Why gold loans continue to glitter in these trying times

Banking & Finance

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Gold accounts for a large proportion of Indian household wealth and this asset has been coming in handy during the period of financial stress caused by the pandemic. Demand for gold loans was strong last fiscal year and the trend continues in 2021-22 too.

Demand for gold loans from micro enterprises and individuals – to fund working capital and personal requirements, respectively – has increased with the pick-up in economic activity and the onset of the festive season, which coincides with the easing of lockdown restrictions by several States, stated Crisil in a recent note.

Loans against gold jewellery portfolio of scheduled commercial banks surged by 59.1 per cent to ₹63,770 crore as on September 24, 2021 from ₹40,086 crore as on September, 2020, according to data with the Reserve Bank of India. SCBs LAGJ portfolio stood at ₹28,163 crore as on September 27, 2019.

 

Q2 disbursements

Second quarter results of banks reveal a continued demand for gold loans while gold loan-focussed non-banking finance companies also said there continues to be a robust appetite for these loans.

“We remain optimistic about gold loans. Year-to-date, gold loans have increased by 26 per cent and we forecast a growth of 25 to 30 per cent for gold loans this fiscal,” said Shyam Srinivasan, Managing Director and CEO, Federal Bank after the second quarter results.

 

The private sector lender’s gold loan disbursals rose to ₹15,976 crore in the quarter-ended September 30, 2021.

CSB Bank also reported a 10.3 per cent year-on-year increase in gold loans for the second quarter of the fiscal.

Second quarter results of gold loan-focussed NBFCs – Muthoot Finance and Manappuram Finance – are likely to shed more light on this trend but analysts said that they are likely to have seen good growth.

“We expect a healthy growth in the gold loan portfolio for Manappuram Finance and Muthoot Finance given the various attractive interest schemes introduced by these gold financiers to attract high ticket-size gold loan customers. Since gold prices have been stable, we expect gold financiers to offer some reprieve to customers (especially those who continue to pay the interest component) to repay rather than rush to auction off their gold,” said a recent report by Motilal Oswal.

IIFL Finance also reported a 19 per cent year-on-year growth in its gold loans AUM to ₹13,600 crore as of September 30, 2021.

 

Will growth sustain?

Umesh Mohanan, Executive Director and CEO, Indel Money pointed out that the economy is getting back on track but a large number of sectors are still badly impacted.

“People trying to reopen or restart their businesses need urgent cash, and for this gold loan is a convenient and fast option that does not require a credit check. Gold is in fact becoming an alternative capital option,” he said.

Indel Money has registered a growth of 25 per cent year-on-year in gold loans and expect the demand to continue. The average ticket size of loans is ₹75,000-85,000 and the average tenure is 1 year.

Experts point out that small business owners, many of whom took the moratorium or restructuring, may now find it difficult to get a loan from the bank.

In this case, gold loans prove to be a useful option.

VP Nandakumar, Managing Director and CEO, Manappuram Finance said, “With the unorganised sector also getting back on its feet, we expect improved growth in gold loans, microfinance, as well as our other business verticals.”

 

Assets under management (AUM) of non-banking financial companies (NBFCs), which primarily offer loans against gold, is expected to rise 18-20 per cent to ₹1.3 lakh crore this fiscal, according to Crisil’s forecast.

 

PSBs lead

According to a recent report by ICICI Securities, the organised gold loan industry, including agriculture loans, has grown at an even stronger pace since 2018-19, with a near 31 per cent growth in 2020-21 due to the cautious stance taken by financial institutes in other loan products due to pandemic-hit economy and higher gold prices.

 

Public sector banks held the largest market share of the organised gold loan industry (excluding agriculture loans) at about 44 per cent in 2017-18, compared to 34 per cent of specialised NBFCs and 12 per cent of private sector banks.

The report estimated that overall, the market share of banks in the organised gold loan industry including agri loans, increased to about 75 per cent in 2020-21 from about 73 per cent in fiscal year 2019-20.

“If banks versus NBFCs share in organised gold loan industry including agriculture loans is observed, banks’ share is estimated to have increased in fiscal year 2020-21 on the back of increased LTV or loan to value and risk aversion by banks in other loan products,” it noted.

However, operationally intensive nature of the business, existing well-distributed infrastructure across India and a well-established client base provide strong business moats for specialised NBFCs, it said.

Online gold loans are also now catching up.

