Tag: state bank of india

State Bank may look to finance Tata group’s Air India bid, BFSI News, ET BFSI

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State Bank of India is likely to support Tata Sons‘s bid to acquire state-owned carrier Air India.

The bank may subscribe to Tata Sons debentures or fund the special purpose vehicle (SPV) set up by Tata Sons for the acquisition, according to a report.

Tata Sons’s Air India buy may cost Rs 15,000 crore. The bank will subscribe to the debentures as Indian banks do not provide loans to corporates for acquisitions.

The lender is banking on the Tata Sons AAA rating, which signifies high safety and the prospects of Air India under the Tatas.

Tata Sons has a shareholder approval to raise Rs 40,000 crore while it Rs 10 lakh crore stake in TCS gives it financial heft to go for such a big acquisition.

Air India finances

Air India’s accumulated losses ballooned to Rs 70,820 crore in FY20. The earnings for FY21 haven’t been reported yet but the annual loss is expected to touch Rs 10,000 crore, from Rs 8,000 in the previous year.

Its revenue in FY21 more than halved year-on-year to Rs 12,139 crore. Air India’s total debt (according to provisional figures for FY20) stood at Rs 38,366.39 crore after transfer of debt amounting to Rs 22,064 crore to the special purpose vehicle, Air India Assets Holding Ltd, in FY20.

Tata group airlines

If it acquires Air India, the airline will compete directly with Vistara, another airline from the Tata stable. Bringing Vistara under the holding company with Air India could help with operational synergy and economies of scale.

Vistara’s loss for the year narrowed to Rs 1,612 crore, from Rs 1,814 crore a year earlier, having widened from Rs 831 crore in FY19. Its total liabilities at the end of FY21 were Rs 11,491 crore, while its net worth was a negative Rs 6,088 crore.

According to its latest annual report, Tata Group’s budget carrier AirAsia India’s net loss almost doubled in FY21 to Rs 1,532 crore and its net worth slipped into negative territory as the pandemic hit aviation globally.



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Banks rush to implement ‘standing instructions’ system, but may still miss deadline, BFSI News, ET BFSI

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Banks and payment aggregators are rushing to meet the October 1 deadline for implementing a new system for standing instructions for recurring online transactions as the Reserve Bank of India is not likely to extend it. Banks are sending communications to customers saying that they will not process recurring payments, and customers will have to make payments directly to merchants.

“In compliance with the regulatory requirements, we are currently building a solution to seamlessly manage all your domestic standing instructions for recurring payments. This solution will be available soon for you. Starting October 1, any existing standing instruction for domestic and international recurring transactions on your card account will not be processed. We request you to make these payments directly to the service providers to avoid any interruptions,” American Express said in a recent message to customers.

How does the new system work?

Under the proposed system, as a risk mitigating and customer facilitation measure, the card-issuing bank will have to send a pre-transaction notification to the cardholder, at least 24 hours before the actual charge or debit to the card. While registering e-mandate on the card, the cardholder shall be given the facility to choose a mode among available options (SMS, email, etc.) for receiving the pre-transaction notification from the issuer. On receipt of the pre-transaction notification, the cardholder shall have the facility to opt-out of the particular transaction or the e-mandate. For transactions above Rs 5000, banks will also be required to send one time passwords to customers.

What is a standing instruction?

A standing instruction is a service offered to customers of a bank, wherein regular transactions that the customer wants to make are processed as a matter of course instead of initiating specific transactions each time.

This service relates to transactions like renewing subscription to over-the-top (OTT) platforms, newspapers and magazines, and utility bill payments.

The issue

Large lenders and payment entities including State Bank of India, Citi, HDFC, Axis, HSBC, Visa and Mastercard had asked the RBI to postpone the deadline for putting in place a new system to alert customers on ‘standing instruction’ transactions.

The banks were asked to set up the system by March 31, 2021.

The lenders also wanted RBI to exclude transactions against pre-existing standing instructions and those with international merchants from the new conditions for e-mandates on cards for recurring transactions.

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SBI to offer home loans at concessional rates during festive season, BFSI News, ET BFSI

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Bhopal, Sep 17 (PTI) With an eye on the coming festive season, leading public sector bank State Bank of India will provide home loans to its customers at concessional interest rates. SBI Chief General Manager (CGM) Umesh Kumar Pandey informed that this drive to provide home loans at concessional interest rates will be completed in two phases, an official release said on Thursday.

The first phase will be operated from September 1 to October 31, while the second phase will be operational from November 1 to December 31, it said.

