Tag: npas

NPAs may remain within projections: RBI Governor Shaktikanta Das

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The earlier FSR released in January 2021 had projected that the gross non-performing assets (GNPAs) of banks may rise to 13.5% by September 2021 in the baseline scenario.

By Ankur Mishra

Reserve Bank of India Governor Shaktikanta Das on Friday said that non-performing assets (NPAs) in the banking sector may remain within the range of projections made in the last financial stability report (FSR).

However, Das specified that final details would be out in the upcoming FSR, which will be released later this month.

The earlier FSR released in January 2021 had projected that the gross non-performing assets (GNPAs) of banks may rise to 13.5% by September 2021 in the baseline scenario.

“On the NPA situation, whatever projection we had given earlier in the last FSR. I think it will be within that (range),” RBI Governor Shaktikanta Das said in a press conference on Friday after releasing policy.

“I think the figures (NPAs) are quite manageable, but I would not say anything beyond that because our teams are assessing the numbers and we will spell out details in the upcoming financial stability report (FSR) later this month, ” Das further said.

In the policy statement, the RBI Governor also emphasised on building capital buffers and adequate provisioning for banks and NBFCs to mitigate the impact of Covid-19. Last week, RBI in its annual report, said that gross NPA ratio of banks decreased to 6.8% in December 2020 from 8.2% in March 2020.

The prudent provisioning by banks, even over and above regulatory prescriptions for accounts availing moratorium and undergoing restructuring, resulted in an improvement in the provision coverage ratio (PCR) of banks, RBI had said.

PCR improved to 75.5% at end-December 2020 from 66.6% in March 2020. Similarly, the capital to risk-weighted assets ratio (CRAR) of banks rose to 15.9% in December 2020, compared to 14.8% in March 2020.

The capital adequacy ratio of banks was aided by capital raising from the market by public and private sector banks, and retention of profits.

The central bank, in its annual report had, however, cautioned that asset quality of the banks needs to be closely monitored in the coming quarters.

The regulator had given the warning as the lenders will have to show a true picture of the bad loans after Supreme Court (SC) lifted interim stay on classifying NPAs in March 2021.

In August 2020, RBI had announced a six months moratorium for all term loan borrowers in the wake of Covid-19 impact on borrowers. The Supreme Court had directed lenders to waive compound interest of the borrowers during the moratorium period.

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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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Banks ready to transfer 37 NPAs worth ₹92,000 crore to NARCL

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Banks have so far zeroed-in on 37 stressed assets, with exposure aggregating to about ₹92,000 crore, that can be transferred to the National Asset Reconstruction Company Ltd (NARCL), which is being set up by lenders jointly.

The assets to be transferred to NARCL include those of Videocon Industries, Reliance Naval & Engineering, and Essar Power Gujarat and Coastal Energy, according to bankers. Banks had lent to these entities as part of a consortium.

“Suppose the ₹92,000-crore exposure is transferred to NARCL at 70 per cent haircut. So, it will buy the exposure at ₹27,600 crore. Of the ₹27,600 crore, lenders will get upfront cash of 15 per cent (₹4,140 crore) and the balance (₹23,460 crore) by way of Security Receipts (SRs), which are likely to have government guarantee (partial/full),” said an executive of a state-owned bank.

Upfront cash

The upfront cash that NARCL will give will result in provision write-back for the lenders, though it will be small.

“NARCL may buy all the loans put together at 30 per cent. But if the recovery is higher, say, 40 per cent, lenders will get the benefit via SRs,” the executive quoted above said.

He underscored that a few more Joint Lenders Forum meetings will be organised to arrive at a consensus on transferring more stressed assets.

The criteria prescribed by the Indian Banks’ Association (IBA) for the transfer of stressed assets to NARCL is that they should have been 100 per cent provided for, not be categorised as fraud, and should not be close to a resolution or recovery.

The IBA is spearheading the formation of NARCL in consultation with the Finance Ministry and the Reserve Bank of India. Stressed assets with principal outstanding of ₹500 crore and above, aggregating about ₹1.5-lakh crore, are expected to be transferred to NARCL.

