Tag: npa

Public sector banks list Rs 82,500 crore NPAs for bad bank, BFSI News, ET BFSI

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Public sector banks have shortlisted 28 loan accounts to be transferred to the National Asset Reconstruction Company (NARCL). Of these, lead banks have completed the process of obtaining approval from co-lenders in 22 accounts with Rs 82,500 crore of loans due. Within this amount, borrowers such as VOVL, Amtek Auto, Reliance Naval, Jaypee Infratech, Castex Technologies, GTL, Visa Steel and Wind World account for 80%.

Other large companies that are to be sold to the NARCL include Lavasa Corporation, Ruchi Worldwide, Consolidated Construction and a few toll projects.

According to banking sources, work is progressing on multiple fronts to ensure that the bad bank starts operations as soon as possible. On Wednesday, bankers met to finalise the capital structure of the bad bank (NARCL). Sources said that the company would need at least Rs 6,000-crore capital of equity and debt to start operations. In terms of Reserve Bank of India (RBI) regulations, asset reconstruction companies (ARCs) must pay 15% of the purchase consideration in cash upfront. Even if these 22 non-performing assets (NPAs) were valued at 50% of the loan amount, the ARCs would have to pay over Rs 12,000 crore to banks. The NARCL can, however, raise money on its own.

Since all these 28 loans have been fully provided for, any consideration that the banks receive will go into their bottom line as profit. Once the capital structure is finalised, the promoters will seek a licence from the RBI. Lenders have decided to ask power finance companies to be the promoters as most other large lenders have a stake in existing ARCs. While all banks will hold just below 10% stake, Canara Bank and Bank of Maharashtra will hold just over 10% and may be given promoter status. Most other large banks will contribute to the ARCs’ equity. The articles of association of the NARC have already been finalised. Simultaneously, lenders are also discussing the setup of the asset management company that will do the recovery work. Lenders are hopeful of completing the loan transfer to the NARCL in July.

Finance minister Nirmala Sitharaman had announced in the Budget the setting up of a bad bank (NARCL) to acquire the NPAs from banks. The NARCL was to be in the public sector so that lenders do not have any problems in selling their bad loans. The NARCL would pay 15% in cash and the balance in security receipts, which are similar to units in a mutual fund with the consolidated bad loan being the underlying asset. The government would provide a guarantee to the security receipts issued by the bad bank, which would improve their valuation.

Besides the loans having been fully provided for, the other requirement was that each loan should be above Rs 500 crore. Also, loans that were classified as fraud or were in the midst of a liquidation process were not eligible. Many of these large accounts are undergoing recovery proceedings by banks and buyers have shown interest in these companies. The consolidation of loans will enable faster decision-making by the NARCL.



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Multiple contempt petitions filed in SC against Shaktikanta Das, bank forum chief, others, BFSI News, ET BFSI

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A number of petitions have been filed before the Supreme Court seeking to initiate contempt of court proceedings against Reserve Bank of India (RBI) Governor, Shaktikant Das, Chief Executive of Indian Banks Association (IBA) and others for allegedly flouting the SC’s earlier order, by turning and declaring the account of the petitioners as Non Performing Assets (NPA) in connection with the moratorium matter.

The petitioners – M/s Azeez Trading Company, Umrazz Trading Corporation, Ajay Hotel and Restaurant, Latur, Maharashtra — have filed their plea through lawyer Vishal Tiwari and Advocate On Record (AOR) Abhigya.

The respondents, Reserve Bank of India (RBI) Governor, Shaktikant Das, Chief Executive of Indian Banks Association (IBA) were duty-bound to promulgate and ensure the compliance of the order of this court throughout the country but they deliberately didn’t, the petition said.

The Supreme Court’s order, dated September 3, 2020, was operational on all lending institutions/banks throughout the country and was passed in favour of all borrowers accounts to grant relief from financial stress during the COVID-19 pandemic, Tiwari said in the petition.

The September 3 order was passed in the presence of the respondents represented by their counsel and all were very well aware of the Stay order, the petition said.

It further claimed that the contemptuous act of the respondents had not only disobeyed the court’s order but also caused severe irreparable damage and loss to the petitioners.