Customers wishing to take a home loan during this period can get it with a minimum floor rate of interest of 6.70 per cent, and they will not have to pay any processing fee.

In this campaign, customers will also get many other benefits. The interest rates are linked with the CIBIL score.

No distinction has been made between the interest rates of salaried and non-salaried customers and a genuine effort has been made to pass on the benefit of lowest interest rates to all, it said.

Pandey also informed that the main objective of this campaign of SBI is to help more and more people to get their own home at low interest rates and without paying processing fee, making the home loan business simpler and more attractive, it added.



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Bank of Baroda announces festive offers on retail loans, BFSI News, ET BFSI

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State-owned Bank of Baroda on Thursday rolled out a slew of festive offers for its retail borrowers. The lender is offering a waiver of 0.25 per cent in the existing applicable rates for Baroda Home Loans and Baroda Car Loans, according to a release.

The bank’s home loan rates start at 6.75 per cent and car loan rates at 7 per cent.

It has also waived off processing fee on home loans.

“With the introduction of these retail loan offers for this festive season, we intend to bring festive cheer among our existing loyal customers and also offer new to bank customers an attractive proposition for availing home loans and car loans,” the bank’s general manager (mortgages & other retail assets) H T Solanki said.

Customers can apply for home or car loans by using the lender’s mobile banking application or its website for instant sanction.

Earlier in the day, State Bank of India (SBI) announced various festive offers for prospective home loan customers, including credit score-linked home loans starting at 6.70 per cent, irrespective of the loan amount.



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SBI cuts home loan interest rate to 6.7%, waives processing fees, gives incentive for non-salaried borrowers, BFSI News, ET BFSI

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The State Bank of India (SBI) has announced that as part of its festive season offering it will be offering credit score linked home loans at 6.7%, irrespective of the loan amount. According to press release issued by SBI, earlier a borrower availing a loan greater than Rs 75 lakh, had to pay an interest rate of 7.15%; now with the introduction of the festive offers, a borrower can avail home loan for any amount at a rate as low as 6.7%.

“The offer results in a saving of 45 bps which translates to a huge interest saving of more than Rs. 8 lac, for a Rs. 75 lac loan with a 30 year tenure,” stated the press release.

Further, the rate of interest applicable for a non-salaried borrower was 15 bps higher than the interest rate applicable to a salaried borrower. SBI has said that it has removed this distinction between a salaried and a non-salaried borrower. “Now, there is no occupation-linked interest premium being charged to prospective home loan borrowers. This would lead to a further interest saving of 15 bps to non-salaried borrowers,” stated the bank.

The lender has also waived off the processing fees completely and will be offering attractive interest concession based on the credit score of the borrower.

“This time, we have made the offers more inclusive and the offers are available to all segments of borrowers irrespective of the loan amount and the profession of the borrower. The 6.70% home loan offer is also applicable to balance transfer cases. We believe zero processing fees and concessional interest rates in the festive season will make homeownership more affordable,” said C.S. Setty, Managing Director (Retail & Digital Banking), SBI.



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Here are top banks offering most affordable home loan rates, BFSI News, ET BFSI

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Home loans help people become property owners, and have ownership over secured assets. That is why it is so important for us to know where we can avail the loan from.

Tenure for home loans usually range from 15 years to 30 years, and is one of the most affordable loans available.

The cost effectiveness of a home loan depends on the bank you choose. Following are some top banks offering affordable home loans.

Bank Salaried Borrower Self Employed Borrower Women Others Effective Rate of Interest

(RBI Repo Rate : 4%)

Kotak Mahindra Bank – – – – 6.50%-7.1%
ICICI Bank 6.75%-7.4% 6.90%-7.5% – – 6.75%-7.55%
Bank of Baroda 6.75%-9.0% 7.00%-9.0% – – 6.75%-9.00%
Union Bank of India 6.80%-7.3% 6.85%-7.3% 6.80-7.30% 6.80-7.30% 6.80%-7.35%
State Bank of India 6.80%-7.1% +15 bps -5 bps – 6.80%- 7.15%
Axis Bank 6.90%-8.4% 7.00%-8.5% – – 6.90%-8.55%
Canara Bank – – 6.90%-8.85% 6.95%-8.90% 6.90%-8.90%

(Source:
Official Websites- Kotak Mahindra Bank, ICICI Bank, Union Bank of India, State Bank of India, Axis Bank, Canara Bank
BankBazaar.com- Bank of Baroda )

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Will banks clamp down on cryptocurrency transactions again?, BFSI News, ET BFSI

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Banks which had started processing cryptocurrency transactions after RBI clarification may be again shying away from virtual currencies.