Federal Bank in its investor presentation said disbursals through fintech enabled gold and micro lending platforms crossed ₹3,800 crore.

Recently, asset-backed digital lending platform Rupeek has signed an agreement with Kerala-headquartered South Indian Bank as a lending partner to provide online gold loan services. The service is, however, initially available in limited cities.

Gold prices, repayments

Experts note that gold prices have been stable, which has led to low delinquency amongst borrowers and has helped NBFCs fare better than banks in the business.

“While there has been a moderation in gold prices in the second half of FY21 with around 10 per cent decline in gold prices over peak of August 2021, the decline has been moderated in year to date 2021-22,” ICRA said, adding that gold loan NBFCs have reported low gross net performing assets (GNPAs) since fiscal year 2017-18.

Many NBFCs are also reworking the typical one-year tenure for gold loans to shorter tenures of three months or six months.

Gold loan auctions, which saw a spurt earlier this year, are also likely to normalise as the economic conditions improve.

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5 BSE Small-Cap Company Stocks With High ROCE Annual Percentage

Personal Finance

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Sun Pharma Advanced Research

Sun Pharma Advanced Research Business (SPARC) is a clinical-stage biopharmaceutical company dedicated to consistently enhancing patient care standards around the world through therapeutic and delivery innovation. The stock returned -12.38 percent over three years, compared to 82.17 percent for the Nifty Midcap 100. The company’s annual revenue increase of 198.43 percent surpassed the 45.34 percent CAGR for the previous three years.

Sun Pharma Advanced Research Business Ltd., founded in 2006, is a Mid Cap company in the Pharmaceuticals industry with a market capitalization of Rs 6,915.62 crore. Over a three-year period, the stock had a -12.38 percent return, compared to 43.69 percent for Nifty Pharma.

Mahanagar Telephone

Mahanagar Telephone

Bharat Sanchar Nigam Limited, d/b/a MTNL, is a wholly-owned subsidiary of Mahanagar Telephone Nigam Limited, based in New Delhi, India. MTNL provides services in India’s metro cities of Mumbai and New Delhi, as well as the African island nation of Mauritius.

For the fourth quarter in a row, the company has lost Rs 688.7 crore. Stock returned 38.58 percent over three years, compared to 83.58 percent for the Nifty Smallcap 100. Over a three-year period, the stock returned 38.58 percent, compared to 78.18 percent for the S&P BSE Telecom index.

Kilpest India

Kilpest India

Kilpest India Ltd is a significant agribusiness company in India. Kilpest is an ISO-certified firm with a presence in India in the agricultural market, which includes Crop Protection and Public Health Products, Bio Products, Micronutrients, and Mix Fertilizers. In the fiscal year ended March 31, 2021, the company had a ROE of 86.23 percent, exceeding its five-year average of 60.74 percent. The company’s annual sales growth of 653.53 percent surpassed its three-year compound annual growth rate of 112.21 percent. Stock returned 545.74 percent over three years, compared to 83.58 percent for the Nifty Smallcap 100.

HCL Infosystems

HCL Infosystems

After three consecutive quarters of losses, the company made a profit of Rs 40.58 crore in the quarter ending June 30, 2021. The stock returned -49.71 percent over three years, compared to 83.58 percent for the Nifty Smallcap 100. Revenue fell by 70.67 percent on a quarter-over-quarter basis, the lowest level in the last three years. Stock returned -49.71 percent over three years, compared to 83.58 percent for the Nifty Smallcap 100.

PNB Gilts

PNB Gilts

PNB Gilts Ltd., founded in 1996, is a Small Cap business in the Financial Services industry with a market capitalization of Rs 1,166.47 crore. In the fiscal year ended March 31, 2021, the company generated a return on equity of 34.49 percent, surpassing its five-year average of 17.23 percent. The stock returned 128.17% over the last three years, compared to 83.58 percent for the Nifty Smallcap 100.

Since July 3, 2001, PNB Gilts Ltd. has declared 24 dividends. PNB Gilts Ltd. has given an equity dividend of Rs 10.00 per share in the last 12 months. This translates to a dividend yield of 15.43% at the current share price of Rs 64.80.

