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Tuesday, December 19, 2017

HDFC to raise Rs. 2,000 cr on pvt placement basis via bonds

Mortgage lender HDFC will raise Rs. 2,000 crore by issuing debt securities on private placement basis.

The ‘7.55 per cent HDFC, 20 February 2019’ secured redeemable non-convertible debentures will be issued on a private placement basis, HDFC said in a regulatory filing.

“The object of the issue is to augment the long-term resources of the Corporation. The proceeds of the present issue would be utilised for financing/refinancing the housing finance business requirements of the Corporation,” it said.

The issue will open on December 20 and closes the same day.

HDFC shares closed 0.28 per cent lower at Rs. 1,718.10 on BSE on 18.12.2017.

Source : Thehindubusinessline
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AIBEA opposes CII's proposal on stake dilution in PSU banks

The All India Bank Employees’ Association (AIBEA) has opposed the recommendation of the Confederation of Indian Industry (CII) to the Government to reduce its stake in public sector banks to 33 per cent over the next two-three years.

CH Venkatachalam, AIBEA General Secretary, who was in Mangaluru on Monday, told BusinessLine that that some of the members of CII and other industry bodies are responsible for the bad loans in the banking sector.

Terming this recommendation as preposterous, he said: “They (private corporates) take loan. They don’t repay and make the banks to waive off. Then they are telling the Government to privatise the banks.”

He said that the industry bodies are recommending to the Government to privatise the banks to the very same private sector whose innovation is responsible for bad loans. In the country, PSU banks continue to give a bulk of corporate loans to private corporates. These corporates are now blaming the PSBs. “If pubic sector is not good, why do they come here,” he said.

Rather, he said, CII and other industry bodies should compel their members to repay the bank loans so the banks can again recycle this money for more loan and development. Those who fail to repay should be expelled from the membership of these bodies, Venkatachalam said.

Urging the CII to withdraw the recommendation, he said they should concentrate on helping the banks to recover the bad loans. Stating that AIBEA is planning to meet the Union Finance Minister shortly in this regard, he said the association would urge upon the Government to reject this recommendation of CII. AIBEA will also ask the Government to take tough action on the defaulting members of these industry bodies.

AIBEA has reiterated its demand that willful corporate defaults should be brought under criminal offence to enable the banks to take criminal action against these corporate defaulters, Venkatachalam said.

Source : Thehindubusinessline
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Sunday, December 3, 2017

South Indian Bank rides the blockchain wave to complete overseas transactions

South Indian Bank has successfully executed overseas transactions using blockchain technology in partnership with a leading currency exchange house in West Asia.

With this, SIB joins a niche group of banks in the global market to exchange and authenticate remittance transaction messages electronically on blockchain in real time. The pilot transaction was successfully executed by Forex transaction from UAE to India.

The implementation of the blockchain technology in transaction platforms conforms to the bank’s strategy to embrace emerging and latest technology for ensuring faster as well as safe transaction settlement. Besides delivering customer exuberance, this technology is simple, automated and fully secured with minimal data loss.

At present, SIB is having inward remittance tie-up with 4 banks and 34 exchange houses in all the GCC countries and in South East Asian countries such as Singapore, Australia and Hong Kong. The bank has been aggressive in digital innovations and has launched it’s in-house developed mobile app SIB Mirror+, which offers secured digital e-lock for its customers that enables them to lock their accounts at their convenience.

Source : Economic Times
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Vijaya Bank to raise Rs.1,300 cr via bonds in FY18

Public sector lender Vijaya Bank said on Sunday that its board has approved raising Rs.1,300 crore via bonds in the current fiscal under the Basel III global capital adequacy norms.

”...the board has accorded its approval for raising Rs.1,300 crore by way of additional tier 1 bonds under Basel III for the financial year 2017-18 (revised additional capital requirements amounting to Rs.1,000 crore in addition to Rs.300 crore already approved by the board),” the bank said in a BSE filing.

Source : Economic Times
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South Indian Bank raises Rs.490 cr via private placement

South Indian Bank has announced the successful fund raising of Rs.490 crore by way of private placement of Basel-III compliant Tier-2 bonds.

