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The Reserve Bank of India today released the data showing daily merchant and inter-bank transactions in foreign exchange for the period September 06 – September 09, 2021.
Ajit Prasad Press Release: 2021-2022/1153 |
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The Reserve Bank of India (RBI) should rationalise the interchange fees for Aadhaar Enabled Payments System (AePS) transactions and also disincentivise Business Correspondents (BCs) for unfair business activities to generate commission, according to State Bank of India’s economic research report Ecowrap.
This can ensure a level playing field in the BC model followed by public sector banks (PSBs) and other banks.
AePS is a bank-led model that allows online interoperable financial inclusion transactions at point of sale/PoS (micro ATM) through the BC of any bank using Aadhaar authentication.
BCs are retail agents engaged by banks to provide banking services at locations other than a bank branch/ATM.
PSBs mostly follow ‘branch-led BC model’, while other banks follow ‘branch less/ micro ATM/kiosk application on mobile/corporate BC model’ for financial inclusion.
The report underscored three facts — more than 77 per cent Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts have been opened by PSBs; the number of BCs/customer service points (CSPs) of other banks largely outnumbered that of PSBs and, over the years, OFF-US transactions are increasing.
Data indicate that the share of AePS “OFF-US” transactions (where the card issuing bank and acquiring bank are different entities) in AePS increased from 4 per cent in September 2016 to 51 per cent in September 2021.
In AePS “ON-US” transaction, the card issuing bank and the acquiring bank are the same entity.
“Considering these facts, PSBs (that opened around 77 per cent of the PMJDY accounts) are now net payers of interchange fee. We estimate that the PSBs could be paying ₹600-700 crore per annum as interchange fee,” said Soumya Kanti Ghosh, Chief Economic Adviser, SBI.
He emphasised that since AePS works like a PoS, logically the ‘acquiring bank’ (the bank which has installed the PoS terminal at the merchant location) should pay the interchange fee to the ‘issuing bank’(the bank which has issued the card to the customer).
Alternatively, there could be rationalisation in interchange fee as there is no level playing field in infrastructure provided by all banks.
With requisite savings, banks can further strengthen/upgrade their BC model and promote financial inclusion in a more holistic manner, the report said.
Currently, the account opening bank pays an interchange fee to the operator of the BC/ CSP when a customer makes a transaction at micro ATM that does not belong to the account opening bank (that is OFF-US transaction).
At present the interchange fee is 0.5 per cent of transaction amount (minimum ₹1 and maximum ₹15) for an OFF-US financial transaction and ₹5-7 for non-financial transaction.
The report noted that BCs convert AePS ON-US transactions of one set of bank customers to AePS OFF-US issuer transactions and also carry out multiple AePS ON-US and AePS OFF-US transactions on the primary bank application/software.
Women Business Correspondents: Agents of change in India’s financial inclusion
SBI’s economic research department cautioned that the ‘micro ATM/kiosk application on mobile’ model might also lead to several frauds as the mobile BCs introduce themselves as government persons and need biometric authentication to provide different types of subsidy.
PSBs, who are active in financial inclusion activities, have opened a large number of PMJDY accounts (out of 44 crore accounts, PSBs opened 34 crore accounts and non-PSBs 1.3 crore, rest RRBs) with minimal balance and thus incur recurring expenditure by way of servicing such customers, including issuance of free RuPay debit card, besides monthly remuneration for BC operations.
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States with higher Pradhan Mantri Jan Dhan Yojana (PMJDY) account balances have seen a perceptible decline in crime, as per an assessment by the State Bank of India’s economic research department.
The department also observed that there is both statistically significant and economically meaningful drop in consumption of intoxicants such as alcohol and tobacco products in States where more PMJDY accounts are opened.
“This could be because of Jan Dhan-Aadhaar-Mobile (JAM) Trinity which has helped in better channelising of government subsidies and helped in curbing the unproductive expenditure such as alcohol and tobacco expenses in rural areas,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI, in the Bank’s economic research report “Ecowrap”.
The report emphasised that sound financial inclusion policies have a multiplier effect on economic growth, reducing poverty and income inequality, while also being conducive for financial stability.
