank as against 17 per cent in 2016, it said adding that the private sector banks have grown at over 25 per cent per year.



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Foreign banks lose card market share, BFSI News, ET BFSI

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Foreign banks have seen their share of credit cards come down by a third in the last three years. In terms of value of transactions, their share has halved as that of private and public sector banks have grown.

According to data released by the RBI, foreign banks had 57 lakh credit cards outstanding as of March 2018. At that time, there were 3.8 crore credit cards in India, which gave the multinationals a market share of 15%. However, despite losing market share, the foreign banks had significant clout because of the higher value of transactions by their customers who spent more than the average cardholder. In 2018, the foreign banks had monthly card spends of Rs 10,380 crore — a 23.4% share.

Fast forward to March 2021, when the total market expanded to 6.2 crore cards while the number of cards issued by foreign banks stood at 66 lakhs, reflecting a market share of nearly 11%. It is not just in the number of cards that the multinationals have been losing ground. In terms of value of transactions too, foreign banks have a market share of 11.8% in the Rs 72,372-crore monthly volume.

While private banks have consolidated their market share in the card space, increasing their share from 63% to 66%, public sector banks have grown from 21.6% to 23.2% in three years. State Bank of India accounts for almost 80% of all public sector banks. Overall, SBI has 19% of the credit card market, which is still behind the 24% share of HDFC Bank.In global banks, four dominate the credit card space — Citi, Amex, StanChart and HSBC. These MNC banks have also played a pioneering role in the card business in India and they dominated the market in the ’90s. Citi’s decision to exit its retail business in India could further reduce share of foreign banks, should the portfolio be taken by a local player. Additionally, American Express faces a freeze on on-boarding new customers due to data-localisation norms even as more private banks are stepping in.

In 2018, American Express had 3% of the credit card market in terms of number of customers. But it accounted for 10% of all spending by credit card customers in India. In 2021, their share of cards shrunk to 2.5%, while the share of spending declined to 4%. Citibank, which had a 7% share of cards and 9% share of spend, saw these fall to 4% and 6%, respectively. HSBC has held ground better than others with a market share of 1.4% as of March 2021 (1.5% in ’18) and retaining its 1% share of total spend.



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ICICI, Axis and HDFC Bank pick up stake in blockchain start-up

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Private sector lenders including HDFC Bank, ICICI Bank and Axis Bank have picked up a stake in blockchain technology focussed start-up IBBIC Pvt Ltd.

In separate stock exchange filings on Tuesday, HDFC Bank and Axis Bank said they have picked up 50,000 equity shares amounting to 5.55 per cent stake in IBBIC.

HDFC Bank and Axis Bank invested ₹5 lakh each for the shares.

ICICI Bank also said it has subscribed to 49,000 fully paid-up equity shares of face value ₹10 each of IBBIC constituting 5.44 per cent of the issued and paid-up share capital. It paid ₹4.9 lakh for the shares.

IBBIC was incorporated on May 25 this year as a financial technology company with the objective of providing a platform for exploring, building, and implementing distributed ledger technology (DLT) solutions for the Indian financial services sector.

About 15 banks have come together to set up IBBIC, with an aim to expand the use of blockchain application in financial sector transactions.

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HDFC Bank’s Puri top earner among bankers in FY21; ICICI Bank’s Bakhshi forgoes salary in COVID year, BFSI News, ET BFSI

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HDFC Bank‘s Aditya Puri emerged as the highest grossing banker among the top three private sector lenders in his retirement year with total emoluments of Rs 13.82 crore. His successor Sashidhar Jagdishan, who took over as the chief executive and managing director of the largest private sector lender on October 27, 2020 grossed a salary of Rs 4.77 crore for the fiscal year, which included payments as a group head till his elevation. Puri’s overall payments included Rs 3.5 crore as post-retirement benefits.

Its immediate rival ICICI Bank‘s MD and CEO Sandeep Bakhshi “voluntarily relinquished” his fixed compensation of basic and supplementary allowances for FY21, which had seen wide-scale impact of the COVID pandemic, as per the second largest lender’s annual report.