The country’s largest lender, State Bank of India, has blocked the receipt of funds by crypto bourses on its UPI platform. The bank has told payment processors to disable SBI UPI for crypto merchants, according to a report.

With this, traders cannot buy Bitcoin or any cryptocurrency by transferring funds via UPI, as none of the processors which handle funds for

exchanges will be unable to receive money sent for crypto purchases on their SBI accounts.

The largest domestic crypto bourse, WazirX, has already been impacted by the decision, with the processing agency following the directive of SBI. Industry circles said payment processors may stop accepting payment for other exchanges as well, unless SBI does a rethink.

With UPI blocked, many traders on WazirX are using one of the e-wallet services to transact.

But due to wallet charges and limits on fund transfer, traders prefer UPI in the absence of other payment modes like credit and debit cards, NEFT (national electronic fund transfers) and net banking.

After SBI’s decision, many banks may be reluctant to onboard crypto merchants on their respective UPI platforms.

The RBI decision

After the Reserve Bank of India told banks that they no longer can use the regulator’s 2018 circular prohibiting dealings in virtual currencies, as the direction has been struck down by the Supreme Court, banks were allowing crypto transactions.

Lenders including HDFC Bank, ICICI Bank and Axis Bank are allowing transactions in virtual currencies through the UPI platform.

According to crypto exchanges, more banks are now warming up to them and several channels are available for customers to buy crypto assets.

Till June this year banks were sending official notices to many customers warning them of curbs, including permanent closure of accounts.

Lenders were asking customers to clarify the nature of transactions and warning credit card users that transactions of virtual currency will lead to suspension/cancellation of card.

While trading in cryptocurrency is not illegal as per existing Indian laws, individual institutions can enforce their terms based on their risk assessment.

A grey area

Despite the boom, cryptocurrencies are in a grey area in India, with the Reserve Bank hostile towards it and the government unsure about its prospects.

There is no legislation or regulatory code yet to govern the crypto ecosystem, leading to confusion among customers, businesses and financial institutions providing banking services.

In 2018, the Reserve Bank of India barred financial institutions from supporting crypto transactions, which the Supreme Court overturned in 2020. The government has circulated a draft bill outlawing all cryptocurrency activities, which has been under discussion since 2019.

The RBI asked banks not to cite its 2018 circular and clarified that banks can do their own KYC for crypto clients. With this, banks are now reassessing the situation, but several banks currently lack the technical expertise to make a supervisory assessment on these transactions.



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Assets under management likely to grow 15% in 3-5 years, BFSI News, ET BFSI

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Even as lenders jostle for home loan pie, the assets under management of the segment across banks and non-banks are likely to grow by 15% over the next three to five years, according to ICICI Securities.

This would be on the back of the rise in disbursements and improved affordability.

“Factors such as low interest rates, stamp duty cut, benign real estate prices, etc. have improved affordability to own a house. ‘Work from home’ has kindled incremental housing demand. Construction too was not adversely impacted during the second wave,” the brokerage said.

Home loan growth fell to 8% over the previous three financial years as compared to 17-18% earlier while disbursements fell to Rs 5.3-5.5 lakh crore due to the pandemic. However, now risen to a run-rate of Rs 7-8 lakh crore.

Segment-wise

The Rs 2.5-7.5 lakh ticket size, or prime segment, has grown in the mid-teens, while the affordable housing segment has grown in mid-single digits over the past two to three years.

The extent of loans disbursed in the prime segment has also been significant, as per the brokerage.

Among housing financiers, the likes of Housing Development Finance Corp and LIC Housing Finance are returning to double digits for retail loans. In the case of banks, the home loan portfolio has stayed put since March. “Neither did they decline in the initial two months of this fiscal, nor was the momentum build-up witnessed in June-July. Year-on-year growth, thereby, sustained at around 9%. Now banks are fiercely competing with cut-throat pricing,” ICICI Securities said.

The Kotak offer

The competition among banks in home loan space is growing.

Kotak Mahindra Bank is offering home loans at a lower rate of 6.50 per cent is a festive period offer available only for two months till November 8, and the lowest offering is for those having highest credit scores coming from the salaried segment.

In the past, its rivals which include HDFC and SBI, have responded to rate cuts by slashing their own offering. The rate cut comes at a time when demand for home loans is falling in the country and may spark similar offers from rivals.

Large banks like the State Bank of India already offer home loans at as low as 6.65 per cent and 6.75 per cent, respectively, while the interest rates for HFCs is between 7.45 per cent and 10 per cent.