Besides augmenting Tier-2 capital, this exercise would further strengthen the capital adequacy ratio or the capital to risk-weighted assets ratio (CRAR) position of the bank to support the targeted business growth.

The capital position of SIB as on September 30 was 11.74 per cent, which is well above the minimum required level of 10.25 per cent.

VG Mathew, MD and CEO of South Indian Bank, said: “The infusion of fresh capital would improve the CRAR by 108 basis points, which will take care of the capital requirement for the coming year at the targeted business growth of 18 per cent.

Source : Economic Times
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Corp Bank launches RuPay credit cards

Corporation Bank has launched its RuPay Select and RuPay Platinum credit cards.

A press release said here that Corporation Bank’s RuPay credit cards are accepted at all RuPay-enabled 1.5 million plus PoS terminals and 80,000 plus e-commerce merchants in India and all ICS Partner acceptance points (POS, e-commerce merchants) globally.

Jai Kumar Garg, Managing Director and Chief Executive Officer of Corporation Bank, unveiled the cards in Mangaluru on Saturday. Gopal Murli Bhagat, Executive Director of the bank, was present during the launch.

Quoting Garg, the release said that these cards will boost digital payment and will be beneficial in creating a ‘less cash society’.

Personal accident insurance of Rs.10 lakh and Rs.2 lakh is offered on RuPay Select Credit Card and RuPay Platinum Credit Card, respectively, it said.

Source : Economic Times
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Double digit loan growth possible next year, says HDFC Bank

The banking sector has the potential to touch double-digit loan growth next year as there are signs of corporate demand picking up and other credit avenues stabilising, a top official of HDFC Bank has said.

After clocking just under 10 per cent growth for almost a year, credit expansion fell to under 5 per cent starting November 2016. Since then it has been struggling to cross the double digit mark on sustained basis due to the impact of demonetisation and the implementation of Goods and Services Tax (GST).

"The demand so far has been essentially driven by working capital and some short-term loans and, maybe, a little bit of brownfield capex but you have not had a meaningful private investment especially from the private sector to give a boost to corporate credit demand," Deputy Managing Director Paresh Sukthankar told .

The good news is that on the working capital side, given that commodity prices have moved up from the bottom, as volumes increase there would be higher demand for capital, he said.

"But till you have a further pick up in the capex related demand, you cannot expect reversal in the trend... It s been long time now for single digit loan growth for banking industry...when you go into next year if double digit loan growth possible? I think it is if some of these issues play out," he said.

A major portion of loan demand until a few months ago was met through commercial paper, bonds, foreign currency borrowings, while dependence on bank credit was less due to interest rate arbitrage.

Expressing hope of a pick up in the next couple of quarters, Sukthankar said, "I would still think that all of the factors have played out. I am not going suggesting that there is going to be huge capex demand, but share of the pie with others probably stabilising now...growth in corporate credit from now will move to banks," he said.

Source : Economic Times
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Monday, November 13, 2017

No easy capital for PSBs, stick to reforms: Banking secy

Exhorting state-owned lenders to go in for reforms, Financial Services Secretary Rajiv Kumar today said the banks are not going to get easy money as part of the Rs. 2.11-lakh crore recapitalisation plan of the government.

Speaking to the media after the first ‘PSB Manthan’ here, he said the Rs. 1.35-lakh crore recapitalisation bonds will be front-loaded and the contours of the bonds are being decided at the level of the finance minister.

The banks will also be getting nearly Rs. 18,000 crore under the Indradhanush plan.

“Everything is linked to the reforms which each board will consider within a short time as to what kind of business and how they want to go ahead. It’s not an easy money which is going to come, that is the main point. It has to be followed with a whole lot of reforms,” the secretary said.

Kumar made the point that the reforms also include bank boards taking a stand and coming up with a clear plan on consolidation.

He emphasised that recapitalisation does not come on its own as it is followed and preceded by a whole lot of reforms.

As for the proposed recapitalisation bonds, he said the plan is to front-load them, meaning most of it would happen in the current year.

Last month, the government had unveiled a staggering Rs. 2.11-lakh crore two-year road map to bolster NPA-hit public sector banks, which includes recapitalisation bonds, budgetary support and equity dilution.

