Tag: hdfc bank

Benchmark indices rebound after 2 days of consecutive losses; Financials outperform, BFSI News, ET BFSI

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The market opened on a positive note following the positive global markets on Friday. US GDP data and a decline in the unemployment claims boosted market sentiments. After falling for two consecutive days, Sensex and Nifty moved higher on Friday with Sensex ending above 49,000 while Nifty 50 zoomed to cross 14,500 today.

The Nifty Bank Index ended higher at 33,318 adding 0.94%. Amongst the top gainers were- HDFC Bank at Rs 1491 adding 1.91% followed by PNB at Rs 36 (1.41%), ICICI Bank at Rs 578 (1.22%), IDFC First Bank at Rs 57 (0.87%), SBI at Rs 357 (0.56%). Axis Bank at Rs 698 (0.52%). while all major indices ended on a positive note, Induslnd Bank and Bandhan bank ended red.

Nifty Financial Services ended higher at 15,717 adding over 1.57%. Amongst the biggest gainers were Bajaj Finserv at Rs 9,467 adding over 4.53% followed by Chola Invest. at Rs 554 (3.19%) HDFC at Rs 2,532 (2.51%), Bajaj Finance at Rs 5,183 (1.19%), Indiabulls Hsg at Rs 197 (1.20%).

Other key takeaways

SEBI’s new rules on startups, delisting, ESG and more
The SEBI has approved a raft of measures including more transparent and efficient delisting of shares, reporting of sustainability issues by companies and provisions to make it easier for startups to go public.

In its board meeting on March 25, the market regulator also mandated public disclosure of analyst calls, quick reporting of earnings, and expanded the requirement of setting up a Risk Management Committee to the top 1,000 listed companies by market capitalisation from the existing to 500 listed entities

Suryoday Small Finance Bank debuts at 4% discount to issue price
Suryoday Small Finance Bank share price started off the first day of trading at a 4.2 percent discount at Rs 292 on March 26 on the National Stock Exchange, amid weak market conditions and muted subscription to IPO.

The Rs 582.34 crore public issue was subscribed 2.37 times during March 17-19, the lowest subscription amongst IPOs closed in 2021. The stock opened at Rs 293 on the BSE, down by 3.93 percent compared to issue price of Rs 305.

Market on Thursday
It was the second successive day of losses for the Indian market on March 25 amid unsupportive global cues and selling across sectors on the F&O expiry day. At close, the Sensex was down 1.51%, at 48,440.12 and the Nifty was down 1.54%, at 14,324.90. Nifty PSU Bank, FMCG, auto, infra, IT and energy indices declined 2-3 percent. Broader markets mirrored the benchmarks, as BSE midcap and smallcap indices fell 1.8-2.2%.

Stocks rebound in late-day rally on Wall Street
US stocks rose in a late-day rally on Thursday as investors bought stocks likely to do well in the recovery and picked up beaten-down Apple and Tesla shares in anticipation that the US economy grows at its fastest pace in decades this year.

The Dow Jones Industrial Average rose 199.42 points, or 0.62%, to 32,619.48. The S&P 500 gained 20.38 points, or 0.52%, to 3,909.52 and the Nasdaq Composite added 15.79 points, or 0.12%, to 12,977.68.



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HDFC Bank’s MSME book grows 30% to cross ₹2-lakh cr

Banking & Finance

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HDFC Bank’s MSME book grew 30 per cent year-on-year to cross the ₹2-lakh-crore-mark as of December-end, mainly boosted by the pandemic-induced ECLG scheme under which it disbursed over ₹23,000 crore.

The growth is also driven by a renewed push towards customers in semi-urban and rural areas, the bank said.

In December 2019, the bank’s MSME book stood at ₹1.4-lakh crore. This grew by over 60,000 crore, or 30 per cent, to ₹2,01,758 crore by the December 2020 quarter, giving it a 10.6 per cent share system-wide MSME lending, becoming the second-largest lender in this segment after State Bank of India, the bank added.

