Tag: idbi bank

Bank unions threaten two-day nationwide strike against proposed privatisation of PSBs, BFSI News, ET BFSI

Banking & Finance

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The United Forum of Bank Unions (UFBU), an umbrella body of nine unions, has given a call for a two-day strike from December 16 to protest against the proposed privatisation of two state-owned lenders. In the Union Budget presented in February, Finance Minister Nirmala Sitharaman had announced the privatisation of two public sector banks (PSBs) as part of its disinvestment plan.

The government has already privatised IDBI Bank by selling its majority stake in the lender to LIC in 2019 and merged 14 public sector banks in the past four years.

The government has listed the Banking Laws (Amendment) Bill, 2021, for introduction and passage during the current session of Parliament.

In view of this, UFBU has decided to oppose the move for privatisation, All India Bank Employees Association (AIBEA) General Secretary C H Venkatachalam said in a statement.

Strike notice for December 16 and December 17, 2021, has been served by UFBU on the IBA, he said.

In a developing country like India, where banks deal with huge public savings and they have to play a leading role to ensure broad-based economic development, public sector banking with social orientation is the most appropriate and imperative need, he said.

Hence, he said, for the past 25 years, under the banner of UFBU “we have been opposing the policies of banking reforms which are aimed at weakening public sector banks”.

Members of UFBU include All India Bank Employees Association (AIBEA), All India Bank Officers’ Confederation (AIBOC), National Confederation of Bank Employees (NCBE), All India Bank Officers’ Association (AIBOA) and Bank Employees Confederation of India (BEFI).

Others are Indian National Bank Employees Federation (INBEF), Indian National Bank Officers Congress (INBOC), National Organisation of Bank Workers (NOBW) and National Organisation of Bank Officers (NOBO).



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Unions in IDBI Bank request it be re-classified as PSB

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Four unions in IDBI Bank have written to the Finance Minister requesting that the proposed sale of their bank to private players by the government and LIC of India be stopped and the bank be re-classified as a public sector bank.

This comes in the wake of the Department of Investment & Public Asset Management (DIPAM), on behalf of GoI, moving to engage legal advisor and transaction Advisor for facilitating/ assisting it in the process of strategic disinvestment of IDBI Bank along with transfer of management control.

The four unions — All India IDBI Officers’ Association, IDBI Officers’ Organisation, All India IDBI Employees’ Association and IDBI Karmachari Sangh — emphasised that all the staff had secured job in IDBI Bank through All India competitive exam.

“Many officers left their previous job with public sector banks and the Central government to join IDBI Bank,” per a joint statement.

Risk to employment

The unions feared that in case of sale of IDBI Bank to private players, as proposed by the government and LIC, the fate of around 17,000 families supported by direct employment and around 20,000 families supported by indirect employment with IDBI Bank will be at risk.

According to the statement, around 50 per cent of staff working in IDBI Bank under direct or indirect employment are female employees. More than 100 officers under direct employment are either physically challenged or visually impaired.

Serve the common man

AV Vithal Koteswara Rao, General Secretary, AIIDBIOA, underscored that IDBI Bank, being majority owned by LIC (promoter with management control) and GoI (co-promoter), is catering to the needs of the common man with zero balance Savings Bank accounts and offering aggressively various Government products and schemes.

So, if IDBI Bank is sold to a strategic buyer, various products and schemes of GoI which are meant for the common man and general public cannot be offered through a Bank owned by private entities, he added.

“India needs more government banks to improve financial inclusion parameters/aspects. Reduction in the number of government banks leads to less competition which is nothing but monopoly. This is totally against the interest of the common man and general public,” Rao said.

Possible amalgamation

He felt that the government should explore the possibility of amalgamation of IDBI Bank with either State Bank of India, Bank of India, Central Bank of India or Bank of Maharashtra so that the Government’s cause of financial inclusion, credit outreach to MSMEs and agriculture, and support to the ₹100-lakh crore ‘PM Gati Shakti Master Plan’ for developing holistic infrastructure is better served.

The Cabinet Committee on Economic Affairs had given its in-principle approval in May 2021 for strategic disinvestment along with transfer of management control in IDBI Bank.

The extent of respective shareholding to be divested by GoI and LIC shall be decided at the time of structuring of transaction in consultation with RBI, per a CCEA statement.