While announcing the government’s plan of capital infusion in public sector banks (PSBs) last month, Finance Minister Arun Jaitley had said it would be accompanied by reforms to enable the lenders to play a major role in the financial system and give a strong push to the job-creating MSME sector.

Giving details on the Manthan attended by top officials of PSBs and financial institutions, Kumar said discussions took place on reforms including strengthening of bank boards, resolution of non-performing assets and HR issues so that they do responsive and responsible banking in future.

Asked about credit growth, Kumar said banks have put forth suggestions in this regard at the meeting.

With strong fundamentals of the economy and growth getting back on track in coming months, he said banks are preparing themselves for credit offtake.

Under the Indradhanush road map introduced in 2015, the government had announced infusion of Rs. 70,000 crore in state- owned banks spread over four years to meet their capital requirements in line with global risk norms, known as Basel- III.

As per the plan, PSBs were given Rs. 25,000 crore in 2015 -16, and a similar amount has been earmarked for the following years. Besides, Rs. 10,000 crore each would be infused in 2017 -18 and 2018-19.

Source : Thehindubusinessline
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Debit, credit cards, ATMs will be redundant in 4 years: Niti CEO

Niti Aayog CEO Amitabh Kant today said debit and credit cards as well as ATMs will be redundant in next three-four years and people will use their mobile phones for financial transactions.

He further said that with India being a country where 72 per cent population is below 32 years of age, it will have an advantage over other regions like the US and Europe in terms of demographic dividend. “India will make credit cards, debit cards and ATMs technologically redundant in next 3-4 years and we all will be using mobiles for doing many transactions,” Kant said at Amity University Noida campus where he was felicitated with an honorary doctorate degree.

Kant said that India is the only country in the world with billion biometrics and as many mobile phones and bank accounts and therefore, in future, it will be the only nation which will make a lot of disruptions.

More financial transactions will be done on mobile phones and this trend is already rising spirally, he said. “India is growing at around 7.5 per cent per annum and it is an oasis of growth in the midst of a very barren economic landscape across the world but our challenge is to grow at even higher rates of 9-10 per cent,” Kant said.

He said that India is passing through a window of demographic transition, which rarely happens in history.

About “72 per cent of India is below the age of 32 and the population will keep getting younger and younger till 2040 while the population across America and Europe will keep getting older and older... We need a society which will constantly innovate, which will continuously disrupt,” the Niti Aayog CEO said.

Source : Thehindubusinessline
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Govt will pump more capital into public sector banks: Jaitley

Finance Minister Arun Jaitley said on Sunday that the government has decided to inject more capital into state-owned banks to strengthen the banking system and spur economic growth.

Last month, the government had unveiled a Rs.2.11 lakh crore two-year roadmap to bolster public sector banks hit by non-performing assets (NPAs), which includes recapitalisation bonds, budgetary support and equity dilution.

Addressing heads of state-owned banks at the ‘PSB Manthan’ here, Jaitley said the government has decided to put in more capital from the Budget, through bonds and banks’ equity expansion and “therefore, it is the country which is virtually going to pay to keep the banking system in good health.”

“You won’t find us interfering” in commercial transactions, but “when the system is making all these changes and all these monetary contributions in order to strengthen the banking system, we want a robust public sector banking system so that your ability to support growth itself increases,” the Finance Minister told the bankers.

MSME support

He further said one of the focus areas banks have taken up is to support MSMEs (micro, small and medium enterprises) because the sector, creating jobs and giving a boost to the economy, has no access to international finance or the bond market.

Jaitley told the bankers that the government is spending a lot of public money and foreign investment is coming in. “...We need the third engine also to fire and a robust private sector, MSME sector, so that the optimum growth rate, which we have the potential for, can be reached,” he said.

NPAs of PSBs had increased to Rs.7.33-lakh crore as of June 2017 from Rs.2.78-lakh crore in March 2015. In the last three-and-a-half years, the government has pumped in more than Rs.51,000-crore of capital into PSBs.

Source : Thehindubusinessline
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RBI seeks fresh applications for CFO post

The Reserve Bank has sought fresh applications from eligible candidates for the post of Chief Financial Officer (CFO).

This is the second time that the central bank has modified the original appointment notice issued in May this year.

