Tag: pandemic

Number of unique wilful defaulters rose by 286 in pandemic, BFSI News, ET BFSI

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The number of wilful defaulters has increased from 2,208 to 2,494 at the end of March 31, 2021, Finance Minister Nirmala Sitharaman informed Parliament on Tuesday.

As per RBI data on global operations, during the last three financial years, public sector banks (PSBs) have effected recovery of Rs 3,12,987 crore in non-performing assets (NPAs) and written-off loans.

“RBI has further apprised that the total number of unique wilful defaulters reported by PSBs was 2,017 as on March 31, 2019, 2,208 as on March 31, 2020 and 2,494 as on March 31, 2021,” she said.

Bank NPAs

Sitharaman said that the RBI has apprised that as per data reported by banks to the Central Repository of Information on Large Credits (CRILC), the total funded amount outstanding of borrowers whose sector code is private and whose loans are classified as NPAs in the PSBs as on March 31, 2019, March 31, 2020, and March 31, 2021, is Rs 5,73,202 crore, Rs 4,92,632 crore and Rs 4,02,015 crore respectively.

Banks are required to take steps to initiate the legal process, wherever warranted, against the borrowers or guarantors for recovery dues, she said. They may also initiate criminal proceedings against wilful defaulters, wherever necessary, she added. In reply to another question, the Finance Minister said public sector banks have done a write-off of Rs 1,31,894 crore during 2020-21 as compared to Rs 1,75,876 crore in the previous year. As a result of the government’s strategy of recognition, resolution, recapitalisation and reforms have led to decline in gross NPAs as a percentage of total advances to 9.11 per cent as of March 31, 2021, from 11.97 per cent on March 31, 2015.

Top 100 wilful defaulters

The total size of the top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019.
Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters’ list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as of March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

Write-offs

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing o the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-offs are accounting entries for shifting NPAs from the active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.
RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs.

The reduction in NPAs during FY20 was largely driven by write-os, RBI had said in its report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.



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Kerala inks $125-million pact with World Bank to boost disaster preparedness

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Government of India, the Government of Kerala and the World Bank have signed a $125-million programme to support Kerala’s preparedness against natural disasters, climate change impacts, disease outbreaks, and pandemics.

Rajat Kumar Mishra, Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India; Rajesh Kumar Singh, Additional Chief Secretary, Government of Kerala; and Junaid Ahmad, Country Director, World Bank are signatories to the agreement consummated in Delhi.

Need for building resilience

A World Bank spokesperson quoted Junaid Ahmad as saying that in today’s context of increased economic, climatic, and health shocks, building resilience of economies is a policy imperative.

The World Bank is investing in Kerala’s capabilities to respond to shocks to the state economy and, importantly, prevent as much as possible the loss of lives, assets, and livelihoods. The objective is not to finance schemes but partner with the State government to improve the state’s financial health.

The programme also seeks to invest in sectors like health, water resources, social protection and agriculture, and address the drivers of natural disasters, climate change, and pandemic risks.

Multi-sectoral approach

For instance, in the Pamba River Basin, a multi-sectoral approach will be tested in Idukki, Kottayam, Pathanamthitta, and Alappuzha districts which represent a microcosm with tropical monsoon forests, dense urban settlements, and a rice bowl. Its success will have a demonstration impact across the state.

This is part of a programmatic series of World Bank-financed operations in the state. The First Resilient Kerala Development Policy Operation approved in June 2019 undertook several initiatives, the spokesperson said.

It helped the state draft a River Basin Conservation and Management Act, which will conserve and regulate water resources and ensure their sustainable management, allocation, and utilisation. It also introduced climate-resilient agriculture, risk-informed land use, and disaster management planning.

State Partnership Framework

The programme laid the foundations for a five-year State Partnership Framework and will focus on two key areas. First, it will incorporate disaster risk planning in the master plans of urban and local self-governments to ease financial constraints on the State government when faced with unexpected shocks.

Second, it will help make the health, water resources management, agriculture, and road sectors more resilient to calamities. Meanwhile, the Department of Economic Affairs, Ministry of Finance, stated that the state has shown resilience against the impacts of natural disasters and climate change.

