Tag: Standard Chartered Bank

10 banks come together to set up Secondary Loan Market Association

Banking & Finance

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Ten major banks, including State Bank of India (SBI), ICICI Bank, Canara Bank and Standard Chartered Bank (SCB), have come together to set up the Secondary Loan Market Association (SLMA). It is aimed at promoting the growth of the secondary market for loans in India and also create an online platform for this purpose.

SLMA is a self-regulatory body and has been formed as per the recommendation of the Reserve Bank of India’s Task Force on the Development of secondary market for corporate loans.

Wanted: A secondary market for bank loans

The other members of SLMA are Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

As per SLMA’s memorandum of association, it will facilitate, promote and set up an online system for the standardisation and simplification of primary loan documentation, and standardisation of documentation for the purchase and sale/assignment documentation and other trading mechanisms for the secondary loan market and its documentation.

Website, logo, launched

SLMA will also develop and promote standard trading, settlement and valuation procedures and practices and rules and timelines for the members for conducting the business and to fix transaction-related charges.

The company’s website and logo were digitally launched on August 11, 2021, by Saurav Sinha, Executive Director, Reserve Bank of India.

Bonding together

Sinha said an active secondary market for loans in India will offer benefits to various stakeholders by way of capital optimisation, liquidity management, risk management, exposure re-balancing and efficient price discovery mechanism.

He observed that since smaller banks are generally constrained for various reasons from participating in large and creditworthy lending exposures at the time of origination, the secondary market can enable them to participate in such exposures at a later stage and the constraints faced under the Large Exposure Framework will be a thing of the past.

Sinha also laid stress on the essential pre-requisites for a vibrant secondary market — an ecosystem of market intermediaries like facility agents, security trustee, arrangers, valuation agencies, etc.

Expanding the spectrum of investors

Ashwini Bhatia, Managing Director, SBI, noted that the conceptualisation and operationalisation of SLMA in a time-bound manner is an appropriate response to the long-felt need for wider participation in the loan market aided by appropriate risk mitigation. It will provide the banks and other participants a window for managing their loan assets portfolio, he added.

Bhatia underscored that presently, the primary and secondary markets are restricted to banks and non-banking finance companies and domestic and foreign investors participate only in distressed debt through Asset Reconstruction Companies.

“As such, there is a felt need to expand the spectrum of investors in the secondary market and Alternative Investment Funds/Mutual funds to invest in the secondary loan market,”he said.

Sanjay Srivastava, Chairman, SLMA, said the secondary market for loans in India will evolve on the strength of a systematic digital loan trading platform, standardisation of documents, active participation by stakeholders and effective price discovery mechanism.

Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA), said currently the IBA is actively working on development of syndicated loan market in India and one of the key success factors for such market will be the parallel development of secondary market for sale of loan.

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Raghuram Rajan, BFSI News, ET BFSI

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NEW DELHI: The term ‘Quantitative Easing’ became widely known in financial markets during the last Global Financial Crisis of 2008. Former RBI governor Raghuram Rajan, who famously predicted that particular collapse, has recently warned about the risks associated with excessive largesse from central banks.

In a recent article, Rajan flagged the potential pain that global financial markets might see when central banks turn off the easy money tap.

The world over, government debt is rising exponentially and more worryingly, an increasing amount of the debt maturity profile is skewed through issuance of longer-dated securities.

Political dispensations typically look past long-term debt, as the exigencies of democratic politics may ensure that a successive administration has to bear the burden of earlier borrowings.

“…What if interest rates start moving up as inflation takes hold? If government debt is around 125% of GDP, every percentage point increase in interest rates would translate into a 1.25 percentage point increase in the annual fiscal deficit as a share of GDP,” the RBI ex-governor wrote.

SHORT-TERM EXPOSURE
Rajan specifically warned about the risks that economies are exposing themselves to on account of the inevitability of interest rate hikes.

