Tag: West bengal

Provisions for MFI loan write-offs lead Bandhan Bank to post 80% drop in Q4 net, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Bandhan Bank on Saturday reported an 80 per cent dip in its March quarter net profit at Rs 103 crore, as it wrote off a huge portfolio of loans in the flagship microlending business by recognising stress upfront. The bank’s post-tax profit for FY21 also reduced by 27.1 per cent to Rs 2,205 crore as a result of the hit to the business in the last quarter.

Its managing director and chief executive C S Ghosh said the bank wrote off Rs 1,929 crore of loans, a bulk of them in the microfinance segment, in the March quarter because it wanted to start the new fiscal with a clean balance sheet.

As a result of the accelerated write-off, the bank’s overall provisions shot up to Rs 1,594 crore from the year-ago period’s Rs 827 crore, which had a direct impact on the profit line. Operating profit, which is arrived at by excluding the provisions, was up 13 per cent to Rs 1,729 crore.

Its chief financial officer Sunil Samdhani said performance of the last 3-6 months was assessed before taking a call on the write-offs, and added that most of these accounts are contact-based businesses like beauty parlour, gym, school bus owner.

The bnak had restructured less than Rs 200 crore of advances in the year-ago period, and most of the loans which were written-off in the reporting quarter were microloans, he said.

Additionally, Bandhan Bank also restructured over Rs 600 crore of advances, which were majorly from the home loan book, he said, adding that with such accounts, it has got greater possibility of an account normalizing if its defers the repayments.

The gross non performing assets ratio improved to 6.8 per cent as against 7.1 per cent in December, including the proforma NPAs.

If one were to include the impact of the write-offs and NPAs, the overall repayments for the bank stand at over 98 per cent, Ghosh said, pointing out that the troubles in two key markets of West Bengal and Assam, arising due to factors like the state elections, a local law in Assam and the second wave of the pandemic, have subsided, with both the states showing collection performance at over 90 per cent.

Ghosh said that Bandhan Bank will suffer some reductions in repayments over the next two months because of the second wave induced localised lockdowns in many states.

Samdhani, however, said that the reverses on the overall economic climate front will not impact its loan growth in FY22 because advances growth mostly happens in the second half of a fiscal starting October every year. The bank, which posted a 27 per cent rise in advances for FY21, did not share an advances growth target.

The core net interest income rose by only 4.6 per cent during the reporting quarter to Rs 1,757 crore despite the advances growth. Restricting the growth was a Rs 538 crore interest reversal on recognitions made in the past on assets which turned NPAs after the Supreme Court order on asset classification, which also reduced the net interest margins by 1 percentage point to 7.8 per cent.

The non-interest income grew 57.4 per cent to Rs 787.3 crore during the quarter.

From a business growth perspective, de-risking has been prime on the agenda with limited network expansion in West Bengal and Assam, Ghosh said.

The bank has turned 11 of its training centres into COVID-care facilities to accommodate 700 beds and is also donating 500 oxygen concentrators, he said.

The overall capital adequacy ratio of the bank stood at a healthy 23.5 per cent, and was down when compared with the 27.2 per cent in the year-ago period.

The bank scrip had gained 0.80 per cent to close at Rs 297 a piece on Friday’s trade on the BSE, as against gains of 0.52 per cent on the benchmark.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Poor people rely more on post-offices for their savings: SBI report

Banking & Finance

[ad_1]

Read More/Less


Post-Office savings deposits are negatively correlated to per capita income while bank deposits are positively correlated with per capita income, according to State Bank of India’s (SBI) economic research report “Ecowrap”.

This indicate that poor people are more reliant on post-offices for their savings and when the income increase they shift to bank deposits first and not to financial products,as per the report put together by SBI’s Economic Research Department.

“That’s why the proportion of post-office deposits in Maharashtra & Delhi, where per capita income is very high is only 60 per cent.

“In states with low per capita income like West Bengal, Uttar Pradesh, Rajasthan and Bihar, the elderly population of 60 plus has a clear preference to invest in post office saving deposits,”Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, said.

