Tag: India

Financiers line up green deposits as investors ready as ESG concerns trump yield chase, BFSI News, ET BFSI

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As investors become environmentally conscious and look to put their money in green projects, financiers are rising to the cause.

They are offering green deposits to customers which will be used to fund environmentally friendly projects.

UK-based Hong Kong and Shanghai Banking Corp (HSBC) has raised $400 million of green deposits in India and identified financing opportunities to use those funds.

Under its strategy, the bank first finds avenues to finance before raising the resources. The loans are extended for renewable projects, biodiversity linked initiatives, clean transportation and pollution control.

Once the loans are sanctioned they are matched with deposits.

While HSBC will offer deposits and lend the money raised to companies, HDFC plans to raise these funds through retail depositors.

HSBC has opened these deposits only for corporate clients currently, but there is no differentiation in interest rates with normal deposits. The bank is currently offering a tenure ranging from 90 days to five years.

HDFC bonds

Last week, India’s largest private-sector mortgage financier announced the launch of a new green deposit plan to attract environmentally conscious depositors.

The company plans to raise these deposits from individuals to lend to projects by retail borrowers.

It plans to use these funds to lend to standalone homes which use environment-friendly practices, like putting up solar panels and water recycling, or even to women borrowers or self-help groups.

These deposits to be raised from retail and HNI investors will carry interest rates up to 6.55 per cent, while the maturity period would vary from three to five years.

Senior citizens (60 years+) will be eligible for an additional 0.25 per cent per annum on deposits up to Rs 2 crore.

HDFC Chairman Deepak Parekh said, “Today, sustainability is no longer about doing less harm, but about doing more good.” HDFC anticipates growing demand for green solutions and has launched green and sustainable deposits offering for our customers who can grow their wealth while they contribute to serving the needs of a changing world, he said, adding that HDFC is committed to supporting India’s efforts for a sustainable and green low-carbon economy.

At present, HDFC has a total deposit base of Rs 1.54 lakh crore as of June end and even 1% of this the new fundraising will amount to over Rs 1,500 crore.



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China’s crackdown to boost Indian startups, BFSI News, ET BFSI

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It’s been a landmark year for Indian tech startups, which have already raised a record $20.76 billion from investors since January. Now, with China’s crackdown on its technology sector forcing risk investors to look elsewhere, it seems the funding tap isn’t going to run dry anytime soon.

Also in this letter:

  • Milkbasket cofounder resigns, RIL execs join board
  • Infosys fixes I-T portal after CEO is summoned
  • Cognizant Technology faces US visa trial

Indian startups will benefit from China’s tech crackdown

China’s crackdown on its tech sector is expected to further boost investments in India’s tech startups, which have already been raking in record sums from private equity and venture capital firms this year. That’s according to several founders and investors we spoke with.They also said China’s continued crackdown on Big Tech firms could also trigger long-term changes in the way large internet companies are regulated globally.

Case in point: Earlier this month, education platform Eruditus saw its valuation jump 4x to $3.2 billion after it raised $650 million from SoftBank, Accel US and others.

Ashwin Damera, its cofounder and CEO, said, “China gets more venture capital than India. Now, if the Chinese funnel is getting choked, it will [have to] go somewhere. Emerging markets such as India will get that allocation.”

SoftBank leads the way: Chinese startups account for 23% of SoftBank’s portfolios in terms of fair value. But CEO Masayoshi Son said that since April, only 11% of new investments have been in Chinese companies.

Earlier this month, Son said he was being ‘cautious’ on China investments and that it may take up to two years for the situation there to stabilise.

SoftBank has a sizable India portfolio and has invested large sums in Meesho, Swiggy, Mindtickle, OfBusiness and others this year.

China’s crackdown to boost Indian startups
Third-largest market: India is the third-largest startup market for investors. So far this year, 25 new unicorns—startups valued over $ 1 billion—have been minted here.