GoI and LIC together own more than 94 per cent of equity of IDBI Bank (GoI at 45.48 per cent, LIC at 49.24 per cent). LIC is currently the promoter of IDBI Bank with Management Control and GoI is the co-promoter.

The government intends to come out with expression of interest for strategic disinvestment of IDBI Bank by December.

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CBI searches premises of ex-MP minister in connection with bank fraud case, BFSI News, ET BFSI

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The CBI conducted searches on Thursday at the premises of Surendra Patwa, a BJP MLA from Bhojpur near Bhopal, after booking him for alleged fraud of Rs 29.41 crore in the Bank of Baroda between 2014 and 2017, officials said.

Patwa was earlier a minister in the Madhya Pradesh government.

The case pertains to a loan of Rs 36 crore taken from the bank for Patwa’s car showroom in Indore — Patwa Automotive Private Limited — which was not repaid to the bank, the officials said.

The Central Bureau of Investigation (CBI) has booked Patwa, a director in the company, and another director, Monika Patwa, they added.

Patwa is the nephew of former Madhya Pradesh chief minister Sunder Lal Patwa. He was also the tourism and culture minister of the state.

“It was alleged that the borrower company had committed fraud during the period of 2014 to 2017 in conspiracy with its directors and unknown public servants and cheated the Bank of Baroda to the tune of Rs 29.41 crore (approx.),” CBI Spokesperson RC Joshi said in a statement.

Searches were conducted at the premises of the accused in Bhopal and Indore, which led to the recovery of incriminating documents, he added.

The CBI has alleged that the firm was extended the working capital loan and a term loan amounting to Rs 36 crore by the Bank of Baroda on September 13, 2014, after taking over the credit facilities extended by the IDBI Bank.

“The said loan account became an NPA on May 2, 2017 and was subsequently reported as fraud to the RBI. The outstanding loan amount was Rs 29.41 crore. It was also alleged that the forensic accounting had revealed siphoning of funds and diversion of funds by the said private company,” Joshi said.

Patwa did not respond to a request seeking his comments on the development. PTI ABS RC



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IDBI Bank net profit jumps 75% in Q2 on lower employee costs, higher net interest income

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Slippages amounted to Rs 1,541 crore, down from Rs 1,577 crore in Q1FY22. Recoveries and upgrades were to the tune of Rs 1,910 crore, up from Rs 1,596 crore in the June quarter. The slippage ratio for the year so far stands at 2.2% and the bank intends to contain it at around 3% for the full year.

IDBI Bank on Thursday reported a 75% year-on-year (y-o-y) jump in net profit to Rs 567 crore for the quarter ended September, driven by a reduction in employee costs and an improvement in net interest income (NII).

The bank’s NII, or the difference between interest earned and interest expended, rose 9.45% y-o-y to Rs 1,854 crore.

P Sitaram, chief financial officer, IDBI Bank, explained that the improvement in the bottom line was aided by certain accounting benefits.

“We have seen a reduction in the employee cost. In September 2020, because of the interest rate movement, we had to take an actuarial hit on retirement benefits. This year so far, the movement in interest rates has not given rise to any significant increase in retirement benefits over and above the March 2021 levels,” Sitaram said.

The private lender’s pre-provisioning operating profit rose 15% y-o-y to Rs 1,209 crore. The net interest margin (NIM), a key measure of profitability, stood at 3.02%, down 104 basis points (bps) sequentially.

The lender’s provisions rose 11.6% y-o-y to Rs 434 crore in Q2FY22. Asset-quality performance was a mixed bag as the gross non-performing asset (NPA) ratio improved to 20.92% in Q2FY22 from 21.48% in the previous quarter. The net NPA ratio rose to 1.62% in the September quarter from 1.56% in the June quarter. The provision coverage ratio (PCR) improved to 97.27% as on September 30, 2021, from 95.96% as on September 30, 2020.

Slippages amounted to Rs 1,541 crore, down from Rs 1,577 crore in Q1FY22. Recoveries and upgrades were to the tune of Rs 1,910 crore, up from Rs 1,596 crore in the June quarter. The slippage ratio for the year so far stands at 2.2% and the bank intends to contain it at around 3% for the full year.

