Tag: Mahindra

At least seven lenders, including Axis Bank, HDFC Bank and ICICI Bank harness GIFT City facilities, BFSI News, ET BFSI

Banking & Finance

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At least seven lenders, including Axis Bank, HDFC Bank and ICICI Bank, are harnessing the GIFT City facilities to mark a robust Indian presence in the non-deliverable forward (NDF) currency derivatives market, potentially paving the way for eventual currency convertibility that’s considered a draw-card for overseas investments. Average daily volumes in over-the-counter trades at Gujarat GIFT City surged to an estimated $1.5-2 billion from $100-200 million about a year ago, four bankers told ET.

Among the other major participants in the NDF trade are State Bank of India, IndusInd Bank, Kotak Mahindra and Standard Chartered, executives said. “Daily average volumes have surged for offshore OTC NDF trades during the onshore time,” said Bhaskar Panda, executive vice president at HDFC Bank. “This has helped bridge gaps between offshore and onshore prices bringing in relative stability in the exchange rate. This in turn will help attract foreign investors, who always prefer full currency market convertibility.” IndusInd, Kotak and SBI didn’t comment.

The differential between one-month onshore and offshore forwards trade is now less than a paise, which would have been about four-five paise in normal circumstances. A wider differential encourages speculators to tap arbitrage opportunities short-selling rupees or dollars, a potential source for heightened volatility. The one-month Rupee Options Volatility index is now at 4.51 percent versus 7.63 percent nearly a year ago, show data from Financial Benchmarks India (FIBIL). “Axis Bank IBU Branch has been playing a significant role in the NDF markets at GIFT City,” said Lalit Jadhav, CEO – Axis Bank IBU Branch, GIFT City.

“We have a full-fledged Treasury Desk with robust risk controls and look at trading opportunities in this segment which can potentially help reduce volatility and drive price convergence between offshore and on-shore markets.” Before local banks were allowed to tap the NDF market at GIFT City, the Reserve Bank of India was unable to control NDF moves on the rupee-dollar. Now, the central bank even directs private banks along with traditional public sector lenders to buy or sell units, which is known as NDF market intervention.

“NDF business would be one of the core pillars of our business strategy at GIFT City that provides an excellent platform to meet the global banking needs,” said Anupam Verma, head – international banking unit, IFSC GIFT City, ICICI Bank. RBI had permitted Indian banks, which hold a licence to operate in the International Financial Services Centre in GIFT City – Ahmedabad, to participate in the NDF market from June 1 in 2020. “The liquidity has significantly improved in the NDF market at GIFT City with large local banks transacting,” said Anindya Banerjee, currency analyst at Kotak Securities.

“We are gradually moving towards full capital account convertibility making our exchange rate easily available.” RBI deputy governor T Rabi Shankar Thursday called for a preparedness to meet challenges related to full capital account convertibility as foreign investors get full access to India’s debt market under a dedicated route meant for global bond index inclusion.

“A key aspect of currency convertibility is integration of financial markets,” Shankar said at the fifth Foreign Exchange Dealers’ Association of India (FEDAI) annual day. “An effort has already commenced in the interest rate derivative segment.” “NDF-onshore spreads have substantially narrowed after allowing Indian banks into the NDF space,” he said.



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Kotak Mahindra Bank launches Micro ATMs across India, BFSI News, ET BFSI

Banking & Finance

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To deliver essential banking services conveniently to a larger section of consumers living in relatively far-off areas, private lender Kotak Mahindra Bank Ltd on Tuesday announced the launch of Micro ATMs across the country.

Customers of all banks who possess a debit card can use a Kotak Micro ATM for key banking services such as cash withdrawals and checking account balances. A mini version of an ATM, micro ATMs are small handheld devices. The bank will use its extensive Business Correspondents (BC) network to launch micro ATMs.

“The micro ATM is a simple, innovative and highly effective solution to deliver essential banking services such as cash withdrawals in a convenient manner to people residing in relatively remote locations,” said Puneet Kapoor, President – Products, Alternate Channels and Customer Experience Delivery, Kotak Mahindra Bank. “It is a viable alternative to a regular ATM, allowing for faster expansion and increasing banking touchpoints for consumers. Kotak’s network of micro ATMs across the country will help customers of all banks (Kotak and non-Kotak customers) get easy access to their bank accounts and promote financial inclusion.”

At the end of August, there were 2.13 lakh ATMs in the country, up from 2.09 lakh same time last year, a meagre growth of 1.5%. On the flip side, micro-ATMs have grown to 4.94 lakh as against 3.07 lakh in August last year, a rise of over 60%.

In the first phase, Kotak Mahindra Bank is introducing micro ATMs in the outskirts of the top 8 metro cities – locations where the demand for cash withdrawal services is high but the prevalence of ATMs is low.