“Our MSME lending is back to pre-pandemic levels, with loan book growing at 30 per cent year-on to ₹2,01,758 crore as of December 2020 quarter,” said Sumant Rampal, Senior Executive Vice-President, Business Banking and Healthcare Finance.

“While the ECLG scheme was the biggest driver, boosting the loan book by ₹23,000 crore disbursed to around 1,10,000 MSME customers, our own renewed push towards customers in semi-urban and rural areas also helped us during the pandemic, leading to an incremental loan growth of over ₹60,000 crore,” he said, adding most of the ECLG disbursals took place only in the past three to four months.

At 30 per cent loan growth, the MSME book is the fastest-growing vertical for the bank.

“This is a testimony to our commitment to strengthen the MSME sector that accounts for about 30 per cent of GDP and the largest employer,” said Rampal.

ECLGS scheme

The government launched the third version of the ₹3-lakh crore emergency credit line guarantee scheme (ECLGS) last November for MSMEs, following the KV Kamath committee report.

On Thursday, Union MSME Minister Nitin Gadkari told Lok Sabha that banks and other financial institutions have cumulatively sanctioned ₹2.46-lakh crore of the ₹3-lakh crore scheme, while disbursal stood at a low ₹1.81-lakh crore as of February 28, according to the data from the National Credit Guarantee Trustee Company, which is the implementing agency of the ECLGS.

The scheme comes with a 2 per cent interest subvention and is of five-year tenor, of which, the first year gets a payment moratorium.

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HDFC Bank’s MSME book grows 30% to cross Rs 2 trillion-mark, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: HDFC Bank‘s MSME book grew 30 per cent year-on-year to cross the Rs 2-lakh-crore-mark as of December-end, mainly boosted by the pandemic-induced ECLG scheme under which it disbursed over Rs 23,000 crore. The growth is also driven by a renewed push towards customers in semi-urban and rural areas, the bank has said.

In December 2019, the bank’s MSME book stood at Rs 1.4 lakh crore, which has grown by over 60,000 crore or 30 per cent to Rs 2,01,758 crore by the December 2020 quarter, giving it a 10.6 per cent share system-wide MSME lending, becoming the second-largest lender in this segment after the State Bank of India, the bank added.

“Our MSME lending is back to pre-pandemic levels, with loan book growing at 30 per cent year-on to Rs 2,01,758 crore as of the December 2020 quarter,” Sumant Rampal, senior executive vice-president, business banking and healthcare finance, at the bank told on Friday.

“While the ECLG scheme was the biggest driver boosting the loan book by Rs 23,000 crore disbursed to around 1,10,000 MSME customers, our own renewed push towards customers in semi-urban and rural areas has also helped us during the pandemic, leading to an incremental loan growth of over Rs 60,000 crore,” he said, adding most of the ECLGS disbursals took place only in the past three-four months.

At 30 per cent loan growth, the MSME book is the fastest-growing vertical for the bank. “This is a testimony to our commitment to strengthen the MSME sector that accounts for about 30 per cent of GDP and the largest employer,” Rampal said.

The government launched the third version of the Rs 3-lakh crore emergency credit line guarantee scheme (ECLGS) last November for MSMEs, following the KV Kamath committee report.

On Thursday, Union MSME minister Nitin Gadkari told the Lok Sabha that banks and other financial institutions have cumulatively sanctioned Rs 2.46 lakh crore of the Rs 3 lakh crore scheme, while disbursal stood at low Rs 1.81 lakh crore, as of February 28, according to the data from the National Credit Guarantee Trustee Company, which is the implementing agency of the ECLGS.

The scheme comes with a 2 per cent interest subvention and is a five-year tenor of which the first year gets a payment moratorium.

“Our MSME portfolio is geographically balanced spread across all metropolitan cities, urban, semi-urban and rural regions. And we reached out to them with a suite of customised products which they could access conveniently either through physical or electronic channels,” said Rampal.

The bank offers a range of services to MSMEs, ranging from conventional working capital/term loans, structured cash flow management and financing solutions, trade financing solutions, forex services, individual banking needs of promoters and family, salary accounts plus advisory on investment banking.

