Our Bureau The Finance ministry’s decision to ask Public Sector Banks (PSBs) to complete staff accountability exercise within six months from the date of classification of an account as a non-performing asset (NPA), will boost the morale of employees, according to the Indian Banks’ Association (IBA).
PSBs have been asked to implement the directives with effect from April 1, 2022 for accounts turning NPA on or after this date. Banks have been advised to revise their Staff Accountability Policies based on these broad guidelines and frame the procedures with approval of the respective boards. At present, different Banks are following different procedures for conducting staff accountability exercise. Also, staff accountability exercise is being carried out in respect of all accounts which turn NPA.
‘Strain on resources’
“This approach not only adversely affects staff morale but also puts a huge strain on the bank’s resources. While punitive action need to be taken against the officers having malafide intent/involvement, it is essential to ensure that bonafide mistakes are dealt with compassion,” per the IBA statement. The Association noted that at a time when the country is in need of an economic boost, slow credit delivery to industries due to the fear of implication, is a matter of concern and needs urgent address.
It emphasised that there is a need to protect people taking bonafide business decisions in this competitive environment.
‘Protect bonafide action’
Banks with the approval of their Board may decide on threshold of ₹10 lakh or ₹20 lakh depending on their business size for the need of examining the aspect of staff accountability, IBA said.
Bombay Mercantile Bank recovered bad loans worth over Rs 6 crore in 2020-21 and expects better realisation going forward, a senior official has said. Recovery of NPAs (non-performing assets) has been a major thrust area for the bank. The bank has taken specific steps for reduction of NPAs by formulating policy for recovery of NPA through personal follow-ups and other legal measures, Zeeshan Mehdi, Chairman, Bombay Mercantile Co-operative Bank, said in his address at the annual general meeting (AGM).
“These efforts have resulted in the bank posting a recovery of Rs 6.10 crore, in NPA accounts. Due to the pendency of cases in various courts whose functioning was hampered because of the pandemic, resulting in delays in final verdicts, the recoveries in many NPA accounts could not be achieved as targeted,” he added.
Mehdi said the bank expects a healthy recovery of NPAs during the ensuing year.
The bank’s gross bad loans stood at 6.61 per cent and the net NPAs were 5.11 per cent during FY21.
The NPA is slightly higher due to the pandemic, however, it is still within the permissible limit of the regulators, he added.
The CRAR (capital to risk-weighted assets ratio) stood at 17.26 per cent against 16.88 per cent in the preceding fiscal.
BMC Bank registered a net profit of Rs 3.78 crore in FY21. Mehdi said the bank posted a second consecutive year of profit, however, the target was much higher.
The total business of the bank during 2020-21 stood at Rs 3,467.55 crore, of which deposits were Rs 2,363.38 crore and advances Rs 1,104.17 crore.
“During the year, the bank has been allotted its own IFSC code by the RBI, with all branches using exclusive IFSC codes. The bank is now a direct member of IFTAS and has been given permission to use INFINET connectivity to provide a variety of services to our customers and our treasury department,” the chairman said.
These services are RTGS, NEFT, SGL account with RBI, NDS-OM, NDS-Call, SWAP, LAF and MSF. Earlier, the bank did not have such facilities, he added.
The implementation of these digital initiatives would result in the enhancement of the customer experience, he said.
“The bank is moving ahead digitally at a fast pace…we are launching Mobile-App to our valued customers to meet the emerging business challenges and be at par with the best in the industry,” Mehdi added. PTI KPM BAL BAL
Net interest income of the lender is seen higher by 44.5% y-o-y at Rs 267.8 crore for Q1. (Picture courtesy: IE)
CSB Bank on Thursday reported a 14% year-on-year increase in its first quarter net profit to Rs 61 crore, even as bad loans surged in the gold loan portfolio. The Thrissur-based lender had reported a net profit of Rs 53.56 crore in Q1 of FY21 and a net profit of Rs 42.89 crore in the fourth quarter of the previous fiscal.
The asset quality of the lender deteriorated, with gross non-performing assets (NPA) as a percentage of gross advances standing at 4.88% for Q1FY22, from 2.68% in the preceding quarter and 3.51% in the year-ago period. Net NPA as a percentage of gross advances was at 3.21%, against 1.17 % in the preceding quarter and 1.74% in the first quarter of FY21.
CVR Rajendran, managing director and CEO, said the bank is confident of managing NPAs as the challenges are mainly from the gold segment where recovery is only a matter of time.
Fresh slippages in the quarter under review was seen at Rs 435 crore, of which Rs 337 crore was from gold loans. The gross NPA at the end of Q1 stood at Rs 686 crore, against Rs 401 crore in the year-ago period.
“COVID second wave, coupled with the LTV management of gold loans, did pose some challenges in the first quarter of FY 22. Lockdowns, alternate holidays, slowing down of the economic activity, controlled movements due to strict social distancing norms, lack of transport, etc restricted the customer access to branches, which in turn impacted both fresh pledges and releases. Thankfully, the worse seems to be over now and recoveries are happening in full swing,” he added.
