Tag: sbi

SBI likely to transfer Rs 20,000 crore NPAs to National Asset Reconstruction Company

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“In case the recovery is higher, assuming it to be 40%, the lenders will get the benefit via security receipts,” the bank official said.

By Ankur Mishra

State Bank of India (SBI) has identified bad loans worth Rs 20,000 crore that it plans to transfer to the National Asset Reconstruction Company (NARCL), sources close to the development told FE. These non-performing assets (NPAs) include Essar Power Gujarat, Coastal Energy and Reliance Naval.

In all, banks have identified 22 stressed accounts worth around Rs 89,000 crore that they want to transfer to NARCL in the first phase. Over time, lenders are expected to move loans worth nearly Rs 2 lakh crore to the bad bank.

In an email response to FE, SBI said, “It is a policy of the bank not to comment upon individual accounts and its treatment.”

FE also learned that the operational guidelines for NARCL are in the final stages, but the value at which the assets will be transferred is yet to be decided.

Explaining the process at NARCL, a senior bank official said: “Suppose NPAs worth Rs 89,000 crore are transferred to NARCL at an 80% haircut, NARCL will buy the exposure at Rs 17,800 crore.” Of the Rs 17,800 crore, NARCL will provide upfront cash of 15% to the banks and issue security receipts (SR) for the remaining 85% or Rs 15,130 crore. The upfront cash that banks receive would result in a write-back of provision for the lenders.

“In case the recovery is higher, assuming it to be 40%, the lenders will get the benefit via security receipts,” the bank official said.

The accounts that banks have chosen to transfer to NARCL should be completely provided for by the lenders, as per the Indian Banks’ Association (IBA) directions. The NPA accounts should also not be categorised as fraud or nearing a resolution for being eligible to be sent to NARCL.

IBA chairman Rajkiran Rai G has said banks have identified Rs 89,000-crore NPA accounts which could go to the ARC in the first phase. Rai added that only if the ARC management finds these assets worthwhile, it would make an offer to the banks.

Rai, who is also the MD and CEO of Union Bank of India, said, of the total amount, Union Bank has identified Rs 7,800-crore bad loans to be sent to NARCL. Similarly, Punjab National Bank (PNB) MD and CEO SS Mallikarjun Rao had said the lender had identified Rs 8,000-crore NPAs to be sent to NARCL.

In her Budget speech, finance minister Nirmala Sitharaman had announced setting up of an ARC and asset management company (AMC) for the resolution of stressed assets.

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Cashfree raises funds from SBI

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Bengaluru-based Cashfree, a digital payments and banking technology company, has raised an undisclosed amount from State Bank of India (SBI).

Cashfree provides a full-stack payments solutions platform, enabling over 1 lakh businesses in India and across the globe to accept and disburse payments online through a single integration.

Currently ranked among the leading payment service providers in India, Cashfree processes transactions worth $20 billion annually. Apart from India, Cashfree’s products are used in 8 other countries, including the US, Canada, and the UAE.

Cashfree secures $35.3 million as part of Series B raise

Akash Sinha, Co-Founder and CEO, Cashfree, said: “The investment from India’s largest bank shows its trust in Cashfree’s innovation and the way we are rapidly scaling up the payments business. This also underscores Cashfree’s role towards building a payments ecosystem that enables the fastest and easiest way to collect payments and make payouts for growing businesses. As we work towards digitising the economy, we remain committed to bringing uniformity, transparency and a reduced turnaround time to digital transactions among Indian businesses. The investment fits perfectly with our growth strategy as we continue to focus on customer experience and product innovation”.

Incubated by PayPal, Cashfree is backed by Apis Partners, Smilegate and Y Combinator. Cashfree is used by Zomato, CRED, Nykaa, Delhivery, Acko, and Shell, among others, for various business payment needs such as e-commerce payment collection, vendor payments, and marketplace settlements.

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SBI to keep up the momentum of stressed assets recovery: Dinesh Kumar Khara

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State Bank of India (SBI) will put in all efforts in FY22 to keep up the momentum of recovery made in stressed assets in FY21, according to Chairman Dinesh Kumar Khara.