India’s startups have raised $20.76 billion in 583 deals this year (as of August 20), according to data from Venture Intelligence. In comparison, they raised $11.1 billion in all of 2020, with 12 turning unicorns.

Fallout goes beyond money: China’s crackdown on its tech sector wiped more than half a trillion dollars off Chinese tech stocks in a week, including those of Alibaba Group, Kuaishou Technology and Tencent Holdings.

China’s crackdown to boost Indian startups
But the impact of the country’s new rules will be felt in other ways, too.

Varun Dua, founder of Acko, an insurance tech startup, said China’s clampdown may have long-term, global impact, “especially on labour rules for gig workers, data privacy and usage, corporate structures, and more regulations for fintech”.

India and other countries may adopt portions or versions of these rules as internet companies become larger and more powerful, he added. “While the underlying reasons [for framing rules] might be different, it’s a sign of things to come across the globe. These changes could take businesses years to adjust to,” he said.
RIL execs join Milkbasket board, cofounder resigns
China’s crackdown to boost Indian startupsMilkbasket cofounder Anant Goel

Milkbasket cofounder Anant Goel resigned as of July 19, and two senior Reliance Industries executives—Nikhil K Chakrapani and Rajendra Kamath—joined the startup’s board the same day, according to the latest regulatory filings.

We had reported in May that RIL was in the final stages of acquiring Milkbasket, which offers subscription-based grocery deliveries, to bolster its ecommerce play.

The development is an indication that RIL now controls the firm, though neither company has made an official announcement.

  • “The deal was done in May itself. The recent filings reflect that. All investors have exited and Goel is out too,” a source said.

RIL’s JioMart has been testing subscription-based deliveries of essentials in select markets such as Chennai and Bengaluru.

New faces: Kamath is chief financial officer (CFO) of Reliance Retail Value and has been associated with Reliance for the past 29 years.

Chakrapani is CFO of Reliance Content Management and also director at Jio Infrastructure Management. Sources said he is also part of the mergers and acquisitions team at RIL.

Other exits: Besides Goel, Vani Kola, managing partner of Kalaari Capital, has also quit the board, as have Nikhil Khattau Nirvan, managing director of Mayfield Ventures, and Pawan Chaturvedi, partner at Unilever Ventures.

Also Read: How Kalaari’s exit led to the fall of Milkbasket

Both Mayfield and Unilever Ventures were among Milkbasket’s main investors, while Kalaari sold its stake in Milkbasket to MN Televentures in July-August last year.

Related Coverage:

Tweet of the day

Infosys fixes I-T portal after CEO is summoned
China’s crackdown to boost Indian startupsInfosys CEO Salil Parekh

Infosys CEO Salil Parekh will meet Finance Minister Nirmala Sitharaman today to explain why glitches in the tax filing website built by the company persist. The snags haven’t been resolved, two-and-a-half-months since its launch, and it hasn’t been available at all since Saturday, the Income Tax department said in a Twitter post on Sunday afternoon.

Quick fix: Late on Sunday night, Infosys tweeted that emergency maintenance on the website had concluded and it was now live.

Background: The union cabinet approved a new income tax e-filing portal at a cost of Rs 4,242 crore in 2019, and the government has paid Infosys Rs 165 crore through June this year, minister of state for finance Pankaj Chaudhary told Parliament last month. Taxpayers and professionals have reported defects in the portal and Infosys has acknowledged technical issues, Chaudhary said.

Infosys had in June said that it would resolve all issues in a few weeks, and again reiterated its commitment to fixing issues in a timely manner during its 40th annual general meeting on June 19.

But on Saturday, Infosys tweeted that the income tax website was inaccessible due to “planned maintenance”. The following day, the company again tweeted that the portal continues to be under “emergency maintenance” and it would post an update when the portal would be available for use again.
Cognizant faces US visa trial as court refuses to dismiss case
China’s crackdown to boost Indian startups
A US court has refused to dismiss a lawsuit against Cognizant Technology Solutions Corp. for allegedly sending workers to the country using business or intra-company visas, instead of the more expensive H-1B work permits.