Besides banks, state-owned non-banking finance companies in the power sector — Power Finance Corporation and Rural Electrification Corporation — are likely to contribute to the equity of NARCL and sell to it the stressed assets in their portfolio.

Will alter balance-sheets

NARCL may structurally alter the balance-sheets of lenders in such a way that it will further the government’s agenda of divesting its stake in IDBI Bank and privatising two public sector banks. Once chunky stressed assets are out of their books, the valuation of these banks will improve, making them more saleable, say market experts.

Finance Minister Nirmala Sitharaman, in her Budget speech on February 1, observed that the high level of provisioning by PSBs on their stressed assets calls for measures to clean up their books.

In this regard, she had said that an Asset Reconstruction Company and an Asset Management Company would be set up to consolidate and take over the stressed debt and then manage and dispose of the assets to Alternate Investment Funds (AIFs) and other investors for eventual value realisation.

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IDBI Bank has transformed into a retail bank: Samuel Joseph, Dy MD

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During the four years that IDBI Bank was under prompt corrective action (PCA), it transformed itself from a predominantly corporate bank to a retail bank. And the Bank, which exited PCA on March 10, 2021, would like to keep it that way, according to Samuel Joseph J, Deputy Managing Director. In an interaction with BusinessLine, he emphasised that it had aggressively accelerated provisioning, over and above the regulatory requirement, in the past to strengthen its balance sheet. So, write back to profits in the next two to three years, whenever the recovery from stressed assets happens, will be about ₹7,500 crore. Excerpts:

Now that your bank is free from the shackles of PCA, how does it plan to grow business?

During the period that we were under PCA, we were consolidating our position. We completely revamped our risk management policies, especially concerning corporate credit. So, everything was ready (for growing business) before we exited PCA. But unfortunately, the exit coincided with lockdown and related economic uncertainty. However, we will be able to expand our book in FY22. We propose to grow our corporate loan book by 8-10 per cent and our retail book by 10-12 per cent.

There is an impression that our Bank is a corporate bank. But if you look at our March 2021 numbers, our corporate to the retail ratio in the overall loan book was 38:62. This is a significant shift from where we were three-four years ago when the ratio was 60:40.

Going forward, we would like to keep the corporate book at about 40-45 per cent and the retail book at about 55-60 per cent.

And even on the liabilities side, we have transformed our liabilities franchise, and today our CASA (current account, savings account) is 50.45 per cent of total deposits. Even within term deposits, our reliance on bulk deposits is less than 15 per cent. Three years back, CASA was at about 37 per cent.

So, we have used the PCA period well to completely transform our business mix and strengthen the balance sheet.

How did you strengthen the balance sheet?

The first thing was recognition of non-performing assets (NPAs). We made aggressive provisioning for the NPAs and took the hit upfront on our Profit & Loss (P&L) account. So, today, our provision coverage ratio is at 96.9 per cent. The huge losses in 2019-20 were all because of aggressive accelerated provisioning. This was not required as per the regulatory norms, which give banks a gliding scale (for provisioning). Going by this, 96.9 per cent provisioning is not required at all. But we made accelerated provisioning to absorb the pain upfront. So, though the Gross Non-Performing Assets (NPA) ratio is slightly elevated at 22.37 per cent, the net NPA ratio is only 1.97 per cent as of March-end 2021.

We have not aggressively written off NPAs in the past because of the uncertainty relating to future profitability. But now that we have made five quarters of profit, we are fairly certain. Of course, we will wait for the Covid uncertainty to clear up, promoter change and all that and then we should be able to bring down GNPA by writing off 100 per cent provided for accounts.

How much provision write-back can you get from recoveries?

Our Gross NPAs are at about ₹36,000 crore. Technically written off (TWO) accounts already in our book aggregate to about ₹43,000 crore. So, both put together is about ₹79,000 crore. And this is about 97 per cent provided for….On average, let us say, we recover about 15 per cent. So, on ₹79,000 crore, we will be able to recover about ₹11,850 crore. Now, let us take a more conservative estimate — say, we recover only about ₹10,000 crore. Our net NPAs are only ₹2,500 crore because of aggressive provisioning. So, provision write-back to profits in the next two to three years, whenever the recovery happens, will be about ₹7,500 crore. The future (profit) potential of this aggressive past provisioning will at least be ₹7,000 crore to ₹7,500 crore going forward in the next two to three years.