“India has stolen a march in financial inclusion with the initiation of PMJDY accounts since 2014, enabled by a robust digital infrastructure and also careful recalibration of bank branches and thereby using the BC model judiciously for furthering financial inclusion,” the report said.
Such financial inclusion has also been enabled by use of digital payments as between 2015 and 2020, mobile and internet banking transactions per 1,000 adults have increased to 13,615 in 2019 from 183 in 2015.
The number of bank branches per one lakh adults rose to 14.7 in 2020 from 13.6 in 2015, which is higher than Germany, China and South Africa.
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The Reserve Bank of India issued All Inclusive Directions to Millath Co-operative Bank Limited, Davangere, Karnataka under Section 35 A read with Section 56 of the Banking Regulation Act, 1949 vide Directive DCBS.CO.BSD III.D-12 /12.23.096/2018-19 dated April 26, 2019, as modified from time to time, which were last extended up to November 07, 2021 vide Directive DOR.MON.D-26/12.23.096/2021-22 dated August 05, 2021. 2. The Reserve Bank of India is satisfied that in the public interest, it is necessary to extend the period of operation of the Directive DCBS.CO.BSD III.D-12 /12.23.096/2018-19 dated April 26, 2019 issued to Millath Co-operative Bank Limited, Davangere, Karnataka, and as modified from time to time, last being vide Directive DOR.MON.D-26/12.23.096/2021-22 dated August 05, 2021. Accordingly, the Reserve Bank of India, in exercise of powers vested in it under sub-section (1) of Section 35A read with Section 56 of the Banking Regulation Act, 1949, hereby directs that the Directive DCBS.CO.BSD III.D-12 /12.23.096/2018-19 dated April 26, 2019, issued to Millath Co-operative Bank Limited, Davangere, Karnataka, as modified from time to time, the validity of which was last extended up to November 7, 2021 vide Directive DOR.MON.D-26/12.23.096/2021-22 dated August 05, 2021, shall continue to apply to the bank for a further period of three months from November 8, 2021 to February 7, 2022, subject to review. 3. Other terms and conditions of the Directives under reference shall remain unchanged. (Yogesh Dayal) Press Release: 2021-2022/1152 |
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Housing finance companies are expected to register a growth of eight to 10 per cent in their portfolio this fiscal, ratings agency ICRA said on Monday.
Noting that the second wave of Covid-19 infections impacted business sentiments in the first quarter of the fiscal, ICRA said growth is expected to pick up in the rest of 2021-22.
“The healthy demand in the industry, increasing level of economic activity and increasing vaccination in the country are expected to result in a steady growth in disbursements and improvement in collection efficiency in 2021-22,” it said.
However, while the portfolio growth is expected to drive an improvement in revenue, the expected elevated credit costs are likely to keep the profitability subdued in the fiscal, it cautioned.
Asset quality metrics weakened quite sharply in the first quarter of the fiscal but the headline asset quality numbers are expected to moderate slightly from current level as the trend in the collection efficiency continues to remain encouraging, the agency further said.
ICRA expects a 40to 70 basis points increase (net of recoveries and write-offs) in the gross non-performing assets (GNPAs) by March 31, 2022 from GNPAs as on March 31, 2021, assuming there are no further Covid-19 induced lockdowns.
“Overall, on-book portfolio of HFCs in India is estimated at ₹11 lakh crore as on June 30, 2021, with exposures across home loans, loan against property, construction finance, and lease rental discounting. The Covid-19-induced disruptions moderated the portfolio growth to 6 per cent in 2020-21,” noted Sachin Sachdeva, Vice-President and Sector Head, Financial Sector Ratings, ICRA.
The pre-tax return on average managed assets (PBT per cent) for the fiscal is likely to remain similar to levels of last fiscal at 1.9 to 2 per cent, he further said, adding that if the collection efficiency trends post a steady and healthy revival and if slippages remain contained, then PBT per cent may also benefit from reversals in provisions.