The bank’s total deposits fell 0.26% y-o-y to Rs 2.23 lakh crore at the end of September 2021. The value of current account savings account (CASA) with the bank increased 13% y-o-y to Rs 1.22 lakh crore. The share of CASA in total deposits improved to 54.64% as on September 30, 2021, against 48.33% as on September 30, 2020.
Gross advances grew 0.41% y-o-y to Rs 1.64 lakh crore at the end of September 2021. Retail loans accounted for 63% of the total loan book, with the rest being corporate loans.

Shares of IDBI Bank ended at Rs 55.60 on the BSE on Thursday, down 2.03% from their previous close.

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IDBI Bank Q2 results: Net profit up 75%

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IDBI Bank reported a 75 per cent year-on-year (yoy) increase in second quarter standalone net profit at ₹567crore, supported by a huge write-back in provisions for non-performing assets (NPAs) and lower tax expense.

The Bank had posted a net profit of ₹324 crore in the year ago quarter.

Net interest income increased 9 per cent yoy in the reporting quarter to ₹1,854 crore (₹1,694 crore in the year ago quarter).

Other income, including income from non-fund based banking activities such as commission, fees, earnings from foreign exchange and derivative transactions, and profit and loss from sale of investment, declined about 4 per cent yoy at ₹846 crore (₹881 crore).

The received a write-back of ₹1,426 crore in provisions for NPAs against ₹165 crore in the year ago quarter. Tax expense burden was lower at ₹215 crore (₹347 crore).

As at September-end 2021, gross advances barely nudged up to ₹1,64,506 crore (₹1,63,841 crore as at September-end 2020).

Rakesh Sharma, MD & CEO, said the Bank has built up a sanctions pipeline in the mid and large corporate segments and disbursals are expected to pick up from year-end onwards.

The Bank expects to grow its corporate loan book by about ₹6,000 crore in the current financial year.

Samuel Joseph, Deputy Managing Director, said the Bank has an exposure of about ₹400 crore to the SREI group, which is undergoing corporate insolvency resolution process, and has made 100 per cent provision towards this exposure. IDBI Bank recovered ₹196 crore from DHFL.

P Sitaram, CFO, emphasised that the Bank will grow the corporate loan book even as the emphasis will continue to be on structured retail loans.

Gross NPAs declined about ₹1,186 crore during the reporting quarter to ₹34,408 crore.

Gross NPAs as a percentage of gross advances declined to 20.92 per cent against 21.48 per cent in the preceding quarter. Net NPAs, however, nudged up to 1.62 per cent of net advances against 1.56 per cent.

Fresh slippages rose by ₹1,438 crore (₹1,332 crore in the first quarter). The Bank settled NPAs aggregating ₹1,436 crore (₹587 crore).

ends

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IDBI Bank Q2 net profit jumps 75% to ₹ 567 cr on NII growth

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IDBI Bank on Thursday reported a 75 per cent jump in its standalone profit after tax to ₹ 567 crore in the second quarter ended September 30, on higher interest income.

The LIC-owned bank had reported a standalone profit after tax of ₹ 324 crore in the year-ago quarter.

“Overall, there has been improvement in the bank’s performance parameters. The cost of deposits has come down to 3.60 per cent as of September 30, 2021, from 4.41 per cent last year. Similarly, cost of funds has also declined from 4.73 per cent to 3.88 per cent,” the bank’s Managing Director and CEO Rakesh Sharma told reporters.

The bank has managed to contain its operating expenses and maintain yield on advances almost at the same level, he added.

The lender’s Chief Financial Officer P Sitaram further said the rise in profit during the quarter was on account of higher net interest income, lower tax provisions and reduction in the employee cost.

Net interest income (NII) improved by 9 per cent to ₹ 1,854 crore against ₹ 1,694 crore.

Net interest margin (NIM) improved by 32 bps to 3.02 per cent compared to 2.70 per cent in the year-ago quarter.

NPAs and slippages

The lender also witnessed improvement in its asset quality, with the gross NPA ratio reducing to 20.92 per cent from 25.08 per cent.

Net NPAs improved to 1.62 per cent as of September 30, 2021, against 2.67 per cent a year ago.

Provision coverage ratio (including technical write-offs) improved to 97.27 per cent as of September 30, 2021, from 95.96 per cent in the same quarter of the previous fiscal.

Fresh slippages during the quarter stood at ₹ 1,438 crore.

Recovery during the quarter stood at ₹ 1,788 crore, which includes ₹ 1,436 crore of recovery in normal accounts.

