Tag: reserve bank

Moody’s, BFSI News, ET BFSI

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NEW DELHI: Moody’s Investors Service on Tuesday said the economic activity in India is picking up with the gradual easing of Covid restrictions and there could be further upside to growth as economies around the world gradually reopen.

In its August update to ‘Global Macro Outlook 2021-22’, Moody’s retained India’s growth forecast for the 2021 calendar year at 9.6 per cent and 7 per cent for 2022.

“In India, economic activity is picking up alongside a gradual easing of restrictions that were implemented in response to the second wave. And there is further upside to growth as economies around the world progressively reopen,” Moody’s said.

The rating agency said it expects the Reserve Bank to maintain an accommodative policy stance until economic growth prospects “durably improve”.

“We expect the RBI …. to maintain the status quo until the end of this year. We expect to see an increasing number of emerging market central banks shift to a neutral policy stance amid their gathering growth momentum later this year and early next year,” Moody’s said.

Indian economy contracted 7.3 per cent in 2020-21 fiscal. GDP growth in the current fiscal was estimated to be in double digits initially, but a severe second wave of the pandemic has led to various agencies cut growth projections.

Moody’s had in June projected a 9.3 per cent growth for the current fiscal ending March 2022.

It said the rapid global spread of the highly contagious delta variant of the coronavirus is a stark reminder that the global pandemic is far from over, although some vaccines appear to be highly effective at suppressing the severe disease, reducing the need for hospitalisations and lowering the incidence of fatalities.

Vaccination rates, the extent of serious infections and mobility restrictions remain the key determinants of where countries find themselves in their economic recovery cycle, it said, adding while the spread of the delta variant has prompted mobility restrictions in Asia, renewed lockdowns are far less likely in other regions of the world.

Moody’s estimates that the G-20 economies will grow by 6.2 per cent in 2021, after a 3.2 per cent contraction last year, followed by 4.5 per cent growth in 2022.

G-20 advanced economies will grow by 5.6 per cent collectively in 2021 while emerging markets will collectively expand by 7.2 per cent in 2021, it added.



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RBI increases incentives for banks for distribution of coins, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank on Friday increased incentives for banks for distribution of coins to the general public to Rs 65 from Rs 25 per bag. This has been done keeping in view the overall objectives of clean note policy and to ensure that all bank branches provide better customer service to people with regard to exchange of notes and distribution of coins, the central bank added.

The banks will also be provided an additional incentive of Rs 10 per bag for coin distribution in rural and semi-urban areas, the RBI said in a notification.

“With effect from September 1, 2021, an incentive of Rs 65 per bag for distribution of coins (instead of Rs 25 as earlier) will be paid on the basis of net withdrawal from currency chest (CCs), without waiting for claims from banks,” the RBI said.

The currency chest branch, it added, will pass on the incentive to the linked bank/branches for coins distributed by them on a pro-rata basis within one week from the receipt of incentives from RBI.

The circular further said with a view to meet the coin requirements of bulk customers (requirement of more than 1 bag in a single transaction), banks are advised to provide coins to such customers purely for business transactions.

The banks may also endeavour to provide such services as part of their board-approved policy on ‘Door Step Banking‘ services.

“Such customers should be KYC compliant constituents of the bank and the record of coins supplied should be maintained. Banks are advised to exercise due diligence to ensure that such facility is not misused,” it added.

Currently, coins are distributed to retail customers in small lots and not to bulk customers.

The Reserve Bank has also advised the banks to enhance the engagement of their Business Correspondents (BCs) for distribution of coins to the public and incentivise such activities as per their board-approved policy.



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RBI discusses a host of issues with small finance banks, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank on Friday discussed with the heads of the small finance banks (SFBs) the stress build-up due to the COVID-19 pandemic and other related issues. The round-table discussion of RBI Deputy Governors M K jain and M Rajeshwar Rao with managing directors and chief exceutives of small finance banks was held through video conference.

The discussion, according to an RBI release, focused on a range of issues including evolution of the business models of SFBs; enhancing board oversight and professionalism; further improvements in assurance functions, compliance; internal control and risk management; and need to build up their IT infrastructure both for enhanced customer experience and for cyber security resilience.

“…the stress build-up due to COVID-19 and the mitigation measures for continued resilience of books of SFBs also formed part of the discussion,” it said.

Challenges and the way forward were also deliberated upon to enable the SFBs to play their role in the Indian financial intermediation space and contribute to financial inclusion, the RBI said.

The deputy governors recognised also the contribution of SFBs towards financial inclusion by extending credit and reaching out to the underserved sections of society.

“Fruitful discussion was held in which the MDs and CEOs shared their experiences and ideas on the need to work together so that stated objective is achieved for which differentiated licences were issued,” the release said.

Other senior RBI officials, including executive directors too participated in the meeting.



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RBI imposes Rs 15 lakh penalty on Baghat Urban Co-operative Bank, Solan, BFSI News, ET BFSI

Banking & Finance

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The RBI on Wednesday said it has imposed a penalty of Rs 15 lakh on The Baghat Urban Co-operative Bank Limited, Solan, for violation of certain norms, including, those related to NPA classification. In another statement, the RBI said it has imposed a penalty of Rs 1 lakh on Delhi Nagrik Sehkari Bank Limited, New Delhi, for non-compliance with certain directions issued by the central bank.

