Tag: scheduled commercial banks

Mudra loan disbursals rise in H1 on economic revival, BFSI News, ET BFSI

Personal Finance

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As the economy revives, Mudra loans, or small-ticket loans up to Rs 10 lakh for entrepreneurs and small businesses, have made a comeback.

According to the latest data, Rs 1,17,332 crore has been disbursed as on October 15 in the current fiscal, as against Rs 85,000 crore, showing the trend of normalisation of the economy.

Total disbursals in 2020-21 had declined to Rs 3.11 lakh crore against Rs 3.29 lakh crore in the previous year.

While public sector banks are actively lending to small businesses, many private sector banks are cautious on the segment and lending, just to meet the priority sector norms.

Rise in NPAs

However, non-performing assets among such loans have also increased. In Maharashtra, public sector banks’ Mudra loan NPAs have risen to 32 per cent at June-end 2021, from 26 per cent a year ago.

SBI’s NPA on Mudra loans in the state is at 59 per cent as on June-end 2021, followed by Punjab National Bank at 44 per cent, Indian Bank at 33 per cent and Bank of Maharashtra at 31 per cent at June-end 2021.

In Jharkhand, Canara Bank’s Mudra NPAs are as high as 114.35 per cent and bad loans were Rs 183.63 crore, against the outstanding amount of loans at Rs 160.58 crore.

Among private sector banks, HDFC Bank’s Mudra loan NPAs in Jharkhand were at 26.21 per cent, followed by IDFC First Bank at 24.93 per cent.

Loan losses

Public sector banks have seen a sharp surge in the amount of Mudra loans turning into NPAs over the last three years. NPAs in Mudra loans had jumped to Rs 18,835 crore in 2019-20, from Rs 11,483 crore in 2018-19 and Rs 7,277 in 2017-18, according to finance ministry data.

Mudra loan disbursements by state-owned banks rose to Rs 3.82 lakh crore in 2019-20, from Rs 3.05 lakh crore in 2018-19 and Rs 2.12 lakh crore in 2017-18.

Banks and financial institutions have sanctioned Rs 14.96 lakh crore to over 28.68 crore beneficiaries in the last six years. The average ticket size of the loans is about Rs 52,000, it said.

Under Pradhan Mantri MUDRA Yojana, collateral-free loans of up to Rs 10 lakh are extended by Member Lending Institutions (MLIs) viz Scheduled Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) etc.



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As markets soared, PSBs raised a record Rs 58,700 via debt, equity, BFSI News, ET BFSI

Banking & Finance

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Make hay while the sun shines. As the stock market soared during the pandemic, public sector banks raised a record Rs 58,700 crore from markets in FY2020-21 through a mix of debt and equity to enhance the capital base.

Series of successful QIP reflect the confidence of both domestic and global investors in PSBs and their potential.

The fundraise

This included Rs 4,500 crore raised by Mumbai-based Bank of Baroda from qualified institutional placement (QIP). Punjab National Bank mobilised Rs 3,788 crore through share sale on a private placement basis during the financial year ended March 31, 2021.

At the same time, Bengaluru-based Canara Bank raised Rs 2,000 crore from QIP, as per data collated from regulatory filings.

In addition, 12 PSBs raised funds from Tier I and Tier II bonds taking the total fund mobilisation to Rs 58,697 crore, highest amount garnered in any financial year.

Government reforms

Various reforms undertaken by the government including recognition, resolution and recapitalisation resulted in progressive decline in non-performing assets (NPAs) and subsequent rise in profit.

NPAs of PSBs had declined to Rs 7,39,541 crore as 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). Provision Coverage Ratio (PCR) at the same time increased sequentially to a high of 84 per cent.

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 due to COVID-19 pandemic.

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.

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.

Credit growth

Overall credit growth of Scheduled Commercial Banks (SCBs) has remained positive for 2020-21 despite a contraction in GDP (-7.3 per cent) due to the COVID-19 pandemic.

As per the RBI data, gross Loans and Advances 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.

Further, as per RBI data of loans to agriculture and allied activities, micro, small and medium enterprises, housing and vehicles 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.



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Minister, BFSI News, ET BFSI

Banking & Finance

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Non-performing assets (NPAs) or bad loans of banks have declined by Rs 61,180 crore to Rs 8.34 lakh crore at the end of March 31, 2021, as result of various steps taken by the government, Minister of State for Finance Bhagwat K Karad said on Monday.

Scheduled commercial banks (SCBs) were carrying NPAs worth Rs 8.96 lakh crore on their balance sheet at the end of March 2020.

“Primarily as a result of transparent recognition of stressed assets as NPAs, gross NPAs of SCBs, as per RBI data on global operations, rose from Rs 3,23,464 crore as on 31.3.2015, to Rs 10,36,187 crore on 31.3.2018, and as a result of Government’s strategy of recognition, resolution, recapitalisation and reforms, have since declined to Rs 9,33,779 crore on 31.3.2019, Rs. 8,96,082 crore as on 31.3.2020, and further to Rs 8,34,902 crore (provisional data) as on 31.3.2021,” he said.

Karad in a written reply to the Lok Sabha said COVID-19 Regulatory Package announced by RBI permitted lending institutions to grant a moratorium of six months on payment of all instalments falling due between March 1 and August 31, 2020, in respect of all term loans and to defer the recovery of interest for the same period in respect of working capital facilities.