Its MSME portfolio is spread across sectors like textiles, fabrication, agri-processing, chemicals, consumer goods, hotels & restaurants, auto components, pharma and the paper industry, and also include the entire selling chain ranging from wholesalers, retailers, distributors, stockists and supermarkets, he said.

On Q4, Rampal refused to share numbers citing the Nasdaq silent period, just saying my team is busy at work and pointed to the large market of 6 crore registered MSMEs, but only 1.2 crore of them borrowing even after all the push by the government and the Reserve Bank.

He said of their 5,500 branches, 1,800 of them have more than 25 per cent of their loans to MSMEs and 4,800 units service this segment of customers. Geographically speaking, the bank is present in 630 districts, of these, 560 districts have MSMEs.

There is no concern on the asset quality front for the bank, which has a history of having the lowest NPAs in the system. In December 2019, the MSME bad loans for the bank were just 0.48 per cent and Rampal said, anyway currently the entire ECLGS book is under mandatory moratorium.

He said, the services industry is still facing challenges and expressed apprehension about the second wave of the pandemic.



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HDFC Bank’s Rahul Shukla confident about bank’s portfolio

Banking & Finance

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The country’s largest private sector lender, HDFC Bank, is optimistic about credit demand from India Inc in the new fiscal and said there is already capex-led credit demand in mid-sized corporates and small and medium enterprises.

“The economy will show a synchronous recovery with a pick-up in domestic demand in consumption and investment and external demand in the following 12 months. There are strong expectations of private sector capex revival in the second half,” said Rahul Shukla, Group Head, Wholesale Banking, HDFC Bank.

In an interaction with BusinessLine, he said that even today, there is private sector capex leading to credit demand in sectors such as food processing, textiles, industrial chemicals, iron and steel in some parts of country, packaging, auto components and electrical appliances.

HDFC Bank registers double-digit growth in deposits and advances in Q3

Noting that the capital expenditure is front loaded by the government, Shukla said the infrastructure cycle is robust for banks to participate.

Upward trend

“Today, you can’t think of a central public sector enterprise that has not increased its capex plans significantly. This push is showing its impact on the economy,” he said.

Shukla also noted that various macro indicators, including PMI data, goods and services tax collections, e-way bills and passenger vehicle sales, are showing an upward trend.

HDFC Bank, CSC partner to launch EMI collection service for business correspondents

“Due to a normal revival of nominal GDP growth in 2021-22, along with a strong push to infrastructure and industrial growth (through PLI and rising commodity prices), loan growth could rise,” he said, adding that a revival of growth through capex, strong balance sheets of the largest banks, creation of a bad bank and low interest-rate environment could lead to a secular revival of loan growth.

Data released by the Reserve Bank of India revealed that bank credit rose by 6.63 per cent to ₹107.75 lakh crore in the fortnight ended February 26, 2021.

Balanced advances

Meanwhile, when asked about HDFC Bank’s wholesale strategy going forward, Shukla said the lender has largely maintained balanced advances of 50:50 retail and wholesale.

“That is our model. It is balanced. There are times when retail is slow and wholesale picks up and there are times when wholesale will be slow and retail picks up,” he said.

Shukla also expressed confidence about the bank’s portfolio and said it will continue to perform well during the current phase.

“It has been tested through the pandemic and has given us greater confidence in our approach to doing business,” he stressed.

As on December 31, 2020, HDFC Bank had reported a 5.2 per cent growth in domestic retail loans and 25.5 per cent increase in domestic wholesale loans. The domestic loan mix as per Basel 2 classification between retail:wholesale was 48:52.

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Bank credit grows by 6.63 per cent

Banking & Finance

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Bank credit rose by 6.63 per cent to Rs 107.75 lakh crore and deposits grew by 12.06 per cent to Rs 149.34 lakh crore in the fortnight ended February 26, according to a report.

