Tag: nbfc

Gold loans sparkle again after second COVID-19 wave blip, BFSI News, ET BFSI

Personal Finance

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Gold that lost shine after the Reserve Bank of India took away the loan-to-value (LTV) benefit for banks amid COVID restrictions in the second wave are sparkling again.

Gold loans were up 1% month on month in August 2021 as restrictions during the pandemic eased and economic activities grew.

Loan demand has picked up from the beginning of July as COVID-19 cases started declining. Gold loan non-banking finance companies (NBFCs) had reported higher customer walk-ins.

FILE PHOTO: Gold bars and coins are stacked in the safe deposit boxes room of the Pro Aurum gold house in Munich, Germany, August 14, 2019. REUTERS/Michael Dalder/File Photo

LTV impact

However, gold loans have grown a mere 3.6% year to date, which is in contrast with the 54% CAGR seen in gold loan growths over the past two years. Gold loan portfolios are up 66% year on year in August.

RBI had raised the LTV of 90% on gold loans, which allowed banks to lend up to 90% of the value of the collateral.

However, it withdrew the special allowance for banks from April 2021, impacting loan growth.

The average ticket size of loans that customers are opting for is Rs 55,000-60,000, which are rising for many lenders, showed growing signs of distress.

Gold loan NBFCs saw higher competition in the gold loan business last fiscal as banks grew their portfolio taking advantage of the special LIV allowance given to them by the RBI.

The expansion

With growth returning gold financiers are ow gearing up to tap the expected surge in gold loans.

Muthoot FinCorp has expanded its physical network by more than 100 new branches, mainly in the north, east and west regions of India, most of which were in rural and semi-urban areas. The NBFC had opened 70 branches in FY20.

Muthoot’s gold asset under management (AUM) grew at a compound annual growth rate of 12% between FY15 and FY20. In FY21, the portfolio grew 27%.

Pune-based Bajaj Finance has increased its gold loan branches from 480 to 700 in the last financial year and plans to add 100 plus branches this fiscal.

Its loan book grew 52% last year to Rs 2,300 crore while it saw an increase in ticket sizes from Rs 75,000 to Rs 85,000 last year.

Bengaluru-based Rupeek Fintech Private Ltd’s disbursals grew 2.5 times during the calendar year 2020. It has added its presence in 17 more cities, from 10 at the end of 2019.

Shriram City Union Finance is also looking to ramp up its gold financing business this financial year, changing its strategy of focusing on other loan portfolios.



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Mahindra Finance reports 100% collection efficiency in September, BFSI News, ET BFSI

Personal Finance

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Mahindra Finance, the NBFC arm of the Mahindra Group has reported a 100% collection efficiency for the month of September, as per latest figures revealed by the company. This is on the back of improvement in mobility during September even as the economy opens up post Covid.

The company’s September collection efficiency is an improvement over the levels of 95% and 97% in July and August, 2021 respectively. This has resulted in the further reduction in the NPA contracts during September, a trend which the company feels will continue in the third quarter of FY22.

During September, the company’s total disbursement stood at Rs 1900 crore, a growth of 23% on a YOY basis, albeit on a lower base in FY21 due to the first wave of the pandemic. During Q2 of FY22, the total disbursement stood at Rs 6450 crore, a 60% YOY growth over Q2 of FY21.

Mahindra Finance is hopeful of a good third quarter of FY22, subject to improvement in the auto supply chain as well as a good festive season and harvest cashflow. The company mentioned that it enjoyed a comfortable liquidity position on its balance sheet as on 30th September, 2021.

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RBI supersedes boards of Srei Infrastructure Finance, Srei Equipment Finance

Banking & Finance

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The Reserve Bank of India has superseded the Board of Directors of Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance Ltd (SEFL), owing to governance concerns and defaults by the companies in meeting their payment obligations.

Rajneesh Sharma, Ex- Chief General Manager, Bank of Baroda, has been appointed the administrator of the companies under Section 45-IE (2) of the RBI Act.

“The Reserve Bank also intends to shortly initiate the process of resolution of the two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointment of an administrator as the Insolvency Resolution Professional,” RBI said in a statement

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FIDC seeks refinance mechanism for NBFCs

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Finance Industry Development Council (FIDC) has sought a refinancing mechanism for non-banking finance companies and other measures to further credit flow to MSMEs through these shadow banks.

In a letter to SIDBI Chairman and Managing Director S Ramann, FIDC has said there is a dire need for an effective refinance mechanism on similar lines as the NHB refinance to ensure diversity and greater regularity in sources of funds to NBFCs.

“We believe that SIDBI is most suited as an institution to provide such a facility to NBFCs for onward lending to MSMEs and other appropriate sectors,” FIDC said, adding that it has also discussed the issue with the Reserve Bank of India and Finance Ministry.