What’s the matter? The lawsuit, filed by the Teaneck, New Jersey-based company’s former assistant vice president Jean-Claude Franchitti under the False Claims Act (FCA), alleges that Cognizant may have underpaid for visa costs for its foreign employees.

  • A US judge said that Cognizant had an obligation to pay an appropriate fee for the privileges associated with the desired visa.
  • The company had argued that the FCA does not apply to records and statements made under the US Internal Revenue Code.

Quote: “By paying for L-1 and B-1 visas but directing its staff to perform work that required a more expensive H-1B visa, Cognizant decreased its obligation to pay money to the United States government.” — Peter G. Sheridan, United States District Judge for the District of New Jersey.
Where India stands on the global AI landscape
China’s crackdown to boost Indian startups
Artificial Intelligence, or AI, holds great potential as a key driving force for the next phase of economic growth led by technological innovation, and no nation wants to be left behind.

More than 50 countries have announced national strategies on AI and many others are rushing to do so. Which are the countries that are early movers in the global AI sweepstakes and where does India stand in the race for global AI leadership? (read more)

Also Read: Conversational AI is set to become ubiquitous
Femtech startups want to change women’s healthcare in India
China’s crackdown to boost Indian startups
It took Dhivya Arumugam about 15 years to find her people. For the former software engineer, who had grappled with irregular periods since puberty and was taunted about her weight, it had been a long and lonely battle with polycystic ovarian syndrome (PCOS), a chronic condition involving hormones.

It was about a year ago that she came across an online platform called My Ava, focusing on PCOS, which had a community section.

  • “It was the first time in my life that I was seeing women talking openly about it. I had never got that kind of affirmation before,” says the 31-year-old, who now runs a homestay in Manali. In February, helped by a 21-day free trial of My Ava’s PCOS programme, she got her period after a 28-day cycle for the first time in her life. “I couldn’t believe it.”

That Arumugam had to struggle for years with a medical condition that is hardly rare is emblematic of the silence, stigma and lack of resources that have historically plagued much of women’s health, unless it is concerned with maternity or infertility. A clutch of women-led startups now wants to change that. (read more)
Other Top Stories We Are Covering
Volunteers needed: The people behind www.covid19india.org are hopeful others will take over the task of updating the website once they stop doing so at the end of October.

Sustained momentum: Indian IT services providers are expected to perform well going forward, despite challenges in sourcing talent, a new report by HDFC Securities showed.

The rise of greentech: The technology from Sentient Labs uses microbes to break down paddy and wheat straw to produce pure hydrogen, and methane, which can be further processed to produce hydrogen.
Global Picks We Are Reading

  • How Amazon won shopping (NYT)
  • One man’s quest to get an AI machine gathers momentum (Bloomberg)
  • The biggest gift of remote work is not commuting (Axios)

Today’s ETtech Morning Dispatch was curated by Tushar Deep Singh and edited by Zaheer Merchant in Mumbai. Graphics and illustrations by Rahul Awasthi.



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Vietnam, India top measure of crypto adoption by individuals

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Global cryptocurrency adoption among individual investors has surged in the past year, according to crypto-analysis firm Chainalysis.

Using factors like peer-to-peer exchange trading volume and value received, Chainalysis said global crypto adoption rose some 881 per cent in the past 12 months.

The firm sees institutional markets as crucial but aimed to highlight the countries with the greatest crypto adoption by retail investors. It focused on use cases related to transactions and individual saving, rather than trading and speculation. Top-ranked countries are Vietnam, India, Pakistan and Ukraine.

“In emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions,” Chainalysis said in the report. It added that “adoption in North America, Western Europe, and Eastern Asia over the last year has been powered largely by institutional investment.”

Also read: What central bank digital currency is and isn’t

Interest in cryptocurrencies has surged since the onset of the pandemic, in part because of substantial gains by digital tokens like Bitcoin and Ether. The Bloomberg Galaxy Crypto Index has climbed about 380 per cent in the past year.