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Regular customers who deposit less than Rs 2 crore will now receive a rate of 2.80 percent to 5.25 percent on deposits maturing in 7 days to 5 years. The following are the most recent interest rates on fixed deposits offered by Indian Bank to the general public, effective from November 5, 2021.
| Period | Interest rates in % per annum |
|---|---|
| 7 days to 14 days | 2.8 |
| 15 days to 29 days | 2.8 |
| 30 days to 45 days | 2.8 |
| 46 days to 90 days | 3.25 |
| 91 days to 120 days | 3.35 |
| 121 days to 180 days | 3.5 |
| 181 days to less than 9 months | 4 |
| 9 months to less than 1 year | 4.4 |
| 1 year | 4.95 |
| Above 1 year to less than 2 years | 5 |
| 2 years to less than 3 years | 5.1 |
| 3 years to less than 5 years | 5.2 |
| 5 year | 5.25 |
| Above 5 years | 5.15 |
| Source: Bank Website. With effect from 05.11.2021 |
On their Short Term Deposits, Fixed Deposits, and Money Multiplier Deposit Schemes, senior citizens will continue to get an additional rate of 0.50 percent p.a. for amounts up to ’10 crore for all tenors over the card rate. The latest interest rates on fixed deposits provided by Indian Bank to elderly persons, effective November 5, 2021, are listed below.
| Period | Interest rates in % per annum |
|---|---|
| 7 days to 14 days | 3.3 |
| 15 days to 29 days | 3.3 |
| 30 days to 45 days | 3.3 |
| 46 days to 90 days | 3.75 |
| 91 days to 120 days | 3.85 |
| 121 days to 180 days | 4 |
| 181 days to less than 9 months | 4.5 |
| 9 months to less than 1 year | 4.9 |
| 1 year | 5.45 |
| Above 1 year to less than 2 years | 5.5 |
| 2 years to less than 3 years | 5.6 |
| 3 years to less than 5 years | 5.7 |
| 5 year | 5.75 |
| Above 5 years | 5.65 |
| Source: Bank Website. With effect from 05.11.2021 |
| Period | Interest rates in % per annum |
|---|---|
| 7 days to 14 days | 2.9 |
| 15 days to 29 days | 2.9 |
| 30 days to 45 days | 2.9 |
| 46 days to 90 days | 2.9 |
| 91 days to 120 days | 2.9 |
| 121 days to 180 days | 2.9 |
| 181 days to less than 9 months | 3.25 |
| 9 months to less than 1 year | 3.25 |
| 1 year | 3.55 |
| Above 1 year to less than 2 years | 3.25 |
| 2 years to less than 3 years | 3.25 |
| 3 years to less than 5 years | 3.25 |
| 5 year | 3.25 |
| Above 5 years | 3.25 |
| Source: Bank Website. With effect from 05.11.2021 |
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Planning
oi-Roshni Agarwal
The public sector lender has posted robust September numbers better than even street expectations and viewing it several global brokerages have raised its target price. You got it right we here are talking about State Bank of India (SBI).
The firms that have increased price target for SBI stock include Morgan Stanley, Credit Suisse, JPMorgan, and HSBC. After the stock posted its earnings, the stock scaled to a 52-week high price of Rs. 542.2. On losses in the Bank Nifty, SBI stock trades lower by over 2 percent today at Rs. 520.85 per share.
| Global brokerage | Rating | Price target |
|---|---|---|
| Morgan Stanley | Buy | Rs. 680 |
| Goldman Sachs | Buy | Rs.739 |
| CLSA | Buy | Rs. 750 |
| Macquarie | Outperform | Rs. 580 |
| Nomura | Buy | Rs. 650 |
As per Goldman Sachs, the PSB is well positioned to offer strong profitability over next few years, said the brokerage. On the other hand, CLSA says the company has performed well on most parameters with core margin improving quarter on quarter by 15 bps. RoE has been now at 15 percent with potential upsides.
The asset quality of SBI & large private peers indicate undershooting of credit costs from H2. CLSA increase EPS estimates by 3-5% for FY23-24 & now expect 1% ROA & +15% RoE.
SBI profit during the September quarter jumped 66.7 per cent to Rs 7,626.6 crore as compared to Rs 4,574.2 crore in the same quarter a year-ago period. “The asset quality outcomes are very encouraging to us, while weak credit growth is a concern”, says research firm Macquarie believes that believes the core price to book value is cheap.
