Tag: MSME

RBI report shows decline in bank credit post festival season pick-up

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The outstanding credit of all scheduled banks declined by ₹5,034 crore in the fortnight ended November 19, indicating the festival season credit pick-up witnessed in the preceding fortnight has lost steam.

In the preceding fortnight ended November 5 the outstanding credit of all scheduled banks had increased by ₹1,25,262 crore, according to Reserve Bank of India’s data on “Scheduled Banks’ Statement of Position in India”.

Sluggish loan growth

“Loan growth continues to be sluggish with no sharp recovery in any specific segment barring Small and Medium Enterprise.

“A low interest rate environment continues but spreads remain elevated. With asset quality issues gradually receding, we should see spreads decline but loan demand issues remain,” Kotak Securities Analysts’ MB Mahesh, Nischint Chawathe, Abhijeet Sakhare, Ashlesh Sonje and Dipanjan Ghosh, said in a report.

Deposits during the reporting fortnight declined by ₹2,67,623 crore against an increase of ₹3,38,451 crore in the preceding fortnight.

Deposit rates flat

As per the latest data from RBI, deposit rates were flat month-on-month at about 5.1 per cent.

“Both private and PSBs have reduced their term deposit rates by about 50 basis points (bps) over the past 12 months. Wholesale deposit cost (as measured by Certificate of Deposit rates) has seen a much sharper decline. It has been broadly stable in FY2022,” the Analysts said.

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SBI enters co-lending agreement with Capri Global Capital Ltd, BFSI News, ET BFSI

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State Bank of India has entered into a co-lending agreement with Capri Global Capital Ltd (CGCL) to boost MSME lending. The two parties have signed a Memorandum of Understanding to create multiple co-lending opportunities for the financial empowerment of the MSMEs, which aims to provide further impetus to financial inclusion in the country, the bank said in a release.

Dinesh Khara, Chairman, SBI said, “To improve the credit to the underserved and unserved, we are happy to associate with Capri Global Capital. We believe this collaboration will provide the nimble footedness of NBFC and quality credit to the right set of the population which will further deepen lending to MSMEs through the last mile connect.”

RBI had issued guidelines on the co-lending scheme for banks and NBFCs for priority sector lending to improve the flow of credit to unserved and underserved sectors of the economy, and make funds available to borrowers at an affordable cost.

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Union Bank of India partners Capri Global for co-lending, BFSI News, ET BFSI

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Mumbai: Union Bank of India has partnered Capri Global Capital (CGCL), an NBFC focused on MSMEs, and affordable housing finance segment, for co-lending. The two partners entered into a co-lending agreement under which they aim to disburse MSME loans across over 100 centres in India.

In November 2020, the RBI had issued guidelines enabling banks to co-lend with finance companies to the priority sector. The tie up aims to enhance last-mile credit and drive financial inclusion to MSMEs by offering secured loans between Rs 10 lakh to Rs 1 crore in tier-2 and -3 markets.

The agreement was signed in the presence of Rajkiran Rai G, MD & CEO, Union Bank of India and Rajesh Sharma, MD, Capri Global Capital. The NBFC will have the advantage of low cost funds while the bank will get the benefit of last mile efficiency of the NBFC.

“The partnership with CGCL is part of UBI’s strategy to support the MSMEs by providing tailor-made financial solutions and accelerating the growth of MSMEs to contribute to the country’s economic development,” said Rai.

According to Sharma, the aim is to reach out to a large section of society by offering easy, convenient, and efficient credit solutions and empowering them to be key contributors to fiscal growth. “Our focus is to support the grassroots entrepreneurship that creates economic value,” said Sharma.



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Asset quality pains for banks ease, focus on growth likely in H2

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Asset quality pains for banks have largely eased after the second quarter and they are now likely to focus on growth, believe analysts.

A report by ICICI Securities noted that overall the quarter ended September 30, 2021 saw improvement in broad business parameters and management commentaries have been positive suggesting better traction in the second half of the fiscal.

“We believe profitability should see a boost in coming quarters with better top-line growth and lower provisions. Loan growth is to be largely driven by retail and MSME segment while corporate segment should witness gradual pick up in working capital utilisation,” it said.

Also read: NPAs of NBFCs, HFCs may rise for 3-4 quarters due to tweak in norms

Asset quality performance was better than previous quarter with less slippages and better recoveries, the report said.

Slippages were mostly at about 1- 1.4 per cent compared to 2-2.5 per cent quarter-on-quarter while gross non performing assets declined by 30 to 70 basis points, except for a few banks.

