Tag: state bank of india

SBI official, BFSI News, ET BFSI

Banking & Finance

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Cyber security is critical for the success of digital banking and banks should create the infrastructure to win customers‘ trust for all such transactions, a senior SBI official said on Wednesday.

Digital banking or Figital is here to stay and is the future but it is equally important to safeguard the interests of all stakeholders, State Bank of India (SBI) Deputy Managing Director and Chief Digital Officer Ravindra Pandey said at a webinar.

“It is important to win the customers’ trust in any system. It is the objective of banks to create and win the customers’ trust, such that all transactions are routed through banks as is presently done by multiple payment apps,” Pandey was quoted as saying in a release issued by industry body PHD Chamber of Commerce & Industry.

The official said that fintech has bought about changes in the customer mindset and it is an era of techfins rather than fintech.

Digital banking has helped in enhancing customer relationship, engagement and satisfaction and reduced operating cost, processing cycle time, among others, he added.

Digital banking is thriving on artificial intelligence and technical algorithm models which help to find out the customer’s ability to pay and also the intention to pay along with credit ratings of the customer.

According to the official, conventional operating models have given way to new channels. There are three areas in fintech that needs to be intertwined to make it a success — payment and remittance; process improvement – compliance and risk management; and customer engagement –, he noted.

Sanjay Aggarwal, President of PHD Chamber of Commerce & Industry, said the banking industry is moving towards a more collaborative and open environment while focusing on data protection and minimising systemic risks.

Representatives from fintech companies, NBFCs and other financial sector also participated in the webinar.



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Bank employee’s strike may impact SBI’s operations, BFSI News, ET BFSI

Banking & Finance

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State Bank of India, country’s largest lender said in its exchange filing, “We has been advised by Indian Banks Association (lBA) that United Forum of Bank Unions (UFBU) which comprises 9 major Unions, has given a call for all lndia strike by Bank Employees on 15th & 16th March, 2021.”

“While Bank has made all arrangements to ensure normal functioning in its branches and offices, it is likely that work in our Bank may be impacted by the strike.” the lender said in the exchange notification.

The strike is against the Centre’s proposal to privatise two public sector banks.

United Forum of Bank Unions(UFBU) board includes All lndia Bank Employees’Association (AIBEA), All lndia Bank Officers‘ Confederation (AIBOC), National Confederation of Bank Employees (NCBE), All lndia Bank Officers’ Association (AIBOA), Bank Employees Federation of lndia (BEFI), lndian National Bank Employees Federation (INBEF), lndian National Bank Officers’ Congress (INBOC), National Organisation of Bank Workers (NOBW) & National Organisation of Bank Officers (NOBO).



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PSU bank fundraising plans set for revival as bull-run lifts fortunes, BFSI News, ET BFSI

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With the markets on the upswing, public sector banks that struggled to raise funds in December are making hay in the market.

Banks are looking to raise funds to meet regulatory and provisioning requirements and to be ready for the opportunities that a likely boom in the economy may throw up in the coming months.

Bank of Baroda

State-owned Bank of Baroda has raised Rs 4,500 crore equity capital through qualified institutional placement (QIP) on Wednesday.

It allotted 55,07,95,593 equity shares to eligible qualified institutional buyers at an issue price of Rs 81.70 per share against the floor price of Rs 85.98 apiece.

Public sector banks (PSBs) are planning to raise about Rs 10,000 crore through a mix of equity and debt in the remaining two months of the current fiscal ending March to support credit pick up and meet regulatory requirements, the government had said last month.

Union Bank of India

Union Bank plans to raise between Rs 2,000 crore to Rs 3,000 crore through QIP.

The bank has shareholder permission to raise up to Rs 6,800 crore, but was planning to raise only Rs 3,000 crore as the risk appetite for public sector bank shares is still not the best. UBI plans to restrict its target to Rs 3,000 crore and possibly try another issue next fiscal year.

Private sector banks

A clutch of private sector banks also have plans to tap the market.

IDFC First IDFC First Bank’s board will meet on February 18, 2021 “to consider and approve the proposal for raising of funds by way of issue of equity shares/ other equity-linked securities. The bank sees strong strong upcoming growth opportunities.

YES Bank’s shareholders have approved a proposal for raising Rs 10,000 crore capital with the requisite majority.

December raising

Punjab National Bank raised Rs 3800 crore in December 2020 while IDBI Bank raised Rs 1400 crore in twin issues which were priced on the same day in the middle of December. Canara Bank had raised Rs 2000 crore earlier in the month.

PNB had targeted Rs 7,000 crore while IDBI Bank had aimed to raise Rs 2,000 crore. Both issues were short of their targets.

In the last few months, lenders including State Bank of India, Canara Bank and PNB have raised about Rs 50,000 crore from the market.