It has also called for changes in the eligibility criteria used by SIDBI for funding NBFCs, apart from rating.

“While rating should be an important consideration for SIDBI to assess its credit risk, we submit that this may be seen as only one of the criteria, which could be counter-balanced with vintage of NBFC, the track record and experience of the key personnel, financial parameters, credit quality and capital adequacy,” it said, adding that rating should not be used as a qualifying criterion for a “go-no go” decision for lending to NBFCs.

FIDC is a representative body of asset and loan financing of RBI registered NBFCs.

It has sought extension of CGTMSE coverage to loans given to educational institutions. Currently, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) coverage is not available for loans provided by NBFCs to educational institutions.

FIDC pointed out that many educational institutions are now being opened, and there is a need to provide adequate financing for restoring normalcy and enabling their growth.

“Covering these loans under the CGTMSE scheme would facilitate greater flow of funds to this critical sector,” it said.

It also asked that CGTMSE coverage should be restored to 75 per cent of the non-performing asset. Further, FIDC has suggested that arbitration should be considered a valid legal step taken for debt recovery under the ECLGS scheme.

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Bank credit gathers pace in Aug 2020, led by retail, industrial sectors, BFSI News, ET BFSI

Banking & Finance

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As India‘s economic activity revives, bank credit has expanded to various sectors, led by retail and industrial sectors, in August 2021.

According to the Reserve Bank of India data, retail segment showed an accelerated growth of 12.1% in August 2021, compared with 8.5 % a year ago, on higher volume in housing and vehicle credit.

However, credit growth in services sector fell to 3.5% in August 2021 compared with 10.9% a year ago, mainly due to contraction in credit growth to NBFCs and commercial real estate.

Credit to industry rose to 2.3% in August 2021, from 0.4% in August 2020. Loans to medium size units rose to 63.4% in August 2021 against 4.4% last year, RBI said.

Credit to micro and small industries stood at 10.1% in August 2021, from a contraction of 1.1% a year ago, and credit to large industries shrunk by 1.7% in August 2021 compared with a growth of 0.5% a year ago.

Credit to engineering, chemical and chemical products, gems and jewellery, infrastructure, mining and quarrying accelerated in August 2021 as against a year ago, and credit to basic metal, cement & cement products, construction, vehicles, vehicles parts and transport equipment’ either decelerated or contracted, RBI said.



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Lenders approach RBI after Rs 30,000 crore Srei loans turn NPA, BFSI News, ET BFSI

Banking & Finance

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A consortium of lenders led by UCO Bank has sought central bank directions on pursuing recovery of dues from the Srei Group after loans worth about ₹30,000 crore to the Kolkata-based financier officially qualified to be moved to the list of non-performing assets (NPA) this quarter, two people aware of the development told ET.

The Srei Group, however, said it expects banks to chalk out a debt recast plan that will map repayment milestones to future cash flows.

Since the group entities involved are non-banking financial companies (NBFC), the lenders concerned compulsorily need the Reserve Bank of India‘s (RBI) approval to take the Srei Group to the National Company Law Tribunal (NCLT) for insolvency proceedings.

In response to a query from ET, a Srei Group spokesperson said the economic downturn and loan moratoriums provided by the regulator had affected operations. The group is now in discussions with banks to implement a restructuring scheme.

‘NPA Ratio to Take a Hit’
“We hope banks will decide on the debt realignment at the earliest so that the company can pay all its bondholders and other creditors,” a Srei spokesperson said in the mailed response to ET. “We are very hopeful that banks will propose a payment schedule in consonance with the company’s cash flow that will enable payments to all creditors and help run the company smoothly.”

To be sure, Srei Infrastructure Finance may become the next big bankruptcy candidate from the financial services space after Dewan Housing Finance (DHFL). Banks are free to classify loans to Srei Group as NPAs after the National Company Law Appellate Tribunal (NCLAT) lifted a stay earlier this month on marking such exposure as bad, setting aside a lower bench order.

  • Srei Infra and its unit Srei Equipment Finance together owe lenders and debenture holders Rs 30,000 cr
  • UCO Bank, SBI have exposure of more than Rs 2,000 cr each
  • Srei Infra reported a loss of Rs 971 cr in the June quarter
  • Provisions on loans surged to Rs 439 cr from Rs 67 cr a year ago
  • In July, Srei disclosed that a RBI-directed audit had flagged Rs 8,576 cr of lending to ‘probable’ related parties of the group

“All banks will have to classify loans to Srei as NPAs this quarter and make the minimum provisions required,” said a person familiar with banking-sector exposure to the Srei Group. “Many banks have excess provisions; so, that should not be a cause for concern. But with such a big loan account slipping, the gross NPA ratio of some banks will increase at the end of the quarter.”Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of ₹30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than ₹2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than ₹2,000 crore.