5 Small-Cap Stocks With High ROCE Annual Percentage

5 Small-Cap Stocks With High ROCE Annual Percentage

Company ROCE Price
Sun Pharma Advanced 3,836.5 262.50
Mahanagar Telephone 734.2 18.50
Kilpest India 101.1 447.50
HCL Infosystems Ltd. 79.7 12.90
PNB Gilts Ltd. 75.6 64.80

Conclusion

Conclusion

Although ROCE is a key statistic for determining shareholder value, it is rarely included in annual reports. It has been noted that organizations with a higher ROCE than their industry have a relentless focus on driving their organizations to achieve it. All of their strategic and operational efforts, including performance measures across functions and levels, are linked to important ROCE value drivers including fixed asset productivity, working capital turns, and operating margins in such organizations.



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60 per cent of Indian shoppers used digital payments multiple times each week during festive season: Report

Banking & Finance

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A majority of consumers in India are leveraging digital payments more frequently during the festive season, according to a new study conducted by YouGov and ACI Worldwide.

As per the report, frequent usage (2-3 times per week) of digital payments has increased from 57 per cent last year, while 6 per cent of respondents have no intention of using digital payments this festive season, declining from 9 per cent a year ago.

The research highlighted that digital payments continued to be the payment method of choice for festive season spending, with 60 per cent of consumers having used digital payments (including eWallets and UPI) multiple times per week for festive season purchases.

41 per cent of consumers chose digital payments as their preferred payment method, ahead of cash (26 per cent) and debit and credit card payments (23 per cent).

Digital payments were the preferred payment method for 41 per cent of respondents overall, rising to 50 per cent in the 25-34 age group. The over-45 age were divided in terms of their their payment preferences between card payments and digital payments almost equally (35 per cent and 33 per cent, respectively).

19 per cent of respondents used digital payments for purchases of ₹10,000 to ₹50,000 this festive season, in line with 21 per cent last year. Only 4 per cent made purchases exceeding ₹50,000, the same as last year.

57 per cent of respondents said that they use digital payments for groceries and essentials, which remains the most common category for digital payment purchases.

Nearly half of those surveyed used digital payments for apparel (48 per cent) and electronics (47 per cent), with other popular categories including household appliances (43 per cent) and homewares (41 per cent).

While concerns related to digital payments have dropped across the board, failed transactions continued to remain a top concern for 41 per cent of respondents, followed by data privacy (34 per cent) and poor internet connectivity (30 per cent). 14 per cent of respondents had no concerns with digital payments whatsoever.

It also highlighted the advantages of such payments as seen by respondents. 69 per cent feel digital payments offer greater financial transparency (better insights into how, when and what money is spent on) compared to other payment methods. Similarly, 69 per cent think digital payments offer better promotions, incentives, or cashbacks than other payment methods.

Concerns over digital payments fraud have decreased, with 24 per cent identifying it as a concern compared to 30 per cent last year. In line with this trend, digital payments are considered the most secure way to pay for 33 per cent of respondents, up from 24 per cent in 2020, and just behind cash-on-delivery (35 per cent).

“It is encouraging to see the heightened trust in digital payments by Indian consumers, which is also corroborated by the month-on-month growth in transaction volumes, increased frequency of usage among consumers and use of digital payments for higher value payments. This reinforces the fact that digital payments are becoming an even more integral part of our daily lives, as India continues to shine as a global leader in real-time, digital payments,” said Ankur Saxena, country leader, South Asia, ACI Worldwide.

70 per cent of respondents said that with the greater dependence on online shopping that developed during pandemic-related restrictions, they now prefer online to in-store shopping, the report further added. However, 60 per cent also said they look forward to in-person shopping if adequate precautions – including social distancing – are in place.

“While our research suggests that consumers will continue to seek the convenience of online shopping, they’re also looking forward to complementing it with in-store shopping experiences as pandemic restrictions ease,” continued Saxena.

“This highlights how merchants and payment providers will have to account for many different customer journeys, which cross over traditional channels. Omni-channel payments will emerge as a major focus for retailers,” he added.

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Indian Bank reports ₹266.73 crore worth of fraud to RBI

Banking & Finance

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Public sector lender Indian Bank has reported ₹266.73 crore worth of fraud to the Reserve Bank of India (RBI), it said in a regulatory filing on Saturday.

The bank has reported three non-performing accounts as fraudulent.

It detailed the Non Performing Accounts (NPAs) as that have been declared as fraud and reported to RBI as per regulatory requirements, it said in the filing.

The nature of fraud for all three accounts has been specified as “Diversion of funds.”

