Tag: Maharashtra

Telangana pools in Rs 2,000 crore via auction of bonds, eyes more funds, BFSI News, ET BFSI

Banking & Finance

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HYDERABAD: Telangana on Tuesday raised Rs 2,000 crore via auction of bonds following Reserve Bank of India’s (RBI) approval last week. The state went for a payment of the longest duration of 30 years.

Andhra Pradesh, Bihar, Goa, Gujarat, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Uttarakhand and West Bengal also raised bonds. All these states took loans with interest repayment schedule of seven to 10 years, unlike Telangana.

Besides Telangana, other states on long duration schedule are Bihar (15 years) and AP (14). Telangana also fixed a slightly higher interest rate (7.24%) than other states, which kept it in the range of 6.95% to 7%.

Meanwhile, the state will also go for another round of auction to raise Rs 1,000 crore this month end as per schedule given to RBI. According to the calendar, in the July-September quarter, the state will go for auction of Rs 8,000 crore.

In the last quarter too, it had applied for raising of Rs 8,000 crore, but taken Rs 16,000 crore loan. In June, it had taken Rs 10,000 crore loan.

In the 2021-21 budget, it was proposed to pool in funds worth Rs 47,500 crore via loans. Sources said that in this quarter too, the state will go for more loans than it requested in the calendar to the RBI.

It is estimated that with the implementation of PRC recommendations, the state proposing new schemes, new notification of jobs the requirement of funds will go up. “Unless the state earned income goes up there will be more dependency on loans” said officials.



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Bank of Maharashtra plans to raise Rs 2,000 crore via QIP, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: Bank of Maharashtra has decided to float a Rs 2,000-crore qualified institutional placement (QIP) of equity shares next month. The public sector lender has received approval from its shareholders for the capital raise last year.

Speaking to TOI, A S Rajeev, MD & CEO BoM, said that the bank had capital adequacy of 14.5%. Of which, 10.9% is the tier I and capital adequacy is good. “For growth purpose, we require capital as we are envisaging a credit growth of 16-18%. This means that advances will grow by around Rs 25,000 crore for which we require Rs 1,400-1,500-crore capital” he said.

The bank is looking at an issue of Rs 1,000 crore with a greenshoe option to retain an oversubscription of Rs 1,000 crore. “In addition to this we will be raising Rs 1,000 crore through additional tier I and tier II bonds,” said Rajeev. The bank’s stock, which was trading below Rs 11 a year ago, closed at Rs 27 on Friday.



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Bank of Maharashtra tops PSU banks in terms of loan, deposit growth

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State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and deposit growth during financial year 2020-21.

The lender recorded 13.45 per cent increase in gross advances at ₹1.07 lakh crore in 2020-21, as per the published data of BoM.

It was followed by Punjab & Sind Bank which posted 8.39 per cent growth in advances with aggregate loans at ₹67,811 crore at the end of March 2021.

When it came to deposit mobilisation, BoM with nearly 16 per cent growth was ahead of even the country’s largest lender State Bank of India, which recorded 13.56 per cent rise.

However, in absolute terms SBI’s deposit base was 21 times higher at ₹36.81 lakh crore as against ₹1.74 lakh crore of BoM.

Current Account Savings Account (CASA) for BoM saw 24.47 per cent rise, the highest among the public sector lenders, during the year.

As a result, CASA was 54 per cent or ₹93,945 crore of the total liability of the bank.

According to the announced quarterly numbers, Central Bank of India achieved second spot by recording 11.46 per cent growth in CASA at ₹1.61 lakh crore.

Total business of BoM increased 14.98 per cent to ₹2.81 lakh crore.

For the full year 2020-21, BoM’s standalone net profit jumped nearly 42 per cent to ₹550.25 crore. In the previous year, the profit was ₹388.58 crore.

The bank’s asset quality improved significantly as the gross bad loans or gross Non-Performing Assets (NPAs) dipped to 7.23 per cent of gross advances by the end of March 2021 as against 12.81 per cent by the same period of 2020.

In absolute terms, gross bad loans stood at ₹7,779.68 crore at the end of March 2021, lower than ₹12,152.15 crore recorded in the year-ago period.

Net NPAs came down to 2.48 per cent (₹2,544.32 crore) from 4.77 per cent (₹4,145.38 crore).

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NCLT execution is frustrating; credit growth will remain a matter of concern, says Rajnish Kumar, BFSI News, ET BFSI

Banking & Finance

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Q. How are bankers mapping reality when everything is uncertain? How do you see credit growth this year?