“When the central bank hoovers up five-year government debt from the market in its monthly bond-buying program, it finances those purchases by borrowing overnight reserves from commercial banks on which it pays interest… QE thus drives a continuous shortening of effective government debt maturity and a corresponding increase in (consolidated) government and central bank exposure to rising interest rates,” he wrote.

LESSON FOR INDIA?
India’s public debt profile worsened significantly well before the pandemic. Government debt, which till three years back used to be confined to Rs 6 lakh crore on a gross basis, has risen by around 80% over the last 2-3 years.

This financial year, the government has announced a gross borrowing programme of Rs 12.06 lakh crore. When interest rates rise, as they must at some point, the shock to banks’ profit margins could be huge after this degree of exposure.

In recent chats with ETMarkets.com, some leading economists have flagged the issues emanating from such elevated levels of public indebtedness.

“Scenarios where debt-to-GDP becomes a problem can always emerge, especially if nominal GDP growth is not close to double digits. However, as of now, our baseline view is that general government debt-to-GDP is close to 88-90%, but it is unlikely to become a concern for the rating agencies, because we expect a gradual downward trend after two to three years,” Standard Chartered Bank’s head of economic research Anubhuti Sahay said.

“… with public debt at close to 90% of GDP, fiscal headroom to deal with another wave is now further compromised. And then, there is not a whole lot that additional monetary accommodation can achieve,” ANZ Bank’s Chief Economist for South East Asia and India Sanjay Mathur said.

Raghuram Rajan perhaps reserved the most hard-hitting part of his recent note for the last paragraph.

“As for the US, not only is the outstanding government debt much shorter in maturity than that of the UK, the Fed already owns one-quarter of it,” he wrote.



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RBI’s communication key to handling excess liquidity, says StanChart’s Sahay, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Over the last few weeks, a conundrum has resurfaced for the Reserve Bank of India — how to keep the liquidity surplus in the banking system from ballooning past a point that would be difficult to tackle in the future.

Standard Chartered Bank‘s head of economic research – South Asia, Anubhuti Sahay, is of the view that while it is important to permit a surplus of liquidity, it is equally important that “unnecessary excesses” are mopped off.

“I would suggest the following to the RBI Governor. The stock of liquidity if it becomes too large can become very difficult to absorb later on. Thus it is important that timely action is taken to ensure that liquidity remains in surplus, allows monetary policy transmission but unnecessary excesses are mopped off,” she said.

At present, liquidity in the banking system is estimated to be around 6 lakh crore rupees while the government is expected to be sitting on around 4 lakh crores, taking the core liquidity above 10 lakh crores.

Liquidity in the banking system in seen rising in the Jul-Sep quarter because of redemptions of Treasury Bills worth around 1.7 lakh crores, treasury officials said. In addition, the RBI is regularly infusing durable liquidity through its bond purchases under the recently announced ‘Government Securities Acqusition Programme’.

For the current quarter, the central bank has committed bond purchases worth 1.2 lakh crores.

From the perspective of its bond purchases there is little that the RBI can do because it is necessary for the central bank to be an active buyer of gilts and anchor sovereign borrowing costs at a time when the government borrowing programme is huge.

Moreover, the surplus liquidity conditions maintained by the RBI have had a significant role to play when it comes to keeping credit costs in the economy low at a time when the coronavirus crisis has crippled demand.

Sahay said that the RBI’s communication to markets would play a key factor in how the central bank manages episodes of a large accretion to liquidity.

In January 2021, markets were spooked when the RBI unexpectedly announced variable rate reverse repo operations as the step was taken as a precursor to policy normalisation.

At the time, the liquidity surplus was comparable to what it is now. The RBI has since, several times assured markets that it is not taking any steps to commence policy normalisation.

“It is important that measures are announced on a regular frequency while clarifying that these are not measures towards policy normalisation,” Sahay said.



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Banks feel the regulatory heat as RBI imposes penalties amid pandemic shadow, BFSI News, ET BFSI

Banking & Finance

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As it moves to risk-based supervision, the Reserve Bank of India has stepped up the heat on banks.