The lender has declared M P Border Checkpost Development Co Ltd as fraud with an outstanding of ₹166.89 crore, Pune Sholapur Road Development with the amount involved totaling ₹72.76 crore and M/s SONAC with an amount of ₹27.08 crore.

The bank further specified that as on September 30, 2021, it has held provisions worth ₹12.58 crore against SONAC.

In the case of M P Border Checkpost Development Co and Pune Sholapur Road Development, the provisions held were equal to the entire exposure, respectively.

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7 Fintech Startup Gained Unicorn Status In India 2021

Personal Finance

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BharatPe

BharatPe, an Indian merchant payment service, was valued at $2.85 million in a $370 million funding round led by Tiger Global, a US investment firm.

To enable offline merchants to accept electronic payments, BharatPe has developed a QR code-based payments service that uses India’s UPI infrastructure. It also provides working finance to small businesses and this year created its own card acceptance terminal, which has already been placed in over 50,000 locations.

Five of the seven current institutional investors – Coatue Management, Insight Partners, Sequoia Growth, Ribbit Capital, and Amplo – returned to the latest round, along with new investors Dragoneer Investment Group and Steadfast Capital.

CoinDCX

CoinDCX

At a valuation of $1.1 billion, CoinDCX raised $90 million (INR 670 crores) in Series C fundraising. CoinDCX has now achieved the designation of ‘Unicorn,’ making it the first Indian crypto exchange to do so.

CoinDCX has been committed to making cryptocurrencies accessible to the Indian audience with simpler, secure, and compliant solutions since its beginning in 2018. It has onboarded over 3.5 million users so far, and on track to fulfil goal of onboarding 50 million Indians by the end of the year

Furthermore, the Covid-19 pandemic enticed many investors to invest in cryptocurrencies because of their lucrative yields and decentralised nature. Since its beginning, CoinDCX has amassed a user base of over 3.5 million people thanks to a combination of these characteristics.

Ofb Business

Ofb Business

Ruchi Kalra, Vasant Sridhar, Bhuvan Gupta, and Nitin Jain launched OfBusiness, which provides raw material procurement services and finance to small and medium companies (SMBs). Ofbusiness, a B2B firm based in Gurugram, has reached the unicorn club after raising $160 million from SoftBank’s Vision Fund 2.

According to a press release from the firm, existing investors Falcon Edge Capital and Matrix Partners also participated in the round. By September 2021, OfBusiness hopes to be profitable, with a revenue run rate of more than $1.1 billion. The company claims to be growing at a rate of four times every year.

Chargebee

Chargebee

Chargebee, the premier subscription billing and revenue management platform (in the SaaS industry), is the city’s newest unicorn, with a valuation of $1.4 billion following a new round of $125 million in series G funding. Zoho and Freshworkks are two other Unicorns from Chennai (both in the SaaS space).

Chargeebee’s customer portfolio includes Okta, Freshworks, Calendly, Study.com, and thousands of other high-growth subscription businesses in verticals ranging from vertical and horizontal SaaS to D2C e-commerce, OTT streaming, e-learning, publishing, and others, in over 60 countries, selling to end customers all over the world.

Digit

Digit

With a valuation of US$1.9 billion, Digit Insurance, a general insurer founded in 2017, has become India’s first unicorn of 2021.

A unicorn is a privately held startup with a market capitalization of more than $1 billion.

Digit’s premium income increased by 31.9 percent to US$186 million from April to December 2020, according to a statement, and the company has served over 15 million consumers since its establishment. Despite the economic downturn that afflicted other businesses, the insurance was profitable in the first three quarters of fiscal year 20-21.

Groww

Groww

Groww, an investment platform, raised $83 million in a Series D funding round led by Tiger Global Management, valuing the company at more than $1 billion. Sequoia India, Ribbit Capital, YC Continuity, and Propel Venture Partners were among the existing investors in the round.

Groww, which was founded in 2017, claims to have over 1.5 million registered members in over 900 cities. By simplifying the onboarding process, the company makes it simple for consumers to invest in stocks, mutual funds, ETFs, IPOs, and gold. It debuted stocks with an easy-to-use interface for do-it-yourself (DIY) investors in June of last year. Groww competes with online stock brokerages Zerodha and Upstox, as well as Paytm Money, One97 Communications Ltd’s wealth management subsidiary, which controls Paytm.