This will be aided by the roll-out of pre-packaged insolvency for resolution, resumption of courts and formation of National Asset Reconstruction Company Ltd (NARCL).

India’s largest bank will make judicious use of all recovery options at its disposal, he said.

 

However, Khara underscored that it is too early to call a possible deterioration of asset quality in banks due to the second wave.

“The Bank over the last two financial years was dealing with a steep rise in stressed assets. All-round effort in managing stressed accounts initiated in FY2019 was carried through in FY2020 as well.

 

“However, the outbreak of the pandemic and subsequent lockdown in FY2021 altered the dynamics of stressed asset recovery. Bank had to grapple with disruption in normal proceeding at NCLT due to Covid-19 infections,” the SBI Chief said in the latest annual report.

Furthermore, the Reserve Bank of India (RBI) mandated a standstill clause for some portfolios.

Reduction in NPAs

“Despite all this, the bank was able to achieve a reduction in the level of Gross NPAs (non-performing assets) by ₹22,703 crore by March 2021.

“The corporate segment saw the largest reduction in NPA at ₹18,530 crore, while other segments remained more or less stable,” Khara said.

The gross NPA ratio of the Bank accordingly declined to 4.98 per cent from 6.15 per cent last year.

Khara said SBI is comfortably placed in terms of growth capital.

“Opportunities for lending in promising sectors will be explored to diversify the portfolio and contain risk,” he added.

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Through digital strategy, SBI to explore partnership with Agritechs to push farm credit

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State Bank of India (SBI) explores opportunities to enter into partnerships with select Agritechs to handle high volume and low-ticket loans in the Agribusiness optimally through a digital strategy.

India’s largest bank sees Agritech (agricultural technology) as a channel to bring in a new segment of customers (which the bank could not access earlier) – a channel to improve decision making, grow top-line and improve efficiency.

 

“The partnership will also serve as an opportunity to cut operational costs, credit costs, improve profitability and user experience as digital transformation will no longer be optional but a necessity for structural change in the digital ecosystem,” as per the bank’s annual report.

The bank wants to enter into partnerships with Agritechs with a differentiated business model that will help facilitate the transformation of the Agri supply chain to improve farm production opportunities for the farmers.

This will be done using digital tools such as Artificial Intelligence (AI), Blockchain, IoT (Internet of Things) and Machine Learning-powered capabilities.

During FY21, SBI disbursed ₹1,98,268 crore against the target of ₹1,74,468 crore.

 

“Growth in agriculture and allied activities is the only silver-lining in such a gloomy year.

“Agri Gross Value Added expanded by 3.6 per cent in FY2021 due to sufficient access to inputs, adequate and well-spread south-west and northeast monsoon rains, sufficient reservoir levels and improved soil moisture,” the report said.

According to data on the sectoral deployment of bank credit for March 2021, credit growth to Agri and Allied activities accelerated to 12.3 per cent in March 2021 (4.2 per cent a year ago), the highest since April 2017, it added.

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Rajnish Kumar, BFSI News, ET BFSI

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Vijay Mallya, former Chairman, UB Group and Kingfisher Airlines, has been claiming on Twitter that he is ready to make a one-time settlement to the lenders. But in reality, he has not made any official communication to them.

“Till the time I was the chairman, there was no communication received from Vijay Mallya about any such offer,” said, Rajnish Kumar, Former Chairman, SBI.

Mallya fled India in 2016 when the lenders and investigative agencies went heavily against him. He is now living in London. His total dues are more than Rs 7,000 crore and lenders are in the process of recovering from his assets. Recently, the PMLA court has approved the sale of his assets. Lenders are confident that there will be a significant recovery from his accounts.

“Lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently, the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes. I am sure the lender will recover better than many other stressed assets,”Kumar said.

This is the second time that Mallya has been proved wrong on his statements. Earlier too, Mallya had claimed that he had met former Finance Minister Arun Jaitley regarding an offer to settle his dues. But Jaitley had denied any such talks with him.