In the first half of this year, the central bank has imposed fines of over Rs 43 crore on 23 banks for various regulatory non-compliances and lapses. The RBI had imposed a fine of Rs 20 crore on eight banks in 2020.

After the Nirav Modi scam, RBI had stepped up its surveillance and imposed a hefty Rs 143 crore fine on 49 banks in 2019. While the amount of fine was small individually in 2019, the RBI has increased it multifold as it has fined HDFC BankRs 10 crore, Bank of India Rs 4 core, Punjab National Bank Rs 2 crore and SBI Rs 50 lakh.

In January this year, the central bank had imposed Rs 2 crore penalties on Deutsche Bank and Standard Chartered Bank. It has imposed penalties on various cooperative banks during the year.

Risk based supervison

In May this year the Reserve Bank has decided to review and strengthen the Risk Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.

The RBI uses the RBS model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

“It is now intended to review the supervisory processes and mechanism in order to make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies, if any,” the RBI said while inviting bids from technical experts/consultants to carry forward the process for banks.

In case of UCBs and NBFCs, the Expression of Interest (EOI) for ‘Consultant for Review of Supervisory Models’ said the supervisory functions pertaining to commercial banks, UCBs and NBFCs are now integrated, with the objective of harmonising the supervisory approach based on the activities/size of the supervised entities (SEs).

“It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in forward looking manner and for harmonising the supervisory approach across all SEs,” it said.

Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).

The RBI undertakes supervision of SEs with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability, so as to protect depositors’ interests and financial stability.

The Reserve Bank conducts supervision of the banks through offsite monitoring of the banks and an annual inspection of the banks, where applicable.

In the case of Urban Cooperative Banks (UCBs) and NBFCs, it conducts the supervision through a mix offsite monitoring and on-site inspection, where applicable.

A technical advisory group consisting of senior officers of the RBI would examine the documents submitted by the applicants in connection with EOI.



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CDSL becomes the first depository to open 4- crore active Demat accounts, BFSI News, ET BFSI

Personal Finance

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Central Depository Services (India) Limited (CDSL), India’s leading and only listed depository, has announced the first depository to open Four crores plus (40 million) active Demat accounts.

CDSL is currently the largest depository in the country in terms of active Demat accounts.

CDSL facilitates holding and transacting in securities in the electronic form and facilitates settlement of trades on stock exchanges.

CDSL has an objective of delivering quality services and innovative products. Since the financial services industry has become increasingly IT-reliant, CDSL is adopting technology as a part of its strategic vision. Major shareholders of CDSL include BSE, Canara Bank, HDFC Bank, LIC and Standard Chartered Bank.

Nehal Vora, CEO of CDSL said “I will firstly congratulate SEBI – the capital market regulator for being the visionary leader that guided us to this digital growth and safe ecosystem. It is their foresight that transited the long Demat account opening procedure into an easy digital experience without compromising on the necessary controls. Our milestones are a result of the hard work and coordination of all the market infrastructure institutions and the market intermediaries. I wish to thank the investors for choosing CDSL to be their depository. I would like to thank all the participants of the capital market for their contribution in accelerating the digital and financial growth of India.”

This journey of financial inclusion has to enhance to engage with a higher number of persons to foray into the securities market to achieve the objective to make India a capital market hub that is highly focused on corporate governance, technology, investor protection, transparency, and sustainability.

Further, CDSL will continue to provide services for the progress of the securities markets, for the valued investors in line with our vision of “Empowering the Atma-nirbhar Niveshak” through our digital services.”



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Centrum-Bharatpe joint venture to pump Rs 1,800 crore into PMC on merger, BFSI News, ET BFSI

Banking & Finance

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The joint venture floated by Centrum Group and digital payments startup Bharatpe for launching a small finance bank will infuse Rs 1,800 crore capital into troubled Punjab & Maharashtra Cooperative Bank (PMC) on its merger with the proposed bank, a top Centrum official has said. Last Friday, the Reserve Bank gave an in-principle approval to Centrum Financial Services, a step-down arm of the diversified financial services group, to set up a small finance bank (SFB) provided it took over the troubled PMC Bank.