Compared to the last year, the severity of lockdowns is not too much this year. If I look at the earnings of large corporations I can see that they are able to face the situation really well. Sectors like steel, cement and IT have shown some improvement. This year there is an impact on the rural economy, which was not there last year. Also, MSME is the most vulnerable and huge employment loss is a major concern. The key difference between 2020 and 2021 is that last year we had many measures from the government and RBI. My assessment is that the bank’s credit growth will remain a matter of concern this year too. Once vaccinations pick up and the third wave doesn’t strike, we can see a pick-up in the economy from the third quarter.

Q. Are the government and RBI initiatives generating the demand?

The government’s Emergency Credit Lending Guarantee Scheme (ECLGS) was very well received. RBI has kept the rates low and taken initiatives but the general belief is that monetary initiatives are not sufficient. We can’t do the heavy lifting which is required in the current situation. Right now the priority is to revive the demand and consumer confidence which can be done only by the government. Fiscal measures may be required. Given the constraints that the government has, the headroom is not unlimited. But this is an unusual situation and unusual steps are required.

Q. What should the government do to generate demand and consumption?

The government of Maharashtra reduced stamp duty from 6% to 2% and it generated a phenomenal business. This shows that such moves demonstrate the demand really well. It was an unprecedented move and it also improved the liquidity position of real estate developers. It is not necessary that only the central government should do all things; even state governments can take initiatives and offer incentives to encourage the demand.

Q. Has liquidation (at IBC) become a scam? Why are resolutions lesser than liquidations at IBC?

There are two things. First, generally for a better resolution what works is early detection. Here, many of the cases were really old and there was no chance of revival. Second, unfortunately, the weakest link in the whole IBC process is the execution. Many positions are lying vacant at NCLTs and many judges are going to retire soon. So how will the system work? We have thousands of cases. We are in a situation where the cases are piling up and resolution can’t happen. We have to make quick and immediate decisions. It’s a patient in the ICU and you can’t leave the patient unattended for months. There are cases where the resolution plan has been approved and voted on by the Committee of Creditors (COC) but there’s no decision from NCLT yet. It is a frustrating experience for the lenders. It is a frustrating experience for the resolution professionals. I don’t see any issue with the law, because a lot of amendments were carried out, but the execution is the weakest link. My view is if you can settle the cases without going to NCLT do that. You can think of a one-time settlement if you can. You may have a better recovery in certain cases there.

Q. Vijay Mallya is ready with the offer to settle the loans, are there legal challenges in accepting his offer?

There are no legal challenges, but till the time I was the chairman, there was no communication received from Vijay Mallya about any such offer. Also, lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes, from lenders will recover better than many other stressed assets.

Q. With the emergence of digital and digital-only banks, where do you see SBI?

Today if technology is not the core of your business, then it will not survive. We were good at the back end. At SBI we have adopted digital heavily and the benefits are huge. Banking in 5-10 years will change beyond imagination. Large legacy banks also do not have a choice but to think like a tech company. Maybe it’s happening at different spaces at different banks, but SBI has its own advantage because of the customers and resources.

Q. What is the idea behind privatising two public sector banks?

The major issue is how long should the government capitalise the PSBs? And the government’s policy is also that they don’t want to have more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well. Also, the government wants to increase the governance of banks. So it’s a strategic decision. Because if the government wanted to only increase the governance they would have shifted the ownership of the PSBs to RBI, and the issue would have been resolved. RBI would have become the sole regulator and banks would have achieved similar results.



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Average 13 lakh new demat accounts added every month since April 2020, BFSI News, ET BFSI

Personal Finance

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MUMBAI: Amid near-record rally in the equity markets during the pandemic-ravaged FY21, brokerages have added on an average 13 lakh new demat accounts every month since April last year, taking the overall retail investor headcount to record 6.97 crore as of May 31 this year, according to BSE data.

After the bloody March 2020, when the bourses tanked about 35 per cent in a single month after the WHO declared COVID-19 as a global pandemic, the market was on a song from June.

The markets ended the year to December with a 15 per cent gains and the fiscal year to March with a historic 68 per cent, the second best in its history after an 80 per cent in 2008-09 after taking 40 per cent due to the global financial crisis in the previous year.

Brokerages and exchanges on an average added 12-15 lakh new investors every month in the past 14 months, taking the total to 6.97 crore, BSE Chief Executive Officer Ashish Kumar Chauhan told PTI.

He added that 40 per cent of the new demat accounts were added by the BSE brokers.

As of May 31, there were over 6.9 crore demat accounts in the country. Of this, about a quarter of them are from Maharashtra, followed by Gujarat with 85.9 lakh accounts, according to the investor data available with the BSE as of May 31.