The RBI said inspection report of The Baghat Urban Co-operative Bank, based on its financial position as on March 31, 2019, revealed non-adherence with/violation of directions, including non-identification of NPAs, wrong classification of assets, inadequate provisions made due to wrong classification of assets and non-adherence to exposure norms for housing, real estate and commercial real estate (CRE).

A notice was issued to the bank to show cause as to why a penalty should not be imposed for violation of the said directions.

The Reserve Bank of India (RBI) said after considering the bank’s reply and oral submissions, it came to the conclusion that the charges were substantiated and warranted imposition of monetary penalty.

The inspection report of Delhi Nagrik Sehkari Bank, based on its financial position as on March 31, 2019, revealed non-adherence with prudential inter-bank (gross) exposure limit, RBI said.

For both cases, the RBI said the penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by them with their customers.



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What made HDFC Bank’s big boss write the Reserve Bank a thank-you note, BFSI News, ET BFSI

Banking & Finance

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The boss of India’s largest private bank can’t thank RBI enough for the eight-month ban on issuing new credit cards. HDFC Bank‘s CEO Sashidhar Jagdishan in a company-wide communique said the central bank RBI’s embargo enabled the bank to reimagine its IT systems and processes and “turbo-charge” the pace of its technology transformation.

Jagdishan reiterated the bank’s plan to be “back with a bang” in the card space and regain lost market share.

As per Macquarie’s analysis, HDFC Bank lost nearly 180 basis points of market share as of May 2021 since end of November 2020 when the ban on launch of new credit cards came into effect. Their market share slipped to 24% while ICICI Bank and SBI Cards gained 130bps and 37bps to 17.4% and 19.2%, respectively.

The lender also has vast ground to gain and can easily capture back the space it lost after it added 36.5 lakh liability accounts from January to June 2021,1.5-2 lakh credit cards per month pre-Covid.

“I am thankful for the rap on the knuckles from the regulator. This rap has opened our eyes to the world of possibilities,” Jagdishan was quoted as saying in a TOI report. “In the coming time, we will be able to demonstrate the technology transformation that we have embarked on.”

Jagdishan also wrote of HDFC’s future credit card rollout plans. He added that business generation activities would continue under the Digital 2.0 initiative until further review. He plans to scale operations safely by building a ‘digital factory’ and an ‘enterprise factory’.

“Overall, lifting of RBI restrictions before the beginning of festive season is a positive development as HDFC Bank has usually been aggressive during festive season and offers various discounts on consumer products,” said Nitin Aggarwal, research analyst, Motilal Securities.



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HDFC Bank shares shed early gains to close marginally lower on bourses, BFSI News, ET BFSI

Banking & Finance

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After giving up morning gains, shares of the country’s leading private sector lender HDFC Bank closed marginally lower on the bourses on Wednesday.

The shares jumped nearly two per cent in early trade after the Reserve Bank‘s decision to allow the lender to issue new credit cards but the momentum could not be sustained, with the scrip ending marginally lower compared to Tuesday’s closing level on the BSE and NSE.

It ended the day at Rs 1,512.90 apiece on the BSE. After opening at Rs 1,550, the scrip touched an intra-day high of Rs 1,564.75 and an intra-day low of Rs 1,508.45.

On the NSE too, shares of the lender shed early gains to close slightly down at Rs 1,511.50 apiece.

It had touched an intra-day high of Rs 1,565.35 after opening at Rs 1,556.70. The intra-day low level was Rs 1,508.35.

In a regulatory filing on Wednesday, HDFC Bank said the Reserve Bank of India (RBI), through its letter dated August 17, has relaxed the restriction placed on sourcing of new credit cards.

The central bank had issued orders in December and February to HDFC Bank on certain incidents of outages in the internet banking /mobile banking/ payment utilities of the bank over the past two years.

HDFC Bank also said the restrictions on all new launches of the digital business generating activities planned under Digital 2.0 will continue till further review by the RBI.

Snapping its four-session record-setting spree, the 30-share benchmark BSE Sensex on Wednesday closed 162.78 points or 0.29 per cent lower at 55,629.49. It touched its all-time peak of 56,118.57 during the session.



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RBI gives Ind Bank Housing time till December to complete revival process, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank has asked Ind Bank Housing Ltd to complete its revival process by the end of December and submit a board-approved plan.

State-owned Indian Bank is the promoter of Ind Bank Housing with 51 per cent stake in the company.

“On our request, RBI has given us time up to December 31, 2021 for completing the revival process of the company and to submit board approved plan for revival,” Ind Bank Housing said in a regulatory filing on Friday.

The company had reported a net loss of Rs 6.36 lakh in the quarter ended June 2021, which widened from Rs 4.38 lakh loss in the same period a year ago.

The company’s total revenues were Rs 6.39 lakh during the period, down from Rs 8.33 lakh.

In its annual report 2019-20, Ind Bank Housing said it has put in place an aggressive recovery mechanism for realisation of existing home loans.