It has been undertaking comprehensive shifts in policies, institutions, and programmes to address challenges. The Resilient Kerala Programme will help institutionalise disaster preparedness across sectors to ensure a resilient recovery and sustainable development pathway for the state.

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Economic recovery is underway but credit growth remains tepid: Deepak Parekh

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HDFC Ltd Chairman Deepak Parekh on Tuesday expressed confidence that the country’s macroeconomic fundamentals are strong and recovery is underway.

“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in 2020-21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh said at the annual general meeting of HDFC Ltd.

However, while parameters such as foreign exchange reserves and capital markets are strong, he underlined that key laggard remains overall credit growth which continues to remain tepid.

Parekh also said the inherent demand for home loans continues to be strong and even in commercial real estate, most companies have not given up on their office space in the pandemic.

He also noted that there are segments of real estate with immense potential to grow.

“With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres,” he said, adding that with the build-up of digital infrastructure, demand for data centres have increased.

The demand for housing has also continued to be strong after the easing of the national lockdown and was for both affordable housing and high-end properties.

“Asset quality has been challenging for non-individual loans at a systemic level. the corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans,” Parekh further said.

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Debasish Panda, BFSI News, ET BFSI

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The pandemic underscored India’s disruptive progress on the touchstone of financial inclusion, with federal welfare payouts directly reaching the intended beneficiaries in a largely fraud-proof ecosystem undergirded by legacy lenders, nimble fintech firms and pertinent digital regulations. “Financial inclusion was actually tried and tested in terms of scale and volume during the pandemic,” financial services secretary Debasish Panda said at the ET Financial Inclusion Summit. Reliance on the digital infrastructure largely cut out the scope of pilferage in the distribution of federal welfare packages, Panda said.

“This is thanks to the vision of our PM, who thought so in 2015,” Panda said. “Today, it’s a reality and during the pandemic, we used it to the full extent.” Panda said that the government has been asking banks to partner with fintechs, as these new-age firms operate in different ecosystems and geographies, carving out innovative solutions.

“What we are doing now is bringing more, new-to-credit micro enterprises in the formal banking channel. We are taking help from fintechs, carving out innovative solutions for segments and geographies,” he said, adding that fintech firms are trying to connect alternative data points. “I don’t have a credit history but I have a spending history; so they collect those sets of data, do an analysis, use technology and then build a dossier for that individual which then becomes comfortable for the bank to lend,” he said, adding that banks and insurance companies also see value here. Panda said that the regulatory arrangement is already there for fintech firms to operate. “The RBI and IRDAI have provided a sandbox kind of an arrangement where fintech or insurance tech can try and test it on the ground and once the proof of concept is established, they can straightway get the licence and carry the work forward,” he said.

The financial services secretary noted that the basic tenets of the financial inclusion plan are banking the unbanked, securing the unsecured and funding the unfunded. “The three pillars have then created a digital pipeline of Jan Dhan accounts, Aadhaar and the Mobile (JAM), which have built a regular flow of benefits and services,” he said. The number of Jan Dhan accounts stand at 420 million, and more than 55% of these belong to women beneficiaries. Panda said that through opening bank accounts, the initial target was to saturate every household.

“The next target was to saturate every adult and that has also happened to a large extent; there are certain pockets where there is a little shortfall and work is in progress,” he said. The government is now identifying districts not matching with the national-level average. The government further aims to ensure availability of a banking touchpoint for any habitat within a radius of 5 kilometres.

Panda noted that micro finance institutions have the connect with the last-mile borrower. “Banks are tying up with MFIs under the co-lending arrangement of the RBI, where the interest gets blended so it comes down also to the end borrower and the credit is flowing,” he said.

Panda said that the transition toward New India is gathering pace. “We are trying to power India toward a $5-trillion economy; so unless we take this population above that threshold, we will be left behind. So efforts are on,” he said.



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Growth expectations of NBFCs moderated in Q1 FY22

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Growth expectations of Non-Banking Financial Companies (NBFCs) have moderated vis-à-vis the expectations six months earlier in view of the possible impact of Covid 2.0 on business in Q1 (April-June) FY2022, according to an ICRA survey.

The survey expects the asset quality related pain to persist in the current fiscal as well.

