Tag: MSME

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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IDBI Bank launches fully automated loan processing system

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IDBI Bank has launched a fully digitised, end-to-end Loan Processing System (LPS) for its MSME (micro, small and medium enterprise) and agriculture customers.

The bank, in a statement, said the new system seamlessly integrates with data fintechs, bureau validations, document storage/ retrieval, account opening/ management, customer notifications, and portfolio management capabilities, along with embodied credit policy/ knock off parameters.

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Suresh Khatanhar, Deputy Managing Director, IDBI Bank, said more than 50 product lines will be on LPS, which will offer seamless credit lifecycle.

“LPS integrates with the existing core database, human resource management system, and various other applications of the bank.

“This utility would considerably enhance the customer experience with improved turn-around time,” said Khatanhar.

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IDBI Bank automates loan processing system for MSME and Agri lending, BFSI News, ET BFSI

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IDBI Bank Limited announced the launch of its fully digitized, end-to-end, Loan Processing System (LPS) for its MSME and Agri. Products. Data fintechs, bureau validations, document storage/retrieval, account opening/management, customer alerts, and portfolio management capabilities, as well as inherent policy/knock off parameters, are all integrated into this new loan processing system.

These features of the fully digitised and automated loan processing system are aimed to provide a superior tech-enabled banking experience to the bank’s MSME and agricultural customers. For superior underwriting standards, the platform incorporates knock-off criteria and credit policy characteristics.

Suresh Khatanhar, Deputy Managing Director, IDBI Bank, said, ‘‘LPS would carry a total of more than 50 product lines and would offer seamless credit lifecycle with over 35 interface touch points to many satellite systems. The LPS integrates with the existing core database, human resource management system, and various other applications of the Bank. This utility would considerably enhance the customer experience with improved turn-around time.”



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CSB Bank posts highest-ever net profit in FY21 at Rs 218 cr; Q4 net at Rs 43 cr, BFSI News, ET BFSI

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New Delhi: Private sector CSB Bank on Saturday posted an all-time high net profit of Rs 218.40 crore for the fiscal ended March 2021. “The bank recorded an all-time high net profit of Rs 218.40 crore in FY21 as against Rs 12.72 crore in FY20, an increase of 1,617 per cent,” CSB Bank said in a regulatory filing.

During the last quarter ended March of FY21, the lender reported a net profit of Rs 42.89 crore against a loss of Rs 59.70 crore in the same quarter of 2019-20, CSB Bank said.

Total income during the reported quarter grew to Rs 609.45 crore as against Rs 475.49 crore in the same period a year ago. Interest income moved up by 28 per cent to Rs 497 crore.

The full-year income too increased to Rs 2,273.11 crore in FY21 from Rs 1,731.50 crore in FY20. Interest income during the year was at Rs 1,872 crore as against Rs 1,510 crore.

Bank’s asset quality improved as the gross non-performing assets (NPAs) fell to 2.68 per cent of the gross advances as of March 31, 2021 as against 3.54 per cent by end of March 2020. In absolute value, the gross NPAs or bad loans amounted to Rs 393.49 crore, compared with Rs 409.43 crore a year ago.

Net NPAs also fell to 1.17 per cent (Rs 168.81 crore) from 1.91 per cent (Rs 216.94 crore).

Provisions for bad loans and contingencies were down in Q4FY21 at Rs 70.95 crore as compared with Rs 84.32 crore parked aside in the year-ago period.

CSB Bank said its advances grew by 27 per cent mainly contributed by gold loan growth of 61 per cent.

Deposits at end of March this year grew to Rs 19,140 crore as against Rs 15,791 crore a year ago, while the advances were up at Rs 14,438 crore as against Rs 11,366 crore.

Total business has grown by Rs 6,421 crore or by 24 per cent year-on-year, it said, adding, thus in the centenary year the bank has grown a fourth of the total business it grew in past 99 years.

The lender said it has a comfortable liquidity position with liquidity coverage ratio of 210.39 per cent which is well above the RBI requirement.

“While the industry grew by approx 12 per cent in deposits and 6 per cent in advances, we could outperform by recording 21 per cent and 27 per cent growth in deposits and advances, respectively. In terms of overall business, bank has grown a fourth…We could also open 101 branches in this 101st year of existence. In terms of profitability, we could break all the past records by crossing the Rs 200 crore mark,” said C V R Rajendran, Managing Director & CEO, CSB Bank.

He said gold loans, two wheeler loans, agri loans, MSME abd SME loans will continue to be the main focus areas of the bank.

While digital will be the main mantra, the bank also plans to add close to 200 branches to its network in FY22 so that there is proper mix of brick and click banking, Rajendran said.