Replying to another question, Karad said, gross NPAs of public sector banks (PSBs) peaked at Rs 8,95,601 crore on March 31, 2018.

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).

“The net NPAs have displayed a similar trend, increasing initially from Rs 1,24,095 crore on 31.3.2014 to Rs 2,14,549 crore on 31.3.2015, Rs 3,24,372 crore on 31.3.2016, Rs 3,82,087 crore on 31.3.2017 and peaking at Rs 4,54,221 on 31.3.2018, and declining thereafter to Rs 2,84,689 crore on 31.3.2019, Rs 2,31,551 crore on 31.3.2020 and further to Rs 1,97,360 crore as on 31.3.2021 (provisional data),” he said.

Throughout this period, he said, PSBs continued to post aggregate operating profits of Rs 1,37,151 crore, Rs 1,58,994 crore, Rs 1,55,603 crore, Rs 1,49,819 crore, Rs 1,74,640 crore in the financial year 2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 respectively.

“However, primarily due to continuing ageing provision for NPAs, they made aggregate provision for NPAs and other contingencies of Rs 1,55,226 crore, Rs 1,70,371 crore, Rs 2,40,956 crore, Rs 2,17,481 crore and Rs 2,00,404 crore respectively in the said years, resulting in aggregate net losses of Rs 17,993 crore, Rs 11,389 crore, Rs 85,370 crore, Rs 66,636 crore and Rs 25,941 crore respectively and returning to profitability thereafterwith aggregate net profit of Rs 31,820crore in FY2020-21,” he said.

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, he added.

In a reply to another question, Karad said overall credit growth of Scheduled Commercial Banks (SCBs) 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, he said.

Further, he said, as per RBI data of loans to agriculture and allied activities, micro, small & medium enterprises, housing and vehicle 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.

Ability of PSBs to further increase lending is evident through Capital to Risk Weighted Assets Ratio which stood at 14.04 per cent as of March 31, 2021, as against regulatory requirement of 10.875 per cent, he added.



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Credit guarantee scheme for facilitating MFIs loans announced, BFSI News, ET BFSI

Banking & Finance

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New Delhi, The government on Monday announced a new credit guarantee scheme that will facilitate loans to 25 lakh people through micro finance institutions (MFIs).

The announcement was made by Finance Minister Nirmala Sitharaman as part of economic relief package provided to spur investment climate in the country affected by the Covid pandemic.

As per the new scheme, guarantee will be provided to Scheduled Commercial Banks for loans to new or existing NBFC-MFIs or MFIs for on lending up to Rs 1.25 lakh to approximately 25 lakh small borrowers.

Interest Rate on Loans from banks will be capped at MCLR plus 2 per cent.

Maximum loan tenure 3 years, 80 per cent of assistance to be used by MFI for incremental lending, interest at least 2 per cent below maximum rate prescribed by RBI.

The focus of the scheme will that lending would be for new activities and not repayment of old loans. Loans to borrowers to be in line with extant RBI guidelines such as number of lenders, borrower to be member of JLG, ceiling on household income and debt.

All borrowers (including defaulters upto 89 days) will be eligible for guarantee cover for funding provided by MLIs to MFIs/NBFC-MFIs till March 31, 2022 or till guarantees for an amount of Rs 7,500 crore are issued, whichever is earlier.

Guarantee upto 75 per cent of default amount for up to 3 years through National Credit Guarantee Trustee Company (NCGTC) which will also not charge any guarantee fee.

–IANS

sn/kr



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IBC emerges as major mode of NPA recovery in 2019-20

Banking & Finance

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Non-performing assets (NPAs) recovered by scheduled commercial banks through the Insolvency and Bankruptcy Code (IBC) channel increased to about 61 per cent of the total amount recovered through various channels in 2019-20 against 56 per cent in 2018-19, according to latest Reserve Bank of India (RBI) data.

IBC, under which recovery is incidental to rescue of companies, remained the dominant mode of recovery, according to RBI’s “Report on Trend and Progress of Banking in India 2019-20.”

In absolute terms, of the total amount of Rs 1,72,565 crore recovered through various channels in 2019-20, IBC route accounted for Rs 1,05,773 crore. In 2018-19, of the total recovered amount of Rs 1,18,647 crore, the recovery via IBC channel was Rs 66,440 crore.

“Going forward, insolvency outcomes will hinge around uncertainties relating to Covid-19.

“The government has suspended any fresh initiation of insolvency proceedings in respect of defaults arising during one year commencing March 25, 2020 to shield companies impacted by Covid-19,” RBI said.

SARFAESI channel

The report observed that the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, (SARFAESI) channel also emerged as a major mode of recovery in terms of the amount recovered as well as the recovery rate, the report said.

Under SARFAESI, Rs 52,563 crore was recovered in 2019-20 against Rs 38,905 crore in 2018-19.

With the applicability of the SARFAESI Act extended to co-operative banks, recovery through this channel is expected to gain further traction, the report said.

Apart from recovery through various resolution mechanisms, banks also clean up balance sheets through sale of NPAs to assets reconstruction companies (ARCs) for a quick exit.

During 2019-20, asset sales by SCBs to ARCs declined which could probably be due to SCBs opting for other resolution channels such as IBC and SARFAESI, RBI said.

The acquisition cost of ARCs as a proportion to the book value of assets declined suggesting lower realisable value of the assets, it added

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