Tag: pandemic

UPI registers robust growth in August

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Digital payments continued to grow at a robust pace and touched a new record in August with further easing of lockdown restrictions by many States and resumption of economic activities.

Unified Payments Interface registered 355 crore transactions worth ₹6.39 lakh crore in August 2021, according to data released by the National Payments Corporation of India on Wednesday. Transactions on the UPI platform had breached the ₹6 lakh crore-mark in July to amount to ₹6.06 lakh crore.

The Immediate Payment Service (IMPS) also witnessed a sharp growth in transactions. The number of transactions on the IMPS platform rose to 37.79 crore in August and valued at ₹3.18 lakh crore. It had processed 34.97 crore transactions amounting to ₹3.09 lakh crore in July.

ALSO READ e-RUPI could be bigger than UPI, say experts

FASTag collection up

Payments on NETC FASTag crossed 20 crore in terms of volume in August to 20.12 crore. In value terms, it amounted to ₹3,076.56 crore. In contrast, 19.23 crore transactions worth ₹2,976.39 crore were processed on NETC FASTag in July.

Aadhar Enabled PaymentSystem (AePS) transactions, too, scaled the 10-crore transaction mark last month. As many as 10.84 crore payments worth ₹27,353.87 crore took place through AePS in August compared to 8.88 crore transactions totalling ₹23,447.11 crore in July.

The BharatBill Pay platform registered 5.88 crore payments totalling ₹10,307.4 crore in August versus 5.1 crore transactions amounting to ₹9,612.87 crore in July.

ALSO READ UPI sets new record in July

“We believe that continued opening of the economy and markets coupled with the upcoming festive season would enable spends to grow at a better pace over the medium term ,” Motilal Oswal had said in its Digital Payments Tracker report for July that looked at card and UPI spending.

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Facebook, Xiaomi target India’s $1 trillion digital loan market

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India’s digital loan market is becoming a battleground for companies from Facebook Inc. to Xiaomi Corp., as they seek a foothold in what’s set to be a $1 trillion industry.

Facebook this month said India would be the first country where it rolls out its small business loan programme offering loans via a partner to firms that advertise on its platform. The loans will range from ₹500,000($6,720) to ₹5 million with interest rates of 17%-20%, potentially without collateral.

The social media giant’s foray into India coincides with Xiaomi’s, the Chinese maker of everything from rice cookers to gaming monitors, plans to offer loans, credit cards and insurance products in partnership with some of the nation’s biggest banks and start-up digital lenders, the Press Trust of India reported, citing local head Manu Jain.

Amazon.com also made its maiden investment in the country’s wealth management sector this month, participating in a $40 million round by fintech start-up Smallcase Technologies Pvt.

Also read: FB ties-up with Indifi for small business loans initiative

Alphabet Inc.’s Google is also upping its game. After offering wealth management products such as digital gold, mutual funds on its popular Google Pay platform, it’s now tied up with small Indian lenders for opening time deposits for its customers.

Digital lending growing

India’s digital payments market is drawing the attention of some of techs biggest names after online transactions surged during the pandemic and traditional lenders turned cautious following a rise in bad debt. Digital lending is expected to treble to $350 billion by 2023 and reach a total of $1 trillion in the five years since 2019, according to estimates from the Boston Consulting Group.

“The payment business hardly makes any money, but lending makes a lot of money,” said Saurabh Tripathi, Managing Director and senior partner at BCG’s financial institutions practice. “Indian consumers are waiting for more appropriately designed digital experiences and many players are jumping at this opportunity.”

While the potential of India’s loan market is significant, so too are its risks. The nation’s bad loan ratio is expected to rise to 11.3% by March making it the worst performer among major countries for a second consecutive year.

As well as addressing loan collections by digital firms, the Reserve Bank of India is also planning to regulate online lenders, which include more than 300 start-ups.

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RBI paper, BFSI News, ET BFSI

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The newly created small finance banks (SFB) are serving the intended marginalised and under-served people, and doing so profitably, an analysis by RBI officials has revealed. This category of banks was started in 2017, and a bulk of the entities are microfinance institutions, which converted themselves into lenders, which gave them access to public deposits.

