Tag: union bank of india

Indian banks facilitate cryptocurrency transactions amid a fresh boom, BFSI News, ET BFSI

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As Indians flock to the cryptocurrency market with renewed enthusiasm, banks are joining the party.

They are again allowing the purchase of Bitcoin and other cryptocurrencies through their channels, easing curbs that they had imposed on such services.

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

Crypto exchange WazirX has listed the net banking facilities of Punjab National Bank, Union Bank of India, IDBI, IDFC First Bank, Federal Bank and Deutsche Bank to make payments for crypto purchases.

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

The change in stance happened 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, said people in the know.

Banks have also reopened accounts with crypto exchanges after conducting due diligence, in absence of any specific regulation. This comes at a time when Indians are flocking back to cryptocurrencies.

Reluctant banks

As early as June 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.

Last month, 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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Govt extends tenure of 4 public sector banks’ top officials, BFSI News, ET BFSI

Banking & Finance

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Four state-owned banks on Friday said the government has extended tenures of their top officials, including managing director and chief executive officers (MD and CEOs) of Punjab National Bank and Bank of Maharashtra.

Besides, the government has extended the tenures of executive directors of Punjab National Bank (PNB), Union Bank of India and Central Bank of India.

The government sent notifications to these banks on Thursday, informing them about the extensions given to the top-level officials.

“The Department of Financial Services, Ministry of Finance, vide its notification dated August 26, 2021, has extended the term of office of S S Mallikarjuna Rao, managing director and chief executive officer of the bank (PNB), for a period beyond September 18, 2021,” PNB said in a regulatory filing.

Rao’s current tenure was to come to an end on September 18, 2021, and the extension has been given till the date of his superannuation (January 31, 2022) or until further orders, whichever is earlier, PNB said.

The government has also extended the tenure of Bank of Maharashtra MD and CEO A S Rajeev for two years, the Pune-based lender said in a filing.

Rajeev’s current tenure was coming to an end on December 1, 2021.

In addition to this, two executive directors of PNB, two in Union Bank of India (UBI) and one in Central Bank of India have been given extension beyond their current tenures.

Sanjay Kumar and Vijay Dube, executive directors of PNB, have been given extensions till August 23, 2023 and November 30, 2022, respectively.

The terms of UBI’s executive directors — Manas Ranjan Biswal and Gopal Singh Gusain — have been extended.

Biswal’s term has been extended beyond his currently notified term, which expires on February 28, 2022, till the date of his superannuation (April 30, 2022) or until further orders, whichever is earlier, Union Bank of India said.

Similarly, Gusain’s term has been extended till the date of his superannuation, (January 31, 2022) or until further orders, whichever is earlier. His term was coming to an end on September 19.

The Department of Financial Services, through a notification on August 26, has also extended the term of office of Ashok Srivastava, executive director of Central Bank of India, the lender said in a separate filing.

His term has been extended beyond January 22, 2022, till the date of his superannuation (November 30, 2022) or until further orders, whichever is earlier, Central Bank of India said.



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Govt extends tenure of 4 public sector banks’ top officials, BFSI News, ET BFSI

Banking & Finance

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Four state-owned banks on Friday said the government has extended tenures of their top officials, including managing director and chief executive officers (MD and CEOs) of Punjab National Bank and Bank of Maharashtra.

Besides, the government has extended the tenures of executive directors of Punjab National Bank (PNB), Union Bank of India and Central Bank of India.

The government sent notifications to these banks on Thursday, informing them about the extensions given to the top-level officials.

“The Department of Financial Services, Ministry of Finance, vide its notification dated August 26, 2021, has extended the term of office of S S Mallikarjuna Rao, managing director and chief executive officer of the bank (PNB), for a period beyond September 18, 2021,” PNB said in a regulatory filing.

Rao’s current tenure was to come to an end on September 18, 2021, and the extension has been given till the date of his superannuation (January 31, 2022) or until further orders, whichever is earlier, PNB said.

The government has also extended the tenure of Bank of Maharashtra MD and CEO A S Rajeev for two years, the Pune-based lender said in a filing.

Rajeev’s current tenure was coming to an end on December 1, 2021.

In addition to this, two executive directors of PNB, two in Union Bank of India (UBI) and one in Central Bank of India have been given extension beyond their current tenures.

Sanjay Kumar and Vijay Dube, executive directors of PNB, have been given extensions till August 23, 2023 and November 30, 2022, respectively.

The terms of UBI’s executive directors — Manas Ranjan Biswal and Gopal Singh Gusain — have been extended.

Biswal’s term has been extended beyond his currently notified term, which expires on February 28, 2022, till the date of his superannuation (April 30, 2022) or until further orders, whichever is earlier, Union Bank of India said.