The Chainalysis Global Crypto Adoption Index ranked 154 countries by three main metrics. China and the US both dropped in the rankings, primarily because peer-to-peer trading volume declined. Last year, China ranked fourth and the US sixth. This year, the US is eighth and China 13th.

Chainalysis took out one factor it had used previously: number of deposits by country weighted by number of internet users. The firm found that it skewed the rankings toward countries with comparatively more decentralised finance, or DeFi, users. Instead, it’s creating a DeFi Adoption Index that it said will be available in coming weeks.

Also read:CoinDCX has became India’s first cryptocurrency unicorn

“Growing transaction volume for centralised services and the explosive growth of DeFi are driving cryptocurrency usage in the developed world and in countries that already had substantial adoption, while P2P platforms are driving new adoption in emerging markets,” Chainalysis said, adding a key question is whether new approaches will disrupt those trends.

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After a lull, NBFCs banking on better times

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Non banking finance companies (NBFC), which had witnessed a drop in disbursements and collections in Q1 (April-June) FY22, expect business to bounce back to the pre-pandemic levels by the end of this fiscal.

While collections have already started improving, disbursements are also expected to gain momentum in the run-up to the festival season, good monsoon and pent-up demand for credit across various sectors.

According to Mahesh Thakkar, Director General of Finance Industry Development Council (FIDC), Q1 of the current fiscal was not very good, but Q2 (July-September) is seeing an improvement. By Q3 (October-December) the industry should bounce back to around 95 per cent of the pre-pandemic levels.

Also read: Public sector banks report sharp slippages in MSME loans in Q1

“Sales are picking up in the auto sector, demand is coming in from MSMEs… the monsoon has been good, and demand is there ahead of the festival season. People have learnt to live with the pandemic and are looking forward to go out. This will give a push to consumption. Spending will improve,” Thakkar told BusinessLine.

Growth in disbursements

Some of the NBFCs expect business to be back to pre-pandemic levels by Q2 of this fiscal.

Shriram City Union Finance (SCUF), for instance, expects disbursements to return to pre-pandemic levels by the second quarter of this fiscal, backed by a steady pick-up in demand across two-wheeler loans, loan against gold, personal loans, and MSME finance.

The NBFC is looking to aggressively push two-wheeler loans, which have witnessed very little delinquency, as well as gold loans. While it also plans to push personal loans and SME loans, however, it would continue to remain cautious and prefer to lend to existing customers, said YS Chakravarti, MD and CEO.

“We normally do disbursements worth ₹6,500-6,600 crore during a quarter. We have disbursed close to ₹2,000 crore in July alone, and we hope to register close to ₹6,000 crore during the second quarter of this fiscal,” he said.

According to Oommen K Mammen, CFO, Muthoot Finance, while disbursements were low in May, by the end of June it started picking up. The company is targeting a 15 per cent growth in assets under management (AUM) this fiscal.

Also read: Microfinance industry bounces back to pre-Covid levels

“In Q2 we are expecting a better business compared to Q1. The restrictions (across various States) are being relaxed, and people have started getting back (to business),” he said, indicating that it will push up the demand for credit. The AUM of the sector grew by a modest 4 per cent in FY21 vis-a-vis six per cent in FY20 (16 per cent in FY19). The housing finance companies (HFCs) grew by about 6 per cent during the last fiscal; within the other NBFC space, retail credit (consisting of vehicle, business loans, personal credit, microfinance) grew by four per cent, while the wholesale credit declined on a year-on-year basis, said a recent report by ICRA.

Overall, the sectoral AUM is expected to grow at 7-9 per cent in FY22, bolstered by the growth in NBFC retail credit and HFCs, which is expected to be about 8-10 per cent, while NBFC wholesale credit growth would remain muted, the report said.

Collections improve

The ICRA report further suggests that the risks for the NBFC sector remain elevated in the near term, and the revival is likely to happen in the next fiscal.