CRED

CRED

Cred, a fintech startup, has raised $215 million in a fundraising round led by new investment Falcon Edge Capital and existing investor Coatue Management LLP, valuing the company at $2.2 billion. Cred’s current Series D financing comes after the Kunal Shah-led startup secured $81 million at a $806 million valuation just a few months ago. DST Global, RTP Global, Tiger Global, Greenoaks Capital, Dragoneer Investment Group, and Sofina were among the new investors, as were current investors DST Global, RTP Global, Tiger Global, Greenoaks Capital, Dragoneer Investment Group, and Sofina.

Cred was created in 2018 to make it easier for customers to pay their credit card bills and earn incentives. Since then, it has expanded into financing via Cred Cash, as well as online commerce and brand discovery via its ‘Store’ and ‘Discover’ platforms.

Acko

Acko

Acko General Insurance, a digital insurance provider, said on October 28 that it has secured $255 million in a Series D round headed by General Atlantic and Multiples Private Equity. With this financing, the firm became the 34th startup in India to become a unicorn in 2021, bringing its worth to $1.1 billion.

A unicorn is defined as any privately held company with a valuation of $1 billion or more.

The round also includes current investors Intact Ventures and Munich Re Ventures, as well as the Canada Pension Plan Investment Board and Lightspeed. The Company is valued at USD 1.1 billion as a result of this fundraise. The entire amount raised by Acko is now $450 million.



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Reserve Bank of India – Annual Report

Publications

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April 14, 2015




Dear All




Welcome to the refurbished site of the Reserve Bank of India.





The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.




With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.




The site can be accessed through most browsers and devices; it also meets accessibility standards.



Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.



Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.



Thank you for your continued support.




Department of Communication

Reserve Bank of India


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Confident that NPAs will reduce ‘substantially’ in next few months: Bandhan Bank

Banking & Finance

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In absolute terms, NPAs of the bank soared to Rs 8,763.60 crore from Rs 873.97 crore for the corresponding period last fiscal.

Private sector lender Bandhan Bank, which witnessed a massive 10-fold year-on-year rise in its non-performing assets (NPAs) for the second quarter this fiscal, has said it is confident that the NPA level will reduce “substantially” in the next few months as there is clear visibility of improving asset quality day-by-day.

The bank on Friday reported a whopping net loss of Rs3,008.59 crore for the second quarter on the back of Rs5,577.92 crore provisions as the lender saw a huge surge in bad loans. In absolute terms, NPAs of the bank soared to Rs8,763.60 crore from Rs873.97 crore for the corresponding period last fiscal. On a quarter-on-quarter basis, NPAs grew 36% from Rs 6,440.38 crore in the first quarter this fiscal.

“The option was to take it (provisions) over three quarters or take it upfront. But what happens is if I take it over three quarters, the people, the readers will not get the sense of what is the level of stress and how long it can remain. Today, when I am taking it upfront, I am taking the entire possible stress portfolio, whether it is restructuring or whether it is NPA upfront. As I am fully provided, going forward, it will be business as usual and you will see the real strength of Bandhan Bank what it used to be in the pre-pandemic period,” Sunil Samdani, chief financial officer, Bandhan Bank, told FE on Saturday.

During the second quarter, the bank made an accelerated provision on NPA accounts of around Rs1,500 crore. In addition to this, it also provided an additional standard assets provision amounting to around Rs 2,100 crore and provision on restructured assets amounting to around Rs 1,030 crore.

Asked about the Rs2,100 crore provisioning on the standard accounts, Samdhani said, “It is not that we are seeing stress against our standard book. Since we have restructured some accounts, when they come out of restructuring, surely there will be some portions that will fall into the NPAs. So, against that we have taken this provisioning.”

Bandhan Bank MD and CEO Chandra Shekhar Ghosh said this was a “right time” to make one-time provisioning and focus more on future growth. “In the ground level, there are very good improvements. The scenario is becoming normal as Covid-related lockdown restrictions have been removed in most parts of the country. Business is coming back. This is the right time we go for one-time provisioning and focuss more on future growth. It is better to make provision in one quarter and then register profits in the subsequent quarters,” Ghosh pointed out.

“Our bank’s collection efficiency on month-on-month basis improving in a good way. Credit growth is coming back. Whatever we are seeing now, we may see normalcy in the third quarter itself,” he said.