Bakhshi, however, did receive allowances and perquisites amounting to Rs 38.38 lakh, the document said, adding he also got Rs 63.60 lakh as performance bonus from ICICI Prudential Life Insurance Company as deferred variable pay for FY17 and FY18.

Amitabh Chaudhry, who has been leading the third largest private sector lender Axis Bank, got paid Rs 6.52 crore, the bank’s annual report said, adding that the top management was not given any salary increment in FY21.

In the case of ICICI Bank, material risk takers including executive directors, chief financial officer and company secretary voluntarily opted for a 10 per cent salary reduction from May 1 in their payments, possibly because of the impact of COVID. Its executive director in-charge of wholesale banking Vishakha Mulye grossed Rs 5.64 crore, as per the annual report.

When compared with the bank’s median salary, the allowances drawn by Jagdishan were the highest at 139 times the median salary of a bank employee, while Chaudhry earned 104 times the median and ICICI Bank executive directors drew 96 times the median salary.

Data available for ‘crorepati’ bankers, or those earning above Rs 8.5 lakh a month, revealed that HDFC Bank had 200 executives in this exclusive club, including key management personnel, serving officials and those who left the lender midway through the fiscal year.

In comparison, Axis Bank had 69 bankers in the category who served throughout the year, while 17 employees who would otherwise have been in the club left it midway through the year, as per the annual report.



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SBI, HDFC Bank want RBI inspection reports kept under wraps, BFSI News, ET BFSI

Banking & Finance

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State Bank of India and HDFC Bank have opposed the Supreme Court order that had said the Reserve Bank of India can divulge inspection reports of commercial banks through Right To Information applications. The court has kept the hearing for Thursday. The RBI had allowed making such reports public following a Supreme Court order in 2015. Then, it was agreed that the entire report would not be made public, but the relevant portions on bad debts, and borrowers etc.

However, even such information can disclose much information about the borrowers, which violates various client confidentiality clauses of banks, the lenders argue.

The SC verdict in April

In a major blow to banks, the Supreme Court in April this year had refused to recall its 2015 judgment, which had held that the RBI will have to provide information about the banks and financial institutions (FIs) regulated by it under the transparency law.

Several FIs and banks, including the Canara Bank, the Bank of Baroda, the UCO Bank and the Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.

The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.

“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” a bench of justices L Nageswara Rao and Vineet Saran said.

The order, written by Justice Rao, said in the instant case, the dispute relates to information to be provided by the Reserve Bank of India (RBI) under the Right to Information Act (RTI) and though the information pertained to banks, it was the decision of the RBI that was in challenge and decided by this court.

The RBI stance

The RBI in 2019 has declined to share details of banks inspection reports citing a section of the transparency law that exempts public authority from disclosing information that may prejudicially affect sovereignty, security or economic interests of the country.

Replying to an RTI query, the central bank also said furnishing the requested information will disproportionately divert the resources of the public authority.

The Reserve Bank of India (RBI) was asked to provide copies of all the annual financial inspection reports, concurrent audit or inspection reports carried out between 2007 and 2015 on foreign currency derivative contracts sold by the 19 banks that were earlier penalised by it.

“The requested information pertains to inspection reports of 19 banks for a period of eight years from April 1, 2007 to March 31, 2015. Therefore the total number of reports would be 152 (one report per bank for 19 banks for eight years i.e. 152).

“Furnishing the requested information will disproportionately divert the resources of the public authority,” the RBI said in reply to the RTI query filed by S Dhananjayan.



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Chairman, BFSI News, ET BFSI

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HDFC Bank, largest lender by market capital, has created a new business segment of commercial and rural banking to capture the next wave of growth, said Atanu Chakraborty, the bank’s non-executive chairman, in the annual general meeting held on July 17.

“This will not only reinforce your bank’s top position in the MSME segment but also strengthen efforts to serve customers in both India and Bharat,” Chakraborty said, adding that the tech savvy young customers too would be benefited out of this move.