In the fortnight ended February 28, 2020, bank credit stood at Rs 101.05 lakh crore and deposits at Rs 133.26 lakh crore, the recent data released by the Reserve Bank of India (RBI) showed.

Bank credit increased by 6.58 per cent to Rs 107.04 lakh crore and deposits rose by 11.75 per cent to Rs 147.81 lakh crore in the previous fortnight ended February 12, 2021.

Care Ratings in a report said the bank credit growth in the fortnight ended February 26 stood stable compared to the last fortnight and returned to the levels observed in the early months of the pandemic, when the loan growth ranged between 6.5 per cent to 7.2 per cent during April 2020.

According to analysts, the growth in bank credit is driven by an increase in retail loans.

Emkay Global Financial Services in its March 5 report said it expects overall retail credit growth, which is currently at 9 per cent, to accelerate further, led by mortgages (contributing 51 per cent of retail loans) and back-end support by unsecured (cards/ personal loans) and vehicle loans.

“The current market conditions favour banks armed with lower funding rates, strong balance sheet, better asset quality and strong captive customer base,” Anand Dama, an analyst at Emkay Global, had said in the report. Large private banks such as HDFC Bank (despite suspension in new card acquisition) and ICICI Bank have been at the forefront of retail growth momentum, while Kotak Bank too is finally showing signs of much-needed growth and trying to raise the retail game, the report had said.

Among state-run banks, SBI and Bank of Baroda, which have been the key players in the mortgage market, are changing gears in the auto finance space as well, the research report said.

Care Ratings believe that the increase in the credit outstanding during the next fortnight is anticipated as year-end transactions are expected to push up bank credit as banks undertake the year-end closing activities. This trend can be witnessed for the last three-four years. In the first nine months of the current fiscal, while the growth in credit was 3.2 per cent, bank deposits saw a rise of 8.5 per cent.

“While bank credit growth had contracted 0.8 per cent in the first half of this fiscal, it recovered sharply in the third quarter by growing around 3 per cent sequentially. In the fourth quarter, too, it should clock near 3 per cent sequential growth,” Crisil Ratings Senior Director Krishnan Sitaraman had said in a report released earlier this month.

The rating agency expects bank credit to rise 4-5 per cent in the current fiscal despite the sharpest contraction the Indian economy has seen since independence.

In the financial year 2021-22, bank credit is seen growing 400-500 basis points (bps) higher at 9-10 per cent, as the country’s economy recovers, supported by budgetary stimulants and measures announced by the Reserve Bank of India (RBI), the Crisil report had said.

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HDFC Bank launches SmartUp Unnati programme

Banking & Finance

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HDFC Bank on the occasion of International Women’ Day has announced the launch of a dedicated programme for mentoring women entrepreneurs by women leaders at the bank.

Under the SmartUp Unnati programme, over the next one year, senior women leaders from HDFC Bank will mentor women entrepreneurs in helping them achieve their goals, HDFC Bank said in a statement on Monday.

“This programme is available only to existing customers and will initially target more than 3,000 women entrepreneurs associated with the bank’s SmartUp programme,” it further said.

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HDFC Bank launches SmartUp Unnati for women entrepreneurs, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank, has launched SmartUp Unnati on International Women’ Day, a dedicated programme for mentoring women entrepreneurs by women leaders at the bank. Over the next one year senior women leaders at HDFC Bank with expertise spanning domains will mentor women entrepreneurs in helping them achieve their goals.

This programme is available only to existing customers and will initially target more than 3,000 women entrepreneurs associated with the Bank’s SmartUp programme.

Smita Bhagat, Country Head, Government & Institutional Business, E-commerce and Start-up Banking, HDFC Bank said, “In the start-up ecosystem, women entrepreneurs are often faced with challenges unique to them. We believe HDFC Bank’s Smartup Unnati is the perfect platform for them to benefit from the experience of our women leaders.

She added, “It will provide them access to mentorship, expand their vision, and enable them to scale up their businesses by widening their horizons. This is a programme by women for women.”

Under Smartup Unnati, senior women executive leaders’ will act as a sounding board for women entrepreneurs as they undertake building diverse and innovative businesses.