Our Capital to Risk-weighted Assets Ratio (CRAR) is 15.59 per cent. So, from now on, we will be able to recoup our capital and increase CRAR much further. So, this is what we have done — on the P&L part, we have absorbed the pain upfront, and we have strengthened our balance sheet to recoup our capital through recovery and write-back to profits in the next two to three years.

Did you zero in on the stressed assets you will transfer to the National Asset Reconstruction Company Ltd?

We have identified the stressed assets for the transfer. The criteria for the transfer is that they should have been 100 per cent provided for, not be categorised as fraud, and it should not be very close to a resolution or recovery. Using these filters, we have identified the assets. We have a list of 11 accounts aggregating about ₹12,000 crore to be transferred to NARCL.

The immediate visual impact of this transfer on our balance sheet will be by way of a reduction in our Gross NPA ratio. Out of this ₹12,000 crore, some of the accounts may even be TWO accounts. The impact of TWO accounts is already reflected in our books. So, if out of ₹12,000 crore, Gross NPAs and TWO accounts amount to ₹6,000 crore each, then the GNPA could come down about 3.50 per cent.

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Bad bank to kick off with 80 NPAs worth Rs 2 lakh crore, 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 (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.

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.

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 ARC and asset management company (AMC) model for this.

The process

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.

The company will pick up those assets that are 100 per cent provided for by the lenders. It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation.

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 loans identified by the Indian Banks’ Association include NPAs in a variety of industries — including oil, steel, cement and roads, with many admitted under the insolvency process. These loans are almost fully provided for over the years and they exclude the ones where there is fraud involved or those currently under liquidation. About 75% of the lenders by value need to approve to transfer the loans to an ARC.

No fraud loans

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.

The bad bank

Nine banks and two non-bank lenders, including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB), are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank. ICICI Bank, Axis Bank and Life Insurance Corp of India-owned IDBI Bank are also among the shareholders. State-owned Power Finance Corp and Rural Electrification Corp will also be equal shareholders in the new company.



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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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Profit rises 13% to Rs 78 crore, BFSI News, ET BFSI

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Private lender DCB Bank on Saturday reported a 13 per cent increase in net profit to Rs 78 crore for the January-March quarter compared to that of Rs 69 crore in the year-ago quarter. Total income of the bank during the January-March quarter of 2020-21 fell to Rs 971 crore from Rs 1,012 crore in the same quarter of 2019-20, DCB Bank said in a regulatory filing. The income from interest as well as from investment fell during the reported quarter from a year ago.

For the FY2020-21, the bank’s net profit remained nearly flat at Rs 336 crore against Rs 338 crore in FY20. Income also was a tad down at Rs 3,917 crore in FY21 against Rs 3,928 crore in FY20.

The bank’s asset quality worsened with the gross non-performing assets (NPAs) spiking to 4.09 per cent of the gross advances as of March 31, 2021, as against 2.46 per cent by the end of March last year.

In value terms, the gross NPAs stood at Rs 1,083.44 crore, significantly higher than Rs 631.51 crore in the year-ago period.

Provisions for bad loans and contingencies in Q4FY21 came down to Rs 101.18 crore from Rs 118.24 crore a year earlier. Net NPAs stood at 2.29 per cent (Rs 594.15 crore) as against 1.16 per cent (Rs 293.51 crore).

On returning the compound interest to eligible borrowers post the Supreme Court final order in March and subsequent the RBI notification, the lender said it is in the process of account by account calculation of interest relief due to the eligible customers.

In the meantime, as of March 31, 2021, the bank has created liability towards estimated interest relief of Rs 10 crore and reduced the same from the interest income.

The bank said it held contingency provision of Rs 229.11 crore against the likely impact of Covid 19 regulatory package, impact of the conclusion of the interim order (of Supreme Court on not declaring accounts as NPAs till August 31, 2020 and after) and other contingencies.