Sharma said the lender recovered ₹ 200 crore from the resolution of DHFL.

The bank has an exposure of less than ₹ 400 crore to Srei Group, which has turned into NPA. It has made 100 per cent provision on the account, he said.

Capital to Risk (Weighted) Assets Ratio (CRAR) improved to 16.59 per cent as of September 30, 2021, compared to 13.67 per cent as of September 30 last year.

The lender is targeting its credit cost and net slippages ratio to be below 1.75 per cent and 3 per cent, respectively, during this fiscal.

Sharma said the bank has been able to meet its guidance on various financial parameters, except on growth, which it has targeted to be at eight to 10 per cent this year.

“Although we have started showing some increase, we are falling short of our eight to 10 per cent (growth) target. In the mid-corporate and large corporate, enough sanctions have been given, but the disbursements have not taken place so far,” he said.

Sharma, however, said he is quite hopeful that by the year-end, the bank will be able to achieve all the guidance it has given in the past.

The bank’s scrip closed at ₹ 55.60 apiece on BSE, down 2.03 per cent from the previous close.

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IDBI Bank Q2 profit surges 75% to Rs 567 crore, BFSI News, ET BFSI

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New Delhi, IDBI Bank on Thursday reported a 75 per cent jump in net profit to Rs 567 crore for the second quarter ended September 30. The LIC-controlled bank had earned a net profit of Rs 324 crore in the same period (July-September) of the last fiscal.

The net interest income grew 9 per cent to Rs 1,854 crore during the reported quarter against Rs 1,695 crore a year ago. Net Interest Margin (NIM) improved by 32 basis points to 3.02 per cent, compared to 2.70 per cent in the second quarter last fiscal, IDBI Bank said.

The lender’s stressed assets ratio also improved, with gross non-performing assets (NPAs) declining to 20.92 per cent of gross loans as of September 30, 2021, against 25.08 per cent a year ago. Net NPAs improved to 1.62 per cent from 2.67 per cent.
Provisions for bad loans and contingencies rose to Rs 434.47 crore for the September quarter from Rs 389.44 crore in the year-ago period.

Staff costs fell 12 per cent to Rs 698 crore in September 2021 from Rs 789 crore a year earlier while tax expenses fell 39 per cent to Rs 208 crore from Rs 341 crore a year earlier.

“As of September 30, 2021, the bank had COVID-19 related provisions of Rs 863 crore (other than provisions held for restructuring under COVID-19 norms). The provision made by the bank is more than minimum required as per the RBI guidelines,” the lender said.

The provision coverage ratio, including technical write-offs, stood at 97.27 per cent as of September 30, 2021.



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What is co-lending, and how will work?, BFSI News, ET BFSI

Banking & Finance

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-By Ishwari Chavan

Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.


The co-lending model has been around in the BFSI sector for some time now, but after the Reserve Bank of India issued guidelines in November 2020, co-lending has become a response to ease the liquidity crisis in non-bank lenders. The method aims to enhance credit flow to productive sectors, and banks and non-banking financial companies (NBFCs) have been increasingly exploring co-lending opportunities.

What is RBI‘s Co-Lending Model, and how will it work?

RBI’s CLM is one wherein two lender firms, in this case a bank and an NBFC, come together to disburse loans. Under RBI’s model, banks can co-lend with all registered NBFCs, including housing finance companies.

As per the guidelines, NBFCs and HFCs facilitate the origination and collection of housing loans while banks leverage their balance sheet strength to house the majority of the loan. This means that 80% of the loan will reflect in the bank’s balance sheet, while 20% in that of NBFCs or HFCs.

In simple terms, banks will lend to NBFCs, and NBFCs will pass it on to the priority sectors, since they have a greater reach.

NBFCs will be the single point of interface for the customers and enter into a loan agreement with the borrowers. The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

The ultimate borrower would be charged an all-inclusive interest rate.

Considering the lower cost of funds from banks and greater reach of NBFCs, the primary focus is to improve credit flow to the unserved and underserved sectors of the economy, also known as priority sectors, and make funds available to the ultimate beneficiary at an affordable cost.

The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.
The agreement should contain the features of the arrangement and the roles and responsibilities of NBFCs and banks.

RBI has prescribed that a portion of bank lending should be used for developmental activities, for the priority sector, which includes agriculture, MSMEs, housing, and so on.