With the opening up of the economy and normalisation of business activities, most banks have reported better collection efficiencies as well as higher credit demand.

“The asset quality pain for most banks is largely behind and the focus now is on the growth acceleration. The one-off gains helped public sector banks to maintain a strong profitability; whereas the private banks’ performance was a shade better than the first quarter,” said a report by Emkay Global Financial Services.

The second quarter of the fiscal was marked by sequential moderation in stress formation, mainly led by retail, and more so for large private and public sector banks, the report said, adding that it expects non performing asset ratios to moderate due to lower slippages and higher recovery and write offs as most banks, barring a few small private banks, sit on a comfortable provision cover.

Motilal Oswal in a report also said that the asset quality outlook for public sector banks is improving gradually after a prolonged corporate NPL cycle – GNPA ratios had reached the peak of about 15 per cent in 2017-18.

A recent report by CARE Ratings had also noted that the NPA situation of the Indian banking system as represented by 23 banks – 9 PSBs and 14 private sector lenders, indicates a gradual improvement in the NPA ratio in September 2021.

The NPA ratio for these 23 banks was 6.97 per cent as on September 30, 2021 compared to 7.36 per cent as on September 30, 2020.

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Bank of Maha sees 15% credit growth, may not need capital infusion from govt, BFSI News, ET BFSI

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Bank of Maharashtra may not need capital infusion from the government this fiscal as it has adequate funds to meet the expected credit growth of 14-15 per cent, but may raise growth capital in the next quarter.

“Our capital adequacy ratio is 14.68%. As of now we don’t require any capital from the government. Capital is also a cost, the only thing is – when to raise the capital,” Bank of Maharashtra CEO A S Rajeev told ETBFSI in an interview.

The bank has raised Rs 400 crore towards equity in the current fiscal and Rs 1,000 crore as Tier-II capital two weeks back. If the Tier II capital is considered the adequacy ratio would rise to 15.50. The bank expects Rs 1,000 crore minimum profit in the current year, which would be added to the capital. It has also provided Rs 1,000 crore for Covid, which would be added to the capital if the provisioning is not required.

Credit growth

The bank sees credit growth in the infrastructure sector and segments such as hotels that are opening up with the easing of the pandemic. The MSME segment that was witnessing restructuring is also growing.

“The retail growth is on an average 15% in all banks. In our case, it is 17-18%. MSME is around 20% in spite of all these issues. So definitely it will be above 20% in this half year,” Rajeev said.

Home loans are growing 20% growth while auto 28%. The lender expects that the chip shortage will be sorted out in the second half of this fiscal.

Bank of Maha sees 15% credit growth, may not need capital infusion from govt

Outreach programme

The bank’s outreach programme is yielding 300-350 accounts with one credit outreach programme with loans of Rs 200-250 crore, he said, adding a recent SLBC in Pune it fetched loans of Rs 348 crore for the banks involved. The bank’s core business is improving with net interest margin at 3.27%. “If you’re able to maintain a NIM of 3% and you continue with 17% core profitability. And earlier NIM was affected by huge provisioning, now risk adjusted NIM is improving because the provisioning component has come down,” Rajeev said.

FinTech collaboration

The bank is investing a huge amount for FinTech and digital, and have tied with a number of companies, especially in the analytics space. The lender has tied up with around 15 companies for joint lending, including start-ups and NBFCs. The bank is also looking at buying stakes in FinTech firms and at leasing model.

Transfer to NARCL

The lender has identified around Rs 1,800 crore of loans for transfer to the National Asset Reconstruction Company Ltd and plans to shift Rs 3,500-4,000 crore fraud reported assets to the bad bank.



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BOI conducts ‘customer outreach programme’ in Delhi, BFSI News, ET BFSI

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New Delhi [India], November 13 (ANI): With an aim to take mainstream banking services to the people, the Bank of India has been conducting “Customer Outreach Programme”through its branches across the country to include more and more people in the mainstream banking and offer them banking services of their choice.

One first such programme was conducted at Srinagar on October 6, 2021.

According to the official release, BOI conducted another ‘Customer Outreach Programme” at its National Banking Group, New Delhi on November 11 with an attendance of over 100 customers including new and existing customers from all the branches across the New Delhi Zone.

The programme was inaugurated by Managing Director and CEO Atanu Kumar Das by opening New 116 BCs outlets at various locations in Ladakh, Delhi, Punjab and Rajasthan.

Speaking on the occasion, Das highlighted various initiatives taken by the bank under RAM (Retail, Agri and MSME) in recent times for the benefit of its customers.