On the impact of second wave of the pandemic, it said under the current circumstances the bank during March quarter, on a prudent basis, has made a contingency provision of Rs 124 crore towards further likely impact of Covid-19 on restructured and stressed assets.

“In addition to this contingency provision of Rs 124 crore, the bank also holds floating provision amounting to Rs 108.80 crore, besides, provisions for standard assets and specific non-performing assets,” it said.

Besides, the amount in overdue categories where the moratorium or deferment was extended as of March 31, 2020 was Rs 1,908.08 crore at end of March this year, it said. The provisions held on these by the end of September 2020 was Rs 68 crore and similar amount was kept as provisions adjusted against slippages (NPA and restructuring), DCB Bank said.

The lender also said that its board has not recommended any dividend for fiscal ended March 2021 in view of the situation developing around Covid-19 in the country and the related uncertainty that it creates.



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Karnataka Bank will focus on cost-light liability portfolio, says MD

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The Mangaluru-based Karnataka Bank navigated the challenges posed by the Covid pandemic last year, and earned a net profit of ₹451.20 crore in the first nine months of 2020-21 against the profit of ₹431.78 crore for the full year of 2019-20.

In an interview to BusinessLine, Mahabaleshwara MS, MD and CEO of the bank, highlighted the strategies that helped the bank to perform better, and its plans for the current financial year amidst the second Covid wave. Excerpts from interview:

India is witnessing the second wave of Covid. How is your bank planning to tackle this fresh challenge?

The first half of the last fiscal was spent in understanding and fighting the pandemic while the business was muted and there was no clear picture about the Covid pandemic. Our innovative business principle of ‘conserve, consolidate and emerge stronger’ immensely helped us to tide over the said crisis-like situation and be able to come out with satisfactory numbers. But now the situation is different. At least now, we have one year of experience in navigating through the pandemic and that is a huge advantage.

To overcome Covid wave 2.0, as in the previous fiscal, our bank will continue to practice the principle of ‘conserve, consolidate and emerge stronger’ along with the required cost cutting measures this year too. We will continue to be cautious and conservative. We will focus on developing a cost-light liability portfolio by concentrating more on CASA and low-cost retail term deposits besides developing a healthy asset portfolio which is largely protected against the ill effects of pandemic in the long run to tide over the economic challenges associated with the Covid wave 2.0.

Your recent letter to the shareholders mentioned that the bank is aiming at a ‘moderate’ growth of 12 per cent for 2021-22. What are the reasons for this moderate outlook?

Yes. The bank has set a moderate growth target of 12 per cent for business turnover for the current fiscal. Considering the Covid second wave that is sweeping the country with enormous impact on health and business in the short and medium term, we expect growth challenges in key sectors during the first half of the current year. Even though MSME and agriculture sectors are less impacted which are the main components of our retail loan book growth, the entire ecosystem of the economy already took a shock and it may need sufficient time to come out of this, if there are no more waves of Covid going forward.

We also expect the customers to be conservative in investing in new or big projects or expansion of business. Our focus will be to conserve, maintain the asset quality and grow steadily with quality during this fiscal. However, the bank will always be in a ‘ready mode’ to catch up business at any stage of economic rebound, beating our own guidance level. We have superior digital loan journey infrastructure and in a better position to encash such opportunities on the very first sight of economic turnaround.

Do you think the fresh Covid wave will lead to the increase in the NPAs in the coming days? If yes, how are you planning to handle that?

Even though the economic impact of the second wave of Covid pandemic and the related lockdowns ,etc have just started unfolding, no one can take it lightly and it may be too early to foresee the impact. The banking industry in India has fully exhibited its resilience and was able to face the challenges posed by the first wave of Covid, mainly because of the ‘economic vaccines’ in the form of regulatory packages such as moratorium, OTR / MSME restructuring, Emergency Credit Line Guarantee Scheme, charging of simple interest during moratorium, etc announced by the Government / Reserve Bank of India.