India has been trying hard to catch hold of Vijay Mallya who is living in London. There is already an extradition case going on and he is living on bail. After the PMLA courts approval to sell his assets, he said on Twitter, “Does nobody consider that my assets far in excess of Kingfisher Airlines borrowings have been attached by ED and the several of my settlement offers to repay 100%? Where is the cheating or fraud?”



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NCLT execution is frustrating; credit growth will remain a matter of concern, says Rajnish Kumar, BFSI News, ET BFSI

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Q. How are bankers mapping reality when everything is uncertain? How do you see credit growth this year?

Compared to the last year, the severity of lockdowns is not too much this year. If I look at the earnings of large corporations I can see that they are able to face the situation really well. Sectors like steel, cement and IT have shown some improvement. This year there is an impact on the rural economy, which was not there last year. Also, MSME is the most vulnerable and huge employment loss is a major concern. The key difference between 2020 and 2021 is that last year we had many measures from the government and RBI. My assessment is that the bank’s credit growth will remain a matter of concern this year too. Once vaccinations pick up and the third wave doesn’t strike, we can see a pick-up in the economy from the third quarter.

Q. Are the government and RBI initiatives generating the demand?

The government’s Emergency Credit Lending Guarantee Scheme (ECLGS) was very well received. RBI has kept the rates low and taken initiatives but the general belief is that monetary initiatives are not sufficient. We can’t do the heavy lifting which is required in the current situation. Right now the priority is to revive the demand and consumer confidence which can be done only by the government. Fiscal measures may be required. Given the constraints that the government has, the headroom is not unlimited. But this is an unusual situation and unusual steps are required.

Q. What should the government do to generate demand and consumption?

The government of Maharashtra reduced stamp duty from 6% to 2% and it generated a phenomenal business. This shows that such moves demonstrate the demand really well. It was an unprecedented move and it also improved the liquidity position of real estate developers. It is not necessary that only the central government should do all things; even state governments can take initiatives and offer incentives to encourage the demand.

Q. Has liquidation (at IBC) become a scam? Why are resolutions lesser than liquidations at IBC?

There are two things. First, generally for a better resolution what works is early detection. Here, many of the cases were really old and there was no chance of revival. Second, unfortunately, the weakest link in the whole IBC process is the execution. Many positions are lying vacant at NCLTs and many judges are going to retire soon. So how will the system work? We have thousands of cases. We are in a situation where the cases are piling up and resolution can’t happen. We have to make quick and immediate decisions. It’s a patient in the ICU and you can’t leave the patient unattended for months. There are cases where the resolution plan has been approved and voted on by the Committee of Creditors (COC) but there’s no decision from NCLT yet. It is a frustrating experience for the lenders. It is a frustrating experience for the resolution professionals. I don’t see any issue with the law, because a lot of amendments were carried out, but the execution is the weakest link. My view is if you can settle the cases without going to NCLT do that. You can think of a one-time settlement if you can. You may have a better recovery in certain cases there.

Q. Vijay Mallya is ready with the offer to settle the loans, are there legal challenges in accepting his offer?

There are no legal challenges, but till the time I was the chairman, there was no communication received from Vijay Mallya about any such offer. Also, lenders have security. Irrespective of what Vijay Mallya does, bankers have the security to recover their dues from his assets. And that security is very good and valuable. Recently the PMLA court has approved the sale of his assets. In Mallya’s case, whatever is the narrative, whatever be his mistakes, from lenders will recover better than many other stressed assets.

Q. With the emergence of digital and digital-only banks, where do you see SBI?

Today if technology is not the core of your business, then it will not survive. We were good at the back end. At SBI we have adopted digital heavily and the benefits are huge. Banking in 5-10 years will change beyond imagination. Large legacy banks also do not have a choice but to think like a tech company. Maybe it’s happening at different spaces at different banks, but SBI has its own advantage because of the customers and resources.

Q. What is the idea behind privatising two public sector banks?

The major issue is how long should the government capitalise the PSBs? And the government’s policy is also that they don’t want to have more than four entities in non-strategic sectors. There can be a question whether private banks perform better? But there is not an easy answer to this because there are failures in private banks as well. Also, the government wants to increase the governance of banks. So it’s a strategic decision. Because if the government wanted to only increase the governance they would have shifted the ownership of the PSBs to RBI, and the issue would have been resolved. RBI would have become the sole regulator and banks would have achieved similar results.