He informed that the bank has recently slashed ROI for home loans and vehicle loans and has posted a net profit of 1,050.98 crores for the quarter of September 2021 marking a rise of 99.89 per cent.

He said, “BOI is committed fully to the economic revival process.”

He further added that BOI is at the forefront of successfully implementing all the government-sponsored schemes viz. MSME, Mudra, Stand-up, Start-up, PM SVANidhi schemes.

Bank has achieved 33 per cent PMSBY enrolments in PMJDY against DFS Targets 30 per cent for Q2FY21-22 and has won the “APY Annual Award (2020-21)” for overall performance for achieving ‘per APY’ target. The bank is implementing an E-PLATFORM solution for Straight through the process of major Banking products.

Das also distributed sanction letters to the beneficiary customers of various banking products viz. Housing Loan, Vehicle Loan, Stand up and Startup, MSME and PM SVANidhi schemes to the tune of ‘300cr.

It is noteworthy that during the month-long “customer outreach programmes”, the Bank of India has sanctioned ‘5000 cr and disbursed more than 4000 cr in the RAM segment alone. Another 8500 cr disbursal was done in corporate segments.

Bank intends to enrol 1500 BCs in these states during this quarter. Field General Manager Arun Kumar Jain, Zonal Manager, New Delhi Zone Ajay Kumar Panth, other senior officers and respective branch heads along with customers were present during the programme. (ANI)



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Auto debit bounce rates drop in Oct to pre-Covid levels, may fall further in festive season, BFSI News, ET BFSI

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Auto-debit payment bounce rates have dropped to near pre-Covid levels in October in tandem with the opening up of the economy as the pandemic retreated.Of the 86.6 million transactions initiated in October, 27 million transactions, or 31.24 per cent, failed, while 59.52 million were successful, according to the NACH data.
In value terms, 24.83 per cent of the transactions declined in October — the lowest since January 2020.

Volume-wise, the bounce rates were at similar levels seen during pre-Covid wave months of January and February of 2020, and by value, 260 basis points (bps) better than January-March 2021 period, which was the best quarter last year in terms of recovery for the economy.

Improvement over September

On a month-on-month basis, bounce rates have declined 50-60 bps by volume/value. Bounce rates were 31.7% and 25.4% by volume and value, respectively, for September. In August, these figures were at 33% and 26.8% by volume and value, respectively, while in July they were 33.2% and 27.4% by volume and value.

Despite the steady improvement, bounce rates continued to remain above the average levels of 2019. The current bounce rates by value are nearly 300 basis points higher than pre-Covid levels. Most banks and non-bank lenders have reported an increase in fresh disbursements and improvement in collections continues to remain their top priority.

Collection efficiencies

Collection efficiency improved in the September quarter, though slippages have been high in the retail and MSME segment the quantum is likely to have moderated sequentially, keeping asset quality in check, according to analysts.

Typically, auto-debit transactions are for recurring payments such as EMIs and insurance premiums although it does not capture intra-bank transactions. With the second wave of the pandemic leading to localised lockdowns and impacting economic activities, bounce rates had started to climb up from April 2021 after easing from December 2020.

In the last two months, as Covid cases have come down in most parts of the country and the economy has opened up again, bounce rates have started coming down again. Many lenders have reported that collection efficiencies have returned to normal and are at the pre-second wave levels.

Asset quality recovery

Non-bank lenders and housing finance companies, which suffered during the first quarter of this fiscal, are likely to report a steady recovery in asset quality and demand for fresh loans along with improved payment collections in the September quarter.

“The first quarter of fiscal 2022 was impacted by the second Covid wave. Relative to 1QFY22, we expect disbursement volumes of 170-230% for most Affordable Housing/Vehicle Financiers. Impact on AUM growth is likely to be higher for short duration products like Vehicle loans as collections held up well in 2QFY22,” Motilal Oswal Securities said in a note.

For vehicle financiers, or MFIs, the collection efficiencies are likely to be in the 90-100% range. After the high levels of restructuring witnessed in 1Q, a relatively lower incremental restructuring is likely in the second quarter.



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Trade credit insurance norms to kick in from Nov 1

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Companies are gearing up for trade credit insurance covers, for which the guidelines come into effect from November 1. This is expected to improve liquidity for micro, small and medium enterprises (MSMEs).

A number of insurance companies are said to be working on the draft agreements and products.