According to norms, both public and private sector banks have to lend 40% of their net bank credit (NBC) to the priority sector and foreign banks have to lend 32% of their NBC.

How is co-lending beneficial for lenders and borrowers?

The partnership allows banks to lend more funds to sectors and regions they do not have reach in. With the greater reach of NBFCs, the model allows banks to meet their total priority sector lending (PSL), while NBFCs get bigger and top rated borrowers on its books.

It also allows NBFCs to source clients, perform credit appraisals and disburse a small part of the loan amount, and enables banks to expand their lending business.

The end borrower gets accessibility to loans at very affordable and competitive rates, and is in turn included in the country’s financial ecosystem.

Recent co-lending agreements

> Last week, U GRO Capital signed a co-lending agreement with IDBI Bank to provide formal credit to underserved MSMEs.

> Last month, Bank of India entered into a co-lending arrangement with MAS Financial Services for MSME loans, IIFL Home Finance signed an agreement with Punjab National Bank, and SBI signed an agreement with Paisalo Digital.

> In July, YES Bank and Indiabulls Housing Finance Ltd entered into a strategic co-lending agreement to offer home loans.



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Timely recoveries crucial for profitability of sale-bound IDBI Bank, says Icra, BFSI News, ET BFSI

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Timely recoveries will be a key driver of net profitability for IDBI Bank, in the absence of which it may remain at sub-optimal levels in the near to medium term, rating agency Icra has said.

“IDBI Bank’s profitability includes one-time income driven by recoveries from fully-provided legacy stressed assets, and it has utilised the same for accelerated provisioning on other stressed assets and potential asset quality stress in future. Incremental slippages could remain high, given the reasonably large overdue book amid the weak operating environment and certain other vulnerable exposures, the rating agency said in a note while upgrading the rating for the Mumbai-based private lender’s bonds, debentures and tier-II capital instruments from “A” to “A+”

While the bank maintains one of the highest provision coverage ratios on its stressed assets, the timing of recoveries from these could remain uncertain, it said.

The rating upgrade

The rating upgrade factors in the sustained improvement in the credit profile of IDBI Bank Limited with expectations that the internal capital generation is likely to be sufficient for growth as well as for maintaining sufficient cushion over the regulatory capital requirements.

Due to the weak asset quality and capitalisation levels in the past, IDBI Bank was placed under the Prompt Corrective Action (PCA) framework, thereby placing curbs on fresh wholesale lending. This, coupled with increased provision levels on NPAs, resulted in a sustained decline in the net advances to Rs. 1.23 lakh crore as on June 30, 2021 from the peak level of Rs. 2.19 lakh crore as on September 30, 2016. In contrast, the bank’s deposit base moderated less sharply to Rs. 2.23 lakh crore as on June 30, 2021, from Rs. 2.66 lakh crore as on September 30, 2016, that too driven by bulk deposits.

NPA generation

The bank has guided towards the normalisation of NPA generation at 2.0-2.5% in FY2022. However, this will remain contingent on its ability to contain incremental slippages, even as the overdue book, as indicated by the special mention account (SMA)-1 and SMA-2 book (corporate book and retail book combined), remained high at 3.6% of standard advances as on June 30, 2021 (3.3% as on March 31, 2021 and 3.4% as on March 31, 2020).

On a forward-looking basis, normalised operating profitability is expected to remain better compared to past levels although elevated operational costs on a reduced scale along with the continued impact of the high share of low/non-yielding assets on profitability will continue to weigh down the operating profitability, the rating agency said.



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RBI may screen bidders for bank privatisation at EoI stage, BFSI News, ET BFSI

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The government is set to start consultations with the Reserve Bank of India (RBI) to devise a new security clearance framework for screening potential bidders of public sector banks (PSBs), according to a report.

As potential buyers of IDBI Bank and two other PSBs will need to meet the RBI’s fit and proper criteria, the government is planning to bring the central bank on board to vet candidates in the first step itself.

The RBI will screen bidders as early as when expression of interest is placed and only then the process will move forward.

The RBI considers several factors, including the applicant’s integrity, reputation and track record in financial matters and compliance with tax laws, ongoing proceedings of serious disciplinary or criminal nature, financial misconduct for its ‘fit and proper’ tag.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

IDBI Bank

The government has invited bids from transaction advisors and legal firms for assisting in the strategic sale of IDBI Bank.

The Union Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.

The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.



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