Tag: India

ED, BFSI News, ET BFSI

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NEW DELHI: The debts recovery tribunal (DRT) has sold shares worth over Rs 5,800 crore of United Breweries Limited (UBL) that were earlier attached under the anti-money laundering law as part of an alleged bank fraud probe against fugitive liquor baron Vijay Mallya, the Enforcement Directorate said on Wednesday.

Further realisation of Rs 800 crore by sale of shares is expected by June 25, the central probe agency said in a statement.

Recently, it said, the agency had transferred shares attached by it (worth about Rs 6,600 crore) to the SBI-led consortium as per order of the special Prevention of Money Laundering Act (PMLA) Mumbai.

“Today, DRT on behalf of SBI-led consortium, has sold shares of United Breweries Limited for Rs 5,824.50 crore,” the ED said.

Mallya, 65, has lost the case against his extradition to India and he has “been denied permission to file appeal in the UK Supreme Court.”

“His extradition to India has become final,” the ED said.



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Financial services turn investor darlings as m-cap jumps Rs 157 lakh crore, BFSI News, ET BFSI

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Financial services are the clear winners in the stock market with Rs 157 lakh crore increase in their market cap during the past one year IT is another major sector whose market value has increased significantly, followed by oil and gas, consumer goods, automobiles, metals and pharma, according to an SBI Ecowrap report.

The report said that the share of savings in shares and debentures to total household financial savings at 3.4 per cent in FY20 is likely to increase in FY21 to 4.8-5.0 per cent or 0.7 per cent of GDP from 0.4 per cent of GDP in FY20.

Infrastructure play

The market capitalization of Sensex has increased by 1.8 times its value one year ago. However, sector-wise 1-year return in Indian stock markets indicates that IT and Materials have performed better and IT. This clearly indicates the movement in Indian stock markets is increasingly being clearly interlinked with a supposed infrastructure power play in the coming days, the report said.

The increasing retail participation, if it becomes the norm, could also enable a larger resource pool for financing India’s infrastructural requirements, the report said.

Retail investors

The number of individual investors in the market has increased by a whopping 142 lakh in FY21, with 122.5 lakh new accounts at CDSL and 19.7 lakh in NSDL. Furthermore, another 44.7 lakh retails investor accounts have been added during the two months of this fiscal. Also, the share of individual investors in total turnover on the stock exchanges has risen to 45% from 39% in March 2020.

Within retail, the maximum allocation has been to financials, followed by consumer staples, energy and IT.

Lower rates in other saving avenues amidst the low-interest rate regime has led to greater interest by individuals in the stock market. Another reason could be the significant increase in global liquidity. Additionally, the pandemic which has resulted in people spending more time in their homes might also be another reason for individuals’ tilt towards the stock market trading, the report said. However, it is yet to be seen if this increasing retail participation is transitory or the beginning of long term behavioural change.



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DIPAM seeks bids for transaction advisor for IDBI Bank strategic disinvestment, last date July 13, BFSI News, ET BFSI

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The department of investment and public asset management (DIPAM) Tuesday issued a request for proposal for appointing transaction advisor for strategic disinvestment and transfer of management control in IDBI Bank Limited.

Among several criteria listed for eligibility, bidders should have completed at least one transaction of strategic disinvestment, strategic sale or merger and acquisition of Rs 5000 crore or more in size, between April 2016 and March, 2021. The last date for submissions is July 13.

The professional financial consulting firm, investment banker, merchant banker, financial institution or bank bidding for the contract, should have at least five years’ experience in providing advisory service in such transactions.

“The Transaction Advisor (TA) will be required to undertake tasks related to all aspects of the proposed strategic disinvestment culminating into successful completion of the transaction and would, inter alia include but not limited to advising and assisting government of India on modalities of disinvestment and the timing,” the department said as it set out terms of reference for the advisor in the RFP.

The advisor would recommend the need for other intermediaries required for the process of sale or disinvestment, help in identification and selection of the same with proper terms of reference, prepare documents such as the Preliminary Information Memorandum (PIM), Confidential Information Memorandum (CIM), Request for Proposal (RFP), Confidentiality Agreement et al.

It will also structure the transaction, organize roadshows, suggest measures to fetch optimum value, position of the strategic sale, invite and evaluate bids, assist and professionally guide during the negotiations with prospective buyers, draw up the sale or other agreements and advise on post-sale matters on a continuous basis.

DIPAM has barred a person or company owning more than 50% equity interest in the merchant banker or controls the merchant bankers, from participating in the competitive process for acquisition of IDBI Bank.