“The new trade credit insurance (TCI) guidelines have come at the right time. The Factoring Regulation (Amendment) Act, 2021 allows NBFCs [non-banking financial companies] as factors. Once the RBI [Reserve Bank of India] amends the TReDS [trade receivables discounting system] guidelines to allow an NBFC as a financier on the platform, it will increase liquidity and financiers will have a risk-sharing partner,” said Ketan Gaikwad, Managing Director and CEO, Receivables Exchange Of India Limited (RXIL).

SME IPOs pack a punch on the returns front

RXIL had earlier initiated a TCI-backed transaction with Tata AIG General Insurance Company as the insurer and ICICI Bank and Yes Bank as financiers in a sandbox environment.

Gaikwad said RXIL has applied to the RBI for approval and will also seek board approval soon.

The Insurance Regulatory and Development Authority of India had in September announced guidelines for TCI cover to enable general insurance companies to offer it to suppliers as well as licensed banks and other financial institutions to help businesses manage country risk, access new markets and manage the non-payment risk associated with the trade financing portfolio.

Gujarat to have 10 model MSMEs to showcase use of AI, IoT

General insurers can also offer TCI with customised covers for small and medium-sized enterprises (SMEs) and MSMEs.

Arun Poojari, CEO, Cashinvoice, a digital supply chain finance marketplace, noted that several pilots were on for these covers.

“There is a testing with an insurance company on the Cashinvoice platform. By nature, this is a very powerful proposition and bound to be accepted in a big way,” he said.

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Indian banks face rise in bad loans to 8-9% of lending -CRISIL, BFSI News, ET BFSI

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MUMBAI – Indian banks are likely to see a rise in gross non-performing assets (NPA) to 8-9% of total lending at the end of this fiscal year from 7.5% last year, rating agency CRISIL said in a report on Tuesday.

The rises will be led by retail clients and the micro, small and medium (MSME) segments, said Krishnan Sitaraman, senior director and deputy chief ratings officer, noting they represent 40% of total bank credit.

“Stressed assets in these segments are seen rising to 4-5% and 17-18%, respectively, by this fiscal year-end (March 2022). The numbers would have trended even higher but for write-offs, primarily in the unsecured segment,” Sitaraman said.

Last year the Reserve Bank of India (RBI) allowed banks to offer a six-month moratorium to all small borrowers.

It later permitted lenders to offer a one-time loan-restructuring facility to help avert mounting bad loans and to allow borrowers more time to repay their debt.

Despite these measures, stressed assets in the retail segment will rise, with home loans which is the largest segment being the least impacted and unsecured loans being the worst, CRISIL said.

The corporate segment is expected to be more resilient as a large part of the stress in the corporate portfolio was already recognised during an asset quality review initiated by the RBI in 2015, CRISIL said.

The agency said the performance of the restructured portfolio will need close monitoring but slippages from the restructured book are expected to be lower this time around.

“Recent trends indicate that a reasonable proportion of borrowers, primarily on the retail side, have started making additional payments as their cash flows improve, said Subha Sri Narayanan, director at CRISIL Ratings.

“MSMEs, however, may take longer to stabilise and we remain watchful.”

Reserve Bank of India (RBI)



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Union Bank MD, BFSI News, ET BFSI

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MUMBAI: With digitization gaining pace, close to 50 per cent of retail and MSME loans offered by banks will shift to digital lending platforms over the next two to three years, Union Bank of India’s Managing Director and CEO Rajkiran Rai G said on Thursday.

Rai said digital lending is changing the banking landscape in a big way because of the availability of data and many ecosystem partners collaborating with banks.

“I feel that at least 50 per cent of the loans under retail and MSME segments will move to the digital lending platforms, right from sourcing to documentation level, in two to three years,” Rai said while speaking at the Sibos 2021, an annual banking and finance conference.

He said the digital lending space is gaining traction and banks need to develop products that can deliver services online to customers. Rai said he sees a big revolution in MSME lending going forward.

“The working capital lending to MSME will move from open credit like working capitals and cash credits, to very-targeted lending such as very specific invoice discounting and supply bill discounting,” he said.

Speaking about the entry of fintech in the banking space, he said initially it was thought that fintech will compete with banks, but now the relationship between the two has become more symbiotic.

“Now, fintechs are helping us (banks). They are no longer competitors to us. The digital lending space will be nothing but fintech tie-ups,” he said.

There are many products where fintechs are already working with banks, he added.

Rai believes banks need to continuously invest in technology and upgrade themselves.

He said the management bandwidth in the public sector space, at least on thinking about innovations and digitization, is quite less.

“We have the traditional people who are good in handling technology and managing the core banking system, but they are not in the space of innovation and developing new products,” Rai said.

He said public sector banks need to get new talent from the system who are adept in technology and can bring in innovations.



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