As per the survey across NBFCs, covering over 65 non-banks, constituting about 60 per cent of the industry assets under management (AUM), 42 per cent of the issuers now expect growth of more than 15 per cent in the AUM in FY2022, much lower than 56 per cent earlier.

The survey includes Micro Finance Institutions (MFIs), NBFCs, and housing finance companies (HFCs), excluding infrastructure finance companies and Infrastructure Debt funds.

ALSO READ NBFC-MFIs: Sector sees nearly 25% decline in FY21

Manushree Saggar, Vice-President, Financial Sector Ratings, ICRA, said: “While 42 per cent of the issuers (by number) are expecting a more than 15 per cent growth in AUM in FY2022, the proportion based on AUM weights is much lower at 8 per cent; indicating that larger players in the segment expect a relatively moderate growth in FY2022.

“With most of the lenders (74 per cent; in AUM terms) indicating an up to 10 per cent AUM growth, we expect the growth for the overall industry to be about 7-9 per cent for FY2022.”

The agency emphasised that within the non-bank finance sector, segments such as MFIs, SME-focused NBFCs and affordable housing finance would continue to record much higher growth than the overall industry averages; supported by good demand and lower base.

Notwithstanding the optimism on AUM growth, the non-bank finance companies are expecting the asset quality related pain to persist in the current fiscal as well, opined ICRA.

The agency said said overall, 87 per cent of issuers (by AUM) expect reported gross stage-3/NPAs to be either same or higher than March 2021 levels, which in turn will keep the credit costs elevated.

This is also reflected in over 90 per cent of lenders (by AUM) expecting the credit costs to remain stable or increase further over FY2021 levels.

ALSO READ RBI links NBFC dividend payout to capital, NPA norms

Restructuring

On the restructuring front, while lenders are expecting marginally higher numbers as compared to the last fiscal, the overall numbers are expected to be low, the agency said in a note.

Almost 73 per cent of lenders (in AUM terms) have indicated an incremental restructuring of up to 2 per cent of AUM and another 21 per cent are expecting a restructuring between 2-4 per cent of the AUM, under Restructuring 2.0.

Within the non-bank finance sector, relatively higher impacted segments such as MFIs, SME lending and vehicles are expected to undergo larger share of restructuring compared with the industry average., according to the note.

The housing portfolio is likely to remain largely resilient, in line with the trend seen in FY2021.

Raise capital

The agency assessed that 80 per cent of the issuers are expected to maintain or increase on-balance sheet liquidity to take care of market volatility. Further, despite the pressure in the operating environment, 94 per cent of the issuers expect higher or stable profitability in FY2022 vis-à-vis FY2021.

The number of issuers expecting to raise capital almost doubled to 56 per cent this year compared with earlier survey results.

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RBI warns of stress build-up in consumer credit, BFSI News, ET BFSI

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The pandemic and its fallout on the economy has made consumer lending riskier for banks even as it has been the only sector to help banks keep their loan books afloat at such times.

The delinquency rates for such loans are going up particularly for private sector banks and NBFCs during the pandemic warned the Reserve Bank of India‘s latest financial stability report. At the same time the second wave has also affected demand for such loans with a steep fall in demand in April , it said.

The Reserve Bank’s latest Financial Stability Report notes that the delinquency rates for consumer credit in private sector banks doubled from 1.2 per cent in January 2020 to 2.4 per cent in January 2021. While for NBFCs it went up from 5.3 per cent to 6.7 per cent in the same period. Overall consumer credit deteriorated after the loan moratorium programme came to an end in September 2020.

“While banks and other financial institutions have resilient capital and liquidity buffers, and balance sheet stress remains moderate in spite of the pandemic, close monitoring of MSME and retail credit portfolios is warranted.” the report said.

Consumer credit includes home loans, loans against property, auto loans, two-wheeler loans, commercial vehicle loans, construction equipment loans, personal loans, credit cards, business loans, consumer durable loans, education loans and gold loans.

