Tag: loans

S&P revises ICICI Bank outlook to stable from negative, BFSI News, ET BFSI

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NEW DELHI: S&P Global Ratings on Friday said it has revised the rating outlook on ICICI Bank Ltd to stable from negative on grounds that the lender will benefit from the sale of stake in subsidiaries.

The rating agency affirmed its ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit ratings on ICICI Bank.

“We revised the rating outlook to reflect our view that ICICI Bank will maintain its strong capital position over the next 24 months. The bank will benefit from the sale of a stake in subsidiaries and gradual normalization of earnings, which should reduce risks associated with its capital position,” it said.

In a statement, S&P forecast that ICICI Bank will maintain a risk-adjusted capital (RAC) ratio of more than 10 per cent over the next 24 months.

“Our expectation factors in 13-14 per cent credit growth for the bank, an improvement in earnings, and sale of stake in insurance subsidiaries over the period,” it said.

ICICI Bank’s stressed loans (non-performing loans and restructured loans) are likely to remain high when compared to that of international peers.

The bank’s stressed loans are expected to peak at 6 per cent of total loans in the fiscal year ending March 2022, lower than the estimate of 11-12 per cent for the Indian banking industry.

“The bank’s new non-performing loans (NPLs) are likely to stay elevated in fiscal 2022 owing to the impact of the second wave of COVID-19 infections. In our view, localized lockdowns will hit small and midsize enterprise (SME) borrowers the most,” it said.

Retail loans, especially unsecured personal loans and credit card debt, are also vulnerable.

For ICICI Bank, SME loans (accounting for 4.2 per cent of total loans), personal loans (6.7 per cent), credit cards (2.4 per cent) and rural loans (10 per cent) could contribute to the increase in NPLs.

ICICI Bank has made COVID-19 related provisions to the tune of 1 per cent of advances.

This, S&P said, should help smoothen the hit from pandemic-related losses.

“The bank’s better customer profile and underwriting relative to the Indian banking system should limit losses,” it added.

ICICI Bank’s lower credit costs than in the past should enhance its profitability, it said estimated core earnings at 1.3-1.6 per cent of assets over the next two years, with further upside possible from the sale of stake in subsidiaries.

“The stable outlook reflects our view that ICICI Bank’s capitalization will remain strong over the next 24 months, aided by better earnings and profit from the sale of a stake in subsidiaries. We factor in a slight deterioration in the bank’s asset quality and performance due to COVID-19,” it said.

In its base case, ICICI Bank will maintain its strong market position, strong capital, better-than-system asset quality, and good funding and liquidity over the next 24 months.

“An upgrade of ICICI Bank is unlikely in the next one to two years because that would require an improvement in the bank’s financial profile as well as the sovereign credit rating on India.

“Our assessment of ICICI Bank’s financial profile may improve if the bank’s asset quality strengthens to levels in line with international peers, and it maintains its capitalization at a strong level,” it said.



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Assam govt to waive MFI loans for poor women: CM Himanta Biswa Sarma

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Assam Chief Minister Himanta Biswa Sarma on Friday said that he was committed to his election promise of providing relief and incentives to poor women who had taken loans from various Micro Finance Institutions (MFIs).

The government has been holding continued discussions with MFIs, following which the outstanding loan amount has been brought down to ₹8,250 crore from 12,500 crore and this will benefit 22 lakh poor and deprived women of the State, the Chief Minister said at a press conference here.

The outstanding loan has come down as MFIs had flouted the norms set by the Reserve Bank of India (RBI) and these include giving a loan of over ₹1.25 lakh to one group or giving more than one loan to one person or group, he said.

During discussions, it was decided that any loan amount over ₹1.25 lakh would be waived and if there are four outstanding loans against an individual, the fourth loan’s principal and interest amount will be waived, Sarma said.

These measures have brought down the outstanding amount and will go a long way in helping the poor and needy women.

“I had said in all my elections meetings, while campaigning for the BJP, that the loan waiver relief will be for the poor women and not for the middle class or the rich”, he said.

Three groups

The State government has decided to categorise the borrowers in three groups with the first being those women who are paying the loans regularly, he said.