The delivery channels will be complemented with digital marketing, even as your bank leverages the branch channel and virtual relationship channel.

This was Chakraborty’s first AGM after the Reserve Bank of India approved his appointment in April for a period of three years. Chakraborty, a 1985 batch IAS officer of Gujarat cadre, earlier retired as secretary of department of economic affairs in the central government more than a year ago.

The bank continues its focus on corporate and Government business to drive growth.

Chakraborty put emphasis on being “future ready”, a key lubricant for growth in coming days. This, according to him, means that growth engines of corporate banking, MSME, agricultural and rural, government and institutions banking and others will be powered by robust technology and digital platforms.

“These growth engines will account for the bulk of our future investments and can be broadly classified as Business Verticals and Delivery Channels,” said Chakraborty.

During April-June quarter, HDFC Bank reported a 16.1 percent year-on-year growth in standalone profit at Rs 7,730 crore, its slowest pace since December 2016. It was lower than Rs 7,931 crore estimated by analysts in a Bloomberg poll.

In between, the chairman highlighted the lender’s efforts for environment, social and government or ESG, a global cult that qualifies for a cheap international cash pool.

“The bank has taken cognizance of ESG in its business plans and has put in place a broad strategy, which will be fine-tuned as we move ahead,” said Chakraborty.

“Your bank realizes the importance of environment protection and that it is a vital aspect within the ESG framework.”

During the pandemic many bank employees suffered due to the infection. The chairman made a special mention for those as he credited the bank for running bank operations seamlessly braving the odds.

“Many of them lost their lives. They are our unsung heroes. I join all of you in paying my respects to them,” he said.



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RBI’s ban on Mastercard likely to create monopoly in India’s credit card market, BFSI News, ET BFSI

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The Reserve Bank of India’s (RBI) ban on Mastercard is likely to create a near monopoly in India’s credit card market, with the US-based card network Visa likely cornering a significant chunk of the new business that earlier went to its global rival.

While homegrown platforms are expected to gain modestly, Visa’s superior reward offerings to merchants and the government’s zero Merchant Discount Rate (MDR) rule on National Payments Corporation of India (NPCI) is likely to put Visa in an advantageous position.

Private lender HDFC Bank, which is currently facing its own ban on onboarding new card customers, already has plans to roll out debit cards under Visa and RuPay.

“Mastercard is a significant franchise partner for the bank, but the good part is like in most of our businesses, we patronise on open architecture,” said Sashidhar Jagdishan, MD, HDFC Bank. “Whether it’s for cards, insurance, mutual funds, we distribute a lot of company products. Even in cards, we have a lot of franchisees – Visa, Mastercard or Rupay. So, until the ban on Mastercard is lifted and when our ban is lifted, the new cards could be on either of the platforms.”

According to a source, several leading co-branded partnerships such as those of Flipkart and Axis Bank and Indigo and Kotak Mahindra Bank were on Mastercard as well. These contracts are now expected to go to Visa.

Another area where Visa can prosper is the up and coming commercial credit card space where Mastercard and Visa currently have cornered the entire market. “These are typically cards issued for corporate purchases and spending on these cards go up to Rs 500 crore a month for large sized companies,” said a payments executive. “RuPay doesn’t have any exposure in this space; therefore, almost all new contracts on this piece are expected to be landed by Visa.”

Visa is also likely to have an upper hand in getting new debit card issuance contracts as well. The central government’s zero MDR rule on RuPay debit cards means that private sector banks that were tying up with Mastercard will almost exclusively move to Visa.

“Banks cannot make money through RuPay debit transactions. Unless there is a mandate as with public sector banks, most others won’t be compelled to shift their card issuance network to RuPay as it won’t make them any money. This puts Visa in a seriously advantageous position in the Indian market,” said an industry official.