“For clarity, parent entity cannot participate in transaction process in case the selected bidder is subsidiary of an existing retail bank.

In case the interested Transaction Advisor is a subsidiary of an existing retail bank, they need to provide documentation explaining firewall or Chinese-wall structure to maintain confidentiality and conflict of interest.

DIPAM has also barred public sector banks cannot participate as bidders for acquisition of IDBI Bank in the transaction process. Subsidiaries of IDBI Bank – IDBI Capital Markets – cannot participate as bidders for transaction advisors.

The Cabinet Committee on Economic Affairs had given an in-principle approval for the strategic divestment of IDBI Bank in May this year. The extent of shareholding to be divested by the Indian government and Life Insurance Corporation of India will be decided at the time of structuring of transaction in consultation with Reserve Bank of India, it had said.

IDBI Bank is classified as a private sector bank by RBI with government shareholding at 45.48%, LIC of India shareholding at 49.24% and non-promoter shareholding at 5.29%.



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Will equalisation levy spur growth of crypto exchanges in India?, BFSI News, ET BFSI

Personal Finance

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Cryptocurrencies are likely to become slightly expensive for Indian investors buying the token from exchanges outside the country. The Income-Tax department is likely to levy an additional tax of 2% in the form of equalisation levy.

The tax department is now looking into whether the 2% levy is applicable on crypto assets bought online by Indians from overseas exchanges.

The government had expanded the scope of the equalisation levy from this year to include any purchase by an Indian or India-based entity through an overseas platform.

The levy is on the selling price and companies may be required to add this to the cost of the crypto assets.

Experts said there is no clarity as to whether cryptocurrencies can be categorised as goods, services or commodities.

Payback time

Since most cryptocurrency exchanges have not paid this levy, the taxman’s scrutiny now means that customers may have to pay up.

Unlike other taxes, equalisation levy is on the selling price, which would mean that the cost of buying the crypto assets will jump by 2% for Indians.

However, many crypto exchanges in the last few years have created structures where they do not have a presence or permanent establishment in India and the Indian entity only takes care of marketing functions.

Many companies have moved to Singapore or Dubai in a bid to safeguard themselves from some of the Indian laws in the last few years.

Permanent establishment is a concept in tax laws that determines which country has the first right to tax a company and to what extent.

Many companies have moved to Singapore or Dubai in a bid to safeguard themselves from some of the Indian laws in the last few years.
Many companies have moved to Singapore or Dubai in a bid to safeguard themselves from some of the Indian laws in the last few years.

Global interest

Global digital currency exchanges are exploring ways to set up in India, following in the footsteps of market leader Binance.

U.S.-based Kraken, British Virgin Islands-based Bitfinex and rival KuCoin are actively scouting the market,

The interest in cryptocurrency has exploded in India over the last 15 months as a bull run began in bitcoin and other virtual currencies.

India’s biggest crypto exchange WazirX along with other exchanges including CoinSwitch Kuber, Zebpay, CoinDCX has seen expotential growth in the last few months. In April, WazirX claimed it hit $5.4 billion in transaction volumes, which is a tenfold rise from $500 million in December 2020. Its user base shot up by 50% to 3 million in April, and in May, it saw crypto trades worth over $380 million on its platform on a single day. CoinSwitch Kuber raised $25 million at a $500 million valuation in April 2021.

ZebPay, India’s oldest exchange for trading cryptocurrencies, aims to double monthly transactions after an explosion in demand.

ZebPay, a platform with about 4 million customers, expects to churn $2 billion worth of trades per month, which is still less than one-fifth of trades handled by top US-based exchange Coinbase Global Inc.

While there is no exact number of cryptocurrency firms operating in India, estimated that at least 50 are actively onboarding customers and collectively processing transactions worth over Rs 15,000 crore annually.



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Moody’s sees auto loan delinquencies rising for three to six months, BFSI News, ET BFSI

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Moody’s which reported stable collection rates for auto-loan asset-backed securities (ABS) rated by it in the quarter ended March 2021, sees them falling over the next three to six months.

The collection rates were similar to the pre-Covid levels in the March quarter, according to a report. Delinquency rates were also similar in the March quarter over the previous quarter.

The delay in the country’s economic recovery, rise in fuel prices is hurting the commercial vehicle segment. This will hit the performance of asset-backed securities backed by commercial vehicle loans, according to a report by Moody’s Investors Service earlier this month.

“Slowing economic activity in India due to the second wave will constrain commercial vehicle owners’ capacity to pay auto loans. As a result, commercial vehicle loan delinquencies will increase in India and collection rates will remain below March levels over the next three to six months,” according to Moody’s.