“The SFBs have been provided license with the objective to serve the under-served and marginalised sections of the society…preliminary analysis reveals SFBs to be leading in serving the priority sector,” the paper by Nitin Kumar and Sarita Sharma said.

The study contains an initial assessment of the performance of SFBs for early policy inputs, it said, stressing that its assessment should not be considered as the view of the central bank.

A basic examination reveals a relatively high credit deposit ratio of SFBs and most of them displayed healthy profitability with further improvements in recent quarters, it said.

The study went into operational financials between March 2017 and March 2020 and indicated that bank-level factors like efficiency, leverage, liquidity and banking business are significant in determining SFBs’ profitability during this early period of operation.

It can be noted that the first quarter of the FY22 was a difficult time for many of the SFBs, as the collection efficiencies declined because of the second wave of the pandemic.

Meanwhile, another paper in the RBI bulletin for August on the targeted long term repo operations said that non-bank lenders, which accessed funds through the route, have displayed an improvement in their short-term liquidity buckets compared to others.

As NBFCs were finding their footing after the IL&FS default, the COVID-19 pandemic started a chain of adverse reactions, which exacerbated their liquidity position, the paper by KM Neelima, Nandini Jayakumar, and Jibin Jose said.

The RBI and government swung into action to address the stress through a slew of measures, including the TLTRO scheme that aimed at providing targeted liquidity to sectors and entities, which were experiencing liquidity constraints and restricted market access, it added.

Banks were provided funds at the repo rate and were directed to invest in investment-grade papers of corporates, including NBFCs, it said.

The policy was beneficial in alleviating the liquidity stress faced by the treatment NBFCs in the period following COVID-19 and helped them navigate the tough times, the paper said, adding that this happened at a time when both banks and credit markets were averse to help such entities.

“The empirical exercise undertaken in this article, therefore, suggests that the Reserve Bank’s intervention for easing financial conditions proved to be timely and effective for the NBFC sector,” it noted.



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SBI’s biz activity index improves significantly in the week ended Aug 9

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State Bank of India’s business activity index has shown significant improvement in activity since May-end 2021, with the latest reading for the week ended August 9, 2021 of 101.6.

The index reading for May 22, 2021 was 61.4 and for July 21, 2021, was 94.2.

“Recovery is visible in labour participation rate, electricity demand, Google mobility and Apple mobility index. However, there is slight dip in RTO revenue collection and vegetables arrival from last week,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India (SBI).

Also read: Public sector banks report sharp slippages in MSME loans in Q1

Agri production

In a report titled “Covid-19: Vaccinate, Vaccinate & Vaccinate!”, Ghosh observed that the month-on-month (m-o-m) rural recovery in July (as per key leading indicators) is expected to be steady, if not exceptional, as compared to June.

Rural indicators continue to be steady though patchy at times, as per the report.

“The rural recovery is far better than the pre-second wave. Looking ahead, agricultural production and rural demand are expected to remain resilient,” he said.

Covid vaccination

The report assessed that going by the present vaccination rate of 45 lakh per day, the critical mass (70 per cent) may be covered with first dose of the Covid-19 vaccination by November-end 2021 and second dose by March 15, 2022.

Also read: 10 top banks create secondary market for corporate loans

“India’s cumulative Covid-19 vaccination coverage has crossed the 52 crore mark and till now more than 54.04 crore vaccine doses provided to States/Union Territories,” it added.

In the last one month, speed of vaccination accelerated with the 7-day moving average currently at about 45 lakhs, and 43 per cent of eligible population vaccinated with first dose and 12 per cent with second dose.

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Moody’s, BFSI News, ET BFSI

Banking & Finance

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The asset recovery Indian banks is set to get delayed as the second wave has crippled economic activity, says Moody’s Investor Services.

“For India (Baa3 negative), Moody’s projects the economy will return to growth in the fiscal year ending March 2022,” the global rating company said in a note. “But the severe second coronavirus outbreak will delay improvements in asset quality.”