Bank stocks to shine?

Bank stocks were underperforming last year due to fears of a spike in non-performing assets and their annual returns were as low as 4%. However, they are recovering now.

According to analysts, the banking and finance sector seems to be the most probable candidate poised to outperform the broader markets as the pharma sector has run its course.

What RBI says

RBI Governor Shaktikanta Das has been advising banks to proactively raise capital and not wait for a difficult situation to arise due to the Covid crisis.

Besides, the government has allocated Rs 20,000 crore for capital infusion into PSBs in the current fiscal. Of this, the Finance Ministry has granted Rs 5,500 crore to Punjab & Sind Bank.

During 2019-20, the government made Rs 70,000 crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.



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Former CBoI chief Pallav Mohapatra appointed MD and CEO of Arcil

Banking & Finance

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Asset Reconstruction Company (India) Ltd (Arcil) on Tuesday announced the appointment of Pallav Mohapatra as its Chief Executive Officer and Managing Director.

Prior to the appointment, Mohapatra was the MD and CEO of Central Bank of India (CBoI) from September 21, 2018, to February 28, 2021. Before being elevated as MD and CEO of CBoI, he was Deputy Managing Director, Stressed Assets Management Group, State Bank of India.

Vinayak Bahuguna headed Arcil as MD and CEO for five years till June 2020.

Anil Gorthy, Chairman, Arcil, in a statement, said Mohapatra brings with him years of seasoned banking insight and a wealth of experience in the industry, particularly management of stressed assets.

Arcil, which was set up in 2002, currently has assets under management (in non-performing loans) of ₹12,000 crore, according to the statement.

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Bad bank may be led by private lenders for greater flexibility, BFSI News, ET BFSI

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Private sector banks and entities are being tipped for taking 51% stake in the proposed bad bank with public sector lenders taking the rest, according to reports.

However, the lenders with links with bad assets housed in the bad bank will not be allowed to invest in it.

How will a private sector-led bad bank help?

With the majority ownership vested in the private sector, it would lead to flexibility in decision making.

The chief economic advisor had pitched for a private sector-led bad bank earlier.

“The bad bank will certainly help in consolidating some of the non-performing assets. It’s important to also think about implementing the bad bank in the private sector that enables (faster) decision making,” he had said.

The move would keep the organisation out of the purview of government scrutiny of Central Central Bureau of Investigation (CBI), Comptroller and Auditor General of India (CAG), Central Vigilance Commission (CVC).

How does the private sector benefit?

There are about Rs 2 lakh crore of toxic assets that can come under the bad bank which the private sector can manage for fees.

The current plan

Nine banks including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) and two non-bank lenders are likely to put in Rs 7,000 crore jointly as initial capital in the proposed bad bank that aims to help extract funds stuck in non-performing loans.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank along with two state-run financiers of power projects-Power Finance Corp (PFC) and Rural Electrification Corp (REC). All these 11 entities will own an equal stake in the proposed bad bank with little over 9% equity each.

ICICI Bank, Axis Bank and Life Insurance Corp of India (LIC)-owned IDBI Bank are also among the shareholders.

Assets

Lenders have identified about Rs 2 lakh crore of bad loans for which they expect Rs 40,000-50,000 crore. These assets will be transferred to the new ARC at 15% upfront cash, about the level of capital being infused into the company.



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A year after moratorium, YES Bank limping back to normalcy, BFSI News, ET BFSI

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It’s been exactly a year since March 5 when YES Bank was put under moratorium and a rescue by fellow lenders was mounted. State Bank of India and several private lenders had stepped in to infuse money into the lender and bail it out to address systemic risk concerns.

From the pandemonium and panic among investors and depositors then, the bank has come a long way, now under the new management with the former promoter behind bars.

So how has been the journey?

Deposits

A year down the line the beleaguered seems to have regained the trust of depositors.

From a run on deposits, the bank has grown its deposit book by nearly 39% in this fiscal to Rs 1.46 lakh crore from Rs 1.05 lakh crore around the time moratorium was lifted. The surge in deposits was helped by a generous dose of lucrative rate offers. In December, YES Bank acquired 85,000 customers for current and savings account deposits. In July, the lender raised Rs 15,000 crore through a follow-on public offer, with participation from leading domestic institutional investors as well as foreign portfolio investors.

Asset quality

However, asset quality concerns are higher at YES Bank than other banks as it saw more than expected increase in non-performing and restructured assets, mainly due to stress in loans to the real estate and hospitality sectors.

But unlike in the past, there are no more big surprises in store.

Non-performing assets

In a post-earnings presentation on its website, YES Bank has said loans not classified as NPAs due to the Supreme Court stay, loans overdue for more than 60 days, and Covid-19 related advances add up to about Rs 18,551 crore —or 11% of the bank’s loan book of Rs 1.69 lakh crore.