Net interest income of the lender is seen higher by 44.5% y-o-y at Rs 267.8 crore for Q1. Provision coverage is seen lower at 70.20% as on June 31, 2021, compared with 81.73% in the year-ago period.
Panaji, Goa‘s Ports Minister Michael Lobo on Thursday said that he had written to Prime Minister Narendra Modi and Union Finance Minister Nirmala Sitharaman urging them to provide relief from paying loan EMIs for businesses impacted by the second wave of Covid-19.
A cabinet minister in the BJP-led coalition government led by Chief Minister Pramod Sawant, Lobo is also a hotelier himself.
He told a press conference here, that he was forced to write to the Centre after a bank manager informed the Minister that his own account was in the danger of being declared as a non-performing asset (NPA).
“I am also a businessman. I am getting calls from banks from which I have taken loans. A manager of a bank told me yesterday (Wednesday) that if I do not pay my loan instalment by tomorrow (Thursday), it will be declared NPA.” Lobo said.
“If a bank manager can call me and inform me that my account will be declared as an NPA, what about the common man? What about people who live hand-to-mouth and run small businesses? How will they pay instalments. This is an issue which is plaguing people in Goa as well as the rest of India.” Lobo said.
In his letter to Modi and Sitharaman, Lobo has also urged the top ruling duo to urge the Reserve Bank of India to issue a circular directing all nationalised banks to not declare accounts impacted by the second wave of the Covid pandemic, as NPAs.
“There is a need for a decision on this. The Finance Minister should take a decision and instruct all banks.” Lobo said.
The cabinet minister also said that the central government should also replicate the moratorium on loan EMIs provided to businesses during the first Covid wave last year.
The lockdown restrictions were relatively higher in South and some parts of central region,” said Rajat Kumar Singh-business head of MicroBanking and Rural Banking, Ujjivan Small Finance Bank.
Banks saw a significant drop in collection efficiencies for micro-loans during April and May as income generation of borrowers were badly impacted and movements of staff for collection activities in the field were restricted due to lockdowns across multiple states amid the second Covid wave.
Lenders feel that collection efficiency is likely to be ‘volatile’ in the first quarter of the current fiscal year due to the intermittent lockdowns, and the number of micro-finance customers availing loan restructuring will depend on how the economic scenario pans out post-lockdowns. They may be in a position to know the actual number of accounts required to be restructured by July.
As small entrepreneurs and individuals have continued to be affected under the second Covid wave, RBI has announced the Resolution Framework 2.0. for a one-time restructuring scheme. Banks and lending institutions can invoke restructuring under this framework till September 30.
“One EMI restricted collection efficiency in the inclusive finance business as on March 31, 2021, was 85%, which improved from 81% in December 31, 2020. In the month of April 2021 it was 83%. Collection efficiency is likely to be volatile in Q1FY22 due to the intermittent lockdowns. The second wave of Covid has been very severe in phases for the entire country,” Baskar Babu, MD and CEO, Suryoday Small Finance Bank, told FE.
“Due to the uncertainty created by the second wave, we will have to wait for a quarter to understand the incidental impact on collection efficiency. However, things are gradually improving and our focus continues to be supportive to our customers, as they navigate these tough times,” Babu said.
For Ujjivan Small Finance Bank, at the end of March 2021, 96% of its micro-finance customers were paying, fully or partly. In April, collection efficiency dropped to 88%. And, collection efficiency was lower in May compared to April. “In the month of May, majority of states were under lockdown with different levels of restrictions. The lockdown restrictions were relatively higher in South and some parts of central region,” said Rajat Kumar Singh-business head of MicroBanking and Rural Banking, Ujjivan Small Finance Bank.
According to him, the impact on collection efficiency this time around is not as severe as compared to the first wave. “We will provide the option of restructuring to all stressed customers. Additionally, we will also disburse loans to eligible customers to provide them the required liquidity support for revival of their income. This way, customers will be provided assistance to resume their business activities and get back to normalcy,” Singh added.
According to big data analytics company Spocto Solutions, which helps banks with its digital platform on collection-related activities, overall collection efficiency came down significantly not only in micro-finance segment, but also in segments like affordable housing, auto and personal loans. “Bankers work with us for segmentation of borrowers and offering them differentiated solutions. There is a segment which needs restructuring, while there is a segment which may need deferment of payments for a month or two. If there is a real problem, lenders are using us to help borrowers restructure their loans,” Sumeet Srivastava, founder and CEO, Spocto, told FE.
ESAF Small Finance Bank said going ahead the outlook seemed to remain ‘bleak’ for some more time, and how fast the sector will recover depends on the customer segments. However, it expected things to pick up by July 2021. “Customers availing restructuring depends on how the economic scenario will pan out, post lockdown. Generally, the MFI sector picks up faster than any other segment,” the bank added.