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SBI Chennai circle gets new CGM

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R Radhakrishna has taken charge as the new Chief General Manager of State Bank of India, Chennai circle.

Before his elevation as CGM, Radhakrishna served as GM, CCGRO (Commercial Clients Group Regional Office), in Bengaluru. The Chennai circle of the SBI has 1,248 bank branches under its jurisdiction across Tamil Nadu and Puducherry.

He joined the bank as Probationary Officer in 1987, and held various assignments in retail operations, HR and corporate credit. He has more than 33 years of experience in banking with more than 10 years of experience in high value credit, according to a statement.

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SBI sanctions ₹3725 crore for Noida International Airport

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Country’s largest lender State Bank of India (SBI) has sanctioned a loan of ₹3725 crore for the development of Noida International Airport (NIA) which is being developed by Yamuna International Airport (YIAPL) and will be the second airport in National Capital Region (NCR).

A statement issued by YIAPL said that the funding is a crucial milestone for the project as it validates the financial viability of the project while also outlining the next steps for the establishment of NIA.

“The entire loan of ₹3725 crore has been underwritten by SBI on a door-to-door loan tenor of 20 years,” Christoph Schnellmann, Chief Executive Officer of YIAPL said. Further he mentioned that the project will not only boost the Indian economy but will also help in employment generation in Uttar Pradesh and Delhi NCR region.

The airport is being developed in close partnership with the government of Uttar Pradesh and the Central government. The State government’s continued support towards the project has been vital in the process so far. YIAPL now looks forward to the conclusion of the UP government’s resettlement and rehabilitation process and the start of the construction of the airport, the statement mentioned.

Zurich Airport International AG (ZAIA), a fully owned subsidiary of Flughafen Zurich AG, is the main shareholder of YIAPL and is injecting ₹2005 crore into the development of NIA.

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SBI’s Ecowrap revises FY22 GDP projection to 7.9% from 10.4%

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State Bank of India’s economic research department has revised it real GDP projection for FY22 to 7.9 per cent from 10.4 per cent earlier, with its analysis showing a disproportionately larger impact of the second wave of Covid-19 pandemic on the economy.

The Department, in its report “Ecowrap”, imparted an upward bias to this number with the fervent hope of 1 crore vaccinations per day beginning mid-July as per government projections.

“However, our analysis shows a disproportionately larger impact on economy this time and given that rural is not as resilient as urban, the pick up in pent-up demand is unlikely to make a large difference in FY22 GDP estimates, and hence it could only be a modest pick up,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

For the current financial year, GDP outlook will be impacted by the trajectory of international commodity prices which have risen sharply during the year, as per Ecowrap.

Consumption impact

Further, the pass-through impact of higher commodity prices will be visible in domestic prices thus impacting consumption during the year.

Also read: Moody’s pegs India GDP growth at 9.3% in FY22

The report observed that the overall consumption trajectory will depend on the recovery in services “Trade, hotels, transport, communication & services related to broadcasting” which supports roughly 25 crore households. Corporate, in the listed space, reported better growth numbers across parameters in Q4 (January-March) FY21, but this trend may soon reverse.

The report observed that after registering nominal loss of ₹13.4-lakh crore in H1 (April-September) FY21, the gain in H2/October 2020 – March 2021 (of ₹7.3-lakh crore) resulted in overall annual loss of ₹6.1-lakh crore. Real loss on the other hand stood at ₹10.6-lakh crore in FY21.

“This is a peculiar characteristic that is being exhibited in FY21 data. Normally, the annual increase in nominal GDP is more than the annual increase in real GDP, which is quite obvious given the fact that inflation is always in positive territory in India. However, in FY21 the contraction in real GDP was more than the contraction in nominal GDP,” Ghosh said.

Third wave

Meanwhile, the report assessed that the average duration of third wave for top countries is 98 days and that of second wave is 108 days, with third wave peak as a multiple of second at 1.8 and second wave as a multiple of first at 5.2 (for India it was at 4.2).