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Extreme weather like floods, droughts, cyclones puts $84 billion of Indian banks debt at risk, BFSI News, ET BFSI

Banking & Finance

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An increase in extreme weather events such as floods, droughts and cyclones risk souring debt worth more than Rs 6.19 lakh crore ($84 billion) at India’s biggest financial institutions.

That’s according to leading nonprofit environmental disclosure platform CDP. State Bank of India, the country’s largest lender, HDFC Bank, IndusInd Bank and Axis Bank are among the institutions that reported climate risks to CDP in 2020, it said in its annual report released Wednesday.

The banks flagged exposure to environmentally sensitive businesses including cement, coal, oil and power. They also listed the effects of cyclones and floods on loan repayments in farming and related sectors. Lenders accounted for 87 per cent of the total risk, valued at about $97 billion, across 67 top Indian companies that responded to CDP.

“Climate is the biggest risk to businesses in the long run. Financial institutions are beginning to understand it,” said Damandeep Singh, New Delhi-based director of CDP India. “As investors look at funding companies based on environmental, social and governance disclosures, we’ve seen many more companies report climate change risk.”

The potential harm to agriculture echoes concerns raised by India’s central bank about the impact of climate change on farming, a sector that employs more than half of its citizens. At the same time, the world’s third-biggest emitter of greenhouse gases is relying on coal to help drive its post-Covid recovery. The dirtiest fossil fuel could remain its dominant energy source in the coming decades.

CDP, which gathered the data on behalf of 515 investors with $106 trillion in assets, said it received responses from 220 small and large Indian companies.

State Bank of India, which is facing concerns from shareholders and investors over its proposal to help fund the controversial Carmichael coal mine in northern Australia, valued its total climate risk at Rs 3.83 lakh crore. The bank said it may “indirectly face reputational risks, should it be involved in lending to environmentally sensitive projects which may have significant public opposition.” SBI didn’t respond to a request seeking comment.

The second-highest risk was flagged by HDFC Bank, which estimated it had Rs 1.79 laks crore of assets in danger — a 24 per cent increase from 2019. It said its calculations took into account compensation it would have to pay to employees in case of flooding and its exposure to farming, cement, coal, oil and power.

Smaller private banks IndusInd, Axis and Yes reported lowered climate change risk compared to last year at Rs 46,600 crore, Rs 7,500 crore and Rs 2,000 crore respectively, citing more diversified portfolios.

India was second in the Asia Pacific and sixth globally among CDP’s ranking of countries whose companies committed to science-based targets for net-zero carbon emissions, the report showed. More than 50 Indian companies said they are preparing for future policy and regulatory changes by voluntarily committing to cutting their carbon footprint.

Increased investor pressure and stronger disclosure norms are compelling Indian companies to address climate concerns, the CDP report said. Almost all of companies reported board-level oversight of climate-related issues, while some 84 per cent said climate-related risks and opportunities led them to alter plans for products and services.



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Ajay Srivastava, BFSI News, ET BFSI

Banking & Finance

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We will see more and more of this happening because the sheer demand of loans has collapsed in the economy and that is the challenge for the economy and the banks, says Ajay Srivastava, CEO, Dimensions Corporate Finance.

There is a very aggressive home loan rate war out there. Kotak Mahindra Bank has reduced home loan rates to 6.65% till March 31. SBI is giving it at 6.70%, HDFC Bank and ICICI Bank at 6.8%. How are you reading into this? Would the ticket sizes of these home loans be much lower than pre Covid times?
It is an indicator that there is nowhere to lend. Most companies are able to access capital and they have realised that when capital is available at these valuations, why the hell borrow money? Let us dilute. So across the board, we see QIPs, PE fund raising, sale of companies. I do not meet a promoter who wants to borrow money at the end of the day. He is likely to raise capital and keep it in the bank.