“The petitioners have lost their image and has been defamed as the possession notice was published in the new papers of his locality which made the dignity of the petitioner lower,” it added

The contemptuous act of all the respondents has shaken the confidence of the public and has degraded the trust of the borrowers. In this Covid-19 pandemic where all borrowers are passing through the worst scenario and financial stress, the respondents’ alleged act is very disgraceful and contemptuous. The petitioners thereby sought the issuance of notice to the alleged contemnors for willfully violating the order/directions of the Apex Court passed in a writ petition.

“Punish the contemnors for having committed contempt of this Court,” the petition said.

Further, in the petition, Tiwari said that the stay order was passed in the pandemic COVID-19 for the benefit of stressed borrowers so that they shall not suffer in present financial crisis during the pandemic.

“There is already a slump in the work of the petitioner. The stay order was operating as a lifesaving drug but the contemptuous act of the respondent has brought a major setback to the petitioner and his survival has become critical,” the petition said.

Several petitions have already been filed in the same case before the Supreme Court.



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Bank of Baroda posts net loss of Rs 1,047 cr in Q4, BFSI News, ET BFSI

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State-run Bank of Baroda reported a standalone net loss of Rs 1,047 crore in the quarter ended March 2021, as it shifted to a new tax regime.

The lender had reported a standalone profit-after-tax of Rs 507 crore in the year-ago period.

For the full year, net profit grew 52 per cent to Rs 829 crore from Rs 546 crore in FY20.

The bank booked a profit before tax (PBT) of Rs 2,680 crore during the quarter against a loss of Rs 1,723 crore in the year-ago period. PBT stood at Rs 5,556 crore for FY21 against a loss of Rs 1,802 crore in FY20.

“Given the fact that we had a PBT of Rs 5,556 crore (in FY21), we thought this is the right time to transit to a lower tax rate regime. But the movement to the new tax regime means we have to make a DTA (Deferred Tax Assets) adjustment, which was of the order of Rs 3,500 crore for the full year. Because of that, we are reporting an accounting loss of around Rs 1,000 crore in Q4 FY21.

“But for the DTA impact, we would have a profit after tax of Rs 2,200 crore in the last quarter,” the bank’s managing director and CEO, Sanjiv Chadha, told reporters.

Net interest income (NII) rose by 4.54 per cent to Rs 7,107 crore compared to Rs 6,798 crore a year ago.

Global net interest margin (NIM) improved to 2.72 per cent from 2.63 per cent in Q4 FY20 led by margin expansion in international business to 1.57 per cent in Q4 FY21.

Domestic NIM declined to 2.73 per cent as against 2.76 per cent in the fourth quarter of FY20.

Gross NPA ratio fell to 8.87 per cent as against 9.40 per cent and net NPA ratio to 3.09 per cent from 3.13 per cent.

Fresh slippages during the quarter stood at Rs 11,656 crore in the fourth quarter of FY21.

The lender’s slippage ratio declined to 2.71 per cent in FY21 from 2.97 per cent in FY20. Credit cost decreased to 1.68 per cent in FY21 from 2.35 per cent in FY20.

“Slippages will come down very significantly during the current year (FY22) despite the second wave. I would believe that we should be trending towards 2 per cent or lower in FY22,” Chadha said.

He expects credit costs to be in the range of 1.5-2 per cent in FY22.

Total provisions and contingencies declined 46.03 per cent to Rs 3,586 crore in the fourth quarter of FY21 from Rs 6,645 crore in the year-ago period.

Domestic advances increased by 4.91 per cent year-on-year led by domestic organic retail and agriculture loans which grew by 14.35 per cent and 13.22 per cent respectively.

Within retail loans, auto loans increased by 27.79 per cent year-on-year and personal loans grew at 27.21 per cent year-on-year.

Chadha said collection efficiency of the bank improved to 93 per cent during the March quarter. He expects some impact on collections during the April-June quarter of FY22.

He said despite the impact of the second wave, the bank’s corporate book is likely to remain strong.