Bankers say they have already set the ball rolling for recovery of loans by writing to the RBI and a regulatory nod to take the company through the bankruptcy courts could mean another DHFL-type insolvency process.

“Already two letters have been sent to apprise RBI of the conditions. If the central bank gives the permission, banks will go ahead with a court monitored process,” said a second person aware of the Srei-related banking-sector exposures. “It remains to be seen what the central bank’s response is.”



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Private firms’ bank deposits log 26.5% growth during pandemic, households lag, BFSI News, ET BFSI

Banking & Finance

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In FY21, deposits from private sector companies grew by 26.5%, the biggest jump in nine years, even as the share of household bank deposits declined.

The share of private sector companies in total outstanding bank deposits increasing from 11.3% in FY20 to 12.7% in FY21, according to a report by Kotak Institutional Equities. The growth here has been faster than that of deposits from households, which grew by 12.9% during the year. The ratio of household (bank) deposits to GDP declined to 3 per cent in the third quarter from 7.7 per cent in July-September.

The data shows that the pandemic was not hard on private firms but households suffered.

“The slower growth in retail deposits and solid growth in the private corporate sector gives two opposing signals of the current economic condition. The private sector has accelerated deposit growth for the third consecutive year, giving further evidence that the impact of the pandemic was not negative,” the Kotak report noted.

Households hit

The first wave of Covid last year impacted households as their financial savings moderated to 8.2 per cent of GDP in the December quarter from 10.4 per cent in the previous three-month period, according to RBI data.

The preliminary estimate of household financial savings is placed at 8.2 per cent of GDP in October-December 2020-21, exhibiting a sequential moderation for the second consecutive quarter after having spiked in the pandemic-hit June quarter, RBI said in a release.

“The moderation was driven by a significant weakening in the flow of household financial assets, which more than offset the moderation in the flow of household financial liabilities,” it said.

Household debt to GDP

RBI further said household debt to GDP ratio, which is based on select financial instruments, has been increasing steadily since end-March 2019.

“It (household debt to GDP ratio) rose sharply to 37.9 per cent at end-December 2020 from 37.1 per cent at end-September 2020,” it said.

Despite higher borrowings from banks and housing finance companies, the flow in household financial liabilities was marginally lower in the third quarter following a marked decline in borrowings from non-banking financial companies.

As per the data, financial assets, including deposits, life insurance funds, provident and pension funds, currency, investments in mutual funds and equity, and small savings, stood at Rs 6,93,001.8 crore in the third quarter. It was at Rs 7,46,821.4 crore in July-September 2020-21.

Financial liabilities (loans) stood at Rs 2,48,418.7 crore in the third quarter. In the preceding quarter it was Rs 2,54,915.2 crore.



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Muthoot Finance launches AI Virtual Assistant ‘Mattu’, BFSI News, ET BFSI

Personal Finance

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Muthoot Finance, gold loan NBFC has partnered with Senseforth.ai, conversational AI technology company to launch ‘Mattu’, an AI-powered virtual assistant.

Available on the website and mobile app, the intelligent assistant enables users to apply for various kinds of loans, address concerns, and perform transactions like checking account balance, paying gold loan interest, availing loan top-ups, making part payments and much more.

Alexander George Muthoot, Deputy Managing Director, The Muthoot Group said, “The launch of a revamped and turbo-charged Mattu marks the beginning of a new chapter for us. This AI-powered virtual assistant offers various customer-friendly features like multi-lingual support, voice search capability, and can handle more than 250 frequently asked questions.”

Customers of Muthoot Finance can chat or speak with the AI virtual assistant in both English and Hindi. This virtual assistant is also available on WhatsApp, which makes it very easy for users to access key services through natural human interactions.

Shridhar Marri, CEO & Co-founder of Senseforth.ai said, “The modern day customer expects their needs to be fulfilled within seconds, without having to browse the website or visiting a branch. The launch of Mattu would eliminate buyer friction and ensure that customers of Muthoot Finance have instant access to key services on a channel of their choice.”



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Arohan Financial looks to expand its footprint in newer markets

Banking & Finance

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Arohan Financial Services Ltd, which has been witnessing a steady improvement in disbursements and collections in the second quarter of this fiscal over Q1, has firmed up expansion plans to grow its portfolio further.

The company, which is looking to expand its footprint in newer geographies and strengthen presence in some of the existing towns and cities, is waiting for its capital raising plan to fructify to push ahead with the expansion programme.

IPO plan

The NBFC-MFI, which is a part of the Aavishkaar Group, had filed draft red herring prospectus for its proposed initial public offer (IPO). It plans to raise around ₹850 crore primary through the issue apart from secondaries.