Similarly, Gusain’s term has been extended till the date of his superannuation, (January 31, 2022) or until further orders, whichever is earlier. His term was coming to an end on September 19.

The Department of Financial Services, through a notification on August 26, has also extended the term of office of Ashok Srivastava, executive director of Central Bank of India, the lender said in a separate filing.

His term has been extended beyond January 22, 2022, till the date of his superannuation (November 30, 2022) or until further orders, whichever is earlier, Central Bank of India said.



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Govt extends tenures of UBI, Central Bank of India’s executive directors, BFSI News, ET BFSI

Banking & Finance

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Public sector lenders Union Bank of India (UBI) and Central Bank of India on Friday said the government has extended tenures of their executive directors.

The terms of UBI’s executive directors — Manas Ranjan Biswal and Gopal Singh Gusain — have been extended vide a notification dated August 26, the lender said in a regulatory filing.

Biswal’s term has been extended beyond his currently notified term, which expires on February 28, 2022, till the date of his superannuation (April 30, 2022) or until further orders, whichever is earlier, Union Bank of India said.

Similarly, Gusain’s term has been extended till the date of his superannuation, (January 31, 2022) or until further orders, whichever is earlier. His term was coming to an end on September 19.

The Department of Financial Services, through a notification on August 26, has also extended the term of office of Ashok Srivastava, executive director of Central Bank of India, the lender said in a separate filing.

His term has been extended beyond January 22, 2022, till the date of his superannuation (November 30, 2022) or until further orders, whichever is earlier, Central Bank of India added.



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Home loan defaults: Demand, possession, auction notices on the rise as delinquencies climb

Banking & Finance

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Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes.

Demand and possession notices for apartments bought using home loans have been on the rise as delinquencies climb in the segment. Over the last few weeks, banks and non-banking financial companies (NBFCs) alike have sharply increased the volume of homes they repossess and put up for auction.

The notices have been put out by lenders across the public and private sectors, with institutions like IDBI Bank, Union Bank of India, Bandhan Bank, IIFL Home Finance, Tata Capital Housing Finance, Muthoot Housing Finance and Manappuram Home Finance, among others. The recovery amounts fall in the wide range of just under Rs 1 lakh and up to Rs 95 lakh.

“It is true that banks across the industry have become active about making recoveries. There are three processes they are employing – aggressive collections, resolution of the accounts wherever possible, and finally liquidation of whatever stock they have,” said a senior executive with a mid-sized private bank. The trend of recoveries through auctions are likely to continue into the third and fourth quarters of the current year, he added.

A similar trend of auction notices had been observed in the January-March quarter with respect to gold loans. Thereafter, most lenders with a sizeable gold loan portfolio reported a deterioration in asset quality in that segment. Bankers said that the notices work more as a wake-up call for the borrower than as an actual announcement of auctions.

Of course, there are stages to making recoveries through the auction route. The lender first issues a demand notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, seeking repayment of outstanding dues within a stipulated period. If the demand is not met, it then puts out a possession notice and then finally a sale notice. All three kinds of notices now cover entire pages of newspapers.

Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes. However, the second wave of the pandemic has dealt a huge blow to some borrowers, causing home loan slippages to rise.

Bankers said that the pain is severest in the self-employed category because their income streams have been affected due to repeated lockdowns and mobility restrictions. Unlike in the first half of FY21, there is no moratorium in the current year and that has caused higher delinquencies. State Bank of India’s (SBI’s) gross non performing asset (NPA) ratio in the home loan segment stood at 1.39% as on June 30, though it improved to 1.14% thereafter.

SBI chairman Dinesh Khara said after the bank’s Q1 results that almost 50% of the bank’s home loan book is to the non-salaried class. “Many of the SME borrowers also would be the ones to avail home loans. I think the essential stress seen in this book is on account of disruption in cash flows for the SMEs,” Khara said.

Analysts expect collection trends to improve in the days ahead. In a recent note, Emkay Global Financial Services said that banks expect some NPAs from the inflated special mention account (SMA) pool to spill over into Q2, while the restructured pool too should inch up. “Collection activity may return to the pre-Covid level in Q3, subject to no severe Covid third wave. Within retail, recovery rates should improve in secured mortgages and gold loans as stress formation in those segments was higher than expected due to impaired mobility, which has normalised now,” Emkay said.

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BFSI CEOs look to unlock business value as pandemic ebbs, BFSI News, ET BFSI

Personal Finance

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After almost two harrowing years of the pandemic, bank chief executives are looking ahead for a period of stability and growth with predictions of an uptick in credit demand.

Sanjay Singh, Deputy CEO, BNP Paribas India

Sanjay Singh, Deputy CEO, BNP Paribas India

“All the factors are favouring the capex revival. Low interest rates, lower leverage, efficient ecosystem, and demand uptake. All are indicating that capex will resume in next six months,” Sanjay Singh, Deputy CEO, BNP Paribas India, said at the CEO Panel discussion BFSI Leaders: Unlocking Business Value at ETBFSI Summit.