Sluggish economic activity will dampen demand for goods transportation and lower freight rates. This will reduce commercial vehicle operators’ incomes, and therefore, their ability to repay auto loans, the agency said.

Furthermore, fuel costs are rising following a depreciation of the rupee and state and central fuel tax changes, which have hiked up commercial vehicle operators’ costs and will further constrain their loan-repayment ability.

Cash reserves, excess spread and transaction structures will mitigate risks. The Indian asset-backed securities that Moody’s rates benefit from non-amortising cash reserves and substantial excess spread, providing liquidity and buffers against losses. Most deals also have timely interest and ultimate principal structures, which provide additional protection against liquidity risks.

Second wave harsh

The impact of the first Covid wave was cushioned with multiple measures such as regulatory moratorium, loan restructuring, additional funding through the emergency credit line guarantee scheme. Also, a sharp pent-up demand recovery raised optimism about faster-than-expected normalisation, according to India Ratings.

However, the outcome may be different during the second wave, due to the wide-scale impact, including rural areas and pent-up demand being absorbed already.

With reduced borrowers’ savings and rising operating costs due to fuel inflation, the excess capacity had its offsetting impact on freight contract renewals or market freight rates, all impacting borrowers’ cash flows.

Early demand indicators, such as the E-way bill, diesel consumption are showing signs of moderation and asset inflation (rising raw material prices like steel and cement) would impact demand offtake and thus load availability.

Thus, both demand and rising operating costs would moderate borrowers’ cash flows in the financial year 2021-22.

“Lenders’ collection efficiency would also be affected by restricted mobility as the second wave has spread across all geographies, the agency said, adding it has a negative outlook on commercial vehicle finance as an asset class.

There are emerging trends of rising loan tenures across vehicle financiers to reduce servicing burden for borrowers, however, these could lead to a rise in loss given defaults for collaterals.



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Finance ministry refutes reports of alleged black money held by Indians in Switzerland, BFSI News, ET BFSI

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NEW DELHI: The Union finance ministry on Saturday said that increase in deposits of Indians in Swiss Banks could be on account of increase in business of Swiss bank branches located in India and raised Inter-bank transactions, rather than due to an increase in alleged black money held by Indians in Switzerland.

It, however said that Swiss Authorities have been requested to provide the relevant facts along with their view on possible reasons for increase or decrease in deposits so that facts could be presented in correct perspective.

Certain reports suggested that that funds of Indians in Swiss Banks have risen to over Rs 20,700 crore (CHF 2.55 billion) at the end of 2020 from Rs 6,625 crore (CHF 899 million) at the end of 2019, reversing a 2-year declining trend. It has also been stated that this is also the highest figure of deposits in the last 13 years.

“Reports allude to the fact that the figures reported are official figures reported by banks to Swiss National Bank (SNB) and do not indicate the quantum of much debated alleged black money held by Indians in Switzerland. Further, these statistics do not include the money that Indians, NRIs or others might have in Swiss banks in the names of third-country entities,” the ministry statement said.

The statement added that the customer deposits have actually fallen from the end of 2019 in a Swiss Banks. The funds held through fiduciaries has also more than halved from end of 2019. The biggest increase is in “Other amounts due from customers”. These are in form of bonds, securities and various other financial instruments, the finance min statement said.

The ministry also ascribed various other reasons for increase in deposits and not possibly on account of the increase of deposits in the Swiss banks out of undeclared incomes of Indian residents. It said that that increase in deposits may be on account if increase in deposits owing to the business of Swiss Bank branches located in India or Increase in Inter- bank transactions between Swiss and Indian Banks. Also, it could be due to capital increase for a subsidiary of a Swiss Company in India or increase in the liabilities connected with the outstanding derivative financial instruments.

The government has issued clarifications in wake of widely held position that it has curbed generation of black money in the economy or unaccounted funds of Indians stashed abroad. The fresh tax agreements reached between India and certain perceived tax havens has introduced certain instruments to prevent round tripping of funds and generation of black money.

It is pertinent to point out that India and Switzerland are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and both countries have also signed the Multilateral Competent Authority Agreement (MCAA) pursuant to which, the Automatic Exchange of Information (AEOI) is activated between the two countries for sharing of financial account information annually for calendar year 2018 onwards.

Exchanges of Financial Account information in respect of residents of each country have taken place between both countries in 2019 as well as 2020. In view of the existing legal arrangement for exchange of information of financial accounts (which has a significant deterrent effect on tax evasion through undisclosed assets abroad), there does not appear to be any significant possibility of the increase of deposits in the Swiss banks which is out of undeclared incomes of Indian residents, the finance ministry said.