“Q 1 of 2021-22 especially May’21 was slightly difficult period with the localised lockdowns but we managed well and we will be filing an updated DRHP soon. Q2 is turning out to be much better. We are seeing an increased demand for credit with the festival season round the corner,” Manoj Nambiar, MD, Arohan Financial Services, told BusinessLine.

Arohan currently provides microcredit to borrowers with a focus on underpenetrated States including Assam, Meghalaya,Tripura, Manipur in the North East; West Bengal, Bihar, Jharkhand and Odisha in the east; Madhya Pradesh, Chhatisgarh, Uttar Pradesh & Uttarakhand in central India.

The company plans to expand its presence in three more States including Rajasthan, Punjab and Haryana once its IPO is complete. It also plans to strengthen its presence in Uttar Pradesh and Madhya Pradesh by setting up more branches.

“We had entered UP and MP markets about two years back. Both of these are very big markets and we haven’t yet covered fully. We are also looking to enter newer markets contiguous to our existing operations. Our expansion plan is ready and it will all depend on the raising of additional capital,” he said.

Talking about the overall credit demand in the industry he said, demand is high and all clients are working towards a return to “normalcy” soon as people would require additional credit to restart their business. Credit demand had witnessed a dip in May this year following the regional lockdowns announced in several parts of the country and the slowdown induced by the second wave of Covid. Starting first half of June (when opening up started) things have started showing signs of improvement and each month has been better than the previous one for the industry, he said and added that the credit demand would increase further supported by the requirements of the upcoming festive season.

The company had a total loan outstanding of close to ₹4,800 crore as on March 2021.

Digital push

Arohan has digitalised the entire customer lifecycle and the post sales support touchpoints to enhance its offerings. With a clear focus on being ‘Cashless at the front and Paperless at the back’, the company aims to serve its customers better with limited paper work and in the process also reduce operational cost for both the customers as well as the company. Client origination is paperless and 100 per cent of the disbursements are now into the bank accounts of the client.

It has launched “meraArohan”- an automated lending solution designed to completely digitise the loan lifecycle from end-to-end. It has recently also launched “apnaArohan” app for customers. The app, which is available in regional languages, uses facial recognition to validate the login and helps customers view their loan details, including a complete ledger with details of payments made, call for any service request.

Customers can also make digital payments through the payment gateway provided.

According to Nambiar, an internal study shows that close to 61 per cent of the company’s customers have access to smartphone and close to 40 per cent had done cashless transactions during the Covid pandemic.

Such digitisation initiatives will help the company by ensuring better management of portfolio, better service and reduced time as compared to manual offerings. “The cost benefit will accrue over a period with business growth and better utilisation of the field employee time” he said explaining the rationale behind ramping up its digital offerings.

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MFIN, BFSI News, ET BFSI

Banking & Finance

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The microfinance industry’s gross loan portfolio (GLP) rose 4.2 per cent to Rs 2,37,369 crore as of June 30, 2021, compared with Rs 2,27,727 crore as of June 30, 2020, according to a report by Microfinance Institutions Network (MFIN). Microfinance loan disbursals during the first quarter of the financial year 2021-22 improved significantly to Rs 25,503 crore, compared with Rs 6,186 crore in the corresponding quarter last year.

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates including banks, small finance banks (SFBs) and non-banking financial companies (NBFCs).

It released the Micrometer report for the April-June 2021 quarter on Tuesday.

The report showed that 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of Rs 1,02,405 crore, which is 43.14 per cent of the total micro-credit universe.

NBFC-MFIs are the second-largest provider of micro-credit with a loan amount outstanding of Rs 75,021 crore, accounting for 31.61 per cent of the total industry portfolio.

SFBs have a total loan amount outstanding of Rs 38,624 crore with a total share of 16.27 per cent. NBFCs account for another 7.89 per cent, and other MFIs account for 1.09 per cent of the universe, it said.

As of June 30, 2021, the microfinance industry served 5.68 crore unique borrowers, through 10.30 crore loan accounts, the report showed.

The microfinance active loan accounts decreased by 0.67 per cent during the past 12 months to 10.30 crore as of June 30, 2021, it said.

The report said the gross loan portfolio (GLP) of NBFC-MFIs stood at Rs 76,237 crore as of June 30, 2021, a 6.9 per cent year-on-year rise as compared to Rs 71,301 crore as of June 30, 2020.

Loan amount of Rs 6,511 crore was disbursed in Q1 FY 2021-22 by NBFC-MFIs through 17.97 lakh accounts, compared with Rs 561 crore disbursed in Q1 FY 2020-21 through 1.99 lakh accounts.

NBFC-MFIs received a total of Rs 3,596 crore in debt funding during the April-June quarter of this fiscal, which is 39.6 per cent lower than that in the year-ago period.

Total equity of the NBFC-MFIs grew 11.9 per cent year-on-year to Rs 18,660 crore as of June 30, 2021. PTI HV HRS hrs



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