The bank’s gross NPAs reduced to 15.4% in the December quarter from 16.9% in September, NPAs could be close to 20%, taking into account the Rs 8,000 crore book the bank has restructured that could slip into NPAs. And that excludes another Rs 10,000 crore of loans that are stressed, but not classified yet as NPAs.

The total stressed loans and loans overdue for more than 30 days stand at Rs 28,000 crore, or about 16% of the loan book — in addition to the gross NPA of 15%. While all overdue loans of 30 dpd (days past due) and 60-90 dpd do not become NPLs, analysts remain concerned on the size of the loan book that is overdue.

The size of the net overdue loan book is Rs 25,500 crore (net of Covid provisions) and net worth of Yes Bank as of December 2020 is Rs 37,000 crore — roughly 70% of net worth.

The bank, however, is confident that further provisions can be made in the next few months. It has made a total of Rs 2,683 crore in provisions including a 15% provision on the SC mandated standstill accounts and a 10% provision on restructured loans.

Core capital

Core equity capital of 13% helps YES Bank exceed the regulatory requirements. It raised Rs 14,267 crore through a follow-on issue in July. The bank’s board also approved an enabling resolution to raise Rs 10,000 crore.

Future plans

YES Bank intends to stay away from large corporate businesses as it looks to rebuild its loan book in the mid- and small-corporate segment.

The bank, like other lenders, saw increased stress in its retail segment, which had touched nearly 3% in this financial year compared with 1% during pre-coronavirus times, but feels things were improving.



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Home loan rates hit rock bottom, only for those with high credit scores, BFSI News, ET BFSI

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Home loan rates have dropped to a jaw-dropping sub-7% range, last seen 15-20 years back, and are luring buyers to the real estate market.

However, lenders are not offering such low rates to all, but only to the borrowers who have high creditworthiness.

State Bank of India

The SBI announced an interest concession of up to 70 bps with interest rates starting from 6.7% onwards for a limited period till March 31, 2021. The lender is also giving a 100% waiver on processing fees.

However, its interest concession is based on loan amount and CIBIL score of the borrower. SBI believes that it is important to extend better rates to customers who maintain good repayment history. SBI home loan interest rates are linked to CIBIL score and start from 6.7% for loans up to Rs 75 lakh and 6.75% for loans above Rs 75 lakh.

SBI is offering such rates to borrowers who have a CIBIL credit score of above 800, according to reports. At SBI borrowers credit scores of 700-750 will have to shell out a higher rate of 6.9% on home loans, whereas those in the 751-800 band will be eligible for loans at 6.8%.

CIBIL score

According to CIBIL, about 79% of loans sanctioned are for people with 750-plus score. Scores above 800 are considered high and you can easily ask for a lower rate on personal loans and credit cards.

A score of 850 – 900 shows that the borrower has never defaulted even once and is an excellent score.
The credit bureau scores are used to assess the creditworthiness of borrowers and lenders often offer lower interest rates to customers with higher scores.

Home loan rates hit rock bottom, only for those with high credit scoresKotak Mahindra Bank

Kotak Bank also recently announced a 10 basis points (bps) cut in its home loan rates for a limited period, while claiming it to be the lowest in the market. Customers will be able to avail of home loans for 6.65% till March 31 as part of a special offer after the rate reduction. The 6.65% rate is applicable to both home loans and Balance Transfer Loans across amounts. This is a limited period offer ending on 31 March. The lender is also giving a 100% waiver on processing fees.

HDFC

HDFC slashed home loans interest rates by 5 basis points to 6.75%. The changes will be effective from Thursday (4 March). The company reduced its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 5 basis points. The change will benefit all existing HDFC retail home loan customers.

Home loan rates hit rock bottom, only for those with high credit scoresBooming sales

Housing sales rose 25 per cent year-on-year during the October-December period at 1,10,811 units across seven cities on pent up and festive demand, according to data analytic firm PropEquity. Housing sales stood at 88,976 units in the year-ago period.
Showing signs of recovery, total sales of home units in seven cities increased 78 per cent in the fourth quarter of 2020 to 1,10,811 units as against 62,197 units in the third quarter of 2020.



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Morgan Stanley, BFSI News, ET BFSI

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Indian state-owned lenders are expected to see additions to bad loans moderate, but structural issues at the banks could cap returns on their stocks, Morgan Stanley said on Thursday.

Some of the country’s state-owned banks have long struggled with a pile of bad loans, prompting the government to pump in more funds to shore up their balance sheets.

“Over the past few years, state-owned enterprise banks have seen significant capital infusion by the government, lower risk-weighted assets density, higher provisioning and some large recoveries,” the brokerage said in a report, adding that as slippages moderate, fresh additions to bad loans, credit costs will also moderate over the next few years.