Nirmal Bang Institutional Equities said in a note, “The demand momentum seen in housing loans last year has tapered off and organic growth for the housing finance industry has been softening,” the brokerage house said. The organic growth in the home loan segment for large banks has been slowing over the last 45-50 days.



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SBI and Bandhan Bank planning to move their back office verticals to fintech hub of Kolkata, BFSI News, ET BFSI

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Banks like State Bank of India and Bandhan Bank are planning to move several of their back office verticals and processing centers in the sprawling fintech hub of Kolkata which is being built on 70 acre in New Town area.

As many as 28 financial institutions and legal firms have already taken land in the fintech hub, for which foundation stone was laid in 2012, one year after Mamata Banerjee came to power ending three decades of Left rule.

The government on Friday made the land booking and registration process online. About 48 acre of 70 acre has been allotted so far.

The government has also made rules easier for mutual funds to acquire land here.

Entities other than mutual funds, become eligible for a plot of land in the fintech hub if and only if they have annual revenue in excess of Rs 500 crore every year for three years.

Bandhan Bank has taken two plots in the hub and is planning to build its headquarter here as well as create a currency chest and back office, managing director Chandra Shekhar Ghosh said at the event to launch the online facility.

SBI chief general manager Ranjan Kumar Mishra said the bank is contemplating various of its verticals and processing centers here.

The hub, which is located at one of the most modern townships adjacent to Kolkata, is expected to be ready in three to four years time.



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Lenders slap personal insolvency cases on promoters of defaulting firms, BFSI News, ET BFSI

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Banks are approaching the National Company Law Tribunal for invoking personal guarantees of defaulting promoters armed by the Supreme Court go-ahead for such action.

The latest data released by the Insolvency and Bankruptcy Board of India (IBBI) show that 56 new cases were filed in the first quarter ended June, almost half of the total 128 cases filed in the whole of fiscal 2021, as banks stepped up their recovery efforts from personal guarantors.

These include cases filed against promoters of Punj Lloyd, Amtek Auto, Videocon, DHFL, ABG Shipyard, Videocon, Varun Shipping, and Lanco Infratech.

Overall, a total of 201 cases have been registered against personal guarantors since the new law came into force in December 2019, 184 of which have been filed by financial creditors while 17 have been voluntarily filed by debtors.

Data from the IBBI show that creditors are chasing a total debt of Rs 36,014 crore through the personal insolvency process, which has been backed by personal guarantees of Rs 33,294 crore. Individual debtors have filed a relatively lower Rs 1,848 crore of claims backed by guarantees of Rs 791 crore.

The challenge

Anil Ambani, Kapil Wadhawan, Venugopal Dhoot had challenged proceedings against them under the Insolvency and Bankruptcy Code (IBC) to recover loans for which they had given personal guarantees.

They had argued that the resolution process would discharge them of all personal liabilities and guarantees and that the government was wrong to issue a notification that permitted lenders to initiate separate insolvency proceedings against them.

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India (SBI).

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.

The Supreme Court order

The Supreme Court in May had held that the November 15, 2019 government notification allowing creditors, usually financial institutions and banks, to move against personal guarantors under the Insolvency and Bankruptcy Code (IBC) was ‘legal and valid’.

Post the judgement, a senior official of a public sector bank said banks are assessing the level of involvement of those directors who pledged their personal guarantee against the loan.

Banks have started receiving calls from some of the promoters for the exclusion of their personal guarantee from the non-performing assets. Some of them are coming forward to resolve bad loans to save their personal wealth.

Most of the promoters thought that once their case is admitted under IBC, their past obligations cease.

However, the order has generated fear among the promoters and directors who pledged their personal guarantee of losing their personal wealth as part of the resolution process.

The personal guarantees are likely to expedite the resolution process as the guarantor stands the risk of losing personal property.

The hurdle

Many of these promoters are being investigated for fraud and their assets are already attached by the investigative agencies. Getting these assets released from the law agencies will take time.

SBI action

SBI was one of the respondents to the 74 petitions and challenges by promoters on invocation of personal guarantees. It has been in the forefront of invoking guarantees of promoters of defaulting companies. It had invoked Rs 1200 crore of guarantees given by Ambani for defaulting companies Reliance Communications and Reliance Infratel.

SBI had also approached the Mumbai bench of the NCLT to initiate guarantees by the Videocon Industries Dhoot brothers totalling Rs 11,500 crore.

It had also taken Bhushan Power & Steel promoter Sanjay Singal to court to recover Rs 12,276 crore dues to the bank for which he was a guarantor. All these promoters had challenged these actions in court.



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