As of March 31, 2020, it had only one employee on direct rolls, while others were engaged on contractual basis or deputed from the parent organisation, it said in the report.

In 2020-21, the company had a net loss of Rs 18.87 lakh. During FY20, the company had a profit of Rs 2.74 crore. After appropriating the profit, the accumulated losses of the company stood at Rs 134.83 crore as at March 31, 2020 as against Rs 137.58 crore a year ago, it said in its annual report.

Ind Bank Housing said it is making efforts for revival of its operations and has prepared a road map for restructuring of capital and restarting of lending operations. However, the efforts have been delayed due to the COVID-19 situation, it said.



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Finance Minister Nirmala Sitharaman to meet CEOs of public sector banks on August 25, BFSI News, ET BFSI

Banking & Finance

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Finance Minister Nirmala Sitharaman is scheduled to meet heads of public sector banks (PSBs) on August 25 to review financial performance of the lenders and progress made by them to support the economy battered by COVID-19 pandemic.

Given the importance of the banking sector in generating demand and boosting consumption, sources said the meeting with the MD and CEOs of PSBs is considered important.

Recently, the Finance Minister said the government is ready to do everything required to revive and support economic growth hit by the COVID-19 pandemic.

“Growth will be given its importance. Growth will be pushed both by the Reserve Bank and by us…,” she had said.

Interestingly, this would be the first physical review meeting since the outbreak of the pandemic in March last year.

The meeting is expected to take stock of the banking sector, progress on restructuring 2.0 scheme announced by Reserve Bank of India (RBI), sources said, adding that banks may be nudged to push loan growth in productive sectors.

The revamped Rs 4.5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) would also be reviewed during the meeting likely to be held in Mumbai, sources said.

Besides, the Finance Minister is expected to take a stock of the bad loan or non-performing asset (NPA) situation, and discuss various recovery measures by banks, they said.

As a result of government’s strategy of recognition, resolution, recapitalisation and reforms, NPAs have since declined to Rs 7,39,541 crore on March 31, 2019, Rs 6,78,317 crore on March 31, 2020 and further to Rs 6,16,616 crore as on March 31, 2021 (provisional data).

At the same time comprehensive steps were taken to control and to effect recovery in NPAs, which enabled PSBs to recover Rs 5,01,479 crore over the last six financial years, the government informed Parliament recently.

As far as credit growth of scheduled commercial banks (SCBs) is concerned, it has remained positive for 2020-21 despite contraction in GDP (-7.3 per cent) due to the COVID-19 pandemic.

Gross loans and advances – outstanding of SCBs increased from Rs 109.19 lakh crore as of March 31, 2020 to Rs 113.99 lakh crore as of March 31, 2021. Agriculture and allied activities, micro, small and medium enterprises, housing and auto have witnessed a year-on-year growth of 12.3 per cent, 8.5 per cent, 9.1 per cent and 9.5 per cent, respectively, during the year.

Notwithstanding economic disruptions caused by the pandemic, PSBs have managed to raise a record Rs 58,700 crore from markets in 2020-21 through a mix of debt and equity to enhance capital base. As a result capital to risk weighted assets ratio rose to 14.04 per cent as of March 31, 2021, as against regulatory requirement of 10.875 per cent boosting the ability of PSBs to further increase lending.

As a result, PSBs in aggregate recorded a profit of Rs 31,816 crore, highest in five years, despite 7.3 per cent contraction in economy in 2020-21.

The primary reason for PSBs to post such a Rs 57,832-crore turnaround from a loss of Rs 26,015 crore in 2019-20 to a combined profit of Rs 31,816 crore was the end of their legacy bad loan problem.



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RBI gives Ind Bank Housing time till Dec to complete revival process, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank has asked Ind Bank Housing Ltd to complete its revival process by the end of December and submit a board-approved plan. State-owned Indian Bank is the promoter of Ind Bank Housing with 51 per cent stake in the company.

“On our request, RBI has given us time up to December 31, 2021 for completing the revival process of the company and to submit board approved plan for revival,” Ind Bank Housing said in a regulatory filing on Friday.

The company had reported a net loss of Rs 6.36 lakh in the quarter ended June 2021, which widened from Rs 4.38 lakh loss in the same period a year ago.

The company’s total revenues were Rs 6.39 lakh during the period, down from Rs 8.33 lakh.

In its annual report 2019-20, Ind Bank Housing said it has put in place an aggressive recovery mechanism for realisation of existing home loans.

As of March 31, 2020, it had only one employee on direct rolls, while others were engaged on contractual basis or deputed from the parent organisation, it said in the report.

In 2020-21, the company had a net loss of Rs 18.87 lakh. During FY20, the company had a profit of Rs 2.74 crore. After appropriating the profit, the accumulated losses of the company stood at Rs 134.83 crore as at March 31, 2020 as against Rs 137.58 crore a year ago, it said in its annual report.

Ind Bank Housing said it is making efforts for revival of its operations and has prepared a road map for restructuring of capital and restarting of lending operations. However, the efforts have been delayed due to the COVID-19 situation, it said. PTI KPM ABM ABM



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