“Though we may have to wait for a month or so to fully understand the impact of second wave of Covid-19, we are optimistic in our outlook to continue the good work in FY22 as well,” he added.



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RBI allows lenders to revamp MSME accounts under Covid-19 related stress

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The Reserve Bank of India (RBI) has allowed lenders to extend the facility for restructuring existing loans of micro, small and medium enterprises (MSMEs) without a downgrade in the asset classification under the “Resolution Framework 2.0” given the uncertainties created by the resurgence of the Covid-19 pandemic.

Among the conditions specified by the central bank for restructuring existing MSME loans include: the aggregate exposure, including non-fund based facilities, of all lenders to the borrower should not exceed ₹25 crore as on March 31, 2021; and the borrower’s account should have been a ‘standard asset’ as on March 31, 2021. Further, the borrower’s account should not have been restructured earlier.

RBI said the restructuring of the borrower account has to be invoked by September 30, 2021.

The decisions on applications received by the lenders from their customers for invoking restructuring under this facility should be communicated in writing to the applicant by the lending institutions within 30 days of receipt of such applications.

Further, the restructuring of the borrower account has to be implemented within 90 days from the date of invocation.

Upon implementing the restructuring plan, lenders have to keep the provision of 10 per cent of the borrower’s residual debt.

RBI asked lending institutions to put in place a Board approved policy on the restructuring of MSME advances at the earliest, and in any case, not later than a month.

In respect of accounts of borrowers, which were restructured in terms of the MSME restructuring circulars, lending institutions have been permitted, as a one-time measure, to review the working capital sanctioned limits and/or drawing power based on a reassessment of the working capital cycle, reduction of margins, etc. without the same being treated as restructuring.

The decision with regard to above should be taken by lending institutions by September 30, 2021.

RBI said accounts provided relief under these instructions will be subject to subsequent supervisory review about their justifiability on account of the economic fallout from Covid-19.

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Breather for borrowers and small businesses as RBI allows Restructuring 2.0, BFSI News, ET BFSI

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The Reserve Bank of India has brought back the restructuring scheme for retail and small business borrowers allowing the lenders and borrower to brace the impact of the ongoing severe second wave of Covid-19 across the country.

RBI Governor, Shaktikanta Das said, “Small businesses and financial entities at the grassroot level are bearing the biggest brunt of the second wave of infections.”

He added, “The resurgence of COVID-19 pandemic in India in recent weeks and the associated containment measures adopted at local/regional levels have created new uncertainties and impacted the nascent economic revival that was taking shape. In this environment the most vulnerable category of borrowers are individual borrowers, small businesses and MSMEs.”

Under the Resolution Framework 2.0 for COVID Related Stressed Assets of Individuals, Small Businesses and MSMEs, borrowers who have aggregate exposure upto Rs 25 crore and have not availed restructuring in previous framework and who are classified as standard as of March 31, 2021 will be eligible for restructuring. The proposal has to be invoked up to September 30, 2021 and shall be implemented within 90 days after invocation.

Borrowers who have availed restructuring in the earlier framework where the resolution plan is permitted for less than two years are being permitted to use this window to modify their plans to extend the period of moratorium or tenor of the loan up to a total of 2 years.

For small businesses and MSMEs restructured earlier the central bank has allowed lending institutions as a one-time measure to review the working capital sanctioned limits based on a reassessment of working capital cycle, margins and other parameters.

Aashit Shah, Partner at J Sagar Associates said, “Restructuring guidelines for MSMEs, small businesses and individuals will assist them tide over the uncertainties caused due to the second wave. These guidelines as well as the recently introduced pre-arranged insolvency resolution process will enable MSMEs to restructure their debts without the looming fear of losing or liquidating their businesses.”

“Opening a one-time restructuring window for individuals and MSME till September 2021 will give an impetus to scale up their business without worrying about financial destitution,” said Rajesh Sharma, MD at Capri Global Capital Ltd.



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Bank of Maharashtra sees big recovery from IL&FS; No cap on digital loan sanctions, BFSI News, ET BFSI

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BoM earned a net profit of Rs 165 crore in the January-March quarter. The bank has recovered Rs 508 crore from the toxic account of Bhushan Power and hopes to get another cheque of almost the same amount from IL&FS soon. In an interaction with ETBFSI, A S Rajeev, MD & CEO of Bank of Maharashtra, said he does not see a major impact of the second wave for his bank. He also mentioned that they are seeing notable results of end-to-end digital lending platforms which they have created. Edited excerpts.