Also read: Manufacturing PMI slides to 50.8, job shedding accelerates

International experience thus suggests that the intensity of third wave is as severe as the second wave, according to Ecowrap. However it is also observed that in third wave, if we are better prepared, the decline in serious case rate will lead to less number of deaths.

The department’s analysis shows that if serious cases decline from 20 per cent to 5 per cent (due to better health infrastructure and rigorous vaccination) in the third wave, then the number of deaths in the third wave could significantly reduce to 40,000 as compared to current deaths of more that 1.7 lakh.

“So vaccination should be the key priority, especially for the children who could be the next vulnerable group. With around 15-17 crore children in the 12-18 age bracket, India should go for an advanced procurement strategy like that adopted by developed nations to inoculate this age-group,” emphasised Ghosh.

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Banks begin process of restructuring of loans up to Rs 25 crore, BFSI News, ET BFSI

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To provide support to small businesses hit by the second coronavirus wave, banks have initiated the process of restructuring of loans up to Rs 25 crore in line with the COVID-19 relief measures announced by the Reserve Bank earlier this month. Many lending institutions have got board approval for the resolution framework and eligible borrowers are being contacted.

For example, Bank of India has sent messages to its eligible customers to submit their willingness to debt recast online.

“In these trying times, we offer you a helping hand by extending relief as per RBI Resolution Framework 2.0 dated May 5, 2021. If you are under financial stress caused by the COVID second wave, you may opt for restructuring of your account,” the message said.

Another public sector lender Punjab & Sind Bank said its debt recast plan as specified by the RBI has been approved by the board.

“We will be reaching out to our customers including through BCs…we will get a fair idea about how many customers want to avail the restructuring in the next few days or so,” Punjab & Sind Bank managing director S Krishnan said.

SBI Chairman Dinesh Kumar Khara said for the resolution framework 2.0 announced by the RBI on May 5, all public sector banks have come out with a formulated templated approach for restructuring of loans to individuals, small businesses, MSMEs up to Rs 25 crore.

“The idea behind this is that those who are involved in the implementation of the resolution framework, they should not have any hardship in terms of any implementation,” Khara added.

When asked about the size of the restructuring pool banks are expecting this time, IBA Chairman and Union Bank of India‘s Managing Director and Chief Executive Officer Rajkiran Rai G said it was too early to put a number for potential recasts, as banks are only sending messages to eligible borrowers.

“Last time also we saw that the number of customers opting for this (restructuring) was not that high. So, we need to get some feedback and it is difficult to crystallise a number at this point in time,” he said.

The SBI chairman, Khara, said during the previous restructuring scheme, SBI had about 8.5 lakh SME customers who were eligible for restructuring but only 60,000 borrowers availed it.

The resurgence of the fresh COVID-19 wave has put many MSME, individuals and small businesses under stress. Taking cognisance of the prevailing situation, the RBI announced Resolution Framework 2.0 under which individuals and small businesses having exposure up to Rs 25 crore can opt for loan restructuring if they had not availed the earlier scheme.

In the case of those who had availed the loan restructuring under the earlier scheme, the RBI permitted the banks and lending institutions to modify the plans and increase the period of the moratorium to help alleviate the potential stress.

“In respect of small businesses and MSMEs restructured earlier, lending institutions are also being permitted as a one-time measure, to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, etc,” RBI Governor Shaktikanta Das had said while announcing steps to deal with the impact of the second wave of the COVID-19.

This is a one-time loan restructuring scheme under which the loan would remain standard despite recast and banks would not have to make additional provision in such cases.

This is the second restructuring scheme announced by the central bank in less than one year, with the first unveiled in August last year when the first COVID-19 wave had battered the Indian economy with a contraction of 8 per cent during the financial year ended March 2021.

Borrowers who were classified as “standard” as of March 31, 2021, will be eligible to be considered under Resolution Framework 2.0.

Restructuring under the proposed framework may be invoked up to September 30, 2021, and would have to be implemented within 90 days after invocation. DP MKJ MKJ



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