“In view of modifications in eligibility criteria for the above-mentioned post, it has now been decided to accept fresh applications from applicants who had applied earlier in response to our advertisement No 6 & 6A/2016-17 dated May 15, 2017 for the said post (CFO),” according to the latest public notice by the RBI.

Accordingly, it said, the last date of receiving applications for the post of CFO from all eligible candidates will now be November 16, 2017.

The CFO, who will be of the rank of executive director, will be responsible for accurate and timely presentation and reporting of financial information of the central bank, and establish accounting policies and procedures and ensure compliance with regulations.

The CFO will also formulate the accounting policy of the bank, maintain the internal accounts and report financial results, and carry out corporate strategy functions like provident fund policies.

Till now, the central bank did not have a dedicated official handling the finance function, and the tasks were being carried out internally. The appointment is part a major organisational change being carried out by Governor Urjit Patel.

His predecessor Raghuram Rajan had pursued an idea of creating a chief operating officer for the apex bank but the government shot down the proposal as it involved changing the RBI Act. Rajan had also hired a slew of specialists from outside.

Source : Thehindubusinessline
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Not to pursue Islamic banking: RBI

The Reserve Bank of India has decided not to pursue a proposal for introduction of Islamic banking in the country. Replying to an RTI query, the central bank said the decision was taken after considering “the wider and equal opportunities” available to all citizens to access banking and financial services.

Islamic or Sharia banking is a finance system based on the principles of not charging interest, which is prohibited under Islam. The issue of introduction of Islamic banking in India was examined by the RBI and the government of India, it said.

Source : Thehindubusinessline
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Mumbai to host Asian Bankers Association summit

For the first time, the nation’s financial capital will host the 34th annual conference of the Asian Bankers Association (ABA) this week.

The two-day conference will be held in the megapolis from November 16 and will be hosted by State Bank, with the theme of ‘Asia’s turn to transform’, SBI said.

The event is expected to see the presence of over 160 domestic as well as international bankers and Reserve Bank deputy governor Viral V Acharya will deliver the special opening address on the second day, a SBI spokesperson told PTI.

Founded in 1981, the ABA serves as a forum for advancing the cause of the banking industry and promote regional economic cooperation across the continent.

With around 80 members from 25 countries, the association holds conferences on issues of concern to the banking sector, policy advocacy discussions, and training programmes.

The this year’s summit will discuss the impact of the ongoing global downturn on the outlook of the Asian economies; economic consequences of the Brexit in March 2019 on Asia, the America-first policy of the Trump administration; implications of fintech on banks, among others.

Some of the key foreign speakers at the event include ADB’s Noritaka Akamatsu, Chikahisa Sumi of IMF and Cheng Cheng-Mount of Financial Supervisory Commission of Taiwan.

State Bank chairman Rajnish Kumar and Kotak Bank’s Uday Kotak will also address the meet.

Source : Thehindubusinessline
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Thursday, August 17, 2017

Yes Bank savings account interest rates cut; turns 5th lender to do so

Mid-sized private lender Yes Bank on Wednesday became the fifth bank to reduce interest rates on savings accounts. With effect from September 1, savings accounts with balances under Rs 1 lakh at the bank will now earn 5%, against 6% so far. Accounts with balances of Rs 1 crore and above will earn 6.25%, compared with 6.5% earlier. In the last two weeks, State Bank of India (SBI), Bank of Baroda (BoB) and Axis Bank have all reduced interest rates on savings accounts by 50 basis points (bps) to 3.5%. While the cut at SBI applies to accounts with balances up to Rs 1 crore, the reduction at BoB and Axis Bank is for accounts with balances up to Rs 50 lakh. Kotak Mahindra Bank reduced the rate on deposits of between Rs 1 crore and Rs 5 crore by 50 bps to 5.5% on August 4.

Yes Bank had earlier mentioned lowering the SA rate in line with the system as one of the tools available to them to reach their stated goal of a 4% net interest margin by FY20.

Source : Financial Express
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Bank unions firm on strike as talks with IBA fail

Talks between the Indian Banks’ Association (IBA) and the unions held in Mumbai on Wednesday, to avert a nationwide strike on August 22, have failed.

