Tag: India

From August 1, get your pay on bank holidays, too

Banking & Finance

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Starting August 1, you will be able to get your salaries and pensions credited over the weekend, too, with the National Automated Clearing House (NACH) becoming available on all days of the week.

RBI Governor Shaktikanta Das announced the move on Friday. “In order to further enhance customer convenience, and to leverage the 24×7 availability of RTGS, NACH which is currently available on bank working days, is proposed to be made available on all days of the week effective from August 1, 2021,” he said.

NACH is a bulk payment system operated by the NPCI and facilitates one-to-many credit transfers. Over 40.6 crore transactions (credits and debits) were presented on the NACH platform in May.

Digital drive

Amidst the rising adoption of digital payments, the move is set to benefit customers. Apart from getting salaries and pensions over weekends, customers will also be able to make payments such as EMIs and SIPs over the weekend.

Das noted that NACH has emerged a prominent mode of direct benefit transfer (DBT) to a large number of beneficiaries and has helped transfer of government subsidies on time.

At present, it is available on days banks work and auto debit transactions are not processed on holidays.

Vishwas Patel, Chairman, Payments Council of India, said it will speed up payments. “As IMPS, NEFT and RTGS are moving into real-time payments, NACH being available on all days will help employees get salaries on time, faster and even on weekends,” he said.

Jithesh PV, Vice-President and Head, Digital Banking, Federal Bank, said: “More partners such as NBFCs and products like bill payments may move to NACH as it is now available on all days making it a more convenient platform.”

“Availability of NACH on all days will further the financial inclusion objectives through DBT,” said SS Mallikarjuna Rao, MD and CEO, Punjab National Bank.

Also read: Non-banking finance cos seek easier rules for cancelling NACH mandates

 

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S&P, BFSI News, ET BFSI

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Credit losses for Asia-Pacific banks could reach $585 billion by 2022, or nearly double the pre-Covid level raising credit costs for banks, according to S&P Global.

The credit costs of the Indian banking system may rise to 2.4 per cent by March 2022, compared to a base case of 2.2 per cent, according to the S&P report, “Intervention Worked: Credit Losses Set To Decline For Most Asia-Pacific Banks”.

“In India and Indonesia, where banks have suffered higher asset distress in recent years, the credit losses are set to trend closer to our expected long-term average in the coming years,” said S&P.

Moratorium cushions blow

S&P said moratoriums on loan repayments–together with fiscal, monetary, and policy support–have helped cushion the blow to borrowers in Asia-Pacific from the Covid outbreak and containment measures.

Credit losses are set to fall across most Asia-Pacific banking systems over the next two years, partly because targeted assistance to stretched borrowers will likely continue in many places until pandemic-related challenges substantially abate.

S&P forecasts that credit losses will remain well below its expected long-term average in most countries despite last year’s economic hardship. Credit losses encompass provisioning for expected bad loans, and generally precede charge-offs, the actual write-down of loans that detract from the balance sheet allowances for credit losses

Extended troubles

S&P said the effect of Covid on credit costs in the country will be extended over several years.

“Given the scale of the supports to banks and borrowers, downside risks will stay elevated.

“Besides moratoriums and fiscal support, temporary lenient regulatory and accounting treatment of stressed borrowers will also be lifted over time. And new waves of Covid remain a threat,” it said.

S&P said Asia-Pacific banks should safely avoid a ‘cliff effect’ even as extensive relief measures are progressively removed.

The report said while China‘s banks has taken much of its pandemic-related pain up front, with large credit losses reported in 2020, the fallout is not quite over.

Given the vast size of the country’s banking system, this translates into big numbers, it said.

The report discussed forecast credit losses for the 12 larger banking systems in Asia-Pacific: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan, and Thailand.



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KVGB conducts vaccination camp for bankers

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A Covid vaccination camp for bankers was conducted at the head office of Karnataka Vikas Grameen Bank (KVGB) in Dharwad on Wednesday.

Also read: KVG Bank launches loan scheme for medical sector

Inaugurating the camp, P Gopi Krishna, Chairman of KVGB, said the bank employees and officers have done commendable job during the period arising out of Covid by extending uninterrupted service to the customers in general and villagers in particular. “The vaccine would boost their self-confidence and immunity,” he said.

More than 200 bank employees aged between 18 and 45 were vaccinated on Wednesday. The camp was organised in association with the Dharwad district administration and the Dharwad district district health office.