Referring to the trend of last 20 years data on gross small savings collections, the report noted that there is a structural break in 2008-09. In particular, the share of different states in gross small saving collections were declining till the global financial crisis.

However, post the financial crisis in 2008, there has been a significant jump in preference for post office savings. This jump is maximum in low income states like West Bengal and even in high income states like Maharashtra, the report added.

India Post Payments Bank app: The good, the bad and the ugly

Lack of financial literacy

Ghosh observed that the huge post-office collections in states like West Bengal and Uttar Pradesh and the preponderance of Kisan Vikas Patras indicate the lack of financial literacy for the products such as mutual funds.

“Particularly in West Bengal, sometimes, the left of political ideology that everything that market does is bad in fact results in asymmetric results with poor people investing more in chit funds, the live example of this is the ₹20,000-30,000 crore Saradha scam.

“Most of the times these types of scams are also the product of political dispensation,” Ghosh said.

He emphasised that the Government has taken the best decision of not changing the rates on small saving schemes as the country is currently going through an unprecedented pandemic crisis.

Lock into the Post-Office Senior Citizens Savings Scheme

Protecting seniors interest

To further improve the economic condition of senior citizens, the report recommended giving full tax rebate on the interest amount up to a threshold level on the Senior Citizens Savings Scheme (SCSS). This will have nominal impact on the exchequer.

Under SCSS, a senior citizen can deposit ₹15 lakh and the current interest rate is 7.4 per cent. However, the interest on SCSS is fully taxable (the interest amount for ₹1 lakh deposit for 5 years is around ₹51,000 which is taxable). The February 2020 outstanding under SCSS was ₹73,725 crore.

The report suggested that an age-wise interest rate structure should be ushered in, with rates linked to long-term bank deposit rates till a certain age group, and offering a higher than market rate over that age group.

“This could, in one go, serve the multiple purposes of ensuring a lower lending rate structure, adequate returns for senior citizens, lower interest expenditure and an alternative to floating rate deposits,” Ghosh said.

As Small Savings Scheme (SSS) rates are adjusted in every quarter, the report said the Government should ideally remove the 15-year lock-in period for Public Provident Fund (PPF) and give the investors the option to withdraw their money within a stipulated time with some sort of disincentive

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Bank union strike severely disrupts banking services across the country, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The two-day strike by some 10 lakh bank employees, mostly from the public sector space, has severely disrupted banking services across the country, bank union leaders said. About 85 lakh cheques and other bank instruments were not cleared by bank branches in Mumbai alone on the first day of the strike as half a lakh bank employees joined the protest against the government move to privatise banks.

Almost all of the 8300 bank branches in West Bengal barring a few exceptions remained closed for the two days while about 90% of nearly 11,000 ATMs did not open their shutters, said Rajen Nagar, president of All India Bank Employees Association. United Forum of Bank Unions (UFBU), the umbrella organisation of nine bank unions, had called the strike.

UFBU said that instead of strengthening public sector banking, the present policies are aimed to weaken them, by starving them of the required capital, human resources, through disinvestment and proposed privatization.

“We demand strengthening of public sector banks, by adequate infusion of capital, human resources and strengthened statutory framework to recover the stressed assets,” UFBU’s West Bengal unit convenor Goutam Neogy said. Operating profit of all public sector banks grew 16.4% at Rs 174336 crore in fiscal 2019-20 despite an economic downturn showing the strength of these lenders. Their net profit however dwindled as the lenders had been required to provide aggressively against high non-performing assets.

The government had injected Rs 80,000 crore in 2017-18, Rs 1.06 lakh crore in 2018-19 and Rs 65,443 crore in 2019-20 in the banks it owns. The government has also budgeted to infuse another Rs 20,000 crore in weaker public sector banks, despite strains on government’s own finances.

“It’s not possible for the government to infuse capital every year while the capital is largely being used to cover bad loans. Therefore, new ways of raising capital is being looked at,” a senior banker said. The overall capital adequacy ratio for scheduled commercial banks stood at 14.8% as of March 2020, compared with 14.3% in March 2019. Capital adequacy for PSBs had improved 13% from 12.2% over the same period.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,