On the debit card, most leading banks have multiple tie-ups with all three major card networks and internally switching the issuance infrastructure would not be a major challenge. However, for certain banks such as RBL Bank and Yes Bank which had exclusive tie up with Mastercard, RBI’s new diktat could affect their plans.

RBI doesn’t disclose the share of Mastercard and Visa in the overall payments system. Most banks have both Mastercard and Visa and in some cases RuPay as their payment platform for cards.

“We have already taken note of the situation and will soon be moving to the Visa platform for most of our debit and credit card requirements,” said another private lender that had co-branded with Mastercard. “But we believe that the onboarding to a new platform could take about two months.”



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HDFC Bank cautious on retail biz, BFSI News, ET BFSI

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Mumbai: The second wave of the pandemic has turned HDFC Bank cautious with respect to retail loans. The bank’s overall retail loan book shrank from Rs 5.27 lakh crore at the end-March 2021 to Rs 5.23 lakh crore at the end-June. Retail loans fell with a drop in credit card outstandings, auto loans, two-wheeler loans and loans against securities.

According to HDFC Bank’s chief financial officer Srinivasan Vaidyanathan, credit card outstanding shrank to Rs 60,429 crore in end-June from Rs 64,674 crore in end-March because of a drop in revolving credit. He said that the focus was on the quality of credit and around three-fourths of the bank’s credit card customers have deposits that are on average five times the credit card outstanding. He was addressing analysts in a conference call after the bank’s results for the first quarter of the current fiscal.

Speaking in the same call, head (retail assets) Arvind Kapil said that the bank was now seeing buoyancy returning to the personal loan segment and expects good growth in future.

The bank, which is facing a freeze on issuing new cards, has completed an audit of its IT systems as required by the RBI and is now waiting to hear from the central bank. Even as it awaits the RBI’s nod for resuming card issuance, the bank is rapidly growing its card-acceptance business. Vaidyanathan said that the bank already has 2.3 million merchant-acceptance points and it has a 50% market share of merchants being on-boarded for card acceptance as against 40% last year.

HDFC Bank’s chief credit officer Jimmy Tata said that, during the quarter, things had not been the most orderly because of the second wave. “We were pretty much back to pre-Covid level until March, till the second wave hit us in April. We found our staff getting infected rapidly and we stopped going out on recovery calls. Most of the work was work-from-home. It is only in the month of June that we had the ability to start going out,” he said. In the second quarter, there has been a high level of vaccinations in the bank and staff have returned to the office for calling on borrowers.

According to Tata, the one product segment that has seen a non-Covid impact was diesel commercial vehicles (CVs), because they have not been able to pass on the sharp hike in fuel costs. He said that the bank was watching the portfolio as it would take two quarters for the price hike to be passed on. “We expect that by the festival season, things would have been brought back on an even keel, with cost increases passed on.”

On the cards business, Srinivasan said that HDFC Bank’s debit card issuance would not be hit because of the ban on Mastercard except for a couple of co-branded cards. He said that cards contribute between one-fourth to a third of the bank’s fee income in any quarter.



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HDFC Securities to enter discount broking to win market share, BFSI News, ET BFSI

Personal Finance

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Mumbai, July 18: HDFC Securities is creating its own discount broking architecture to compete with new-age firms like Zerodha which are eating into market shares of entrenched players in the business, its parent HDFC Bank‘s managing director Shashidhar Jagdishan has said. Over the next two-three years, the company targets to gain market, Jagdishan said, making it clear that the largest private sector lender does not have any plans to sell stakes in the brokerage.

It can be noted that over the last few years, discount brokerages which help an investor transact by paying a fraction of commissions and fees have become popular with investors, forcing many of the entrenched players to offer similar offerings.

“I’m happy to say that our own HDFC Securities also has a plan and you will see that countering the threats from discount brokerages with its own neo architecture or discount kind of an architecture as well,” Jagdishan told the bank’s shareholders at its annual general meeting on Saturday.

He added that HDFC Securities will be responsible and exuded confidence that it will gain market share in the next 2-3 years.