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We are looking at a revival through retail focus, says Shivan JK, MD, Dhanlaxmi Bank

Banking & Finance

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Thrissur-based Dhanlaxmi Bank has chalked out strategies for growth by expanding its retail book. Shivan JK, Managing Director and CEO, is optimistic of achieving a good growth rate in the current fiscal. He says that the bank would continue to focus on CASA and retail advances including gold loans. The business volumes grew 6.39 per cent to ₹18,834 crore for the last fiscal. Edited excerpts:

What are your growth plans in the current financial year?

We will continue our focus on expanding our retail book through gold loan and other retail products. We have launched limited period MSME campaign. Our gold loan book is showing steady growth and with the launch of special 1/3-month product this book is gaining traction.

Also read: Dhanlaxmi Bank posts ₹5.28 crore net profit in Q4

We are looking at an overall 12-15 percent growth with thrust on retail/ agri including microfinance and select MSME and corporate growth. Our liability franchise is robust, and we estimate steady growth in CASA and retail term deposits.

What is the position of NPAs of the bank? How has it progressed last year?

The GNPA position as on March 31, 2021, was 9.23 per cent. We are maintaining a provision coverage of 74.20 per cent.

The position has deteriorated from the previous year due to a low advance base and recognition of NPAs, which were under moratorium following the Supreme Court order on March 23. If we include the ‘proforma’ NPAs, we were at 10.82 per cent as at the end of Q3.

Most of these are small ticket NPAs with good security coverage. Due to lockdown, our recovery efforts are constrained. We are hopeful of bringing this level below 9 per cent by end of this quarter. And there are no major fresh slippages expected.

What is the impact of Covid on the bank’s business? What plans are in place?

The growth has been muted whereas asset deterioration has steadily increased. The moratorium and its sudden lifting added to the woes.

We have instructed our operating offices to maintain all Covid protocols and safety precautions. We are tying up with two private hospitals to ensure that all staff take at least the first dose of vaccine.

When do you see the economy recovering? Also do you see interest rates going up soon?

Our hope is that things return to almost normal from the second quarter of this fnancial year and then the economy will bounce back with a growth in GDP of 8-9 per cent for the FY as per revised predictions. As for your question regarding the interest rates going up, we have reached the bottom. But with the liquidity overhang and the time lag in corporate demand picking up, the rates would be stable in the short term but will firm up by Q3.

Also read:Banks decide to extend unsecured personal loans for Covid treatment

How about NRI investments in your business? And are there any plans for merger with bigger banks?

We are not a big player in the NRI segment compared to other peer banks. In this current financial year, it will be one of our focus areas. And, no, we don’t have any plans for merger with other bigger banks.

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Central authority needed to vet write-off, compromise proposals: AIBEA

Banking & Finance

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The All India Bank Employees’ Association (AIBEA) has called for the setting up of a Central authority, comprising retired bankers with credit knowledge and integrity, under the auspices of the Central Vigilance Commission (CVC) to vet the proposals for write-off and compromise.

The authorities or the Committees that have sanctioned loans must not have the powers to write-off the same, according to CH Venkatachalam, General Secretary, AIBEA. “The (public sector) banks are bleeding because of the problem of bad loans and huge write-offs and provisioning are being made year after year from out of the operating profits,” he said.

Also read: Delay in insolvency resolution continues to be cause for concern

As per the Association, in 2019, bad loan write-offs by banks amounted to ₹1,83,391 crore and the amount transferred from operating profits as provisions for bad loans/ NPAs (Non-Performing Assets) was at ₹2,29,852 crore.

‘Compromise’ proposals

Venkatachalam emphasised that all write-off proposals beyond a particular limit should be disposed off by the Central Authority constituted specifically for the purpose. Further, “compromise” proposals should be screened at the highest levels. He alleged that going by present day experience, these so-called “compromise proposals” are nothing but camouflage and cover-up of collusive acts.

“Willful bank loan default should be treated as a criminal offence… personal guarantees/ assets of the borrowers including directors of the corporate sector should be attachable for recovery of bank loan dues as has been held by the Supreme Court of India,” Venkatachalam said.

In a representation to the RBI’s committee on the functioning of Asset Reconstruction Companies (ARCs), AIBEA said, “Looking to ARCs’ track record, recovery performance, and the loss borne by the banks on bad debts handled by ARCs, we are very clear that ARCs are not required but stringent laws should be enacted to recover all willful defaults at a relatively quick-time.”