In a post-earnings conference call on Friday, Ghosh said the majority of the bank’s customers are either part paying or full paying their dues. “There is clear visibility of improving asset quality day-by-day. In the last month alone, we have seen that per day 14,000 customers standardized their accounts every day. I firmly believe that the most difficult period with respect to Covid-related disruptions and asset quality challenges are behind us,” he said. The lender was now in a position to accelerate the next phase of its growth with a strong balance sheet, he emphasised.

“If economic growth is coming back as the recoveries come in, there is a strong possibility of a part of this provisioning getting retained back. With credit growth rising, collection efficiency improving, recoveries gathering steam, we are confident that our NPA level will reduce substantially in the next few months,” Ghosh added.

Samdani, during the post-earnings conference call, said the bank was very confident that by the end of this fiscal it would be able to recover around Rs6,000 crore of bad loans. “If we look at collections, disbursement and demands from customers and DPD (days past due) position, there has been substantial improvement,” he added.

In September, the lender’s collection efficiency for non-NPA customers stood at 94%. Sector-wise, EEB (erstwhile microbanking segment) collection efficiency stood at 93% as against 77% in June. In Assam and West Bengal, collection efficiencies improved.

During the second quarter this fiscal, the bank’s gross NPAs as a percentage of total loans increased 964 basis points on year-on-year basis to 10.82% from 1.18% during the same quarter last fiscal. On a quarter-on-quarter basis, the gross NPA ratio soared 264 basis points from 8.18% in Q1FY22.

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Why no-cost EMI is no free lunch

Personal Finance

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A coffee time chat between two colleagues leads to an interesting explainer on an emerging loan product.

Vina: Hi Tina, did you check out the ongoing festive sales online? I have shortlisted a few items to buy.

Tina: No big ticket purchases this year, Vina. Spent a lot last month. It’s time I tighten my purse strings.

Vina: Why don’t you try the no-cost EMI options offered by many sellers, including e-comm websites?

Tina: No, Vina. No-cost EMI is a misnomer.

Vina: Why do you say that? The EMI instalments include no interest or any other additional charges. Plus, you get to defer the payment on your purchases by 3 to 12 months. What more could you ask for?

Tina: That’s not entirely true. Many banks, NBFCs (Bajaj FinServ) and other financial institutions (such as ZestMoney) with whom e-commerce websites have lending tie-ups, charge a processing fee on such no-cost EMI options. Starting from ₹99, the processing fee can go up to 1 per cent of the order value. Besides, a few also levy additional charges on pre-closure of loans, which may apply even if you return the product or cancel purchase.

And like any other loan, the instalments in no-cost EMIs also include an interest component, which however is offered as an upfront discount, hence the term ‘no-cost’. This interest ranges from 12 to 15 per cent per annum.

Vina: Yeah, isn’t that good saving on the interest front? Imagine how many people could benefit.

Tina: There is another catch here. The no-cost EMIs are only available for existing customers (debit or credit card holders) of the bank with whom the e-commerce site has partnered. These customers must have an existing pre-approved credit or overdraft limit with the bank. Moreover, this option is available only on purchases over a certain limit, ₹5,000 in most cases. Besides, part payment is also not an option. You need to either make full payment or avail a no-cost EMI option in full. But the advantage is that one can avail the loan online and almost instantly, without visiting the branch and submitting numerous documents.

Vina: Oh, these are part of pre-approved loans? Clearly those who have already exhausted such limits with their bankers, or have low or no credit score cannot avail no-cost EMI options.

Tina: Right. However, there are new fintech players such as ZestMoney, that provide such no-cost EMI options online to even those with no cards, credit score or such pre-approved limits. One has to just register their Aadhaar-linked mobile number on the platform and complete basic KYC for onboarding. Post this, the website approves a certain credit limit based on your transaction history and the customer can avail the no- cost EMI option on its partnered websites. These come with varying terms and conditions.

Vina: But then again, I need to verify if such players have partnered with the store where I want to make a purchase, or if the product of my choice is entitled for such an option from the fintech players.

Tina: Right! Net-net while no-cost EMIs do sound exciting, remember that there is no free lunch, ever.

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DCB Bank Q2 net profit down 21%

Banking & Finance

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DCB Bank reported a 21.08 per cent drop in its standalone net profit to ₹64.94 crore in the second quarter of the fiscal compared to ₹82.29 crore in the corresponding quarter a year ago.

The board of directors on Saturday also gave its in-principle approval to the lender to invest up to ₹2.04 crore to acquire 9.9 per cent shares in Svakarma Finance.