The second wave of Covid9 had a varied impact on the business and operations of NBFCs (private NBFCs, including HFCs). While large HFCs saw relatively limited impact on their collection efficiency (CE), other NBFCs, having exposure to several segments such as vehicle finance, business loans and microfinance, witnessed their CEs decline by about 20-25 per cent in May 2021 vis-a-vis the average Q4 (January-March) FY21 when the lockdown imposed by various States was more stringent and widespread. The CE improved marginally (up by three-to-five per cent) in June 2021 vis-a-vis May 2021 levels, with States steadily relaxing restrictions.

“The impact on CE was lower during Q1 FY22 compared to what was witnessed in Q1 FY21, and initial feedback indicates a further improvement in CE in July 2021. Sustenance of the same in the subsequent months and no further impediments in the revival trends would be crucial from an asset quality perspective. We note that the headline asset quality numbers for June 2021 would be significantly elevated vis-a-vis March 2021, but the same is expected to subside over a couple of quarters if the CEs continue to trend upwards in the subsequent months,” said AM Karthik, Vice President, Financial Sector Ratings, ICRA Ltd.

The restructured book for the NBFCs (excluding HFCs) is expected to move up to 4.1-4.3 per cent by March 2022, while the same for the HFCs is estimated to go up to 2-2.2 per cent. The overall sectoral restructured book is expected to double to 3.1-3.3 per cent by March 2022 vis a vis 1.6 per cent in March 2021.

“Notwithstanding the near-term pressures, the net increase (adjusting for write-offs) in the 90 plus days past due (90+dpd) in the current fiscal is expected to be about 50-100 basis points. ICRA draws comfort from the provisions maintained by the entities, which continue to remain about 100 bps higher than the pre-Covid levels,” Karthik added.

Comfortable liquidity

Liquidity cover at a number of NBFCs has improved from a year ago, putting them in a better position to service debt in the near-term, and cushioning the impact of lower collections because of the second wave, said a CRISIL Ratings study.

Also read: Small businesses hit as banks freeze current a/cs

That is a change from last year when asset-quality and liquidity fears multiplied after a moratorium on repayments and stringent lockdowns affected collections.

Fund-raising through special RBI and government schemes, improving collections in the second half of fiscal 2021, and limited disbursements are some of the factors that supported liquidity.

In the first half of last fiscal, nearly 45 per cent of the funds raised via bonds were through schemes announced following the first wave of the pandemic, such as the targeted long-term repo operations and partial credit guarantee. Even NBFCs that did not have strong parentage managed to raise close to 60 per cent of their incremental bond funding through these routes.

This apart, in the fourth quarter, debt market borrowings also began to rebound. Bond and commercial paper issuances in March 2021 saw the highest on-month rise since January 2020. Even bank funding improved to nearly seven per cent during January-March 2021. With collections picking up and disbursements subdued, liquidity was bolstered.

“Most CRISIL rated NBFCs have built significant on-balance-sheet liquidity. This will allow them to manage the impact of the second wave of the pandemic better than the first. Nevertheless, business challenges linked to the pandemic will continue through most of this fiscal. In this milieu, we expect many NBFCs to continue maintaining strong liquidity cover for debt repayments and operating expenses. That would also help them assuage potential investor/ lender concerns in the near term,” said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings, in the study.

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PMJDY turns 7; brings 43 crore under formal banking system

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As India celebrates its 75th Independence Day, nearly 43 crore poor beneficiaries in the country now have a basic bank account, thanks to Centre’s flagship financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana (PMJDY).

The scheme, announced by Prime Minister Narendra Modi in August 2014, has dispelled initial apprehensions on its efficacy and proved to be a steady vehicle for financial inclusion.

Also read: Over 5.82 crore Jan Dhan accounts inoperative: Finance Ministry

As per latest government data, PMJDY now has 42.89 crore beneficiaries (basic bank account holders) with ₹1,43,834 crore total balance. More than half of the beneficiaries are women (23.76 crore) while 28.57 crore are from rural and semi urban areas.