Also read: Private sector banks increased share in deposits, credit at the cost of PSBs in FY21:

The Association suggested that banks should be banned from lending to a company or group of companies, which defaulted and whose account has become a NPA in a particular bank. “The loans of such groups in other banks should also be treated as NPA and should be recalled by the banks. This, we feel, would enable speedy recovery of willfully defaulted corporate loans,” Venkatachalam said.

‘No participation’

The company or group of companies should not also be allowed to participate in the auction for purchase of assets of other defaulting company or group of companies that are brought through SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) or ARCs.

The Association said in case of ARCs, as far as the Public Sector Banks are concerned, the amount of discount with which a bad loan is sold, the discounted amount should be replenished by the government of India as they are the primary owners of these banks.

Also read: Bank credit growth declines to 5.6 per cent in March

“The present system of sharing recovery on water-fall structure has to change. At present, ARC recovers first its legal and resolution expenses and then management fees and thereafter the recovery is shared in the agreed ratios. This needs to be changed to proportionate sharing of all the items so as to keep the ARC driving recovery,” Venkatachalam said.

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Investors cheer after RBI clarifies crypto trading isn’t banned

Banking & Finance

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The Reserve Bank of India’s clarification that cryptocurrency trading isn’t banned in the country is a welcome relief for a community facing push-back from traditional lenders needed to help settle these deals.

The regulator late on Monday told banks not to cite a 2018 central bank circular as a reason to hinder crypto trades, given the Supreme Court has since squashed the order. “Banks must continue with other routine due diligence measures on the deals,” the RBI said.

Also read: A glimmer of hope for cryptos in India

The RBI order follows local media reports that financial firms, including SBI Cards & Payment Services Ltd., one of India’s biggest credit card issuers, and the nation’s largest private-sector bank HDFC Bank Ltd. had cautioned customers against dealing in virtual currencies. Indian authorities have repeatedly expressed concern that crypto assets could be used for criminal activity such as money laundering and funding terrorism.

“Investing in crypto has always been 100 per cent legal in India and the new RBI circular clearly confirms the right to do business with crypto firms,” said Avinash Shekhar, co-Chief Executive Officer at ZebPay, India’s oldest crypto exchange. He added that the clarification will attract more investors to the virtual currencies.

Also read: What’s next in the world of cryptos and blockchain?

“The RBI’s broader concerns and banks’ worries around money laundering should help to spur regulations and make the industry safer and stronger,” said Sumit Gupta, CEO and co-founder of crypto exchange CoinDCX.

Bitcoin, the largest cryptocurrency, was little changed as of 12:15 pm in Hong Kong on Tuesday, after having gained in the two previous sessions.

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SBI’s Ecowrap revises FY22 GDP projection to 7.9% from 10.4%

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State Bank of India’s economic research department has revised it real GDP projection for FY22 to 7.9 per cent from 10.4 per cent earlier, with its analysis showing a disproportionately larger impact of the second wave of Covid-19 pandemic on the economy.

The Department, in its report “Ecowrap”, imparted an upward bias to this number with the fervent hope of 1 crore vaccinations per day beginning mid-July as per government projections.

“However, our analysis shows a disproportionately larger impact on economy this time and given that rural is not as resilient as urban, the pick up in pent-up demand is unlikely to make a large difference in FY22 GDP estimates, and hence it could only be a modest pick up,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

For the current financial year, GDP outlook will be impacted by the trajectory of international commodity prices which have risen sharply during the year, as per Ecowrap.

Consumption impact

Further, the pass-through impact of higher commodity prices will be visible in domestic prices thus impacting consumption during the year.

Also read: Moody’s pegs India GDP growth at 9.3% in FY22

The report observed that the overall consumption trajectory will depend on the recovery in services “Trade, hotels, transport, communication & services related to broadcasting” which supports roughly 25 crore households. Corporate, in the listed space, reported better growth numbers across parameters in Q4 (January-March) FY21, but this trend may soon reverse.

The report observed that after registering nominal loss of ₹13.4-lakh crore in H1 (April-September) FY21, the gain in H2/October 2020 – March 2021 (of ₹7.3-lakh crore) resulted in overall annual loss of ₹6.1-lakh crore. Real loss on the other hand stood at ₹10.6-lakh crore in FY21.

“This is a peculiar characteristic that is being exhibited in FY21 data. Normally, the annual increase in nominal GDP is more than the annual increase in real GDP, which is quite obvious given the fact that inflation is always in positive territory in India. However, in FY21 the contraction in real GDP was more than the contraction in nominal GDP,” Ghosh said.