Some of the Southeast Asian countries including Singapore, Vietnam and Malaysia appear to be better off with economic activities resuming.

The global economic activity will likely boost trade growth in Vietnam (Ba3 positive), Malaysia (A3 stable) and Singapore (Aaa stable).

“This will help offset domestic economic disruptions from the pandemic, although slow deployment of vaccines is a risk for Vietnam,” Moody’s said.

The asset quality risk is still looming large amid resurgence of coronavirus infections. The slower pace of vaccinating citizens will add to the woes.

Slow vaccination rates will hinder economic recovery, though to varying degrees, Moody’s said.

Unemployment rates have risen across the country going by the June quarter. This contributes to any jump in bad loans.

The growing young populations in economies such as India, Indonesia, Malaysia and Philippines could help accelerate economic expansion and boost overall wealth, which will lead more people to engage banking services, said the rating company.

“This, however, will depend highly on the governments’ ability to support domestic labour markets.”

However, extended support by central banks and governments can help fix any further dent in the economy.

“Continued policy support for borrowers from governments and central banks will prevent sharp increases in defaults on bank loans,” Moody’s said.

The financial impact of the prolonged pandemic for now is concentrated on a few economic segments, which will limit the deterioration of banks’ overall asset quality.

Moody’s expects non-performing loan ratios across ASEAN and Indian banks to remain broadly stable at 2020 levels over the next 12-18 months.



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Indian bankers in talks as court rulings threaten over $6 billion in loans

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Informal talks are taking place to deal with the fall-out from two rulings by the Supreme Court that threaten the repayment of loans totalling nearly ₹500 billion ($6.73 billion) to some of India’s largest banks, bankers close to the matter say.

Any failure to recoup the money adds to stress in the banking sector, which is already dealing with an increased level of bad loans and reduced profits because of the impact of the Covid-19 pandemic.

Biyani-Ambani deal in trouble as Supreme Court rules in favour of Amazon

Last week, the Supreme Court effectively blocked Future Group’s $3.4-billion sale of retail assets to Reliance Industries, jeopardising nearly $2.69 billion the retail conglomerate owes to Indian banks.

That ruling was delivered days after the Supreme Court rejected a petition to allow telecom companies to approach the Department of Telecommunications to renegotiate outstanding dues in a long-running dispute with Indian telecom players.

Following SC ruling, NCLT to pause hearing on Future-Reliance deal

That raises concerns, bankers say, over whether Vodafone Idea will repay some ₹300 billion ($4.04 billion) it owes to Indian banks and billions of dollars more in long-term dues to the government.

Future of Future?

Two bankers, speaking on condition of anonymity, said negotiations were taking place to try to limit potentially severe consequences.

Loans to Future worth nearly ₹200 billion were restructured earlier this year, giving it more time to come up with repayments due over the next two years, but that was on the premise that Reliance would bail it out, the bankers said.

Future group did not immediately respond to a request for comment.

Should Future be taken to a bankruptcy court, bankers say they are concerned they will have to take haircuts on the loans of more than 75 per cent.

“The immediate apprehension is that the restructuring deal will fall through for banks by December,” said a banker at a public sector bank that has lent money to Future.

Future’s leading financial creditors include India’s largest lender State Bank of India, along with smaller rivals Bank of Baroda and Bank of India.

Bank of India, the lead bank in the consortium lending to Future, did not immediately respond to an emailed request for comment.

Vodafone Idea

Banks have also started discussing Vodafone’s debt to lenders of nearly ₹300 billion. Top lenders to Vodafone include YES Bank, IDFC First Bank and IndusInd Bank, as well as other private and state-owned lenders.

Vodafone, YES Bank, IDFC First Bank and IndusInd did not immediately respond to a request seeking comment.

“Even though banks have the option of restructuring loans in case the company defaults, it will only make sense if there is clear cash flow visibility, which is not the case right now,” a senior banker at a public sector bank said on condition of anonymity.

Already, at the end of March, Indian banks had total non-performing assets of ₹8.34 trillion ($112.48 billion), the government has said. It has yet to provide more updated figures.