Singh said his bank’s focus is to embrace the best of traditional banking and a mix of new-age technologies.

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank
Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Focus on risks

Along with growth and revival, bankers are also focused on risks.

Risk taking in the post pandemic world is a very important factor for all. Retail lending is a safer bet than corporate, said Rajeev Yadav, MD & CEO, Fincare Small Finance Bank. “Being a retail bank, we are taking retail risk. Retail lending is stabilised and fear of incremental lending is no more there,” he said.

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services
Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services said that the business metrics have changed and the vaccination of employees is now an integral factor.

“Liquidity is not a problem anymore. We are extra conscious about risks and are focusing on how to retain customer franchise by maintaining the relation without meeting the customer. The strategy is to use data intelligence rather than conventional wisdom or rule of thumb for decision making,” he said.

During the pandemic it’s okay to miss top-line success because survival is the major objective, Yadav of Fincare said. “Shouldn’t worry about any loss of GDP or growth. As compared to 2019 data we are doing better,” he said.

On growth

Bank CEOs see a lot of pent-up demand.

“On an average credit demand is muted but there are pockets where demand is thriving. Use of behavioral analytics, machine learning, tailoring asset strategy etc. has helped us to recover faster, said Prabhune of L&T Financial Services, adding that his company’s disbursement this quarter was 3-3.5 times of the last quarter.

Nitesh Ranjan, ED, Union Bank of India
Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India said credit demand is subdued right now but definitely recovering from what is seen in the last six months across the spectrum. “Push from the government will help. The demand is high in Agri, renewable energy, Infra and warehousing,” he said.

“In the new normal world, we look at data and decide business operations. We are a rural bank and our rural business is shaping up better than pre-Covid,” Yadav of Fincare said,

Covid didn’t have any impact on businesses that are part of essential services, i.e. agri, dairy, he said, adding that credit demand is reasonably strong.

Future trends

The focus is on the next 3-5 years, how to better leverage digital and data, how to build capacity to manage people and continuously invest in the right risk architecture, said Ranjan of Union Bank of India.

Can banks build their own super app since they have a large customer base, asked Anand Dalmia, Co-founder, Fisdom. “With a super app, banks can offer more service to customers,” he said.

Prabhune of L&T Financial Services said “Monitoring is not something when it’s going wrong. Our focus is to detect what is something like to happen rather than what has happened. Can we predict if a customer is going to delay his payment for a day?”

Yadav of Fincare wants to focus on basic banking objective which the bank missed due to the pandemic. “We would like to have in-house talent rather than depending on the others,” he said.

Learnings from Covid

Ranjan said the PSU bank merger was a major challenge along with Covid. “Overnight we doubled the size. But we are seeing a much better period than what we have seen. With vaccination, we will be in a better place and business continuity is also improving.”

All of us had plans for 3-5 years. Covid taught us to accelerate the plans to one year.

Dalmia of Fisdom said during the pandemic FinTechs gained a lot due to digital adoptions by banks. We focused on getting more partners onboard. “We have collaborated with 10 banks. Banks have many retail customers, which is beneficial for FinTechs.”



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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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PSU banks report fourfold jump in MSME slippages in Q1, BFSI News, ET BFSI

Banking & Finance

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Public sector banks have reported sharp slippages in their micro, small, medium enterprises (MSME) loans during the first quarter when the Covid restrictions kept the economy subdued.

The fresh slippages of all public sector banks jumped more than four times to Rs 53,914 crore in Q1FY22 from Rs 13,188 crore in Q1FY21. SBI, PNB, Union Bank of India, Bank of Baroda and Canara Bank accounted for 75 per cent of the total slippages in the April-June quarter.

State Bank of India‘s fresh slippages rose more than four times to Rs 15,666 crore in the first quarter, of which 40%, or Rs 6,416 crore came from the MSME sector.

Nearly 59 per cent of Indian Bank’s fresh slippage in the first quarter at Rs 4,204 crore came from the MSME sector while for Canara Bank, they were 58 per cent of the total slippage of Rs 4,253 crore during the first quarter.

The Reserve Bank take

During the monetary policy review earlier this month, the Reserve Bank had allayed the fears of lenders about the rising delinquency levels among small business loan borrowers, who are hit hard by the Covid second wave, saying the numbers are not alarming yet. The government and the central bank push to support MSMEs during the pandemic through credit measures like the emergency credit line guarantee scheme (ESLGS) saw lending to them jumping to Rs 9.5 lakh crore in the pandemic-hit FY21 from Rs 6.8 lakh crore in FY20, while the asset quality deteriorated to 12.6 per cent as of March 2021 from 12 per cent in December 2020.