“These women should continue to do so that their CIBIL score is not affected and the government will reward these prompt payers with a one-time incentive,” he said.

The second category are those women who have an overdue, meaning that those who were paying regularly but now has an overdue as they have stopped paying after they heard that the loans will be waived.

“I appeal to this category of women to resume repaying their loan and the goverment will repay the overdue amount,” he said.

In the third category, are those women who have no plans to take any further loans or engage in any further activity and the government will provide them with full relief.

The women taking full waiver will, however, not be able to take any further loans in the future.

Altogether 26 lakh customers with 45 lakh bank accounts have taken loans from 40 lenders with 53 per cent of this amount lent by banks, 22 per cent by Non-Banking Finance Companies (NBFCs) and microfinance institutions, 26 per cent by small finance banks and 16 per cent by regular NBFCs.

The Chief Minister had decided to set up a committee to study the financial implications of waiving off the loans in the first cabinet meeting of the new Council of Ministers held on May 11 with Guwahati Development Department Minister Ashok Singhal as the Chairman and Principal Secretary of Finance and Panchayat and Rural Development as members.

The Chief Minister had directed the committee to prepare a package to provide relief to maximum poor women who had taken loans and are facing immense miseries.

It has been decided that only those loans will be considered which were taken before December 31, 2020 and those with family income of ₹1 lakh, paying income tax, owning four-wheelers or any other such guidelines set by the RBI will not be considered for waiver of loans.

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S&P revises rating outlook on ICICI Bank to ‘stable’

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S&P Global Ratings has revised its rating outlook on ICICI Bank to stable from negative.

It has affirmed its ‘BBB-’ long-term and ‘A-3’ short-term issuer credit ratings on the private sector lender as well as its ‘BBB-’ long-term issue rating on the bank’s senior notes.

“We revised the rating outlook to reflect our view that ICICI Bank will maintain strong capital position over the next 24 months. The bank will benefit from the sale of stake in subsidiaries and gradual normalisation of earnings, which should reduce risks associated with its capital position,” S&P Global Ratings said in a statement on Friday.

The agency expects ICICI Bank will maintain a risk-adjusted capital ratio of more than 10 per cent over the next 24 months. “Our expectation factors in 13 per cent to 14 per cent credit growth for the bank, an improvement in earnings, and sale of stake in insurance subsidiaries over the period,” it said.

Stressed loans to peak

The agency however expects ICICI Bank’s stressed loans (non performing loans and restructured loans) to remain high when compared to that of international peers.

It said the bank’s stressed loans may peak at 6 per cent of total loans by March 31, but it would be lower than its estimate of 11-12 per cent for the Indian banking industry.

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UCO Bank likely to rejig loans worth ₹1,000 crore

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UCO Bank is likely to restructure retail and MSME loans to the tune of ₹1000 crore by June this year, under the Reserve Bank of India’s Resolution Framework 2.0.

According to Atul Kumar Goel, MD and CEO, UCO Bank, close to 2,314 accounts amounting to ₹127 crore have been restructured under the framework so far.

The Resolution Framework 2.0 was announced by the RBI on May 5 to help small borrowers tide over the impact of the second Covid-19 wave and State-level lockdowns.

“It is still premature to say what would be the actual amount of restructuring but it is likely to be more than last year. We had restructured personal loans amounting to ₹92 crore and MSME loans worth ₹281 crore last year,” Goel told newspersons at a virtual press meet on Monday.

Goel expects credit demand to pick up following unlocking in various States. The bank is hopeful of registering 7-10 per cent growth in credit during the current fiscal. It had posted a credit growth of around three per cent in FY21.

“I am hopeful that there will be a good demand for credit on account of unlocking in all states. We have witnessed a credit growth of around ₹2000 crore so far during the current fiscal,” he said.

PCA framework

UCO Bank is hopeful of coming out of RBI’s prompt corrective action (PCA) framework. Having complied with all key regulatory parameters during the quarter-ended March 31, 2021, the bank has written to the central bank urging it to consider withdrawing PCA.

PCA is triggered when banks breach certain regulatory requirements such as minimum capital, return on asset and quantum of non-performing asset.