‘Unparalled achievement’

When asked on the impact of the scheme so far, D Janakiram, Director, Institute for Development and Research in Banking Technology (IDRBT), an arm of RBI, said, “PMJDY has done extremely well so far… The massive financial inclusion achieved by the scheme is unparalleled.”

A senior official of State Bank of India said the average balance in the accounts which is hovering around ₹3,000-3,500 across banks is ‘an indication’ that the scheme has now become a channel for savings for the low income families.

“The total deposit balance of ₹1.43-lakh crore is actually a huge amount. Our studies have shown that a good number of these accounts are being regularly used,” Prasanna Tantri, Exectuive Director, Center For Analytical Finance, Indian School of Business (ISB) said.

The Global Findex data base of the World Bank has also shown ‘substantial’ increase in financial inclusion in the country after 2014. As per the index, 80 per cent of people above 15 years of age in the lower-middle income group have a bank account now compared to 53 per cent in 2014.

The next step

While the contribution of PMJDY has well been recognised, there is also a need to scale up to the next level, say experts.

Also read: Why PMJDY must be scaled up to next level

“Going forward, we should move from financial inclusion to financial empowerment by providing credit. The PMJDY should become PM Jan Dhan Vridhi with universal access to bank credit to the most underprivileged sections of our society,” the IDRBT chief said.

It would also need a model of credit history, which will require reduction in cash transactions and moving to digital transactions and building credit models using artificial intelligence/machine learning techniques, he added.

“We should think of building India’s next generation digital financial infrastructure focusing on these needs and to reduce per transaction cost as well as the maintenance cost of these accounts,” Janakiram said.

According to Tantri, there is a need to build up a data base to capture the income, transaction history of the Jan Dhan account holders on the basis of which credit delivery models can be worked out. “As of now, we have only aggregate data. Banks and Fintechs can do further data analysis to create a new data base,” he added.

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Pandemic hits India's prospects to become $5 trillion economy by FY25: Top US economist

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According to him, even if everything goes according to current growth projections by the RBI and IMF, Indian economy will be smaller for a considerable period of next year than it was in 2019.

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Ujjivan SFB plans to apply for reverse merger by early November

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Ujjivan Small Finance Bank is likely to apply to the Reserve Bank of India for reverse merger with Ujjivan Financial Services by November this year.

“The RBI has clarified to the Association of Small Finance Banks that we can apply three months prior to completing five years of business,” said Nitin Chugh, Managing Director and CEO, Ujjivan SFB, adding that this would mean the bank can apply by early November.

It is hopeful that the process may be completed within a 12 month period.

“Instead of applying in February of next year, we will get to apply in November this year. So, we will easily be able to save three months,” Chugh further said.

In a stock exchange filing in July, Ujjivan SFB had said it would be initiating necessary steps for the amalgamation of Ujjivan Financial Services with the bank in accordance with applicable laws and guidelines.

Meanwhile, with a recovery in credit demand and improvement in collection efficiencies, Chugh said the bank is cautiously optimistic.

“We are seeing a strong demand in housing, affordable housing dedicated to micro small enterprises. in microfinance, personal loans,” he said.

The bank is retaining its credit growth target of 20 per cent to 25 per cent this fiscal but Chugh said it may be closer to 20 per cent, given the impact of the second wave of the pandemic.

The lender is also witnessing repayment by customers from July onwards and expects NPA recoveries to improve.

“Collection efficiencies improved to 93 per cent in July compared to 78 per cent in June,” he said, adding that the second quarter of the fiscal is looking quite optimistic on business as well as collection.

The bank had reported a standalone net loss of Rs 233.48 crore in the quarter ended June 30, 2021 with gross non performing assets rising to 9.79 per cent of gross advances.

The lender is also planning to scale up its gold loan business this fiscal and expand it to 25 branches this quarter. In the current fiscal, it plans to take the gold loan offering to 100 branches.