“The BSE has added almost 40 per cent more investor accounts aggregated for all members in the past 15 months. To be precise, between March 2020 and end-May 2021,” Chauhan said.

The pace of investor accounts even on a larger base suggests that automation and mobile trading are taking investments in stocks and mutual funds to nooks and corners of the country, he added.

After Maharashtra and Gujarat, which traditionally have been leading the market when it comes to investors and investment, the third is UP with 52.3 lakh investor accounts (very small compared with the state’s huge population of about 20 crore), fourth is Tamil Nadu with 42.3 lakh accounts, and the neighbouring Karnataka is closely behind with 42.2 lakh ranking fifth.

Bengal comes next with 39.5 lakh at the sixth slot, followed by Delhi (37.3), Andhra (36), Rajasthan (34.6), MP (25.7), Haryana (21.2), Telegana (20.7), Kerala (19.4), Punjab (15.2), and Bihar (16.5).

Excluding Assam, which has 7.6 lakh demat account holders, all other northeastern states together have under 1.70 lakh accounts.

The tiniest territory Lakshadweep has the lowest number of demat account holders at just about 480, following Andaman & Nicobar with 9,700 accounts, according to the BSE data.

But, a vast majority of these accounts are inactive. An industry study in March 2020 said only a fourth of then 4 crore accounts were active.

According to Sebi guidelines, a demat account that has not been operated for a year is considered inactive.

During the financial year 2021, the Sensex zoomed a massive 20,040.66 points or 68 per cent, while Nifty skyrocketed 6,092.95 points or 70.86 per cent despite the pandemic blues. This was considerable as it came a negative return of 30 per cent in 2019-20.

The FY21 rally was the best after the FY09 rally when it skyrocketed 80 per cent after tanking 40 per cent, following the global financial crisis that began in September 2007.

The massive rally in the market was driven by record foreign investments pumping in a net record of USD 35 billion into the equities in the fiscal.

Even after that, in the first four days of June, they pumped in Rs 8,000 crore. The latest inflow comes following a net withdrawal of Rs 2,954 crore in May and Rs 9,659 crore in April.

Prior to April’s outflow, FPIs had been infusing money in equities since October. They invested over Rs 1.97 lakh crore in equities between October 2020 and March 2021. This included a net investment of Rs 55,741 crore in the first three months of this year.

So far this year, overseas investors have put in a net sum of Rs 51,094 crore into equities. However, they pulled out Rs 17,300 crore from debt securities, according to data from the depositories.



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RBI cancels licence of Pune-based Shivajirao Bhosale Sahakari Bank, BFSI News, ET BFSI

Banking & Finance

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The RBI on Monday said it has cancelled the licence of Shivajirao Bhosale Sahakari Bank, Pune as the lender does not have adequate capital and earning prospects. As per data submitted by Shivajirao Bhosale Sahakari Bank, more than 98 per cent of the depositors will receive full amount of their deposits from the Deposit Insurance and Credit Guarantee Corporation (DICGC), the RBI said in a release.

On liquidation, every depositor would be entitled to receive deposit insurance claim amount of his/her deposits up to a monetary ceiling of Rs 5 lakh from the DICGC.

Giving details, the RBI said the bank does not have adequate capital and earning prospects and as such, it does not comply with the certain provisions of the Banking Regulation Act, 1949.

“The continuance of the bank is prejudicial to the interests of its depositors,” it said, adding that the bank with its financial position would be unable to pay its present depositors in full.

While cancelling the licence, effective close of business hours on Monday, the RBI said public interest would be adversely affected if the bank is allowed to carry on its banking business any further.

The Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator.

The release further said consequent to the cancellation of its licence, Shivajirao Bhosale Sahakari Bank is prohibited from conducting the business of banking, including acceptance of deposits and repayment of deposits, with immediate effect.



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HDFC Bank sees stress emanating from loans restructured during Covid 1.0, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank has warned of a rise in loan delinquencies as business and collection efficiencies have been hit by the Covid wave.

The second wave has accentuated problems for the people hit by the first wave and there will be stress emanating from borrowers who took the moratorium or restructuring, its chief executive Sashidhar Jagdishan said in an investor call.

“For the first time in as many years, we don’t have visibility on what is going to happen and, hence, near-term expectations are tepid,”Jagdishan said.

“There will be incremental slippages if this continues for a while longer.”The pace of vaccination is crucial for both clarity and visibility on likely delinquencies. he said.

He stressed that vaccinating more citizens, within the shortest period of time, was the only way of returning to normalcy.