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Corporate lending by major PSBs declines

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In what could be a matter of concern in rekindling the Covid-hit economy, corporate lending by major public sector banks has been on the wane.

The Q1 data of banks show a significant decline of corporate advances compared to the year-ago period.

For instance, State Bank of India’s domestic corporate advances decreased 2.23 per cent at ₹7,90,494 crore in the quarter ended June 30, 2021, compared to ₹8,09,322 crore in the same quarter last year. However, in the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

According to SS Mallikarjuna Rao, Managing Director and CEO, Punjab National Bank: “Corporate growth was almost muted or negative” during the quarter. For PNB, corporate advances marginally decreased by 0.57 per cent at ₹3,264,66 crore in June 2021 compared to ₹3,28,350 crore in the year-ago period.

For Union Bank of India, the share of industry exposure in domestic advances fell to 38.12 per cent at ₹2,40,237 crore from 39.4 per cent at ₹2,47,986 crore in the year-ago period. The same is the case with Indian Bank which saw a 3 per cent dip in the corporate loans during the period under review.

According to a senior SBI official, the last one year saw the complete ‘impact’ of the pandemic on some key investment decisions of the industry.

“In fact, banks, including SBI, have been proactively supporting the industry wherever possible. Assuming that there will be no third wave, we can see greenshoots, going forward,” he added.

As per RBI data, up to May, the gross loans to large industries declined by 1.7 per cent on a year-on-year basis.

Demand low

There has also been lower demand from corporates in general as many adopt a wait-and-watch approach on investments, say bankers. Obviously, there has been a more rigorous due diligence on the part of the banks.

However, banks are optimistic about the future as far as corporate lending is concerned. Even though the corporate lending growth was muted in the first quarter, PNB is bullish. “We are looking at a good amount of growth, whereas corporate growth was almost muted or negative. But we are looking at a good amount of growth that will to be disbursed over a period of time,” said Mallikarjuna Rao in a recent earnings call.

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Usefulness of digital tools for buying and claiming insurance

Personal Finance

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The outbreak of Covid-19 ushered in accelerated digitisation in the insurance industry as well as rapid acceptance and adoption by customers.

The industry introduced many features including telemedicine. Life insurance, which was predominantly done offline, largely moved to online channels.

Digital insurance or ‘InsurTech’ has disrupted the entire insurance sector and is bridging the insurance gap in the country. With smartphones and cheap internet, customers can use various platforms like social media, website, email, apps to interact with the insurers and get help in terms of selection, purchase, and filing for claims.

Ease in claim settlement

Digital tools like mobile applications have been helping consumers across the entire policy life cycle, starting from purchasing policies, intimation of claim incidents, processing claims through submission of documents online to claim settlement across all categories.

Also read: Demystifying restore benefit in health insurance

For example, if a car gets damaged today, the customer can share the photo of the damaged car with the insurer. Once the proof of the damaged car has been submitted, the insurance company can automatically verify it using AI and telematics and after verification, the amount of the claim will be paid to the customer’s bank account, usually within 24 hours.

Personalised insurance

Online channels have made insurance a personalised experience, much like the e-commerce virtual platforms. Advancement in technology including big data, artificial intelligence and machine learning have helped insurers to understand personalised consumer behaviour, their family needs and help them reach out with more accurate need-based insurance solutions.

For example, based on the information provided including health history of the individual and his/her family, insurer can guide the customer with the right policy and the right cover amount.

Also read: All you wanted to know about cyber insurance

Disease specific optional cover (such as diabetics) or need based cover (such as maternity) will also be recommended.

Options to compare and choose the best

Digital platforms of aggregators or insurers provide unbiased comparisons and analysis of various insurance products based on price, quality and other features.

Consumers can evaluate the pros and cons of each product. Digital tools have made the process of insurance transparent, credible, seamless, personalised, and less time consuming.