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Visible signs of economic revival, says finance ministry, BFSI News, ET BFSI

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NEW DELHI: There are visible signs of economic rejuvenation since the second half of May, with the second wave of the pandemic abating in most parts of the country and state governments lifting restrictions in phases, a finance ministry report said on Tuesday, while calling for sustaining the vaccination progress and the need for Covid-appropriate behaviour.

“The receding of India’s second wave, along with rapid progress in vaccination, has set the stage to further accelerate economic recovery. The movement of high frequency indicators in July clearly point towards a broad-based economic revival,” said the finance ministry’s monthly economic report for July, adding that these signs resonate with the fact that the economic impact of the second wave is expected to be muted.

It said PMI manufacturing sharply rebounded to be in expansionary zone across output and input sub-components of the index. Marking swift economic recovery, GST collection has reclaimed its Rs 1 lakh crore-plus territory in July, signifying increased business and consumer activity.

Rail freight at 112.7MT in July hit a record for the month and registered 18.3% growth (year-on-year) and13.2% rise compared to pre-Covid July 2019. The surge in economic activity is further corroborated by trends in Kharif sowing, fertiliser sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions, said the report.

“Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave,” it further added.

“At this juncture, the economy and society are at a crucial inflection point where sustenance of economic recovery, vaccination progress and Covid-19 appropriate behavioural strategies are needed in close synergy with each other.”

It said that having antibodies reduces the probability of acquiring serious illnesses, as is borne by studies. So, any subsequent waves are expected to be mild in terms of severity of disease.



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HDFC Bank receives Rs 30,000 crore prepayments amid signs of economic recovery and deliveraging, BFSI News, ET BFSI

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In clear signs of a robust economic recovery and sustained deleveraging by top-rated Indian corporates, HDFC Bank received about Rs 30,000 crore in prepayments through the June quarter, primarily from companies in the commodities and infrastructure sectors, two people familiar with the development told ET.

“HDFC Bank has not seen such a high level of prepayment in the recent past,” said one of the persons cited above. “Other banks also obtained prepayments, but the scale is not that high because of lower business volumes.”

HDFC Bank, India’s most valuable lender, did not reply to ET’s queries on the subject. Industry sources didn’t reveal the names of individual corporate borrowers prepaying their loans to HDFC Bank.

In the April-June quarter, AAA or AA-rated companies sought to deleverage as they recorded solid cash balances, banking sources said. Cash flows were robust at commodity companies because of record iron ore or aluminium prices, boosting net profits. Infrastructure companies, too, reported fatter bottom-lines due to the government’s extensive highway-building programme.

HDFC Bank now expects renewed credit demand from these companies in a quarter or two, with the pace of economic recovery quickening and fueling the need for more funds.

The bank expanded its corporate loans in excess of 10% in the April-June quarter to about Rs 3.15 lakh crore. Wholesale banking advances largely include working capital loans. About four years ago, the book size was about Rs 1 lakh crore at the traditionally retail-focused HDFC Bank.

“Prepayments came from borrowers with more than two years of residual loans outstanding,” said a market source.

If a borrowing company runs a loan for two years and gives a prepayment notice of up to 30 days, the bank does not charge any penalty.

“Three months later, these companies will come forward with fresh credit demand,” said a senior banking executive, who advises companies on loan deals and works closely with HDFC Bank. “Demand is coming back as the second wave triggered only localised lockdowns.”

HDFC Bank is increasingly leaning toward companies, with the franchise built around individual consumption pushing credit to deleveraged corporates after Covid-induced job losses and wage cuts raised the risk perception of retail borrowers.

“Corporate loans will likely grow selectively,” Kaizad Bharucha, Executive Director, HDFC Bank, said in an interaction with ET two weeks ago. “The second wave has not destroyed demand for corporate loans but postponed it. With caseloads falling, companies will require money – both working capital and term loans.”



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