DT Franco of the All-India Bank Officers’ Confederation (AIBOC) and CH Venkatachalam of the All India Bank Employees Association (AIBEA) said the IBA insisted that it was for the government to make a decision on most of the unions’ demands.

But they were appreciative of the fact that, for the first time, the IBA took the initiative to call the unions for talks. The unions will now meet with the Chief Labour Commissioner in New Delhi on August 18.

At Wednesday’s meeting, VG Kannan, Chief Executive of IBA, expressed the view that the unions should not go on a strike at a time when talks are going on at several levels on the contentious issues.

In his response, AIBEA’s Venkatachalam said that he wished he could agree but most of the issues raised were very serious in nature. On privatisation and mergers, the government has been contradicting the RBI Governor and Deputy Governor, he said.

The Banks Board Bureau is not doing anything concrete for the betterment of banks, he said. There was no way the unions could withdraw the strike call, he added.

AIBOC leader Franco said that instead of requesting the unions not to go for strike, the IBA should support them.

Source : Thehindubusinessline
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Jan Dhan accounts may be losing their momentum

Jan Dhan is probably the most aggressive scheme undertaken by any government for financial inclusion. Between December 2014 and December 2016, the number of accounts increased from 104 million to 262 million and further to 288 million by May 2017. However, the challenge is to get people to use these accounts and get into the banking habit, so that they could move up the ladder and use a credit facility or remittance or third-party product offered by banks. How successful has this scheme been?

The thrust was on numbers to begin with and, hence, having 288 million accounts indicate that virtually every family has access to an account. The average balance held in these accounts, however, is critical as it indicates whether or not the banking habit has been cultivated. The table here provides some data on these accounts, with focus on non-zero balance accounts (information up to February 2017 only). Comparable numbers for average balance in all accounts are also provided to give a perspective.

In terms of the use of these accounts, some interesting facts emerge. First, the average balance kept in these accounts increased and peaked in December 2016. The higher usage of these accounts may be attributed to demonetisation as several transfers were made – both by households as well as those stocking black money for conversion purposes. Still the amount was just about 22 days of NREGA wages. Second, post-demonetisation the money appears to have been withdrawn by around Rs 500 per account. Third, the number of zero balance accounts has come down sharply from 73.3% in 2014 to 24.1% in 2016, but rose to 24.9% in February 2017.

How high are these average balances? Prior to the introduction of this scheme, RBI data on average size of deposits as of March 2014 shows that in rural areas, it was Rs 11,080/account, which rose to Rs 17,251 in semi-urban areas and Rs 36,056 in metro and urban areas. The average for the country was Rs 21,156/account. Two conclusions may be drawn here. The first is that the Indian banking system was doing an excellent job in terms of garnering funds from the business perspective and covered households which had savings. The second is that the present performance, even at its peak of Rs 3,571/account in 2016, is very low compared to the existing average. This raises questions about the savings capabilities in the country.

Some of the questions that may be posed are the following. Do these households actually have money to save considering their low incomes? This is pertinent because with high levels of economic deprivation in the country, households hardly have anything left for saving. Do the households who have been given such accounts know how to operate them, has there been any awareness programme carried out to educate them on these benefits? Are the positive balances here only on account of the direct benefit transfers of the government, where payments on NREGA or pensions or other subsidies made through these accounts? These questions are important as they do involve a cost which banks have to currently bear as these are no-frills zero cost accounts being provided to all and sundry.

The interesting part of these accounts is that it has primarily been an initiative shown by the public sector banks with their share being around 80%, followed by regional rural banks with 16-18%. Both have borne the cost of this scheme. Private sector banks have averaged around 3.2-3.5%. The leading states are UP, Bihar, West Bengal, Maharashtra, Manipur, Rajasthan, Chhattisgarh, Assam and Odisha.

A thought worth pondering over is that if PSBs in the normal course were doing a good job of coverage and Jan Dhan has acted more as a channel for government transfers, the addition of small banks and payments banks would only make the canvas more competitive with each segment fighting for a limited piece. It does appear that we may have reached the end of the road where improvement can accrue only if incomes increase and having more institutions and schemes may not add a significant delta to the frame.