The company, which registered a 94.9 per cent growth in its June quarter net profit to Rs 260.6 crore, is doing extremely well, Jagdishan said.

As per filings, HDFC Securities’ total income grew by 67.3 per cent to Rs 457.8 crore in the June quarter as against Rs 273.7 crore in the year-ago period. It had 215 branches across 147 cities / towns in the country.

Meanwhile, speaking at the bank’s AGM, its non-executive chairman Atanu Chakraborty said the largest lender in the private space is on its way to scale technology adoption and transformation agenda through scaling infrastructure, disaster recovery resilience, information security enhancements and having a monitoring mechanism.

He said the bank has taken the regulatory actions arising out of challenges faced on technology in the right spirit and the management has displayed grace and humility.



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Q1 performance: HDFC Bank profit up 16.1% to Rs 7,730 crore

Banking & Finance

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Other income of the bank grew 54.3% y-o-y at Rs 6,288.5 crore. The four components of other income were fees and commissions of Rs 3,885.4 crore, foreign exchange and derivatives revenue of Rs 1,198.7 crore, gain on sale or revaluation of investments of Rs 601.0 crore.

Amid disruptions due to Covid-19, the largest private lender HDFC Bank on Saturday posted lower than estimated net profit of Rs 7,730 crore during the June quarter as the asset quality of the bank worsened. Although the net profit of the bank registered a 16.1% year-on-year (y-o-y) growth, the bottomline missed the Rs 7,931-crore consensus estimate by Bloomberg. The net interest income (NII) of the lender, however, grew 9% y-o-y to Rs 17,009 crore, but remained flat sequentially.

The bank has acknowledged that business activities remained curtailed for almost two-thirds of the quarter due to Covid-19, which has led to a decrease in retail loan originations, sale of third-party products, card spends and efficiency in collection efforts. The lower business volumes, coupled with higher slippages, resulted in lower revenues, as well as an enhanced level of provisioning.

Provisions during the quarter increased 24% y-o-y to Rs 4,831 crore, compared with Rs 3,892 crore in the year-ago quarter. Provisions and contingencies for the quarter included specific loan loss provisions of Rs 4,219.7 crore and other provisions of Rs 611 crore. The core net interest margin (NIM) of the bank declined 10 basis points (bps) sequentially to 4.1%, compared to 4.2% in the March quarter.

The asset quality of the lender worsened during the June quarter. Gross non-performing assets (NPAs) ratio of the lender declined 8 bps to 0.48%, compared to gross NPAs of 0.4% in the previous quarter. However, net NPAs ratio improved 5 bps to 0.45% from 0.5% in the March quarter. The total credit cost ratio remained at 1.67%, compared to 1.64% in the March quarter and 1.54% in the quarter ending June 30, 2020.

The bank said it has restructured loans worth Rs 7,800 crore, under the Reserve Bank of India’s one-time restructuring scheme. This included Rs 5,457 crore worth retail loans, and Rs 1,735 crore worth of corporate loans. The bank has also restructured loans worth Rs 608 crore to other borrowers under the scheme.

Other income of the bank grew 54.3% y-o-y at Rs 6,288.5 crore. The four components of other income were fees and commissions of Rs 3,885.4 crore, foreign exchange and derivatives revenue of Rs 1,198.7 crore, gain on sale or revaluation of investments of Rs 601.0 crore.

Total advances rose 14.4% y-o-y to Rs 11.5 lakh crore, of which retail loans were up 9.3% y-o-y to Rs 4.58 lakh crore. Similarly, commercial and rural banking loans were up 25% from a year ago to Rs 3.86 lakh crore. The bank also said wholesale loans were up 10% y-o-y to Rs 3.14 lakh crore.

Total deposits of the bank grew 13.2% y-o-y to Rs 13.4 lakh crore. CASA deposits grew by 28.1% y-o-y with savings account deposits at Rs 4.2 lakh crore and current account deposits at Rs 1.85 lakh crore.

The bank’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 19.1% as on June 30 against a regulatory requirement of 11.075%.

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