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Does Siva settlement signal banks’ disillusionment with IBC?, BFSI News, ET BFSI

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Lenders of Siva Industries and Holdings have approved a one-time settlement proposal from the promoter under which they will take a 93.% haircut and just Rs 5 crore upfront cash.

Of the company’s total dues of Rs 4,863 crore, the IDBI Bank-led lenders will get Rs 313, excluding upfront payment, within 180 day of receiving NCLT nod.

They will recover Rs 318 crore, with Rs 5 crore as upfront cash, out of the company’s total dues of Rs 4,863 crore. This amounts to a haircut of 93.5 per cent.

The holding company owes financial and other creditors about Rs 5,000 crore. Tata Sons had filed a claim of Rs 863 crore against the Sivasankaran group company but that was rejected by the latter’s interim resolution professional.

The creditors received an offer from Mauritius-based Royal Partner for the company but that was rejected on the grounds that the investor had been unable to demonstrate its seriousness in completing the deal.

Unusual settlement

Bankruptcy experts have termed the development unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.

Other controversies

Sivasankaran, who was the founder of Aircel before he sold it to Malaysia’s Maxis Communications, is no stranger to controversy.

The South India-based businessman has been at the centre of a probe by the Central Bureau of Investigation (CBI) over alleged irregularities in loans obtained from IDBI Bank. Sivasankaran was accused of obtaining loans from IDBI Bank’s overseas branches and using the proceeds to repay loans obtained from the bank in India which had turned non-performing.

He was also accused by Cyrus Mistry of receiving favours from Ratan Tata such as the grant of a loan to buy a stake in Tata Teleservices. But these allegations were rejected by the Supreme Court in its verdict on the Tata-Mistry dispute delivered on March 26.

Siva Industries was admitted for bankruptcy proceedings on July 4, 2019, as per a public announcement uploaded on the website of the IBBI.



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IndusInd Bank rolls out digital lending platform ‘IndusEasyCredit’, BFSI News, ET BFSI

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IndusInd Bank today, launched the ‘IndusEasyCredit’, a fully digital end to end platform leveraging India’s public digital infrastructure- ‘Indiastack’ to offer personal loans and credit cards in a paperless and cashless manner.

The stack leverages more than 35 interfaces to digitally verify KYC and employment information as well as analyse bank statements. It then uses advanced analytics and machine learning based models to assess eligibility in real time. Post this, the customer can conduct Video KYC and get the loan disbursed into his or her account after executing the agreement digitally.

“Over the past few months, we have been constantly working towards creating a comprehensive solution that enables customers with easy access to credit from the comfort and safety of their homes. ‘IndusEasyCredit’ is a testament to that effort which provides customers with the flexibility to avail a personal loan or a credit card on a single platform, in a completely seamless, paperless, and digital manner.” said Charu Mathur, Chief Digital Officer & Head-Business Strategy, IndusInd Bank in a statement.

Existing as well as non-IndusInd Bank customers can avail an instant personal loan by following the below mentioned steps:

  1. Complete e-KYC and provide basic details to check eligibility (only applicable for non-IndusInd Bank customers)
  2. Select the amount from the pre-approved loan offer as required. Accept the auto populated interest rate, processing fee and EMI amount.
  3. Complete Video KYC (only applicable for non-IndusInd Bank customers).
  4. Authenticate the request for enabling instant money credit into their account, after digitally signing the agreement.
  5. The money gets transferred to the customer’s account instantly on completion of this procedure.

In order to avail credit card, customers can simply follow the below steps:

  1. Complete e-KYC and provide basic details to check eligibility (only applicable for non-IndusInd Bank customers).
  2. Customers will get the pre-approved offer.
  3. They can then select the desired IndusInd Bank Credit Card product.
  4. Complete Video KYC (only applicable for non-IndusInd customers).
  5. On completion of Video KYC, the said card is dispatched to the customer.

Currently, customers can only apply for the ‘IndusEasyCredit’ facility through the Bank’s website. It will also be made available shortly on IndusMobile, the Bank’s mobile banking application, according to the statement.



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After retail, ICICI eyes digital opportunities in corporate sector, BFSI News, ET BFSI

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As retail loans, the mainstay of banks reeling under bad loans, for many years shows pandemic stress, lenders are turning back to corporates.

ICIC Bank, which has been cautious on bulky corporate lending, is looking to increase exposure to companies as it sees them benefiting from the Covid pandemic recovery. Corporate loans constitute 45% of the bank’s Rs 7.33 lakh crore loan book.