The writer is Chief Economist, CARE Ratings. Views are personal

Source : Economic Times
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Wednesday, August 9, 2017

Strike call: IBA invites bank unions for discussions post-noon

The Indian Banks' Association (IBA), which represents the management of banks, has said the all-India strike call given by the unions on August 22 is "totally unwarranted".

S.K. Kakkar, Senior Advisor, Human Resources and Industrial Relations, IBA, made this observation in a communication to Sanjeev K Bandlish, convenor of the United Forum of Bank Unions (UFBU).


Kakkar acknowledged receipt of UFBU's letter to the Chairman, IBA, informing him of the decision of member unions - AIBEA, AIBOC, NCBE,AIBOA, BEFI, INBEF, INBOC, NOBW and NOBO - to go on strike.

The IBA has gone through the demands raised by the UFBU but observed that most of the issues are at the macro-level where the government has to take a decision.

The IBA can facilitate taking up these issues in the appropriate forum. In addition, there are other issues which are under bipartite discussions, for which talks have been initiated.

"We regret to point out that under these circumstances, the UFBU has called for a strike, which is totally unwarranted," the IBA letter said.


The IBA, therefore, requested the unions to reconsider their decision and refrain from undertaking the agitation programme.

It extended an invitation to the UFBU to its office this afternoon along with a representative each from the officers' association and workmen's union to discuss matters "with an open mind."

The IBA also expressed the hope that the UFBU would consider the request being a responsible representative of employee unions and desist from the agitation path that would cause inconvenience to bank employees and put the general public at large to avoidable hardship.

Source : Thehindubusinessline
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Muthoot Finance Q1 net up 30%

Muthoot Finance posted a 30 per cent increase in net profit at Rs.351 crore in the first quarter of FY18 against Rs.270 crore in the previous year.

The company’s loan assets rose Rs.574 crore during the quarter. Its loan assets stood at Rs.27,852 crore as at end-June.

The board has decided to acquire the remaining 11.73 per cent in Muthoot Homefin (India), which is held by other shareholders, at an aggregate price of Rs.38.72 crore. With this acquisition, MHIL will become a wholly-owned subsidiary of Muthoot Finance.

Further, the board has decided to infuse Rs.100 crore in MHIL as equity share capital. During the quarter, MHIL’s loan portfolio increased by Rs.155 crore to Rs.596 crore.

Belstar Investment and Finance, a microfinance NBFC in which Muthoot Finance holds 64.60 per cent stake, grew its loan portfolio 11 per cent to Rs.628 crore.

Source : Thehindubusinessline
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HDFC Bank increasing its term financing exposure riding on demand

HDFC Bank, India’s most valuable private sector bank, is slowly increasing its term financing exposure riding on demand for financing from the road and power transmission sector as it seeks to diversify its balance sheet.

Though working capital loans still dominate the bank’s corporate balance sheet, it is increasing looking at term loans especially refinancing opportunities, executive director Kaizad Bharucha said.

“Though 80% to 85% of our loans were working capital loans, it was not as if we were averse to term financing. But as our balance sheet has increased we have to diversify our lending as well. There are increasing opportunities in refinancing, even though private capex is yet to kick in,” Bharucha said.

Loans to companies or wholesale loans made up 46% of the bank’s loan book as of June 2017. The bank’s total advances as of June stood at Rs 5.80 lakh crore out of which 30% were term loans, up slightly from 27% a year ago, Bharucha said.

HDFC Bank is looking at opportunities especially in road projects under the hybrid annuity model (HAM) under which is a mixture of the built operate transfer (BOT) and engineering procurement and construction (EPC) models in road development. “Besides roads we also have interest in transmission. We will ultimately lend prudently and to projects in which we have seasoned with the management and know the company,” Bharucha said.

On Tuesday, HDFC Bank was ranked number one among banks in India by a annual survey of US based Greenwich Associates on the basis of interviews with CFOs and treasurers of 500 middle market and large companies.

Source : Economic Times
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Axis Bank cuts interest rate on savings bank account

Private sector lender Axis Bank reduced interest rate on savings bank accounts by 50 basis points to 3.5 per cent for deposits up to Rs 50 lakh.