Third wave

Meanwhile, the report assessed that the average duration of third wave for top countries is 98 days and that of second wave is 108 days, with third wave peak as a multiple of second at 1.8 and second wave as a multiple of first at 5.2 (for India it was at 4.2).

Also read: Manufacturing PMI slides to 50.8, job shedding accelerates

International experience thus suggests that the intensity of third wave is as severe as the second wave, according to Ecowrap. However it is also observed that in third wave, if we are better prepared, the decline in serious case rate will lead to less number of deaths.

The department’s analysis shows that if serious cases decline from 20 per cent to 5 per cent (due to better health infrastructure and rigorous vaccination) in the third wave, then the number of deaths in the third wave could significantly reduce to 40,000 as compared to current deaths of more that 1.7 lakh.

“So vaccination should be the key priority, especially for the children who could be the next vulnerable group. With around 15-17 crore children in the 12-18 age bracket, India should go for an advanced procurement strategy like that adopted by developed nations to inoculate this age-group,” emphasised Ghosh.

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Recovered from Covid? It may be difficult to get insurance cover now

Personal Finance

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As India grapples with the second wave of Covid-19, many have understood the importance of insurance, both life and health, and are actively signing up for new policies in recent times. However, if you are among those who were unfortunately infected with Covid , and have subsequently recovered, you may find it difficult to sign up for a new policy, particularly a term life policy. This is because insurers are cautious and have tightened underwriting norms, as the after-effects of Covid remain to be seen.

Cooling-off period

In life insurance, while policyholders who had not been infected with Covid and are otherwise found to meet all conditions for coverage are accepted in the usual manner, those who had recovered from the same are evaluated based on factors such as nature of infection, treatment offered and current status.Accordingly, insurers make room for a recovery period. Life insurers including SBI Life and Kotak Life, for instance, have a cooling-off period of 30 to 90 days post which the policy is issued.

According to Sunil Sharma, Appointed Actuary and Chief Risk Officer (CRO), Kotak Mahindra Life, “If the life to be assured has a Covid history, the insurance cover can usually be considered three months post complete recovery, subject to underwriting. Additionally, specific medical tests may be requested on a case-by-case basis based on the information provided, to evaluate the risk”.

At present, post the said recovery period, policyholders are accepted without any need for restrictive clause or increase in premium. Sajja Praveen Chowdary, Head, Term Insurance, policybazaar.com, says, “There is no differential premium as of now between an individual who has recovered from Covid and a healthy person.”

Further, according to industry sources, in the future, if it is proven that there is a lasting health impact due to Covid, then the underwriter may charge additional premium for those who have recovered. This is similar to differential premium charged for a smoker and a non-smoker.

Additional scrutiny

In life insurance, post recovery from Covid infection, policyholders may be asked to submit a Covid negative report in addition to other medical records. Similarly, policyholders may be subject to additional scrutiny if one of the family members tested positive and later recovered or passed away (if they had been living under the same roof).

Also, given that life insurance is a long-term contract with policyholders, there could be a stringent on-boarding process of new policyholders irrespective of whether he/she contracted Covid. For one, almost all the life insurers including LIC and SBI Life have introduced Covid questionnaires where the prospective policyholders have to provide details such as whether they have travelled abroad in the past six months to one year, whether they plan to travel abroad, date of discharge in case of a Covid-19 diagnosis and whether full recovery has been achieved. This questionnaire is to be submitted along with the proposal form while buying the policy.

Delay in health policies too

In health insurance, while there is no cooling-off period or postponement of policy issuance to new policyholders in many cases, the health/general insurers are cautious when on-boarding customers, particularly those who had recovered from Covid. A few insurers including ICICI Lombard, Max Bupa and Manipal Cigna do have a cooling-off period (in the range of 15-90 days) when on-boarding a customer.

Priya Deshmukh Gilbile, Chief Operating Officer, Manipal Cigna Health, says “While the vaccine is a preventive measure, members who have had a Covid infection may have a possibility of future complications. From that perspective, a person who has been Covid-positive but who is getting vaccinated will still undergo the cooling-off period, and it does not have a bearing on premiums.”

Those who have recovered from Covid, in addition to providing details regarding current health condition, may be required to submit medical records, details of treatment undertaken, the severity of infections and past medical conditions and corresponding records, to the insurer. Some insurers require additional medical tests but it differs on a case-to-case basis. “A medical check-up requirement for those recovered from Covid will depend on the extent of the hospital treatment or the level of damage to the lungs and other vital organs,” says Gurdeep Singh Batra, Head – Retail Underwriting, Bajaj Allianz General Insurance.