The overall demand for consumer credit in terms of inquiries had stabilised in Q4’2020-21 after a sharp rebound during the festive season in Q3’2020-21 after the first COVID-19 wave receded. But the second wave, however, has sharply affected credit demand, with a steep fall in inquiries across product categories in April 2021. Growth in credit-active consumers- consumers with at least one outstanding credit account- and, outstanding balances, however, remains sluggish compared to the previous comparable period. For unsecured loans, the fastest-growing category in this segment, for example, fell from 39.4 per cent in January’20 to 6.5 per cent in FY’21. For home, which accounts for a major chunk of this segment, the growth rate of credit-active consumers slowed from 12.03 per cent to 0.3 per cent during the period.

On a positive note, loan inquiries are more from better-rated borrowers. “Loan approval rates remain healthy as the risk tier composition of inquiries shows a distinct tilt towards better-rated customers.” the central bank‘s report said.



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Western Union aims to scale up outbound remittance service

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Western Union, a global leader in cross border, cross-currency money movement and payments, wants to scale up its outbound remittance service from India this year, Sohini Rajola, Head of Network — APAC and Middle East, has said.

“Today sending money to India is easy. But for sending money from India there is still a room for process streamlining and improvement. We need to make it as seamless as sending money to India currently is. Scaling our outbound remittance service will be the focus area for Western Union India business this year,” Rajola told BusinessLine in an interview.

“As infrastructure develops at our end, we need to offer the same convenience to people sending money out as well. As and when we are able to offer direct debit or have simplified documents based on guidelines, our product will keep changing,” Rajola added.

India is the largest remittance recipient market in the world with annual inbound remittance of over $80 billion. The market for outbound remittance is however smaller at estimated level of $14 billion as of end March 2021. Infact, there has been a steady growth in outward remittance under the Liberalised Remittance Scheme (LRS) route over the last few years with volumes going up from as little as $1.33 billion in 2014-15 to $ 13.79 billion in FY’18-19 and touch high of $18.76 billion in FY’19-20.

Outbound market biz

“In any country we operate, we want to offer both inbound and outbound services. Outbound is definitely a smaller market in India. But if we have been serving the Indian consumer for 25 years, we definitely want the next phase where we can serve that segment well. It is not about whether it is worth it or not. It is about the gamut of services that Western Union offers,” Rajola said when asked it was worth the effort to focus energies on relatively smaller outbound market in India.

Rajola said that her aspiration this year would be to see how Western Union can work together with the regulator and authorities to simplify the processes and offer the same level of convenience of digital remittances to people sending money out of India as available for those making inward remittances.

Impact of Covid-19

On the overall impact of Covid-19 on remittance business, she said that personal remittances saw resilient volumes despite the pandemic. “Overall as a business we processed more business in 2020 than in 2019. We don’t share corridor-specific information, but our principal increased globally,” she said.

“When the pandemic struck initially, there was an apprehension that this will drop overall remittance volumes. What we saw was there was only minor impact. We saw a big jump on the principal volume that was transacted through Western Union,” she added.

Infact, in the first wave, given the cash restrictions, Western Union’s digital business took off in a big way as from people were sending money to support their family, she added. Also, RBI categorising remittance service as an essential service helped some locations to remain open, according to Rajola.

However, in the second wave there was not that big impact on the retail locations. The impact on the physical retail business has been more muted and digital continues to be showing healthy business, she added. At a global level, Wester Union is on course to clock digital revenues of $1 billion this year.

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Paytm launches ‘Postpaid Mini’ – The Hindu BusinessLine

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Digital financial services platform Paytm has launched Postpaid Mini, an extension of its Buy Now, Pay Later service, to drive affordability amongst those new to credit.

The small-ticket instant loans will give flexibility to users to maintain liquidity during the Covid pandemic. This service has been launched in partnership with Aditya Birla Finance Ltd.

With the launch of Postpaid Mini, the company will offer access to loans ranging from ₹250 to ₹1,000, in addition to Paytm Postpaid’s instant credit of up to ₹60,000. This will enable users to pay for their monthly expenses, including mobile and DTH recharges, gas cylinder booking, electricity and water bills, shop on Paytm Mall and more, according to the company.