By opting for the said ‘economic vaccines’, the borrowers managed their cash flow with extended loan period. However, now the country is better placed with all its populace in the age group of 18 years and above are poised to get vaccines. Further, the borrowers have also remodelled their business and became more agile. However, it is also expected that revival and recovery may take more than the expected time. RBI has also recently announced a ‘booster dose’ with various relief measures both for the bankers as well as individual borrowers, small borrowers and MSMEs. This is expected to give the required impetus to the economy. Hence, the response for Covid 2.0 and going beyond, should be collective, comprehensive, decisive and long lasting besides forward looking.

Going by the current trend (until a major portion of India gets vaccinated), Covid waves are likely to recur at regular intervals. How is your bank planning to handle this?

The good news is that the Government has allowed vaccination for individuals aged 18 years and above. With vaccination initiatives and also with more awareness being created among the public about the this, it is hoped that maximum people would get vaccinated in about two-three months considering the current progress. It is expected that once the herd immunity is developed, the surge of Covid would also come down significantly. Like previous fiscal, our bank would continue to be cautious in lending and would ensure adding remunerative and quality assets besides focusing on a cost-light liability portfolio. Necessary steps will be taken at our disposal to protect the interest of all our stakeholders. With the strong fundamentals and improved capital adequacy ratio, we are confident of sailing smooth this year also in spite of unforeseen challenges.

Like earlier economic shocks such as the global recession, global financial crisis of 2007-08, this time too Indian banking sector, I am sure, will withstand the challenges and come out with flying colours. We will stand rock solid with the Government, RBI and the customers.

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SBI chief, BFSI News, ET BFSI

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State Bank of India (SBI) will try to keep the interest rates benign as long as possible with a view to supporting the economic growth, its chairman Dinesh Kumar Khara has said.

On the impact of the second wave of COVID-19 on non-performing assets of the bank, the SBI chief said that as the lockdown was not pan-India, one will have to wait and watch to assess its impact on the banking sector.

Observing that multiple variables including inflation have a bearing on the interest rates, he said, “our effort is to support the growth initiatives. To really ensure that happens, we will try to keep the soft interest rate regime for as long as possible.”

In an interview to PTI, Khara said it is too early to give any colour to likely scenario of NPAs because of local restrictions.

The impact of lockdown differ from states to states as it is not uniform, he said, adding, “so, probably we can wait and watch for some more time before making any comment on impact on economy and NPA situation.”

Speaking about various initiatives of the country’s largest lender, Khara said, SBI has decided to set up makeshift hospitals with ICU facilities for COVID-19 patients in some of the worst affected states.

The bank has already earmarked Rs 30 crore and is engaging with non-governmental organisations (NGOs) and hospital management for setting up medical facilities on an emergency basis for the treatment of COVID-19 patients.

He said the bank intends to put in place 1,000 beds with 50 ICU facilities in the states that are the worst affected.

SBI is also collaborating with hospitals and NGOs to provide oxygen concentrators for patients.

“We have put in place an action plan. We have earmarked Rs 70 crore plus out of which we are giving Rs 21 crore to 17 circles for COVID-19 related initiatives,” he said.

For the safety of employees and their families, he said, the bank has tied up with hospitals across the country to facilitate treatment of those who have fallen sick on a priority basis.

About 70,000 employees out of 2.5 lakh strong staff strength have already got vaccinated. The bank has decided to bear the cost of vaccination for its employees and their dependent family members.



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RBI to strengthen risk-based supervision of banks, NBFCs, BFSI News, ET BFSI

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The Reserve Bank has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.

The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

“It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks.

In case of UCBs and NBFCs, the Expression of Interest (EOI) for ‘Consultant for Review of Supervisory Models’ said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

“It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all SEs,” it said.

Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).

The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors’ interests and financial stability.

The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

In case of Urban Cooperative Banks (UCBs) and NBFCs, it conducts the supervision through a mix offsite monitoring and on-site inspection, where applicable.

A technical advisory group consisting of senior officers of the RBI would examine the documents submitted by the applicants in connection with EOI.

EOI said the consultant would be required to work in close co-ordination with officers of RBI’s Department of Supervision in Mumbai.



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