ICICI STACK

To tap the corporate loan pie, the company has launched a digital solution, aimed at profiting by offering a wider set of services to high-value clients.

The second-largest private sector lender also said that the corporates are slower in adopting digital solutions as compared to the retail segment, and added that the solution focuses on tech-based new age offerings.

A corporate needs a trusted partner, who will handhold and help manage business holistically.

Its newly launched ‘ICICI STACK will provide digital banking solutions to corporates, their channel partners, employees and other stakeholders.

The bank expects corporate demand also to pick up in the next economic cycle. The bank has doubled the number of current accounts in the last year, The bank has launched a new digital banking product that will provide transaction services, credit facilities, advisory and M&A services for companies and their vendors. It will also offer savings bank accounts to the company employees which will help it build its deposits.

Comprehensive product

The new comprehensive digital offering will help the bank connect with companies their vendors and also employees providing it with valuable information to assess the financial health of their clients besides multiplying opportunities for business.

The bank will offer this new product to 15 industries initially, like information technology, pharmaceuticals, steel and financial services. It has opened eight dedicated branches, five in Mumbai and three around Delhi to serve these customers. Another four branches focussed on these services will be launched later this fiscal.

The lender is not looking at it from a line-by-line perspective and expects the initiative to play into the overall profits.

About 90 per cent of the bank’s retail transactions have moved away from paper-based systems like cheques and termed the adoption of digital alternatives among corporates as “low”. Corporates have doubled up on digital transactions, but have a long way to go on it.

Corporate loan growth

The bank feels India will grow after the ravages of the pandemic and the same will come from both investment and consumption.

In such a scenario the corporate loan demand will also fire up, and added that its corporate loan book is a function of the opportunities in the market.

The bank had witnessed a 13 per cent growth in corporate advances in the March quarter as against 20 per cent on the retail front, and overall domestic loan growth of 18 per cent.

It can be noted that even before the pandemic, corporate loan growth was trailing for banks, which shifted focus to the more resilient retail segment amid asset quality reverses on the large value loans. Some experts say with demand affected, corporates are unlikely to up their investment activities, which typically result in loan growth.



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To power FY22 advances growth, Bank of Maharashtra eyes ₹2,000 cr fund raise

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Bank of Maharashtra (BoM) has embarked on an exercise to mop up ₹2,000 crore via qualified institutions placement (QIP) of equity shares in a bid to support its FY22 advances growth target of 16-18 per cent.

The Pune-headquartered public sector bank expects to tap the QIP route, comprising core issue size of ₹1,000 crore and a green shoe option of ₹1,000 crore, by July-end.

AS Rajeev, MD & CEO, observed that the Bank’s target is to increase the advances portfolio to at least ₹1.25 lakh-crore by March-end 2022 against ₹1,07,654-crore as at March-end 2021.

“The envisaged increase in advances of ₹20,000-25,000 crore will absorb around ₹1,500 crore of capital. We will raise another ₹1,000 crore either via Additional Tier-I or Tier-II bonds by March-end 2022,” he said in an interaction with BusinessLine.

The resources raised via QIP and bond routes is expected to take care of the advances growth for the next one to one-and-a-half years. “We posted ₹550 crore net profit in FY21. We are envisaging 25-30 per cent growth in net profit (in FY22). This will also further increase our capital. So, for another two years, we will not require any capital. This is the plan,” Rajeev said.

After the fund raising and plough back of profit, BoM’s capital to risk-weighted assets ratio is likely to go up to 15 per cent by March-end 2022 from 14.49 per cent as at March-end 2021.

Tweaking loan composition

Rajeev underscored that the retail, MSME and agriculture (RAM), and corporate (government guaranteed advances) advances could increase by about ₹15,000 crore and ₹10,000 crore, respectively, so that the retail to wholesale advances ratio in overall portfolio moves to 65:35 as at March-end 2022, against 67:33 as at March-end 2021.

Within emergency healthcare services, BoM’s pharma sector exposure could go up from about 2 per cent of total advances to 4-4.5 per cent. “Funding support is needed by the sector to manufacture Covid-19 related vaccines and medicines,” Rajeev said.

Higher recovery target

BoM is eyeing a higher recovery target of ₹3,000 crore in FY22 against ₹1,644 crore in FY21. “Our target is to bring down Net Non-Performing Assets (NPAs) below 2 per cent by March-end 2022 (from 2.48 per cent as at March-end 2021) and Gross NPAs below 6 per cent (from now 7.23 per cent),” Rajeev added.

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