“Last year, we were not confident about what would happen to the corporate sector. This time we can say with confidence that the second wave has largely left the large corporate businesses untouched. Even in terms of accounts which were relatively weaker and had got restructured, I do not believe we would need to revisit restructuring in most cases,” Chadha noted.

He, however, said the area of concern for the bank remains the MSME sector and to a lesser extent, the retail sector.

“What we have experienced is people, particularly in the retail segment, may fall back on some instalments but ultimately they pull through. Our assessment is that a very large percentage of our retail borrowers will pull through and, for a minority, we may need to do some kind of restructuring. But when it comes to MSME, the impact is larger and restructuring will also be larger,” he added.

Chadha expects a credit growth of 7-10 per cent in FY22 for the bank, if the economy witnesses a double-digit growth.

On capital raising plans for the current fiscal, he said a major portion of the funding requirement will get done through internal accruals.

The bank’s capital to risk (weighted) assets ratio (CRAR) stood at 14.99 per cent in FY21 against 13.30 per cent.

Speaking about the RBI’s announcement on an on-tap liquidity window of Rs 50,000 crore to support healthcare infrastructure, he said the lender has received a board approval on this and it is engaging with the companies.

The bank is targeting a 50 per cent growth in its loans to the healthcare sector.

“Our current exposure to the sector is Rs 7,000-8,000 crore. I would believe we should be looking at targeting a growth between Rs 3,000-5,000 crore there,” Chadha said.



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City Union Bank posts ₹111-cr net

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City Union Bank (CUB) on Friday reported net profit at ₹111.18 crore for the quarter ended March 31. The private sector lender had reported a net loss at ₹95.29 crore during corresponding quarter previous year.

Operating profit on a Y-o-Y basis dropped 15 per cent to ₹284.7 crore (₹335.08 crore) during Q4FY21. The total income of the bank grew marginally to ₹1,121.43 crore (₹1,220.98 crore) during the comparable quarters while interest income fell by 6 per cent to ₹976 crore (₹1,042 crore).

For the full year, the bank’s net profit grew by 24 per cent to ₹592.82 crore (₹476.31 crore). For the year ended March 31, total income stood at ₹4,839.45 crore (₹4,848.54 crore).

Gross non-performing assets (NPA) in percentage terms increased to 5.11 per cent of the advances during Q4FY21 as against 4.09 per cent in the year-ago quarter. Net NPA also increased to 2.97 per cent (2.29 per cent) during this period.

The bank’s capital adequacy ratio (Basel III) as of March 2021 stood at 19.52 per cent.

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Karur Vysya Bank posts 24% growth in Q4 net

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Karur Vysya Bank (KVB) on Friday reported a 24 per cent year-on-year growth in net profit for the fourth quarter of FY21 at ₹104 crore supported by lower provisions for bad loans and contingencies. The bank reported a net profit of ₹84 crore in the year-ago quarter.

The bank’s provisions (other than tax) and contingencies fell by 84 per cent to ₹71.45 crore (₹429.27 crore).

Operating profit of the bank, on a YoY basis, fell by 50 per cent to ₹249.78 crore (₹499.83 crore) after expending ₹62 crore towards arrears payable under XI Bi-partite settlement (BPS) and interest on interest reversal of ₹25 crore as per an order of the Supreme Court.

For the full year, the bank’s net profit grew 52.76 per cent to ₹359 crore (₹235 crore) while operating profit during the period fell to ₹1,429 crore (₹1,761 crore).

Operating profit hit

The bank, however, said that various factors affecting the operating profit include arrear payment under XI BPS and corresponding provisions for various staff retirement benefits amounting to ₹245 crore in all in addition to the interest-on-interest reversal of ₹25 crore mentioned above.

Total business of the bank as on March 31 stood at ₹1.16 lakh crore (₹1.07 lakh crore). While gross advances of the bank stood at ₹52,820 crore (₹48,516 crore) as of FY21, total deposits grew to ₹63,278 crore (₹59,075 crore) during the period.

“Credit growth resulted from improved off take in retail and business segments as well as higher growth witnessed in the jewel loan portfolio, backed by digital processing and improved sourcing of loans through various channels,” the bank said in a release.