(The author is CEO & Co-founder at RenewBuy)

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HDFC’s Q1 net profit down marginally at ₹3,001 crore

Banking & Finance

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Housing Development Finance Corporation (HDFC) Ltd reported a 1.7 per cent drop in its net profit in the first quarter of the fiscal at ₹3,000.67 crore. Its net profit was ₹3,051.52 crore in the quarter ended June 30, 2020.

In a statement on Monday, HDFC Ltd said the profit numbers for the quarter ended June 30, 2021, however, are not directly comparable with that of the previous year. This is due to lower profit on sale of investments, dividend, higher charge for employee stock options and effective tax rate of 23.1 per cent in 2021-22 as against 15.4 per cent last fiscal.

“In the previous year, the tax on capital gains on sale of equity shares was low on account of grandfathering provisions as per the Income Tax Act, 1961,” it said.

HDFC Q4 net profit surges 42 per cent

HDFC provided ₹903.9 crore for tax in the quarter ended June 30, 2021 as against ₹555.31 crore a year ago.

However, shrugging off the impact of the second Covid wave, its net interest income surged by 22 per cent for the quarter ended June 30, 2021, to ₹ 4,147 crore compared to ₹3,392 crore in the previous year. Net interest margin was 3.7 per cent for the first quarter of the fiscal.

Loan disbursements

The country’s largest mortgage financier also saw a robust growth in individual loan disbursements at 181 per cent year-on-year in the first quarter of the fiscal.

“July 2021 disbursements were the highest ever in a non-quarter end month,” it said.

ICICI, Axis and HDFC Bank pick up stake in blockchain start-up

As at June 30, 2021, the assets under management grew 8.1 per cent to ₹5,74,136 crore as against ₹ 5,31,186 crore in the previous year.

The overall collection efficiency ratio for individual loans has improved during the month of June ‘21 to pre-Covid levels. The collection efficiency for individual loans on a cumulative basis in June 2021 stood at 98.3 per cent compared to 98 per cent in March 2021.

The gross non-performing loans as at June 30, 2021, stood at ₹ 11,120 crore or 2.24 per cent of the loan portfolio.

As per regulatory norms, HDFC is required to carry a total provision of ₹ 5,778 crore. Its Expected Credit Loss for the quarter ended June 30, 2021, was at ₹686 crore compared to ₹ 1,199 crore a year ago.

As at June 30, 2021, ₹4,482 crore has been restructured under the RBI’s Resolution Framework for Covid-19 related stress, which amounts to 0.9 per cent of the loan book.

Of the loans restructured, 38 per cent are individual loans and 62 per cent non-individual loans, HDFC said, adding that of the total restructured loans, 62 per cent is in respect of just one account.

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Goldman Sachs to raise pay for junior investment bankers: report

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Goldman Sachs Group Inc is raising salaries for its junior employees in the investment bank division, Business Insider reported on Sunday.

The bank’s second-year analysts will now make $125,000 in base compensation, while first-year associates will earn $150,000, Business Insider reported citing two people familiar with the situation.

No formal announcement about the pay raise has been made and it was unclear which other levels of employees at the investment banking division have also been given salary increases, the report from the financial and business news website said. Goldman Sachs declined to comment.

Goldman Sachs sets up centre in Hyderabad

Investment banks have raised pay for first- and second-year associates this summer in an attempt to ease the strain on these workers and compensate them more for their work supporting more senior staff in a year of unprecedented deal making.

Citi Group, Morgan Stanley, UBS Group AG and Deutsche Bank AG have already increased pay for their first-year analysts to around $100,000, a raise of about $15,000.

‘Saturday rule’

In February, a group of junior bankers in Goldman’s investment bank told senior management they were working nearly 100 hours a week and sleeping five hours a night to keep up with an over-the-top workload and “unrealistic deadlines.” Half of the group, which consisted of 13 first-year employees, said they were likely to quit by summer unless conditions improved.

Goldman Sachs to set up 250 beds across 4 hospitals in Bengaluru

Goldman’s Chief Executive Officer David Solomon has said the bank was working to hire more associates to help with the workload, and vowed to enforce the “Saturday rule,” which prohibits employees from working between 9 pm Friday night and 9 am on Sunday, except in certain circumstances.

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