Fintech will be the silver bullet for growth in 2021

Driving consumption

Bhavesh Gupta, CEO, Paytm Lending, said in a statement: “We want to help new-to-credit citizens start their credit journey and develop financial discipline. Through Postpaid we are also making sincere attempts to help drive consumption in the economy. Our new Postpaid Mini service helps users manage their liquidity by clearing their bills or payments on time.”

Paytm eyes $3-billion IPO

With this service, Paytm Postpaid is offering a period of up to 30 days for repayment of loans at 0 per cent interest. There are no annual fees or activation charges, only a minimal convenience fee.

Through Paytm Postpaid, users can pay at online and offline merchant stores across the country. Paytm Postpaid is currently available in over 550 cities in India.

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RBI warns against combination of high public debt, low interest rates, BFSI News, ET BFSI

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New Delhi: As economies around the world witness ultra-low interest rates and rising public debt amid the pandemic, the Reserve Bank of India (RBI) has said that the combination would pose challenges.

The pandemic response saw a tight interaction of monetary and fiscal policy. As monetary policy has sought to control a larger segment of the yield curve, the overlap with public debt management has grown, noted RBI’s Financial Stability Report for July.

It noted that with monetary policy committed to an easy stance for some time in many countries, the fiscal stance becomes important.

Too loose a fiscal stance could cause inflation surprises and financial conditions could tighten, it said, adding that a more constrained fiscal policy would add pressure on monetary policy.

“It would test the efficacy of further monetary expansion and could heighten intertemporal tradeoffs,” it said.

The extraordinary combination of high debt-to-GDP ratios and ultra-low interest rates raises three challenges, said the central bank’s report, with the first being the risk of fiscal dominance.

Further, it may also lead to a situation where fiscal positions may ultimately prove unsustainable and the complications of the possible joint “normalisation” of fiscal and monetary policies would also crop.

Growth-friendly fiscal policy, the RBI suggested, can help by effectively targeting public infrastructure and productivity.



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Microfinance loan portfolio grows 11.9% to ₹2,59,377 cr as on March-end: MFIN

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The overall microfinance industry’s gross loan portfolio (GLP) surged by 11.9 per cent to ₹2,59,377 crore as on March 31, 2021 from ₹2,31,787 crore as on March 31, 2020, says a report.

The growth was driven by an addition of four lakh borrowers during the pandemic-struck 12-month period ending March 2021, according to a report – Micrometer, released by Microfinance Institutions Network (MFIN).

Also read: In a boost to MFIs, FM hikes ECLGS limit by ₹1.5-lakh cr

MFIN is an industry association comprising 58 NBFC-MFIs and 39 associates, including banks, small finance banks (SFBs) and NBFCs. As on March 31, 2021, the microfinance industry served 5.93 crore unique borrowers, through 10.83 crore loan accounts, the report said.

It said 13 banks hold the largest share of the portfolio in micro-credit with a total loan outstanding of ₹1,13,271 crore, which is 43.67 per cent of total micro-credit universe.

Non-banking financial companies-microfinance institutions (NBFC-MFIs) are the second-largest provider of micro-credit with a loan amount outstanding of ₹80,549 crore, accounting for 31.05 per cent to total industry portfolio, the report showed.

SFBs have a total loan amount outstanding of ₹41,170 crore with a total share of 15.87 per cent.

NBFCs account for another 8.36 per cent, and other MFIs account for 1.05 per cent of the total microfinance universe, it said.

The report further showed that the gross loan portfolio of NBFC-MFIs increased by 11 per cent to ₹81,475 crore as on March 31, 2021, compared to ₹73,412 crore as on March 31, 2020.

This GLP on NBFC-MFIs includes owned portfolio of ₹68,894 crore and managed portfolio of ₹12,581 crore, it said.

The association said its NBFC-MFI members disbursed ₹57,891 crore of loans in fiscal 2020-21 through 1.70 crore accounts.

Also read: RBI proposes regulatory framework for microlenders

Average loan amount disbursed per account during FY20-21 was ₹35,726, an increase of around 20 per cent in comparison to last financial year, the report said.

During FY2020-21, NBFC-MFIs received a total of ₹40,797 crore in debt funding which is 9.2 per cent higher than in FY2019-20.

Total equity of the NBFC-MFIs grew by 15 per cent to ₹18,663 crore as on March 31, 2021.

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