Canara Bank put the property up for auction under SARFAESI, seeking to recover Rs 385 crore after the loan to the property developer Supreme Housing and Hospitality Pvt Ltd. Image: Representational
State-run lender Canara Bank has received e-bids for sale of Supreme Business Park — a 1.28 lakh sq meter (about 14 lakh sq ft) commercial property with a built-up area of over 6.9 lakh sq feet in Powai, Mumbai. Canara Bank put the property up for auction under SARFAESI, seeking to recover Rs 385 crore after the loan to the property developer Supreme Housing and Hospitality Pvt Ltd turned bad. The reserve price for Supreme Business Park is kept at Rs 1,370 crore. The excess amount recovered will be given back to the borrower — Supreme Housing, an official told Financial Express Online. The bids will be opened on 30 March 2021.
Supreme Housing and Hospitality took a loan from Canara Bank in 2016, which later turned into NPA (non-performing asset). Under Sarfaesi Act, the bank can recover its dues by selling the securities. Canara Bank has applied for the physical possession of the entire property. The last date for the bid application submission was March 25, 2021. However, if the auction doesn’t go through for any reason this time, then it would reopen for bids. The E-auction agency is C1 India, and the prospective bidders could participate in the bidding process from anywhere.
According to the e-auction notice seen by Financial Express Online, the commercial property has two towers A and B. The building number 2 known as ‘Supreme Business Park’ consists of two wings, A and B. These wings have 4 stilts and 7 upper IT floors. The size of the mortgaged asset is 1.28 lakh sq meters, and it is owned by Bhawani Shankar Sharma.
Earlier this week, Canara Bank had announced to organise an auction of 2,000 borrower properties on March 26, 2021. The properties include residential flats, apartments, independent houses, industrial lands, commercial complexes, office spaces and vacant lands. These will be sold under the provisions of the Sarfaesi Act, PTI quoted an official statement. According to the statement, so far in the current financial year, Canara Bank has sold 1,450 properties valued at Rs 886 crore. The properties put up for auction are spread across Delhi, Mumbai, Kolkata, Bengaluru, Chennai, and also other semi-urban pockets.
In reply to a question raised by a member of the Lok Sabha, minister of state for finance Anurag Singh Thakur on Monday released data on retail stressed assets in the banking system.
Banks have put up non-performing assets (NPAs) worth at least Rs 5,140 crore for the sale to asset reconstruction companies (ARCs) during the current quarter as resolutions for some large assets failed and stress spilled into the retail segment throughout FY21.
Lenders typically ramp up bad loan sales during the last quarter of the year to clean up their balance sheets.
The list of assets being offered by banks is almost a ready reckoner of all that went wrong in the year of the Covid-19 outbreak. There are loan accounts where buyers pulled out of the resolution process due to their inability to carry out due diligence. This year has also been a unique one in that large pools of retail assets are being offered by banks, symptomatic of the broad-basing of stress as a result of falling incomes.
For instance, Bank of Baroda (BoB) and Karnataka Bank have put on the block their exposures to Coastal Energen and GVK Power (Goindwal Sahib), respectively. Both of these power assets are understood to have received bids last year from a foreign bank active in the Indian distressed assets space. The bank eventually withdrew its bids because it was unable to carry out due diligence of the assets. Quite a few road assets are also on sale, such as Srinagar Banihal Expressway, Thrissur Expressway and Madurai Tuticorin Expressways.
While banks have historically sold large NPAs to ARCs, this year they are looking for buyers for even smaller loans, including housing and education loans. IDBI Bank intends to sell 401 accounts on a portfolio basis, consisting of housing loans, loans against property (LAP), and mortgage loans with an aggregate gross principal outstanding of Rs 96.51 crore at a reserve price of Rs 39.46 crore.
Chennai-based Indian Overseas Bank (IOB) is offering a portfolio of education loans with an outstanding of Rs 304 crore. These are unsecured loans where the original sanctioned limit per borrower was up to Rs 7.50 lakh. Unlike other assets which are being offered on an all-cash basis, the education loan portfolio will be available on a 20% cash and 80% security receipt (SR) basis.
In reply to a question raised by a member of the Lok Sabha, minister of state for finance Anurag Singh Thakur on Monday released data on retail stressed assets in the banking system. The data suggest that some banks have seen a substantial increase in retail stress levels.
For instance, DCB Bank’s stressed retail advances as a share of all retail advances rose to 3.7% at the end of December 2020 from 1.9% at the end of March 2020. Over the same period, the ratio at HDFC Bank rose to 1.4% from 0.7%, at IDBI Bank to 2.5% from 1.3%, at IDFC First Bank to 2.3% from 1.8%, at IndusInd Bank to 4.2% from 2.5%, at Karur Vysya Bank to 5% from 2.2%, and at Punjab & Sind Bank to 9.7% from 5.9%.
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