Gross NPA of the bank, on a YoY basis, improved to 7.85 per cent (8.68 per cent) as of March while net NPA improved by 51 bps and dropped to 3.41 per cent (3.92 per cent) during this period.

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SBI reports net profit of 80% yoy as provisions drop, BFSI News, ET BFSI

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State Bank of India has reported an 80 per cent year-on-year rise in net profit to Rs 6,450.75 crore for the March ending quarter.

The bank’s provisions and contingencies fell to Rs 11,051 crore fro the final quarter of the last financial year as against Rs 13,495.1 crore it reported in Q4FY20.

The bank also declared a dividend of Rs 4 per share for the financial year ending March. The bank also saw it’s net interest income soar with a healthy growth of 19 per cent to Rs 27, 067 crore.

Asset quality improvement was also seen as GNPAs stood at 4.98% from 5.44 per cent in December’20 ending quarter. The bank’s net NPA ratio improved to 1.5 per cent in the March quarter as compared to 1.81 per cent in three months to December 31.

The bank’s provision coverage ratio has improved to 87.75% up 413 bps year-on-year and the slippages ratio for FY21 has declined to 1.18% from 2.16% as at the end of FY20.

The credit cost at the end of FY21 has declined by 75 bps year-on-year to 1.12% and the cost-to-income ratio has marginally increased from 52.46% in FY20 to 53.60% in FY21.

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Banks likely to transfer about 80 large NPA accounts to NARCL, BFSI News, ET BFSI

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Banks are likely to transfer about 80 large NPA accounts for the resolution to National Asset Reconstruction Company Ltd (NARCL), which is expected to be operational by next month.

NARCL is the name coined for the bad bank announced in the Budget 2021-22. A bad bank refers to a financial institution that takes over the bad assets of lenders and undertakes resolution.

The size of each of these NPAs accounts is over Rs 500 crore and the banks have identified about 70-80 such accounts to be transferred to the proposed bad bank, sources said.

It is expected that NPAs over Rs 2 lakh crore will move out of the books of the banks to the bad bank, they added.

The company will pick up those assets that are 100 per cent provided for by the lenders.

Finance Minister Nirmala Sitharaman in the Budget 2021-22 announced that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech.

It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation, she added.

Last year, the Indian Banks’ Association (IBA) had made a proposal for the creation of a bad bank for swift resolution of non-performing assets (NPAs). The government accepted the proposal and decided to go for asset reconstruction company (ARC) and asset management company (AMC) model for this.

NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

The government guarantee would be invoked if there is a loss against the threshold value.

The Reserve Bank of India (RBI) has said that loans classified as fraud cannot be sold to NARCL. As per the annual report of the RBI, about 1.9 lakh crore of loans have been classified as fraud as of March 2020.

To facilitate the smooth functioning of asset reconstruction companies, the RBI last month decided to set up a panel to undertake a comprehensive review of the working of such institutions.

After enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002, regulatory guidelines for ARCs were issued in 2003 to enable the development of this sector and to facilitate the smooth functioning of these companies.

Since then, while ARCs have grown in number and size, their potential for resolving stressed assets is yet to be realised fully.



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SBI to sell three NPA accounts next month for recovery of over Rs 235 crore, BFSI News, ET BFSI

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The State Bank of India (SBI) will sell three bad accounts to asset reconstruction companies or other financial institutions next month to recover dues of over Rs 235 crore, according to a sales notice.

In terms of the bank’s policy on sale of financial assets, in line with regulatory guidelines, SBI said it has placed Heavy Metal and Tubes Ltd, Khare and Tarkunde Infrastructure Pvt Ltd and Elize International Ltd for sale to recover a total of Rs 235.32 crore.

Heavy Metal has outstanding dues of Rs 116.91 crore to the bank, Khare and Tarkunde owes Rs 99.84 crore and Elize International Rs 18.57 crore.

The bank has set the reserve prices for these NPA accounts for sale at Rs 27.50 crore, Rs 15 crore and Rs 8 crore, respectively.

The e-auction of Heavy Metal and Tubes; and Khare and Tarkunde will take place on June 7, while that of Elize will be on June 8.