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PSBs to follow templated approach to restructure loans

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Public Sector Banks (PSBs), under the aegis of the Indian Banks’ Association (IBA), have formulated a templated approach for seamless implementation of RBI’s Resolution Framework 2.0 for restructuring loans to individuals, small business and MSMEs up to ₹25 crore.

Banks have evolved a process flow for individual loans and a templated standardised approach for business and MSME loans up to ₹10 lakh.

Individual loans

The process flow envisaged for individual loans includes a) customer accessing the bank’s portal or manually submitting application for restructuring and b) processing of application and implementation in the system.

The resolution process has to be invoked within 30 days from the receipt of the application. The last date for invocation is September 30.

Invocation means that both the borrower and the bank agree to proceed with the Resolution Plan, which will include rescheduling of payments, granting of moratorium and extension of tenor. Decision in this regard will be communicated to the borrower in writing.

The Resolution Plan has to be implemented within 90 days from the date of invocation, but not later than December-end 2021.

The moratorium period granted will be for a maximum of two years, and it will start immediately after the implementation of the Resolution Plan.

Business, MSME loans

For implementation of resolution framework for business loans, banks have categorised loans into three categories – up to ₹10 lakh, ₹10 lakh and up to ₹10 crore, and above ₹10 crore

Under the templated standardised approach for restructuring Business and MSME loans up to ₹10 lakh, banks have sent bulk SMS to eligible customers including the already restructured accounts.

Offer-cum-acceptance letters, along with application, has been generated centrally. Customers have to provide consent in the offer letter itself. The application will then be processed.

Resolution invocation has to happen within 30 days of receipt of acceptance. Post-invocation, resolution plan has to be implemented within 90 days.

For loans above ₹10 lakh and up to ₹10 crore, and above ₹10 crore, banks will take a graded approach for restructuring. It will also include standard application and assessment formats, standard and simplified documentation, and common outreach approach

Sunil Mehta, Chief Executive, IBA, said a grievance redressal mechanism, comprising nodal officers, has been put in place to address customer complaints.

The Reserve Bank of India (RBI) announced a ‘Resolution Framework 2.0 for Covid-Related Stressed Assets of Individuals, Small Businesses and MSMEs’ on May 5.

Under the framework, borrowers – individuals, small businesses and MSMEs – having aggregate exposure of up to ₹25 crore and have not availed restructuring under any of the earlier restructuring frameworks and were classified as ‘standard’ as on March 31are eligible to be considered under Resolution Framework 2.0.

Restructuring under the framework can be invoked up to September 30, and has to be implemented within 90 days after invocation.

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FlexiLoans.com partners Vivriti Capital to disburse loans worth ₹300-cr to MSMEs

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Fintech platform FlexiLoans.com has partnered with Vivriti Capital to provide working capital financing of over ₹300 crore to Micro, Small and Medium Enterprises (MSMEs) across the country.

MSMEs can apply for loans online and receive in-principal approval within 24-48 hours digitally without manual intervention.

The partnership will be powered by FlexiLoans.com’s technology and credit underwriting platform ‘BiFrost’, which has been integrated with Vivriti’s Co-lending platform ‘CredAvenue’The partnership is aimed at reaching out to more 10,000 MSMEs in the next 12-18 months, the company said in a statement.

Deepak Jain, Co-Founder, FlexiLoans.com said, “FlexiLoans has been scaling its co-lending platform since the IL&FS crisis a couple of years ago to service the wide range of ecosystem and boost assets under management growth. Vivriti has been our long-standing lending partner and its digital-first approach, deep lending expertise syncing perfectly with our co-lending ideology”.

Gaurav Kumar, Co-Founder, Vivriti Capital and CEO CredAvenue said, “The partnership is built on the combination of a deep technology integration via APIs and substantial capital base. We expect to unlock immense market potential and scale with it in the near future. CredAvenue’s co-lending platform has been specifically designed to enable scale-up of such partnerships for Banks, NBFCs and Fintech players vis automated discovery, underwriting, operations and reporting modules on one single portal”.