Many insurers require that if an individual with pre-existing condition such as diabetes, asthma or hypertension has recovered from Covid, he/she may have to undergo further medical tests in addition to submitting a Covid-negative report. However, this is not a universal requirement.

Do note that health policies generally come with an initial waiting period of 30 days..

If you have any pre-existing conditions, there is a waiting period of 2-4 years and there are disease-specific waiting periods as well that vary with insurers. Even if you consider Covid-specific insurance policies like Corona Kavach or Corona Rakshak, there is a waiting period of 15 days.

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Covid-19: UK-based banks announce financial and medical support for employees in India

Banking & Finance

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Barclays and Standard Chartered Bank have announced a slew of measures, including salary advance, enhanced insurance limits and doctors on call, for their employees in India to help them deal with the Covid-19 pandemic.

Barclays has introduced a new set of measures, including facilitating vaccinations, enhanced insurance limits, uncapped paid leave, financial aid and support channels, for its over 20,000 employees in India to deal with the Covid-19 pandemic.

Some of the aforementioned measures will also be available to the families of the London-headquartered Barclays, whose India operations include banking, securities, technology and shared services.

Also read: India inc attract customers with ‘pandemic’ focussed products

The Bank, in a statement, said hospitalisation insurance limits have been raised and certain costs not covered by insurance, such as PPE equipment charges, will be covered.

“All employees can take uncapped paid leave to give sufficient time to recuperate from Covid-19, get vaccinated, and for taking care of a family member.

“Junior colleagues will receive one month’s salary in advance to help manage unforeseen expenses,” it added.

Also read: Several businesses suspend operations in India, help staff as coronavirus ravages

The Bank said employees have access to a 24/7 Covid care helpline, online doctor consultations, a peer-to-peer support network, and a 24/7 confidential helpline that provides free counselling services.

Standard Chartered said its comprehensive benefit programme for its over 25,000 employees in India will include financial reimbursement of expenses incurred towards Covid-19 related medical treatment for parents and parent-in laws up to ₹2.50 lakh per patient with ICU admission and up to ₹1.25 lakh per patient with any other hospitalisation for Covid-19 treatment.

Also: As staff call in sick, India Inc turns a care-giver with well-being interventions

The London-headquartered Bank said it will provide interest free salary advance of up to six months gross pay to meet the expenses incurred on account of Covid-19 related medical emergencies. The repayment will commence following a six-month moratorium period.

In the unfortunate case of an employee passing away, their family will receive financial protection in the form of four times of the annual gross compensation, Standard Chartered said in statement. This increased insurance cover is applicable to all employees, it added.

On medical support, the Bank has constituted a team to assist employees in the hospitalisation process.

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Exim bank eyes to raise $3 billion in FY22

Banking & Finance

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Export-Import Bank of India may raise about $3 billion in FY22, as against $2 billion in FY21, to support Indian exports, as the global trade is gradually opening up.

David Rasquinha, MD & CEO of the bank, said that he sees demand for pharmaceuticals, chemicals, home textiles, among others, gaining traction as advanced economies are gradually coming out of the Covid-19 pandemic. “This opens up an opportunity for Indian exporters,” said Rasquinha.

Exim Bank expects credit growth in the 7-12 per cent range in FY22 (against 7 per cent in FY21), depending on how quickly the economy revives and how the exchange rate moves.

Harsha Bangari, Deputy Managing Director, observed that the borrowings by Exim Bank will be cautiously calibrated to match credit growth in FY22. In January 2021, the bank had raised $1 billion for a 10-year tenor at a coupon rate of 2.25 per cent in the 144A/Reg-S format.

Meanwhile, Exim Bank, which is a wholly owned government of India subsidiary, reported a 105 per cent jump in net profit at ₹254 crore in FY21 as against ₹124 crore in the year ago period.

Loan portfolio edged up 4.43 per cent year-on-year to ₹1,03,851 crore as at March-end 2021 against ₹99,447 crore in FY20. Non-fund portfolio declined about 10 per cent year-on-year to ₹14,229 crore (₹15,869 crore).

Rasquinha emphasised that Exim Bank gives almost 80 per cent of its loans in foreign currency. So, when rupee appreciates against dollar, the loan portfolio in rupee terms comes down. However, in dollar terms, the loan growth was 7 per cent in FY21.

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