SBI said the interested ARCs/banks/NBFCs/FIs can conduct due diligence of these assets with immediate effect, after submitting expressions of interest and executing a non-disclosure agreement with the bank.

Ahmedabad-based Heavy Metal and Tubes is engaged in manufacturing of stainless steel tubes and pipes, while Nagpur-based Khare and Tarkunde is engaged in real estate business.

Elize International is a Kolkata based company engaged in manufacturing of clothing.



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SBI to sell three NPA accounts next month for recovery of over Rs 235 cr

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The State Bank of India (SBI) will sell three bad accounts to asset reconstruction companies or other financial institutions next month to recover dues of over Rs 235 crore, according to a sales notice.

In terms of the bank’s policy on sale of financial assets, in line with regulatory guidelines, SBI said it has placed Heavy Metal and Tubes Ltd, Khare and Tarkunde Infrastructure Pvt Ltd and Elize International Ltd for sale to recover a total of Rs 235.32 crore.

Heavy Metal has outstanding dues of Rs 116.91 crore to the bank, Khare and Tarkunde owes Rs 99.84 crore and Elize International Rs 18.57 crore. The bank has set the reserve prices for these NPA accounts for sale at Rs 27.50 crore, Rs 15 crore and Rs 8 crore, respectively.

The e-auction of Heavy Metal and Tubes; and Khare and Tarkunde will take place on June 7, while that of Elize will be on June 8.

SBI said the interested ARCs/banks/NBFCs/FIs can conduct due diligence of these assets with immediate effect, after submitting expressions of interest and executing a non-disclosure agreement with the bank.

Ahmedabad-based Heavy Metal and Tubes is engaged in manufacturing of stainless steel tubes and pipes, while Nagpur-based Khare and Tarkunde is engaged in real estate business.

Elize International is a Kolkata based company engaged in manufacturing of clothing.

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Auto-debit EMI failures set to rise in May as Covid hits incomes, BFSI News, ET BFSI

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The financial distress due to the Covid pandemic is leading to borrowers defaulting on monthly retail payments.

The rise in cheque bounce cases, which was first reported by HDFC Bank during its fourth-quarter results, is now seen at other payment avenues.

More borrowers missed equated monthly instalments (EMIs) in April, according to the data from the National Payments Corp. of India (NPCI).

In April, about 34.1% of auto-debit transactions on the National Automated Clearing House (NACH) failed, mainly due to insufficient funds.

The percentage of failure was 32.8% in March, when the second wave of Covid hit.

While in the value terms, 27.9% of transactions were unsuccessful in April against 27.5% in the previous month, the rise in the number of failures has alarmed experts, who see more drop in retail payments this month due to the spread of lockdowns to many other states.

This data is only for inter-bank mandates, which means a transaction between a bank and a non-bank lender.

HDFC Bank

HDFC Bank, the top private sector bank in India, first saw a spurt in cheque bounce cases in April, coinciding with the second lethal Covid wave in the country.

Check bounce rates for HDFC Bank were improving up to March 2021. However, bounce rates increased in April, returning to January 2021 levels. Maharashtra, Madhya Pradesh, Punjab, and Telangana were seeing higher check bounce rates.

With the resurgence of Covid cases, the bank continues to make additional contingent provisions to further strengthen the balance sheet. Although, overall asset quality remains stable, with total restructuring at 0.6% of loans and net NPA at 0.4%.

Moratorium demand rises

While the RBI has announced loan recast measures, demand is rising for loan moratorium due to renewed financial stress.

Transporters’ apex body AIMTC has requested the government for a blanket loan moratorium for the sector till August 31, 2021, in the prevailing scenario to help in maintaining business continuity.

In a statement, the All India Motor Transport Congress (AIMTC) pointed out that around 70 per cent of the country is under lockdown and more than 85 per cent of the transporters are small operators having one to five vehicles (both cargo and passenger segment).

“We have requested the government for blanket loan moratorium in the prevailing scenario to help in maintaining business continuity and tackling stressed sectors like the transport sector and help in the survival of crores of these hapless Indian citizens associated with the road transport sector,” it said.



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