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Kotak Mahindra Bank on Friday said its Board of Directors has approved the payment of dividend on 1,00,00,00,000 Nos. 8.10 per cent Non-Convertible Perpetual Non-Cumulative Preference Shares for the period from April 1, 2020 till March 31, 2021, as per their terms of issue.
The record date fixed for the purpose of dividend payment would be Friday, March 19, 2021, it said in a regulatory filing.
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At close, the Sensex was down 0.95% at 50,792.08, while Nifty was down 0.95% at 15,031. Nifty PSU Bank Index fell 1 percent dragged by the Bank of Baroda, Canara Bank, Indian Bank. BSE Bankex also ended lower at 39,995 losing 1.28%.
Nifty Bank Index ended at 34,496 down -1.23%. Amongst the top Losers were- ICICI Bank at Rs 612 ending below -2.04% followed by SBI at Rs 381 with -1.70%, Induslnd Bank at Rs 1,022 (-1.65%), Kotak Mahindra Bank at Rs 1,935 (-1.47%), Axis Bank at Rs 750 (-1.33%). While all the major indices traded in red, RBL Bank and IDFC First Bank managed to stay in the green.
Nifty Financial Services ended at 16,506 Lower by -1.10%. Amongst the biggest losers were Indiabulls Hsg Rs 224 by -2.67% followed by Cholamandalam at Rs 531 (-1.41%), HDFC at Rs 2,568 (-1.22%), Bajaj Finserv at Rs 9,934 (-0.57%).
Other key takeaways
RBI to conduct OMO for sale and purchase of govt securities
The Reserve Bank of India (RBI) on March 10 announced it will purchase and sell Government of India dated securities for Rs 10,000 crore each via an open market operation (OMO) on March 18.
“The Reserve Bank has decided to conduct simultaneous purchase and sale of Government securities under open market operations (OMO) for an aggregate amount of Rs 10,000 crore each on March 18, 2021,” the central bank said.
Suryoday Small Finance Bank to launch IPO on March 17
Suryoday Small Finance Bank will open its initial public offering of 1,90,93,070 equity shares on March 17 with a price band of Rs 303-305 per share. The issue will close on March 19.
The anchor book subscription (if any) will open for a day on March 16. The offer consists of a fresh issue of 81.50 lakh equity shares and an offer for sale of 1,09,43,070 equity shares by existing shareholders.
Rupee Updates
Indian rupee erased some of the intraday gains but ended higher by 13 paise at 72.81 per dollar, amid selling saw in the domestic equity market. It opened 25 paise higher at 72.66 per dollar against Wednesday’s close of 72.91 and traded in the range of 72.62-72.85.
On March 10, the domestic unit ended flat at 72.91 per dollar versus the previous close of 72.93. On Thursday the currency market was shut on account of Mahashivratri.
Wall Street closes on higher mark
The S&P 500 and the Dow closed at all-time highs on Thursday as worries about rising inflation subsided, while a bigger-than-expected fall in weekly jobless claims and the signing of a massive stimulus bill reinforced expectations of a strong economic recovery.
The Dow Jones Industrial Average rose 188.57 points, or 0.58%, to 32,485.59, the S&P 500 gained 40.53 points, or 1.04%, to 3,939.34 and the Nasdaq Composite added 329.84 points, or 2.52%, to 13,398.67
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“Even today, a disproportionate part of the PE and VC industry is foreign savings, while Indian savings are not getting enough channelised into these segments,” Kotak said.
India needs to channel more of its savings into equities and the capital markets in order to reduce dependence on foreign capital, Kotak Mahindra Bank executive vice chairman and managing director Uday Kotak said on Wednesday. He was speaking at the western region annual meeting of the Confederation of Indian Industry.
Kotak said India’s saving rate, while on a decline in recent times, is still pretty high. However, the bulk of Indian savings, traditionally, has been risk-averse and a lot of it has gone into more traditional sources, with the amount going into equity risk being relatively lower.