Since its inception in 2016, Flexiloans.com has disbursed more than ₹1,000 crore to over 30,000 customers across 1,500 cities in India. It receives over 1 lakh applications per month, largely from Tier-II, III and Tier IV cities.

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More Covid-hit companies may need recast of loans, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: Banks have told the Reserve Bank of India (RBI) that the extended restrictions due to the resurgence of the Covid pandemic have caused significant stress on businesses and a restructuring window may be required for more loans.

Although the RBI did allow lenders to restructure loans for borrowers earlier this month, the facility was restricted to loans of up to Rs 25 crore. Since the measures were announced, the second wave of Covid emerged across the country, resulting in most parts of the country observing some form of a lockdown.

On Wednesday, RBI governor Shaktikanta Das met with the CEOs of public sector banks (PSBs) through a video conference. Acknowledging the role played by PSBs in extending various banking services including credit facilities to individuals and businesses during the pandemic, the governor asked them to quickly implement the Covid relief measures already announced. He also reiterated the need for banks to raise capital to increase the resilience of their balance sheet should further shocks arise out of the pandemic.

The governor in the meeting sought feedback from banks on the state of the financial sector and credit flows to different sectors, including small borrowers and micro, small and medium enterprises. The governor also sought information on whether rate reductions by banks were in line with the RBI’s action to bring down the cost of funds.

Bankers said that, while the first quarter is traditionally a sluggish period for credit growth, this year loan pick-up was even lower because of the lockdown. They said that the extended lockdown, while necessary to contain the pandemic, is hurting a large segment of the economy. There is a clear indication of collection efficiency being hit. While earlier the banks were more concerned about the survival of small businesses, they are now worried that larger companies may also start facing liquidity related issues as economic activities in non-essentials have been significantly hit.

Non-banking finance companies (NBFCs) have already asked the RBI for a moratorium for their borrowers and their borrowings from banks. Bankers say that in 2020, NBFCs shrunk their books and reduced debt and obtained cheap finance because of targeted long-term repo operations announced by the RBI, which helped them tide last year’s lockdown. This year, no such package has been announced so far.



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Private banks cut unsecured loans, stay safe in Covid storm, BFSI News, ET BFSI

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Wondering why pesky calls offering personal loans have reduced during the last few months?

After the pandemic started, most private sector banks have scaled down their unsecured loan business and relied on home and government-guaranteed loans.

Lenders are going slow once again on micro nance loans, credit cards and personal loans, as they see these unsecured loans to have become riskier amid the second wave of the pandemic.

The prudence has helped them in reducing the risk of defaults during the second wave.

The banks now cater to small business loans that are guarantee by the government under the Emergency Credit Line Guarantee Scheme. They have also focused on home loans that are secured by a mortgage. SBI last year hit Rs 5 lakh crore home loans target and set a stiff target for the segment.

Portfolio shrinks

Kotak Mahindra has reduced its unsecured portfolio to 5.8% of the total assets in FY21 from 7.5% earlier.

While ICICI bank grew its home loans by 21% year on year, its loan book grew in single digits. The bank also brought down its loan against shares and other securities by 8% and shrunk its two-wheeler loans by 4%.

Axis Bank has cut its share of unsecured loans to small businesses to 11% in FY21 from 15% in FY20.The bank has made 100% provisions for restructured unsecured loans.

IndusInd Bank too remains cautious on unsecured lending and limit the segment to 5% of total loans and go slow on three-wheeler loans.

Cautious stance

Personal loans in the banking industry grew at a slower pace of 10.2 per cent in the last fiscal year ended March 31, compared with more than 15 per cent the preceding year. Consumer durable loans were the worst hit and contracted by more than 21 per cent between March 2020 and 2021 against 47.6 per cent growth in the prior year.

Credit card outstanding totalled Rs 1.16 lakh crore at the end of March, a 7.8 per cent increase in a year against more than 22.5 per cent growth in fiscal 2020.

The growth in home and government-guaranteed loans has helped lenders expand the balance sheet even as they shied away from unsecured loans. By making 100% provisions for unsecured loans, private banks would not have to take a major hit in the first quarter despite the second wave of the pandemic buffeting the economy.