The in-principle approval has been in specific pursuance to Centrum Financial Services’ offer on February 1, 2021 in response to the expression of interest notification dated November 3, 2020 published by the PMC Bank, the RBI said.

This paves the way for ending nearly two anxious years for the PMC depositors whose over Rs 10,723 crore are still stuck in the crippled cooperative bank that has been under RBI administrator since September 2019.

To launch SFB, the Centrum Group has sewed up an equal joint venture with Resilient Innovations, an arm of Gurugram-based Bharatpe. But Centrum Capital will be the promoter of SFB, under the prevailing laws, the group said.

“We (the SFB joint venture) have set aside Rs 1,800 crore for the SFB, which eventually will be pumped into PMC once the government scheme for merger is notified. Of the Rs 1,800 crore, Rs 900 crore will be invested in the first year by the joint venture split equally between the two and the remaining capital in stages,” Jaspal Bindra, executive chairman of Centrum Group, told over the weekend.

Whether they will take over the more than Rs 6,500 crore of NPAs of PMC and also the over Rs 10,700 crore of its deposits, Bindra said that will be known only after the government notified the merger scheme.

“What terms and conditions the government will set in the merger scheme will decide the fate of huge bad loans and losses. In fact, this is the only little unknown we have as of now,” Bindra quipped.

That the groups have allocated nine-times more capital over the RBI mandate of Rs 200 crore for the SFB shows the seriousness of the promoters. If it succeeds, this will be the first SFB in nearly six years — the first set of SFB licences were issued in August 2016, when the monetary authority also made such licensing on-tap.

Bindra, who was the group executive director and chief executive for Asia Pacific at Standard Chartered Bank till 2015, joined Centrum in April 2016 as executive chairman and picked up around 25 per cent, also said they will surrender all their NBFC licences before launching the SFB.

“The RBI has given us 120 days to complete the other “fit and proper conditions” to seek the final licence, which I am very confident of meeting well in time. In fact, we will be seeking the final licence as soon as possible,” he said.

Asked he chose a startup to form an equal joint venture for its banking foray, Bindra said, for one, very few players have the technological edge that Bharatpe has. “For another, we’ve been having strong business relationships with the Gurugram startup since the very first day of its operations.”

“So we are known to each other since 2018 and moreover our businesses complement each other and the SFB will definitely be a tech-driven bank for sure. In fact, we have had a full joint agreement in place much before we sought the licence and we joint bided for the licence,” he added.

Asked if the focus on technology will lead to branch rationalisation of PMC, he said when it comes to lending it will be tech driven “but for deposit raising we have to have branches. So in effect we may have to retain the branches to a large extent”.

The city-based Centrum Group, founded by Chandir Gidwani and Khushrooh Byramjee in 1977, has a diversified fee business and a lending platform for institutions and individuals. It offers investment banking, mid-corporates & SME lending, and broking for institutions and retail. It also provides MSME credit, wealth management, affordable housing and micro lending, apart from private debt and venture capital.

Centrum Capital, which is listed on the exchanges, reported a net loss of Rs 16.02 crore in Q3 of FY21 as against a net profit of Rs 3.35 crore in Q3 of FY20 as its income declined 7.2 per cent to Rs 123.12 crore in the quarter.

On the other hand, 2.5-year-old Bharatpe closed FY21 with an operating income of over Rs 700 crore, up from Rs 110 crore in FY20, driven by its credit business that closed the year with a loan book of Rs 1,600 crore, its president Suhail Sameer had told last week.

As of March 2020, PMC’s deposits stood at Rs 10,727.12 crore, advances at Rs 4,472.78 crore and gross NPAs at Rs 3,518.89 crore and net loss of Rs 6,835 crore, with a negative networth of Rs 5,850.61 crore.

The PMC book was so bad that as much as 73 per cent of its assets worth over Rs 6,500 crore of the total Rs 8,880 crore loans were to the crippled developer HDIL and all of them had turned dud by September 2019.