PPoP growth will accelerate as growth/rate cycle turns, says Morgan Stanley
The peak in NIM and low net slippages are the key positives, while PPoP trend should correlate with loan growth hereon. FY23F should reflect a normalised RoA & RoE at 0.9% & 16% respectively, says Nomura.
GoodReturns.in
Story first published: Monday, November 8, 2021, 12:43 [IST]
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While CEO Masayoshi Son describes SoftBank as a goose laying “golden eggs”, referring to its stakes in startups that go to market, initial public offerings (IPOs) have dropped off and shares in many top assets like online retailer Coupang fell during the quarter.
“The strategy of let’s create the perception of enhanced value by taking things public hasn’t really worked this year,” Redex Research analyst Kirk Boodry said.
Depressed valuations in SoftBank’s China portfolio amid a regulatory crackdown continued to drag with its stake in ride-hailer Didi, acquired for $12 billion, currently valued at $7.5 billion.
The group’s largest asset, Chinese e-commerce firm Alibaba, fell by around a third in the second quarter.
SoftBank’s quarterly net loss compared with a profit of 628 billion yen in the same period a year earlier.
Bright spots for the Vision Fund include its India portfolio with ride-hailer Ola and logistics firm Delhivery targeting listings.
SoftBank has been trimming stakes following the expiry of lock-up periods, while focusing on investing through its second Vision Fund that has $40 billion in committed capital from SoftBank itself.
SoftBank shares, which have lost around a quarter this year, closed down 0.77% at 6,161 yen ahead of earnings on Monday.
($1 = 113.3500 yen)
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| Current market price | Rs 523 |
|---|---|
| Target price | Rs 675 |
| Gains | 29.00% |
State Bank of India reported a steady quarter, with net earnings growing 67% YoY to Rs 76.3 billion (15% beat), aided by controlled provisions, as asset quality showed remarkable strength, despite the impact of the second COVID wave.
“It created a family pension provision of Rs 74.2 billion, instead of amortizing it over five years, thus prudently deploying one-off gains from the DHFL recovery and tax refund. The bank has fully provided for its exposure towards the SREI group,” the brokerage has said.
The bank saw NPA/NNPA ratios improving by 42bp/25bp QoQ to 4.9%/1.5% as fresh slippage subsided to Rs 41.8 billion (66bp annualized). Restructured book remained in check at 1.2% of loans, while the SMA pool declined sharply to Rs 66.9 billion (27bp of loans).
State Bank of India has reported a robust performance as it bravely fought off the COVID-19 impact and displayed remarkable resilience in asset quality performance.
“The bank has been reporting continued traction in earnings, led by controlled provisions. However, business trends remain modest, impacted by continued deleveraging by corporates. The bank has been able to maintain a strong control on restructured assets at 1.2% of loans, while the SMA pool has declined sharply,” the brokerage has said.
| Current market price | Rs 710 |
|---|---|
| Target price | Rs 860 |
| Gains | 21.00% |
Motilal Oswal sees a potential upside of almost 21% on the stock of Bharti Airtel from the current levels.
According to Motilal Oswal, the management is making the right noise in terms of steady market share gains, premiumization, cross selling through digital initiatives, and healthy inroads in non-Mobile revenue streams like payments bank, Home, and Enterprise segments. It expects 20% consolidated EBITDA CAGR over FY21-23E, along with tariff/consolidation to drive FCF/deleveraging.
“Bharti’s superior execution quality is reflected in its strong performance in the last 8-10 quarters; 25% YoY growth in consolidated EBITDA, despite no tariff
hikes; and consistent subscriber and revenue market share gains,” the brokerage has said.
Motilal Oswal sees a potential for a re-rating in both the India and Africa businesses on the back of steady earnings growth.
“We value Bharti Airtel on a Sep’22E basis, assigning an EV/EBITDA of 11x/5x to the India Mobile/Africa business, arriving at an SoTP-based target price of Rs 860. Our estimates do not factor in any upside from a tariff hike or steep market share gains from VIL’s financial stress. We maintain our Buy rating,” the brokerage has said.