Svakarma Finance is an NBFC engaged in lending to micro, small and medium enterprises to meet their business requirements and to other financial institutions engaged in lending to these enterprises. In a stock exchange filing, the bank said it expects to complete the acquisition by December 31, 2021.

Meanwhile, for the quarter ended September 30, 2021, net interest income (NIM) declined by 3.3 per cent to ₹323 crore from ₹334 crore in the same quarter last fiscal. Net interest margin was at 3.37 per cent for the second quarter of the fiscal.

“NIM continues to be negatively impacted due to slippages and above normal liquidity maintained during this period,” DCB Bank said in a statement on Saturday.

Gross non performing assets

Non interest income however, increased by 21 per cent to ₹98 crore in the second quarter of the fiscal as against ₹81 crore a year ago. Provisions declined by 14.9 per cent to ₹86.33 crore in the July to September 2021 quarter from ₹101.45 crore a year ago.

Both gross non performing assets and net NPA slightly reduced in comparison to June 30, 2021. The Gross NPA as on September 30, 2021 was at 4.68 per cent of gross advances and net NPA was at 2.63 per cent compared to the gross NPA at 4.87 per cent and net NPA was at 2.82 per cent as on June 30, 2021.

However, they were significantly higher compared to September 30, 2020 when gross NPA was at 2.27 per cent and net NPA was at 0.83 per cent.

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IDFC First Bank Q2 net profit surges 50%

Banking & Finance

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Private sector lender IDFC First Bank reported a near 50 per cent jump in its standalone net profit in the second quarter of this fiscal year, driven by growth in core operating income and lower net credit losses. The bank’s standalone net profit rose by 49.6 per cent to ₹152 crore in the second quarter of the fiscal from ₹101 crore in the second quarter of last fiscal.

Net interest income grew by 27 per cent year on year to ₹2,272 crore in the quarter ended September 30, up from ₹1,784 crore in the second quarter of last fiscal. Net interest margin improved to 5.76 per cent for the second quarter of the fiscal from 4.91 per cent as on September 30, 2020, and 5.51 per cent as on June 30, 2021.

“The NIM expansion was primarily driven by the gradual improvement in the cost of funds, mainly the cost of deposits,” IDFC First Bank said in a statement on Saturday.

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Other income surged to ₹779.70 crore for the second quarter of the fiscal from ₹166 crore a year ago.

The bank said fee income growth was contributed to primarily by the fees related to retail loans, transaction fees, distribution and wealth management fees.

Provisions double

Provisions however, more than doubled and increased by 122.5 per cent to ₹474.94 crore in the July to September 2021 quarter from ₹213.4 crore a year ago. But on a sequential basis, they dropped sharply from ₹1872.3 crore in the firs quarter of the current fiscal.

“The bank utilised ₹560 crore of Covid provision in the second quarter of the fiscal and carrying forward ₹165 crore of provision for future. The bank expects the net credit loss for the retail loan segment to normalise from here on assuming there is no further disruption in the economy due to a new wave of Covid-19,” IDFC First Bank said.

Asset quality remained under pressure although non performing loans declined on a sequential basis.

NPAs fall sequentially

Gross non performing assets rose to ₹4,485.52 crore as on September 30, 2021, amounting to 4.27 per cent of gross advances. This was lower than 4.61 per cent as on June 30, 2021 but significantly higher than 1.62 per cent a year ago.

Net NPAs also rose to 2.09 per cent of net advances as on September 30, 2021 compared to 0.43 per cent a year ago. But it was lower than 2.32 per cent at the end of the first quarter.

The bank said the impact of the second wave of the pandemic is gradually diminishing and this improvement is showing in the improvement in asset quality.

One infrastructure loan (Mumbai Toll Road account) had become NPA during the last quarter.

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On the overall bank level but for this one infrastructure account, which it hopes to cure in due course, the GNPA and NNPA would have been 3.47 per cent and 1.42 per cent respectively as of September 30, 2021.

Restructuring for the overall portfolio stood at 2.9 per cent of the total funded assets as of September 30, 2021.

V Vaidyanathan, Managing Director and CEO, IDFC First Bank, said, “We are seeing strong revival of the economy and strong demand for home loans, loan against property, MSME and consumer loans. The retail loan book is now highly diversified across over 10 lines of business and millions of customers.”

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