A S Rajeev, MD & CEO of Bank of Maharashtra

Q. Is there any other account other than Bhushan Power in the future where you are expecting some big recoveries?

The amount may not be as huge as Bhushan, but there are a number of accounts in different stages, and the amount may vary between Rs 50 crore to Rs 100 crore. But we are expecting something big from the IL&FS account, it will take some time though. We are expecting between Rs 500 crore to Rs 600 crore from it. Most of the accounts we have fully written off, it will help us to improve the profitability.

Q. How much did you disburse under ECLGS? Are you also keeping funds ready to disburse to MSMEs once the second wave ebbs? Have you spotted new SMEs?

We have lent around Rs 2,400 crore under this scheme. Our MSME growth last year was 36%. Out of that 12% came from ECLGS scheme. Now most of this, about 90-95%, we have already disbursed. Repayments on these accounts are on schedule. The total MSME accounts we restructured were around Rs 650 crore. To attract MSMEs, we have launched a scheme ‘Ghar Wapsi’, we have the database of the last 5-6 years, and we are approaching those customers who left us. Such accounts are in the range of Rs 500-600 crore. We expect around Rs 1,500-1,600 crore of advances in this segment. Also, this year our agriculture portfolio grew 13-16%. There was a good monsoon, and with settlement schemes, we had a good recovery. This year, we created another portfolio of gold loans. It also picked up really well with Rs 2,000 crore jewellery loans. We reduced our interest rates to the lowest in the industry.

Q. The second wave is grappling the country far more significantly. Do you see challenges in recovery, collections?

At present, there are no major challenges. We have not started to see such difficulties yet. Since we are flagging the account status every month, we performed the portfolio analysis in April and didn’t find something challenging. What we are seeing is that stress in the portfolio is not there like the last time during complete lockdown that happened for one, one and a half month. So there is no stress at present in the portfolio or the repayments. Also, it’s local lockdown and has not started affecting the economy. If it continues for some more time, it may affect the economy. Our feeling is that in another 1-2 weeks the situation may change.

Q. Do you see a slowdown in credit demand this quarter?

Generally, the first quarter of the FY is always negative. It is either negative or the growth rate would be 1-2%. Because banks are busy with miscellaneous things such as audits, transfers, promotions, etc. My experience states that there is not much of credit growth during the period of April and May. So even if the economy is affected by slightly localised lockdown, it will be hit only corporate customers. Sowing starts in June, so agricultural lending will start from then. So if you see a 14-16% growth rate per year in any banking system, either it is negative by 1-2% or positive by 1-2% in the first quarter. So geometrically you can see that if 2% is the growth rate in June, for the second quarter it would be 4-5%, for the third quarter it would be 8-10% and so on.

Q. What kinds of digital adoption has BOM done recently? What kinds of digital capabilities are you building?

We have digital products out there. Last year, we incorporated Loan Management System, which is end-to-end digital for loan advancement or sanctioning loans. There is no cap here on the loan amount. Any amount including corporate loans can be disbursed digitally on the Loan Management System. MSMEs can upload their documents to the system. There are certain agencies we have integrated with such as the income tax department, sales tax department, Crisil, Google reports, etc, which undertake the task of vetting as well. It is done parallelly within 2-3 minutes. There is no manual intervention. Only final approvals have to be done by respective authorities. We have also put in place SAP models. There are some models we are still working on and making changes like UAT. Our entire audit system is digitised. An auditor need not go to any other place. Sitting in their place they can do the audit. Digital signatures are also used, and in every area, 100% digitisation has been made. With such an efficient system, it also helps us in declaring our quarterly results early.



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BoM aims to resolve 20-25 stressed MSME loans under pre-packaged resolution process, BFSI News, ET BFSI

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MUMBAI: State-owned Bank of Maharashtra is looking at resolving 20-25 stressed micro, small and medium enterprise (MSME) accounts under the pre-packaged insolvency resolution process, a senior bank official said.

Earlier this month, the government had introduced a pre-packaged insolvency resolution process for stressed MSMEs by amending the insolvency law.

Under a pre-packaged process, main stakeholders such as creditors and shareholders come together to identify a prospective buyer and negotiate a resolution plan before approaching the National Company Law Tribunal (NCLT).

“With the outbreak of the COVID crisis, the stress on hospitality, luxury retail, tour operators, lodging and restaurant operators has increased considerably. I expect around 20-25 stressed MSME accounts to be resolved under the pre-packaged insolvency resolution regime in the coming months,” Bank of Maharashtra’s general manager (credit – large and mid corporate, MSME) Sanjay Rudra said.

He was speaking at a webinar organised by MVIRDC World Trade Center, Mumbai and All India Association of Industries.

He said under the pre-packaged insolvency resolution system, the government has given an opportunity for MSMEs to resolve their stress at an early stage while holding control over their business.