“Unfortunately, the availability of vaccines is still a blind spot. A lot of people are struggling to get vaccinated, but as soon as this is smoothened, positivity should return to the future outlook,” he said. The bank has also asked its collection agents and door-to-door staff to function digitally.

Collections hit

“The impact of Covid 2.0 is much more than what we saw in the first wave, and the health of our staff is paramount,” he said. “So long as they are able to engage with customers digitally and secure business digitally, including collections, we will be alright.

Because we have also directed our collection agents not to step out, among the stressed borrowers we expect to see a higher amount of delinquency but these accounts should get resolved in the coming quarters.”

“As things stood in March, we would have had a very buoyant FY22, but as things stand now, our performance is on a best-effort basis,” he said. “But the platform is so good that we will be in a position to bounce back when things return to normalcy.”

Tech issues

Jagdishan also said the bank management was hard at work to solve the tech issues plaguing the lender in recent years. The bank faced three major digital outages in the last three years, prompting the central bank to direct curbs, including a standstill on launching new digital initiatives and onboarding credit card customers.

“A fair amount of work has happened though we still need some time before we can control the issues on resilience,” Jagdishan said. “We have done a fair amount of work on our IT systems, security, infrastructure, and our recovery timeline is something we are working on.

The strictures imposed by the RBI have given us a window to work faster. We are impacted, it is a blot on the bank that we are unable to source cards but I take this positively and build our technology that is better than that of anyone else in the system.”

HDFC Bank first saw a spurt in cheque bounce cases in April, coinciding with the second lethal Covid wave in the country.

Check bounce rates for HDFC Bank were improving up to March 2021. However, bounce rates increased in April, returning to January 2021 levels. Maharashtra, Madhya Pradesh, Punjab, and Telangana were seeing higher check bounce rates.



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Auto-debit EMI failures set to rise in May as Covid hits incomes, BFSI News, ET BFSI

Banking & Finance

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The financial distress due to the Covid pandemic is leading to borrowers defaulting on monthly retail payments.

The rise in cheque bounce cases, which was first reported by HDFC Bank during its fourth-quarter results, is now seen at other payment avenues.

More borrowers missed equated monthly instalments (EMIs) in April, according to the data from the National Payments Corp. of India (NPCI).

In April, about 34.1% of auto-debit transactions on the National Automated Clearing House (NACH) failed, mainly due to insufficient funds.

The percentage of failure was 32.8% in March, when the second wave of Covid hit.

While in the value terms, 27.9% of transactions were unsuccessful in April against 27.5% in the previous month, the rise in the number of failures has alarmed experts, who see more drop in retail payments this month due to the spread of lockdowns to many other states.

This data is only for inter-bank mandates, which means a transaction between a bank and a non-bank lender.

HDFC Bank

HDFC Bank, the top private sector bank in India, first saw a spurt in cheque bounce cases in April, coinciding with the second lethal Covid wave in the country.

Check bounce rates for HDFC Bank were improving up to March 2021. However, bounce rates increased in April, returning to January 2021 levels. Maharashtra, Madhya Pradesh, Punjab, and Telangana were seeing higher check bounce rates.

With the resurgence of Covid cases, the bank continues to make additional contingent provisions to further strengthen the balance sheet. Although, overall asset quality remains stable, with total restructuring at 0.6% of loans and net NPA at 0.4%.

Moratorium demand rises

While the RBI has announced loan recast measures, demand is rising for loan moratorium due to renewed financial stress.

Transporters’ apex body AIMTC has requested the government for a blanket loan moratorium for the sector till August 31, 2021, in the prevailing scenario to help in maintaining business continuity.

In a statement, the All India Motor Transport Congress (AIMTC) pointed out that around 70 per cent of the country is under lockdown and more than 85 per cent of the transporters are small operators having one to five vehicles (both cargo and passenger segment).

“We have requested the government for blanket loan moratorium in the prevailing scenario to help in maintaining business continuity and tackling stressed sectors like the transport sector and help in the survival of crores of these hapless Indian citizens associated with the road transport sector,” it said.



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Covid surge sparks demand for Insolvency and Bankruptcy Code suspension yet again, BFSI News, ET BFSI

Banking & Finance

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With the Reserve Bank of India unveiling a rescue package that stops short of offering loan moratoriums, lenders now want suspension of the Insolvency and Bankruptcy Code, which was reanimated on March 24 after being suspended for a year.

Banks are planning to petition the government to keep the IBC process under suspension to help companies restructure their finance to face the renewed vigour of the pandemic, according to a report.