The brokerage preferred India’s largest lender State Bank of India, as well as large private banks, expecting them to play a major role in the corporate recovery cycle.

In February, SBI said its asset quality has remained largely stable and the lender revised its credit cost guidance to lower than 2% for the financial year. A return to pre-pandemic levels of retail growth drove the bank’s third-quarter profit well past estimates.

But weak underwriting practices, diminishing loan market and deposits share in the sector will weigh on the stocks of many other public sector banks even as cheap valuations make them look attractive, Morgan Stanley said.

“We think state-owned enterprise banks will continue to lose loan market share given technology changes, strong competition and a weak internal rate of capital generation,” analysts at the brokerage said.

The Nifty public sector bank index was down 0.4% on Thursday. The index has risen nearly 39% so far this year against a drop of about 31% in 2020.



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Extreme weather like floods, droughts, cyclones puts $84 billion of Indian banks debt at risk, BFSI News, ET BFSI

Banking & Finance

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An increase in extreme weather events such as floods, droughts and cyclones risk souring debt worth more than Rs 6.19 lakh crore ($84 billion) at India’s biggest financial institutions.

That’s according to leading nonprofit environmental disclosure platform CDP. State Bank of India, the country’s largest lender, HDFC Bank, IndusInd Bank and Axis Bank are among the institutions that reported climate risks to CDP in 2020, it said in its annual report released Wednesday.

The banks flagged exposure to environmentally sensitive businesses including cement, coal, oil and power. They also listed the effects of cyclones and floods on loan repayments in farming and related sectors. Lenders accounted for 87 per cent of the total risk, valued at about $97 billion, across 67 top Indian companies that responded to CDP.

“Climate is the biggest risk to businesses in the long run. Financial institutions are beginning to understand it,” said Damandeep Singh, New Delhi-based director of CDP India. “As investors look at funding companies based on environmental, social and governance disclosures, we’ve seen many more companies report climate change risk.”

The potential harm to agriculture echoes concerns raised by India’s central bank about the impact of climate change on farming, a sector that employs more than half of its citizens. At the same time, the world’s third-biggest emitter of greenhouse gases is relying on coal to help drive its post-Covid recovery. The dirtiest fossil fuel could remain its dominant energy source in the coming decades.

CDP, which gathered the data on behalf of 515 investors with $106 trillion in assets, said it received responses from 220 small and large Indian companies.

State Bank of India, which is facing concerns from shareholders and investors over its proposal to help fund the controversial Carmichael coal mine in northern Australia, valued its total climate risk at Rs 3.83 lakh crore. The bank said it may “indirectly face reputational risks, should it be involved in lending to environmentally sensitive projects which may have significant public opposition.” SBI didn’t respond to a request seeking comment.

The second-highest risk was flagged by HDFC Bank, which estimated it had Rs 1.79 laks crore of assets in danger — a 24 per cent increase from 2019. It said its calculations took into account compensation it would have to pay to employees in case of flooding and its exposure to farming, cement, coal, oil and power.

Smaller private banks IndusInd, Axis and Yes reported lowered climate change risk compared to last year at Rs 46,600 crore, Rs 7,500 crore and Rs 2,000 crore respectively, citing more diversified portfolios.

India was second in the Asia Pacific and sixth globally among CDP’s ranking of countries whose companies committed to science-based targets for net-zero carbon emissions, the report showed. More than 50 Indian companies said they are preparing for future policy and regulatory changes by voluntarily committing to cutting their carbon footprint.

Increased investor pressure and stronger disclosure norms are compelling Indian companies to address climate concerns, the CDP report said. Almost all of companies reported board-level oversight of climate-related issues, while some 84 per cent said climate-related risks and opportunities led them to alter plans for products and services.



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SBI launches second iteration of YONO Super Saving Days, BFSI News, ET BFSI

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State Bank of India (SBI) announced the launch of the second iteration of the YONO Super Saving Days, following the first edition which ran between February 4th to 7th, 2021.

The Super Saving Days, which will run between March 4 and 7, will give an exclusive range of discounts and cashback to the users of SBI’s banking and lifestyle platform, YONO.

In a statement, SBI said it had witnessed a ‘significant’ jump in traction during the first edition of YONO Super Saving Days. For the second edition, the lender said its 36 million customers would have access to offers across the Travel, Hospitality, Health, Apparels & Online shopping.

Retailers SBI has partnered with for the three days including Amazon, Apollo 24|7, EaseMyTrip, OYO, and Raymond. Customers can further avail upto 50% of hotel bookings, flight bookings, Apparels and Health Categories, apart from 7.5% unlimited cashback off Amazon.



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