“Now, MSMEs should maintain complete transparency in the whole resolution process to regain trust and confidence of lenders,” Rudra said.

Speaking at the webinar, AZB & Partners cofounder Bahram N Vakil said MSME promoters should file for resolution with the NCLT only after having a robust base plan.

“If the promoters could come out with a resolution plan with a minimum possible haircut for operational creditors and if it is also acceptable to the committee of creditors, then the chances of such plans being challenged in the Swiss challenge auction are less,” he added.

Emphasising that MSME promoters and bankers should work on a reasonable price discovery of the underlying asset, Vakil pointed out that more often, the fair value estimation of the underlying asset is the sore point of litigation among contending parties.



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Bank, NBFC loan collections drop up to 10% as Covid intensifies, BFSI News, ET BFSI

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April took a sudden turn for banks moving towards normalcy.

Bank, NBFC loan collections drop up to 10% as Covid intensifies

Bank and non-banking finance companies saw a drop in loan collections from the first fortnight of this month.

Collections dropped 5 per cent to 10 per cent as lockdowns hit businesses.

Banks are now going slow on disbursals too sensing troubled times ahead.

The worst affected have been the micro and small enterprises, micro-finance and the commercial vehicles (CV) segments where collection efficiencies dropped rapidly.

Weak business activity

As per a report by Emkay Global, the first fortnight of April 2021 has been weak in terms of business activity which is down by 20% across various segments due to lower working days and onset of an aggressive second wave of Covid-19 infections. This is expected to fall further with far stricter enforcement of localised lockdowns.

The collection efficiencies were improving from August-September onwards on a month-on-month basis across asset classes. However, a year back, the restrictions announced so far are lower in trajectory or intensity. So while there will be an impact on collections and delinquencies, the impact should be lower than what we saw in Q1 of last year.

Bank, NBFC loan collections drop up to 10% as Covid intensifies
Bank, NBFC loan collections drop up to 10% as Covid intensifies

But if there was a rise in the intensity of cases accompanied by containment measures and restrictions, it could further impact collections.

In the case of NBFCs, gold loan and home loan NBFCs will be least impacted whereas unsecured loans, MSME loans and wholesale loans will be more impacted given the vulnerability of the underlying borrower class.

The spread intensity and duration of the pandemic, how long the lockdown and curbs last and vaccine trajectory will decide the severity of hit to banks.

The customer cash flows

The salaried class includes a large segment of IT professionals whose salary levels and jobs have not been impacted, though their discretionary expenditure has come down.

However, a bulk of the salaried class is facing pay cuts and job losses while among the self-employed, those in the essential segment like agrochemicals, pharmaceuticals, have not seen much impact but others have faced a drop in cash flows.

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Banks want debt recast scheme back as Covid wave intensifies, BFSI News, ET BFSI

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Banks have sought an extension of one-time debt recast scheme as the curbs after fresh Covid wave are likely to increase defaults and affect asset quality.

The bank chiefs have petitioned RBI to extend the scheme introduced last year in a meeting with the governor earlier this week, according to reports.

No relief measures

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 moratoriumRBI governor Shaktikanta Das

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” ratings agency Icra said in a report.

What Fitch says

Banks want debt recast scheme back as Covid wave intensifies

India’s second wave of Covid infections poses increased risks for India’s fragile economic recovery and its banks, says Fitch Ratings. It already expects a moderately worse environment for the Indian banking sector in 2021, but headwinds would intensify should rising infections and follow-up measures to contain the virus further affect business and economic activity.

Fitch forecasts India’s real GDP growth at 12.8% for the financial year ending March 2022 (FY22). This incorporates expectations of a slowdown in 2Q21 due to the flareup in new coronavirus cases but the rising pace of infections poses renewed risks to the forecast. Over 80% of the new infections are in six prominent states, which combined account for roughly 45% of total banking sector loans. Any further disruption in economic activity in these states would pose a setback for fragile business sentiment, even though a stringent pan-India lockdown like the one in 2020 is unlikely.

Challenging environment

The operating environment for banks will most likely remain challenging against this backdrop. This second wave could dent the sluggish recovery in consumer and corporate confidence, and further suppress banks’ prospects for new business (9MFY21 credit growth: +4.5% as per Fitch’s estimate), it said. There are also asset quality concerns since banks’ financial results are yet to fully factor in the first wave’s impact and the stringent 2020 lockdown due to the forbearances in place. We consider the micro, small and medium enterprises (MSME) and retail loans to be most at risk, the rating agency said.

Retail loans have been performing better than our expectations but might see increased stress if renewed restrictions impinge further on individual incomes and savings. MSMEs, however, benefited from state-guaranteed refinancing schemes that prevented stressed exposures from souring.

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