“As a result, what you are seeing, even in capital markets, (is) the disproportionate dominance of international savers in many of our blue-chip companies and a relatively lower focus by Indian savers in putting money into what has been blue-chips over time,” Kotak said, adding, “One of the things we need to do and develop is a stronger equity and a risk culture combined with cutting-edge governance.”
At the same time, things could go wrong if the country were to first build a risk and an equity culture and then have people lose their money. So, both need to evolve at the same time. One of the industries which India needs to develop is the long-term private equity (PE) and venture capital (VC) industry. “Even today, a disproportionate part of the PE and VC industry is foreign savings, while Indian savings are not getting enough channelised into these segments,” Kotak said.
While the country has seen the development of the mutual fund industry and even equity markets investors taking greater exposure, long-term savings turning into long-term risk capital is an area where more needs to be done. This will require a shift in mindset both for policymakers and savers and that is how domestic capital can supplement global capital. “Global capital is welcome, but we cannot be dependent on it for our destiny,” Kotak said.
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Kotak was responding to a query by ET after twitter users complained of excess debits from their accounts.
“A PSU bank has claimed wrong amounts in the settlement file for card transactions done at merchant establishments managed by the PSU bank’s POS. This has resulted in excess debit from customers’ bank accounts on 8th March. All such excess debits have already been reversed”, Rohit Rao, Chief Communication Officer, Kotak Mahindra Group said without naming the bank.
On Monday evening Kotak account holders took to twitter to complain about the sudden loss from the bank accounts.
“Massive technical glitch in Kotak Bank, it seems. Rs 81,972 debited from my account (I don’t even have that much in all my a/cs put together). Call centre exec says ppl have lost Rs 6 lakh+ or Rs 1 lakh +, so i shouldn’t worry. Wait for 24 hours, she said,” Ravi Joshi a user said.
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The board of directors of Kotak Mahindra Bank will meet on March 12 to consider and approve the declaration and payment of dividend on 1,00,00,00,000 Nos. 8.1 per cent Non-Convertible Perpetual Non-Cumulative Preference Shares, the bank said in a regulatory filing on Monday.
The record date fixed for the purpose of payment of dividend is March 19, it further said.
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However, lenders are not offering such low rates to all, but only to the borrowers who have high creditworthiness.
State Bank of India
The SBI announced an interest concession of up to 70 bps with interest rates starting from 6.7% onwards for a limited period till March 31, 2021. The lender is also giving a 100% waiver on processing fees.
However, its interest concession is based on loan amount and CIBIL score of the borrower. SBI believes that it is important to extend better rates to customers who maintain good repayment history. SBI home loan interest rates are linked to CIBIL score and start from 6.7% for loans up to Rs 75 lakh and 6.75% for loans above Rs 75 lakh.
SBI is offering such rates to borrowers who have a CIBIL credit score of above 800, according to reports. At SBI borrowers credit scores of 700-750 will have to shell out a higher rate of 6.9% on home loans, whereas those in the 751-800 band will be eligible for loans at 6.8%.
CIBIL score
According to CIBIL, about 79% of loans sanctioned are for people with 750-plus score. Scores above 800 are considered high and you can easily ask for a lower rate on personal loans and credit cards.
A score of 850 – 900 shows that the borrower has never defaulted even once and is an excellent score.
The credit bureau scores are used to assess the creditworthiness of borrowers and lenders often offer lower interest rates to customers with higher scores.
Kotak Bank also recently announced a 10 basis points (bps) cut in its home loan rates for a limited period, while claiming it to be the lowest in the market. Customers will be able to avail of home loans for 6.65% till March 31 as part of a special offer after the rate reduction. The 6.65% rate is applicable to both home loans and Balance Transfer Loans across amounts. This is a limited period offer ending on 31 March. The lender is also giving a 100% waiver on processing fees.
HDFC slashed home loans interest rates by 5 basis points to 6.75%. The changes will be effective from Thursday (4 March). The company reduced its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 5 basis points. The change will benefit all existing HDFC retail home loan customers.