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Public sector banks losing market share in loans to private sector rivals

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The proposed privatisation of two public sector banks (PSBs) in FY22 could accentuate the already declining market share of PSBs in loans, with the share of private sector banks (PvSBs) expected to go up further.

A realignment of market share in loans has been happening in the banking space over the last four years.

PSBs’ (or state-owned Banks) market share in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.

The aforementioned development comes in the backdrop of PSBs turning cautious on loan growth in the face of stress in their balance sheets and IDBI Bank getting classified as a PvSB following the Life Insurance Corporation of India becoming its promoter with management control in January 2019.

Consolidation exercise

PSBs loan growth also slackened as some of them focussed their energies on streamlining operations following mega-mergers within the grouping.

Dena Bank and Vijaya Bank got amalgamated with Bank of Baroda with effect from April 1, 2019.

The aforementioned consolidation exercise was followed by mega-mergers in PSB space in FY20-21.

With effect from April 1, 2020, Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank; Syndicate Bank merged with Canara Bank; Andhra Bank and Corporation Bank merged with Union Bank of India; and Allahabad Bank merged with Indian Bank.

During the last four years, PvSBs pressed ahead with loan growth. Many larger and mid-sized PvSBs were neither constrained by capital nor weighed down too much by bad loans.

Realignment & privatisation

Now, if the Government makes good on its Budget announcement of privatising two PSBs in FY22, the market share of State-owned banks could shrink further by about 3-4 percentage points, with the share of PvSBs correspondingly going up.

In 2018, Uday Kotak, Managing Director & CEO, Kotak Mahindra Bank, observed that private sector banks’ market share will go up significantly and be on a par with that of public sector banks in the next five years.

“…This major mega trend in the redefinition of the industry structure is something which is playing out as we talk,” Kotak then said.

Banking expert V Viswanathan assessed that PvSBs are focussing on credit to small and medium enterprises (which offer collateral), wholesale trade, home loans and related top-up loans, loan against property, auto loans and personal loans, among others, in a big way.

Meanwhile, small finance banks have grown their market share in loans to about 1 per cent in December 2020 from about 0.22 per cent in December 2017. Foreign banks’ share came down to 3.98 per cent from 4.44 per cent.

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SBI cuts minimum interest rate on home loans up to ₹30 lakh to 6.70 per cent

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State Bank of India (SBI) has cut the minimum interest rate at which its home loans up to ₹30 lakh will start from 6.95 per cent to 6.70 per cent.

The new interest rate is effective from May 1, 2021.

The home loan rate cut comes exactly a month after the bank hiked the minimum interest rate on home loans by 25 basis points (bps) from 6.70 per cent to 6.95 per cent.

For home loans above ₹30 lakh and up to ₹75 lakh, the interest rate will start at 6.95 per cent. For big-ticket home loans above ₹75 lakh, the interest rate will be 7.05 per cent, India’s largest bank said in a statement.

SBI said women borrowers will get a special concession of 5 basis points (bps). Further, a 5 bps concession is being offered as a digital incentive to customers applying for home loans via YONO digital banking platform. One basis point is equal to one-hundredth of a percentage point.

CS Setty, MD (Retail & Digital Banking) said, “The affordability for the consumer increases immensely with the present home loan interest rate offerings, which reduce the EMI (equated monthly installment) amounts substantially. I am sure these measures will give a fillip to the real estate industry too.”

SBI had hiked the minimum interest rate on home loans by 25 basis points (bps) from 6.70 per cent to 6.95 per cent with effect from April 1, 2021.

After SBI upped the minimum interest rate at which it will offer home loans last month, Kotak Mahindra Bank, in a statement issued on April 12, 2021, said it will continue its special interest rate on home loans of 6.65 per cent per annum.

“In the interest of consumers and on the back of strong demand trends, Kotak continues to offer possibly the lowest home loan interest rate in the market,” it said the statement, adding that the rate is applicable across all loan amounts.

“Both fresh home loan applicants and balance transfer cases are eligible for interest rates beginning at 6.65 per cent per annum. Interest rates are linked to borrowers’ credit score and the Loan to Value ratio,” Kotak Mahindra Bank further said.

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