Also, the court proceedings are hampered due to the pandemic with courts hearing only urgent matters.

Experts are seeking an extension of IBC to 3-6 months and taking a call after that depending on the situation.

Industry body Assocham has also urged the government to reimpose a moratorium on taking debt-ridden firms to the NCLT under the IBC till December this year following the severe second wave of coronavirus. In a representation to the Finance Ministry, the chamber said that given the increasing pressure on businesses, it would be imperative to extend the NCLT (National Company Law Tribunal) moratorium to ensure that the pandemic “does not wreak havoc” on the economy.

Virtual hearings

With Maharashtra in partial lockdown to curb Covid-19 infections, experts have said that some high-stake bankruptcy cases in Mumbai could be affected by virtual hearings.

The disposal rate in virtual trials is quite low and could add to the pendency of cases if the state’s restrictions persist for a longerduration. While there has been no official notification, all case hearings in the state have shifted to the virtual platform.

There were more than 20,000 cases pending with the National Company Law Tribunal as of December 2020 and a bulk of them are with the Mumbai NCLT.

With the IBC suspension having been lifted, the number of applications is bound to increase rapidly. Online hearings could add to the existing pressure on the tribunals, which may lead to a further slowdown of resolutions through the IBC process.

The government recently issued an ordinance to provide a pre-packaged scheme – an efficient alternative insolvency resolution framework – for micro, small and medium enterprises (MSMEs). This is set to quicken the resolution process and reduce litigation.

The status of IBC cases

Out of the total 3,774 cases or corporate insolvency resolution processes (CIRPs) filed since the Insolvency and Bankruptcy Code (IBC) came into existence in 2016, 1,604 cases, or 43 percent have closed, by way of resolution, liquidation or other means. The rest 57 percent are ongoing with many overshooting the 330-day maximum time limit.

Of the 1,604 closed cases, only 14 percent have found a resolution, whereas 57 percent have ended in the liquidation of the companies.

Interestingly, the 72% cases of CIRPs ending in liquidation were already defunct and under the Board for Industrial and Financial Reconstruction.

About 312 cases have been closed on appeal or review or settled, 157 have been withdrawn; 914 ordered for liquidation and 221, saw approval of resolution plans.

The recovery rate for resolved cases under IBC is 44% with Rs 1.84 lakh crore recovered so far of the Rs 4.13 lakh crore admitted claims.

In case of the 12 large defaulters identified by RBI, the creditors recovered Rs 1.36 lakh crore from eight cases that have been resolved so far, with recoveries ranging from as low as 17 percent of claims in the case of Alok Industries, to almost 100 percent for Jaypee Infratech.



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Banks gear up for asset quality deterioration as stricter lockdowns loom, BFSI News, ET BFSI

Banking & Finance

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As India stares at lockdowns and curbs for the entire May, banks and NBFCs are Lenders are bracing for a further deterioration in asset quality metrics, cheque-bounce rates and collection ratios.

Collection levels had already dropped to 10% for lenders and cheque-bounce rates had increased in segments like small and medium enterprises, commercial vehicles and microfinance.

Analysts see cheque bounce levels rise by another 3-4% while collection ratios dropping by nearly 5% in May alone

Cheque bounces are back to January 2021 levels after improving in March with Maharashtra, Madhya Pradesh, Punjab, and Telangana are seeing higher check bounce rates, HDFC Bank said in its Q4 results.

Dishonoured cheques in April (half-way through the month) have risen slightly, possibly due to some panic caused by worsening medical conditions,” HDFC said after its Q4 results.

Till the first week of April, the worst affected state was Maharashtra but now many states have been severely impacted by the fresh pandemic surge. NBFCs and small finance banks face a bigger hit.

Axis Bank too has said collections are likely to get impacted in the coming weeks and it was watching the situation closely.

No cover this time

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das said after the central bank’s monetary policy review. However, that statement was before the second Covid wave worsened.

RBI stress test

Bank NPAs may rise to 13.5% under the baseline stress test scenario by September, the highest in more than 22 years, according to the RBI’ financial stability report in January this year.

The gross bad loan ratio of banks which stood at 7.5% as of 30 September, could almost double to 14.8% under a severe stress scenario, RBI warned. Under the severe stress scenario, RBI has assumed a 7.6% economic contraction in the six months to 31 March and a tepid 3.8% growth in the first half of the next fiscal. However, uncertainty over vaccines and the severity of the Covid wave hobbles the 3.8% growth projection.

The last time banks saw such stress was in 1996-97 when the bad loan ratio rose to 15.7%.



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