‘No crisis’

RBI Deputy Governor Mukesh Jain said there is no crisis now on this front, as the stress level among small business borrowers are not very high, even though slippages and loan restructuring are rising of late. The situation is not very bad as many accounts are going in for restructuring under the Covid package version 2 announced in May, which allowed crisis-ridden borrowers to opt for up to two years of the moratorium, he said. “Yes, there is a visible increase in slippages among MSME borrowers, but the quantum of slippages has not reached an alarming level” Jain said.

“We are constantly monitoring all the regulated entities, particularly banks and large NBFCs to check their asset quality. Our stress tests also prove that there is nothing alarming as of now,” he added. A July 28, 2021, report by Sidbi-Cibil said the NPA levels among MSME borrowers have surged to 12.6 per cent in the March 2021 quarter, from 12 per cent in December 2020, while loans to them have jumped to Rs 9.5 lakh crore in FY21 from Rs 6.8 lakh crore in FY20.



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Large private banks undercut smaller ones in corporate loans, BFSI News, ET BFSI

Banking & Finance

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The battle among banks for corporate loans pie is getting fierce even as corporates look at bond markets for cheaper fundraising to refinance existing high-cost loans.

Large private banks are offering aggressively priced refinance loans to lower-rated corporate borrowers of smaller banks.

The rates offered are almost 200 basis points lower than the market rate, which smaller banks are unable to match, according to reports.

With the Reserve Bank of India maintaining an accommodative stance, there is abundant liquidity in the market and rates are at rock bottom. Corporates whose loans are up for refinance are looking to take advantage of the opportunity to cut their interest costs.

PSU banks

PSU banks took are taking a hit.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to Rs 3,28,350 crore a year ago. However, HDFC Bank expanded its corporate loans over 10% in the April-June quarter to about Rs 3.15 lakh crore.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

Ceding ground to private-sector rivals

The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.



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Two new bidders for Lavasa, BFSI News, ET BFSI

Personal Finance

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Creditors to the former Hindustan Construction Company (HCC) controlled Lavasa township have received two bids for their Rs 6,000 crore loans outstanding in a third round of bids for the debt-laden company.

Two bids from Alchemist ARC president Srishti Dhir along with her brother Madhav Dhir and little known Darwin Projects are being considered by lenders, three people familiar with the bids said.

Srishti Dhir confirmed that she has bid in her personal capacity in association with her brother Madhav. Srishti is the elder child of Alchemist ARC promoter Alok Dhir. Darwin Projects could not be reached.

“Both bids are on the condition that the project will receive environmental clearance that has been the main reason this account turned into an NPA. It makes them weak. Creditors will consider them but the conditional nature and huge haircut make the bids unattractive in the present form,” said one of the three persons cited above.

Darwin has bid Rs 750 crore while the Dhirs have bid Rs 550 crore, which means the bids are at 88% and 91% haircuts, respectively. The upfront cash offered by both bidders is less than Rs 100 crore, making it less attractive for creditors.

ET’s queries to Lavasa’s Insolvency Resolution Professional (IRP) Shailesh Verma remained unanswered.

Lenders met on Wednesday to consider the bids and are most likely to ask both bidders to reconsider their conditions, put more cash on the table and compress their future payment timelines after taking views of other lenders in the coming days.

Union Bank of India (UBI) is the lead lender in the project with an outstanding loan of Rs 600 crore. Other lenders include Bank of India, Axis Bank, Punjab National Bank and State Bank of India. L&T Finance, the NBFC from the engineering to IT L&T group, is also a creditor along with asset reconstruction companies Arcil, Edelweiss, and Acre.

Lenders have been frustrated with the multiple pullbacks by bidders since the account was taken to the National Company Law Tribunal (NCLT) in 2018.

In November last year, ET reported that three bids were being considered including one from a Pune-based realty developer Anirudh Deshpande and a Dubai-based fund. Before that, Haldiram Snacks and Oberoi Realty had bid in late 2019, but pulled back later citing uncertainties due to the Covid 19 pandemic.

Lenders do not have high hopes from current bids. “Environmental clearance is the main deterrent for this project and until it gets resolved, things will not move,” a second person cited above said.

Srishti Dhir acknowledged the challenge facing the project but expressed confidence that she will be able to work with the authorities to sort things out. Besides completing the existing flats and villas, Dhir plans to also launch a hotel in the property in partnership with a reputed brand.

It remains to be seen whether creditors will want to settle this account through the NCLT as Lavasa is also earmarked to be sold to the National Asset Reconstruction Company (NARC).

Set up in 2000 by the Ajit Gulabchand-led Hindustan Construction Company (HCC), Lavasa was developing the country’s first privately developed city spread over 20,000 acres in Mulshi and Velhe areas in Maharasthra’s Pune district.



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