A good portion of the deposits are of senior citizens and cooperative societies including an RBI officers association. Its share capital is Rs 292.94 crore.

Bindra said they are yet to finalise the name for the SFB but added it will not be PMC for sure. The board is more or less in place and I will certainly be a part of it, he said.



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It’s a bank, PMC will be part of, it’s not takeover, says Centrum’s Jaspal Bindra, BFSI News, ET BFSI

Banking & Finance

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For Jaspal Bindra, who headed Standard Chartered Bank’s Asia operations in his 40s, the road back to banking is a challenging one. Bindra, who exited StanChart to turn entrepreneur by acquiring a stake in Centrum in 2016, will have to build a bank by merging operations of a failed local cooperative, a non-banking finance company and a new age digital lender.

For Bindra, who has been pursuing a bank licence for some time, the RBI’s quest for a white knight for Punjab and Maharashtra Cooperative Bank (PMC) provided that opportunity. The RBI has granted Centrum 120 days to convert itself into a bank with fintech player BharatPe as an investor who will merge its payment business with the bank. “We are seeing it as a bank which PMC will be a part of and not a takeover. We are capitalising it abundantly so that we will have room to do other things and PMC’s operations will not dominate the new bank,” said Bindra.

“As against the Rs 200-crore minimum capital required for a small finance bank, we are committing to bringing in Rs 900 crore in the first year and we have further committed Rs 900 crore from both of us. In all, we are committing Rs 1,800 crore,” said Bindra. He added that currently the partners are self-sufficient for capital and funds would be raised only at a later day.

Bindra agrees that PMC Bank has a large hole in its books which Centrum examined in January before making the bid. It is not yet clear to what extent the hole will get filled as the Deposit Insurance and Credit Guarantee Corporation would pay out depositors only after the RBI invokes Section 45 of its Act which has the same effect as a bankruptcy resolution and does not leave scope for any additional payments outside the plan notified by the government.

Both Centrum and Bharat Pe will have to follow RBI’s diktat and undertake all financial businesses within the new bank and not in group companies. This means that the bank will begin with Centrum’s sizeable loan book and BharatPe’s large payment business.

“The PMC loan book is wholesale which is not part of our business, and this will be a runoff. This will not exist in our future as we want to be a pure digital play with over 85% of business being done on the digital platform. The offline presence will be for only those segments of society without digital access,” said Bindra.

The government notification will also determine the terms for the staff of PMC Bank. “For PMC staff we will have to see what comes in the government notification. For our existing staff, we are going to choose the best person between Centrum, BharatPe and the market. We are going to plan talent for the longer term. It does not mean that there will be layoffs as there will be jobs outside the bank for Centrum and BharatPe,” said Bindra.

While there is no guarantee that customers will retain their deposits once the new bank opens its doors, Bindra sees value in the retail deposit franchise. “The branch network is relevant from deposit collection point. They were quite exceptional in their service quality, and we will be happy to have the staff as a valuable addition to the group. They have Finacle which is a leading software platform,” said Bindra. Besides the amalgamation of unlikely partners, the PMC resolution is an experiment at several levels. This is the first time that the RBI is using the lure of a bank licence to refloat a failed bank. This would also be the first time that an old-world business is being moved onto a digital system.



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Covid-19: UK-based banks announce financial and medical support for employees in India

Banking & Finance

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Barclays and Standard Chartered Bank have announced a slew of measures, including salary advance, enhanced insurance limits and doctors on call, for their employees in India to help them deal with the Covid-19 pandemic.

Barclays has introduced a new set of measures, including facilitating vaccinations, enhanced insurance limits, uncapped paid leave, financial aid and support channels, for its over 20,000 employees in India to deal with the Covid-19 pandemic.

Some of the aforementioned measures will also be available to the families of the London-headquartered Barclays, whose India operations include banking, securities, technology and shared services.

Also read: India inc attract customers with ‘pandemic’ focussed products

The Bank, in a statement, said hospitalisation insurance limits have been raised and certain costs not covered by insurance, such as PPE equipment charges, will be covered.