Housing sales rose 25 per cent year-on-year during the October-December period at 1,10,811 units across seven cities on pent up and festive demand, according to data analytic firm PropEquity. Housing sales stood at 88,976 units in the year-ago period.
Showing signs of recovery, total sales of home units in seven cities increased 78 per cent in the fourth quarter of 2020 to 1,10,811 units as against 62,197 units in the third quarter of 2020.
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Kotak Mahindra Bank has signed a Memorandum of Understanding (MoU) with the Indian Army for salary account.
“The MoU enables Kotak to offer its salary account proposition, combined with exclusive benefits for the Indian Army, to all army personnel – both active and retired,” the lender said in a statement on Thursday.
The MoU was signed by Lt Gen RP Kalita of the Indian Army and Virat Diwanji, Group President – Retail Liabilities and Branch Banking, Kotak Mahindra Bank.
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Banks have unleashed a rate cut war in the home loan space on the last lap of the current financial year (FY) 2021 to bulk up their retail portfolio.
State Bank of India (SBI) was the first off the blocks, announcing on March 1 around noon that the minimum interest rate at which it will offer home loans will start at 6.70 per cent (against 6.80 per cent earlier) for a limited period — up to March-end 2021.
Late evening, Kotak Mahindra Bank (KMB) went one better, announcing that the lowest interest rate at which it will offer home loan will be 6.65 per cent (up to March-end 2021) against 6.75 per cent earlier.
Also read: Residential realty recovers on consolidation: ICRA
The move to pare home loan interest rate just for a month seems two-fold. Firstly, banks want to grow their topline due to year-end considerations. Secondly, they are probably signalling to prospective borrowers that home loan interest rates have bottomed out (could rise in the new FY) in the context of rising Government Security (G-Sec) yields.
The move by SBI and KMB could trigger a matching response from other lenders as they may not want to lose business to rivals.
“Banks want to increase their topline towards the year end. Normally, in February and March, they will be in campaign mode for promoting their products.
“Along with the home loan, there will be cross-sell of life insurance policy. If you take a car loan, insurance will come along with that,” said V Viswanathan, banking expert.
He said that banks will try to offset the effect of lower interest rate on home loans through cross-sell of life insurance, which is tacked to the loan.
Moreover, sanctioning loans towards the year end will also help banks to do part-disbursal in the first half of next FY, which is typically a lean season, in respect of stage-based release of installments.
“With low interest rates and various income tax exemptions available on home loans, there will be many people who will want to take a home loan,” said Viswanathan.
That interest rates could be headed north could be gauged from the jump in the yield on the benchmark 10-year G-Sec (carrying 5.85 per cent coupon). The yield on this G-Sec has risen about 33 basis points since January-end 2021.
Ravi Prakash Jaiswal, General Manager, Canara Bank, said: “The outlook for home loans is very good. In the wake of the pandemic, work from home has gained ground. People who were earlier advocating rental housing are now going for their own house.
“And people having their own house are going for bigger house. So, they are disposing off/ renting out their smaller house and going for bigger house.”
Canara Bank kick-started a mega retail expo across the country from February 22 to March 16, 2021 to grow its retail loans such as home, vehicle and education loans.
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There is a very aggressive home loan rate war out there. Kotak Mahindra Bank has reduced home loan rates to 6.65% till March 31. SBI is giving it at 6.70%, HDFC Bank and ICICI Bank at 6.8%. How are you reading into this? Would the ticket sizes of these home loans be much lower than pre Covid times?
It is an indicator that there is nowhere to lend. Most companies are able to access capital and they have realised that when capital is available at these valuations, why the hell borrow money? Let us dilute. So across the board, we see QIPs, PE fund raising, sale of companies. I do not meet a promoter who wants to borrow money at the end of the day. He is likely to raise capital and keep it in the bank.
The lowering of home loan rates come out of the sheer desperation of not having enough avenues to lend money to. How much can you lend money on personal loans, unsecured loans etc? That is not the smartest way to play the game. Historically, the housing loans have been the most stable platform for most of the institutions. HDFC ruled the roost and would continue to do so because their DNA and the cost structure are very different.