The lowering of home loan rates come out of the sheer desperation of not having enough avenues to lend money to. How much can you lend money on personal loans, unsecured loans etc? That is not the smartest way to play the game. Historically, the housing loans have been the most stable platform for most of the institutions. HDFC ruled the roost and would continue to do so because their DNA and the cost structure are very different.

These banks will often come in, play the game and try to get you as a customer but all it tells you is that there are no borrowers of significant kind and they have run through individuals as borrowers because who wanted to borrow, you did not want to lend to and instead are targeting those who don’t want to borrow. So, it is very peculiar. You will see more and more of this happening because the sheer demand of loans has collapsed in the economy and that is the challenge for the economy and the banks. So yes, it is down there but not so much that we get excited.

Would you buy HDFC? It is a fantastic business but the stock is underperforming?
I do not think it is underperforming. The stock got rerated quite sharply. I have a holding in that stock and I do not sell it. It went from Rs 1,500 to Rs 2,800. It got back to Rs 2,500, if I am not wrong. It is an incredible franchise and they have done a remarkable job at doing two things — balancing corporate real estate loans and individual real estate loans, doing side investment as well. And of course there’s the holding company. They hold the best bank in the country, the best life insurance company, the best AMC in the country. That is the India story at the end of the day.

What they do not have is Fintech in their portfolio. So, they have got a problem there. Maybe they will come in there through HDFC Bank. but There is no better surrogate for Indian economy than HDFC as an institution. The problem is it is so over owned as a stock that if FIIs decide to sell or one large FII decides to dispose it off, there will be a large correction in the stock.

As a retail person if you are starting your life, that is the stock I want to keep for my children’s education, for my retirement. It is in a separate category. Do not evaluate it day-to-day. Instead, 17 years from now, this stock should pay for your son’s education.



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Ten reasons why banks are reluctant to lend to big corporate houses, BFSI News, ET BFSI

Banking & Finance

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A few years back, big corporates were the cynosure of the banking sector and were given red carpet treatment while the small borrowers had to fret it out.

However, the ballooning of bad loans by big corporates and the opening up of other lending avenues have turned tables on India Inc.

Credit to industry contracted by 1.3 per cent in January 2021 as compared to 2.5 per cent growth in January 2020 mainly due to contraction in credit to large industries by 2.5 per cent (2.8 per cent growth in January 2020). The outstanding bank credit to large industries declined by Rs 59,610 crore on a year-on-year basis to Rs 22.78 lakh crore as on January 29, 2021, according to the latest RBI data.

So what makes banks shun large corporates?

1. The binding constraint for lending has not been liquidity or interest rates, but risk aversion by bankers, who have been burnt in episodes like DHFL, HDIL, where thousands of crores went kaput.

2. Indian banks are already saddled with one of the world’s worst bad-loan ratios, and are naturally reluctant to add to those risks.

3. Economic activity is still in the doldrums, though it is showing signs of improvement of late, which makes risk assessment difficult.

4. Fresh slippages in the December quarter have risen sequentially, with the top ten lenders by the size of their loan book, adding close to Rs 80,000 crore in slippages during the December quarter.

5. Banks have other avenues to lend. Disbursements under the emergency credit line guarantee scheme was at Rs 1.6 lakh crore, and banks deployed around at Rs 1.4 lakh crore through the targeted long-term repo operation and partial credit guarantee scheme, which served as credit substitutes. These credit is guaranteed by the government and less risky.

6. Fear of prosecution of bank officials if the credit decision goes wrong has also kept banks away from lending huge amounts to corporates.

7. Long gestation periods, the uncertainty of returns and cost overruns that saw fortunes of many top corporate houses dwindle is also keeping banks away.

8. Having burnt their fingers by lending astronomical amounts to large business groups, lenders such as YES Bank intend to stay away from large corporate businesses and rebuild loan book in the mid- and small-corporate segment.

9. Also, there are not enough opportunities as the corporate sector, which account for 49% of the overall bank credit, has put their capital expenditure plans on the back burner.

10. Success of the likes of HDFC Bank in building retail loans has drawn other banks to it. Retail loans are typically secured and risk is evenly spread.



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