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‘Disbursements set to grow, while NPAs will decline’

Banking & Finance

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Mahindra and Mahindra Financial Services has seen an improvement in rural sentiment as the second Covid-19 wave ebbs. Ramesh Iyer, Managing Director and Vice-Chairman, Mahindra Finance, says demand is picking up and collection efficiencies are improving. In an interview with BusinessLine, Iyer said the company will look at expansion in the second half of the fiscal and is well capitalised for its business plans. Edited excerpts:

What kind of growth do you expect this fiscal?

Compared to previous years, the disbursement will be high. I see that volumes will pick up for auto loans, tractors, pre-owned vehicles. Disbursements will see a growth trajectory and NPAs [non-performing assets] will have a declining trajectory.

How confident are you of a reduction in NPA levels?

NPAs in the first quarter were purely due to a liquidity problem for customers, where they couldn’t earn enough and delayed payments. Otherwise, they are not defaulting customers. I would call them as a delay and not a default. We are confident that the customers who have delayed their instalments would definitely pay back.

Mahindra Finance: Macro sentiments turning positive in July

Are there more restructuring requests since the first quarter?

We had about six lakh eligible customers, but we did restructuring for only 60,000 in the first quarter. I would not expect the restructuring numbers to be very high this quarter but there could be some demand from commercial and passenger vehicles. It could be 30,000 to 35,000 customers. In terms of exposure, along with what we did in June, it should not account more than 4-5 per cent of the book.

Is demand picking up?

Even during this pandemic, we didn’t see too many cancellations, but dealerships were closed. With the opening-up in June, we did see volumes pick up and it continued in July. Normally, July and August are not great months for vehicle purchase. People wait for the festival season. This could also be pent-up demand from the first quarter. We all hope and pray there is no severe third wave; and with a good monsoon one could expect both September and October to do well, especially as infrastructure work gathers pace. With both of that happening, it could be a good buoyant story from a rural perspective.

Mahindra Finance posts Q1 net loss of ₹1,573 crore

Will this be a year of expansion for you?

It will be a mix in terms of people and branches. We will definitely add in the second half. By then we will know, the third-wave behaviour, if any, and we will also know how the harvest is panning out. We are also ensuring adequate investment in technology. We have built a very strong digital and AI team, and they are looking at various processes that can be digitised. Our data team is looking at the millions of data we have and coming out with forecasts based on trends.

Are you looking at new products or focus areas?

From our point of view, it’s important to capture three areas for further growth. We have created a very strong SME [small and medium-sized enterprises] vertical, where we are working with a large Mahindra ecosystem, and other OEM [original equipment manufacturer] ecosystem, where we will support suppliers for their capex or working capital requirements. We have chosen three industries to work with — auto, agriculture and engineering — where we think there is a lot of play for SME players. In the vehicle segment, pre-owned vehicles will be a good growth segment. As infrastructure opens up, tractor volumes will pick up. Many OEMs in cars are also reaching out to rural markets with their launches and that can become a natural synergy for us to gain volume. We do believe that leasing in the next three years will become a prominent play. We have set up a digital finco for small-ticket consumer durable and personal loans. The platform is live but this is a testing year. While we have done some loans, from April you will see a lot of aggression in this business.

Are there any outstanding issues for NBFCs?

The issue of liquidity has been addressed now. If at all the third wave happens and impacts customers, then expectations would be for a moratorium for customers. In restructuring, typically, customers are a little worried about the interest burden; but in a moratorium, they are very clear that they will not have to pay an instalment for a certain period. It helps both the company and the customer.

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IPPB ties-up with Mahindra Rural Housing Finance for cash management solution, BFSI News, ET BFSI

Banking & Finance

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Mahindra Rural Housing Finance Limited (MRHFL), a subsidiary of Mahindra and Mahindra Financial Ltd, and India Post Payments Bank (IPPB) have tied-up for a strategic partnership for cash management solution. As part of the tie-up, IPPB will be offering cash management and collection services to MRHFL through its access points and postal service providers. With the cash management service, MRHFL customers will be able to repay their monthly or quarterly loan instalments at over 136,000 post offices.

The tie-up for cash management solution is aimed at customer inclusivity by both the partners. IPPB’s large national network combined with its simple, scalable and replicable technology framework has facilitated the deployment of cash management solution to meet the requirements of MRHFL.

J Venkatramu, MD & CEO, India Post Payments Bank, “As technology continues to evolve and creates new ways of doing business, it has been our constant endeavour to offer our customers and partners accessible & affordable banking solutions. Cash management being the lifeline of business operations, IPPB with its robust network and technology platform can help corporates to manage their receivables safely, securely and seamlessly.”

Anuj Mehra, Managing Director, Mahindra Rural Housing Finance said, “At Mahindra, we keep on looking at innovative solutions to enhance the customer support for our customers. The tie up with IPPB is a step in that direction which we believe will provide our customers access to efficient banking services and enable them to become financially secure and empowered. I am grateful to IPPB for agreeing to partner with us on this unique solution which will enable our customers to Rise”.



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

Banking & Finance

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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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