These banks will often come in, play the game and try to get you as a customer but all it tells you is that there are no borrowers of significant kind and they have run through individuals as borrowers because who wanted to borrow, you did not want to lend to and instead are targeting those who don’t want to borrow. So, it is very peculiar. You will see more and more of this happening because the sheer demand of loans has collapsed in the economy and that is the challenge for the economy and the banks. So yes, it is down there but not so much that we get excited.
Would you buy HDFC? It is a fantastic business but the stock is underperforming?
I do not think it is underperforming. The stock got rerated quite sharply. I have a holding in that stock and I do not sell it. It went from Rs 1,500 to Rs 2,800. It got back to Rs 2,500, if I am not wrong. It is an incredible franchise and they have done a remarkable job at doing two things — balancing corporate real estate loans and individual real estate loans, doing side investment as well. And of course there’s the holding company. They hold the best bank in the country, the best life insurance company, the best AMC in the country. That is the India story at the end of the day.
What they do not have is Fintech in their portfolio. So, they have got a problem there. Maybe they will come in there through HDFC Bank. but There is no better surrogate for Indian economy than HDFC as an institution. The problem is it is so over owned as a stock that if FIIs decide to sell or one large FII decides to dispose it off, there will be a large correction in the stock.
As a retail person if you are starting your life, that is the stock I want to keep for my children’s education, for my retirement. It is in a separate category. Do not evaluate it day-to-day. Instead, 17 years from now, this stock should pay for your son’s education.
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Reserve Bank of India (RBI) rules allow banks to hold up to 50% stakes in insurers and on a selective basis equity holdings can be higher but must eventually be brought down within a certain period.
The sources, who asked not to be named as the discussions are private, however said the central bank in 2019 unofficially advised banks seeking to acquire stakes in insurers, to limit such stakes to a maximum of 30%, and more recently directed them to cap stake purchases in insurers at 20%.
“Unofficially, banks have been told that the regulator is not comfortable with lenders increasing their stakes because the insurance business is seen as a money guzzler,” one source said.
The RBI wants banks to focus on their main areas of business instead of locking away capital in non-core sectors. The central bank did not respond to a request seeking comment.
The unofficial push suggests the RBI is looking for uniformity around ownership rules for lenders with exposure in the sector, following suggestions made in a working paper by an internal group released in November.
Some lenders such as Kotak Mahindra Bank and State Bank of India have wholly-owned or majority owned insurance subsidiaries, and the paper had suggested that if any lender had more than a 20% stake in an insurer, they should follow a non-operative financial holding company (NOFHC) structure which will ring fence ownership.
Most lenders are not keen to adopt such a structure on concerns it will hurt shareholder value and limit their capital raising ability, one of the sources said.
Recommendations made by the working paper are under consideration by the RBI and it is not clear when the central bank will act on or implement the suggestions. In light of this, the sources said the RBI was likely to stall on any requests by banks to boost or acquire new stakes in insurers.
The move comes at a time when India is keen to woo foreign investment in its insurance sector. Last month, the government said it would allow foreign direct investment of up to 74% in insurers, up from 49%. Many foreign insurers are expected to explore the opportunity as insurance penetration continues to be low in India.
With fears that banks’ bad loans could double amid the COVID-19 pandemic, the RBI does not want banks to lock up money in capital intensive businesses, the sources said.
The RBI may have reservations about banks having more than 20% stakes in any non-core companies, one of the sources said.
Federal Bank, which sought permission from the RBI to increase its stake in Ageas Federal Life insurance after its board approved the deal about a year ago, has still not received RBI approval, one of the sources said.
Federal Bank did not respond to a request seeking comment.
Last year, the RBI had also rejected Axis Bank’s application to directly purchase a 17% stake in Max Life.
The transaction was only approved after Axis restructured it and agreed to purchase the stake with two subsidiaries, bringing down the bank’s direct ownership share to less than 10%.
Axis Bank did not respond to a request seeking comment on whether it restructured the deal on the advice of the RBI.
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