“All employees can take uncapped paid leave to give sufficient time to recuperate from Covid-19, get vaccinated, and for taking care of a family member.

“Junior colleagues will receive one month’s salary in advance to help manage unforeseen expenses,” it added.

Also read: Several businesses suspend operations in India, help staff as coronavirus ravages

The Bank said employees have access to a 24/7 Covid care helpline, online doctor consultations, a peer-to-peer support network, and a 24/7 confidential helpline that provides free counselling services.

Standard Chartered said its comprehensive benefit programme for its over 25,000 employees in India will include financial reimbursement of expenses incurred towards Covid-19 related medical treatment for parents and parent-in laws up to ₹2.50 lakh per patient with ICU admission and up to ₹1.25 lakh per patient with any other hospitalisation for Covid-19 treatment.

Also: As staff call in sick, India Inc turns a care-giver with well-being interventions

The London-headquartered Bank said it will provide interest free salary advance of up to six months gross pay to meet the expenses incurred on account of Covid-19 related medical emergencies. The repayment will commence following a six-month moratorium period.

In the unfortunate case of an employee passing away, their family will receive financial protection in the form of four times of the annual gross compensation, Standard Chartered said in statement. This increased insurance cover is applicable to all employees, it added.

On medical support, the Bank has constituted a team to assist employees in the hospitalisation process.

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Standard Chartered bank to offer upto Rs. 250000 for the employees who are covid positive, BFSI News, ET BFSI

Banking & Finance

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Standard Chartered Bank and its Global Business Services (GBS) unit in India have announced a slew of initiatives aimed at providing financial and medical assistance to employees.

These new interventions are mostly targeted at junior and mid-level workers, and they are in addition to the benefits that already exist for those employees and their immediate family members.

Additional benefits such as Financial reimbursement of expenses incurred towards COVID-19 related medical treatment for parents and parent-in laws up to Rs 250,000 per patient with ICU admission and up to Rs 125,000 per patient with any other hospitalisation for COVID-19 treatment, Interest free salary advance of up to 6 months gross pay to meet the expenses incurred on account of COVID-19 related medical emergencies can be availed with immediate effect.

Vaccination drives are being organised in multiple office premises for employees and their family members. Additionally, ambulance services, medical oxygen and ventilators are being sourced for helping those in critical health conditions and facilities like doctors on call, counselling sessions including that for emotional well-being, Emergency Support, access to testing labs and Medical Consultancy are being provided.

Zarin Daruwala, Cluster CEO, India and South Asia, Standard Chartered Bank, said, “We are doing everything possible to support our colleagues in these difficult times and we hope that our new initiatives, including timely financial support, will support our colleagues through what is a really challenging period”

Matthew Norris, Global Head, GBS, Standard Chartered, said, “We’re taking these measures swiftly after identifying particular needs that have come up and hope that this will help in mitigating some of the issues navigating through the pandemic.”



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RBI imposes Rs 2 crore penalty on Standard Chartered Bank, BFSI News, ET BFSI

Banking & Finance

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Mumbai: The Reserve Bank on Thursday imposed a penalty of Rs 2 crore on Standard Chartered Bank-India for delays in reporting of frauds to it. The monetary penalty has been imposed on the bank for non-compliance with certain directions contained in the ‘Reserve Bank of India (Frauds – Classification and Reporting by commercial banks and select FIs) Directions 2016′.

“The penalty has been imposed… for delays in reporting of frauds to RBI, revealed during the statutory inspection of the bank with reference to its financial position as on March 31, 2018 and March 31, 2019,” the central bank said in a statement.

A notice was issued to the Standard Chartered Bank-India advising it to show cause as to why penalty should not be imposed on it for such non-compliance with the directions.

“After considering the bank’s reply to the notice and oral submissions made in the personal hearing, RBI concluded that the charge of non-compliance with aforesaid RBI directions was substantiated and warranted imposition of monetary penalty,” the statement said.

The central bank also noted that its action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.



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