The above stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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The brokerage believes the stock of Divi’s Laboratories may appreciate up to a target price of Rs 6,050 from current levels, and forecasts gains of +16 percent. The stock was recommended at Rs 5,205 by the brokerage, but it is today trading at Rs 4,812. According to the brokerage, DIVI’s revenue grew 14% YoY to INR19.9b (est. INR20.4b), and the gross margin remained flat YoY at 67.1%. EBITDA margin contracted by 180bp YoY to 41.5% (est. 42.7%) due to higher other expenses/employee costs (up 150bp/30bp as a percentage of sales).
“DIVI’s EBITDA rose 9% YoY to INR8.3b (est. INR8.7b) and PAT grew at a higher rate (15% YoY) to INR6.1b (est. INR6b) due to a lower tax rate of 20.2% in 2QFY22 (v/s 25.1% in 2QFY21)” said the brokerage. According to the research report of Motilal Oswal “inventories of DIVI’s stood at INR 26.8b at the end of 1HFY22 v/s INR17b/INR21.5b at the end of 1H/FY21.”
According to Motilal Oswal, the management stated that “DIVI has recorded some sales of Molnupiravir in 2QFY22. The management said it may not incur further CAPEX on this product in the near term as it has built sufficient capacity to cater to upcoming demand for this drug. The company has started manufacturing Molnupiravir API across all three production lines. The Generics-to-CS sales split stood at 46:54 in 1HFY22. Sales of Nutraceuticals stood at INR1.6b/INR3.1b in 2Q/1HFY22.”
“We reduce our FY22E/FY23E EPS estimate by 5%/2% to reflect some slowdown in offtake related to the Generics segment and higher operational costs”, said the brokerage. Motilal Oswal has said, “We expect a 34% earnings CAGR over FY21-23E, led by increased business prospects from CS and Generics, benefits from Molnupiravir supply to the innovator, improved growth in Nutraceuticals, new product additions in the Generics segment, as well as ~240bp margin expansion on process and productivity improvements.” The broking house has also reported that “Our TP stands at INR6,050 based on 36x 12-month forward earnings. We remain positive on DIVI on the back of strong demand in the CS segment, reduced cost of production due to backward integration, and the Kakinada project being back on track. We reiterate our Buy rating.”
The brokerage expects IndusInd Bank’s shares to rise to a target price of Rs 1400 from current levels, implying gains of 18 percent. The brokerage recommended the stock to buy at a market price of Rs 1,189, but it is now trading at Rs 1,063.65.
According to the brokerage “The impact of COVID-19 on asset quality appears to be controlled as asset quality ratios witnessed an improvement, with GNPA/NNPA at 2.8%/0.8% as of 2QFY22. Collection efficiency improved to 98% in Sep’21. We expect this to gain further traction. The restructuring book remains high at ~3.6% v/s peers. However, healthy PCR (~72%), coupled with a provision buffer of 1.4% of loans, provides comfort. We remain watchful of asset quality as slippages could remain elevated in the near term and moderate post FY22. We estimate credit cost to remain at 2.8%/2.0% in FY22E/FY23E and moderate to 1.8% in FY24E.” The brokerage has said “IndusInd Bank had rolled out its ‘Planning Cycle 5′ (CY20-23), wherein it would focus on fortifying its liabilities, scaling up its key focus businesses, and investing in new growth engines. It expects the loan book to grow at 15-18% over FY2-223E (unsecured retail at less than 5%), with the CASA ratio in excess of 40% by FY23E. We estimate the loan book to grow 17% over FY21-24E.”
According to Motilal Oswal, “the management has maintained its loan growth and credit cost guidance as given during the 2QFY22 results. It expects loan growth to be 16-18% and credit cost of 160-190bp, plus an additional 50bp for Vodafone. Thus, the total credit cost guidance stands at 240bp. We estimate a loan growth CAGR of 17% over FY21-24E / credit cost of 2.8% for FY22E and moderate it to 2.0%/1.8% for FY23E/FY24E.”
Motilal Oswal in its research report said “The stock could witness some pressure due to adverse media articles and asset quality stress reported by some other MFI lenders. Nevertheless, we expect the impact to be controlled. We expect RoA/RoE of 1.8%/15.1% in FY23E. We maintain BUY, with unchanged TP of INR1,400 (1.9x 1HFY24E ABV).”
The above stocks have been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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