However, the bank will continue to pay 4 per cent interest on deposits of above Rs 50 lakh.

Axis Bank is the fourth lender to reduce the interest rate after market leader State Bank of India (SBI) begun the process of reducing interest rate on savings bank account.

"... the bank has revised the interest rate downward on Savings Account balance by 50 bps to 3.50 per cent per annum on balance of up to Rs 50 lakh," Axis Bank said in a regulatory filing.

The new interest rates will be effective from 08/08/2017, it added.

On July 31, SBI slashed interest rate on savings account deposits by 50 basis points to 3.5 per cent on balance of Rs 1 crore and below.

Source : Economic Times
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Friday, August 4, 2017

Punjab National Bank’s exposure to Videocon, Aban Offshore slips in June quarter

Punjab National Bank (PNB)’s exposure to Videocon Industries and Aban Offshore slipped in the June quarter, the country’s second-largest state-owned lender has told analysts and investors. According to two people aware of the development, PNB said in an analyst conference call that its Rs 770-crore exposure to Videocon and Rs 307-crore exposure to Aban have turned bad. On Wednesday, PNB reported a 12% year-on-year (y-o-y) rise in its net profit to Rs 343 crore for the quarter ended June. Its gross non-performing asset (NPA) ratio rose 113 basis points (bps) sequentially to 13.66%, while the net NPA ratio rose 86 bps to 8.67%. The bank has total exposure of Rs 11,000 crore to nine of the 12 accounts referred by the Reserve Bank of India (RBI) for resolution under the Insolvency and Bankruptcy Code (IBC), according to an analyst, and the lender will have to make additional provisions of Rs 1,000 crore towards them over the next three quarters. PNB is the first large lender to recognise Videocon as an NPA. On May 9, Videocon was declared an NPA by mid-sized lender Dena Bank. Its gross debt stood at Rs 47,554 crore in December 2015.

In FY16, the company’s consolidated net profit stood at Rs 1,368 crore on the back of Rs 10,311 crore in revenues. Earlier, bankers told FE Videocon had been trying to repay debt by selling some of its businesses such as Kenstar, merge its direct-to-home division with Dish TV and lobby for the troubled Petrobras project in the Sergipe Basin, where the company is in a joint venture with Bharat Petroleum (BPCL). Aban Offshore owes Rs 12,030 crore to lenders as on March 31.

Both companies are likely to be on a second list of defaulters that the regulator is believed to be preparing for resolution under the Insolvency and Bankruptcy Code. On June 13, RBI had asked banks to refer a dozen stressed companies — with a combined debt of close to Rs 2.4 lakh crore — to the NCLT. Bankers were given a fortnight from the date of issue of the notification to move the tribunal.

Source : Financial Express
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SBI plans to raise Rs 2,000 cr via Basel-III bonds

State Bank of India plans to raise Rs 2,000 crore by allotting Basel-III compliant bonds to various investors.

“The committee of directors for capital raising accorded its approval today to allot 20,000 AT1 Basel-III compliant non-convertible, perpetual, subordinated bonds in the nature of debentures... aggregating Rs 2,000 crore to various investors,” SBI said in a regulatory filing on thursday.

The country's largest lender said the bonds will carry a coupon rate of 8.15 per cent per annum with a call option after 5 years or the anniversary date thereafter.

SBI shares were trading 1.67 per cent lower at Rs 302.50 on the the BSE

Source : Thehindubusinessline
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Kotak Mahindra Bank retains SB a/c rates at 5-6%

“Borrowers matter, so do savers,” tweeted Uday Kotak, Executive Vice-Chairman and Managing Director, Kotak Mahindra Bank, on Thursday even as his bank decided to keep its savings bank rate steady at 5-6 per cent.

This decision comes despite the RBI paring the repo rate (the interest rate at which banks borrow funds from the central bank to overcome short-term liquidity mismatches) from 6.25 per cent to 6 per cent and State Bank of India reducing its savings bank (SB) rate to 3.50 per cent from 4 per cent on deposits up to Rs.1 crore.

Kotak Mahindra Bank offers 5 per cent interest on SB deposits up to Rs.1 lakh; 6 per cent on deposits above Rs.1 lakh and up to Rs.5 crore; and 5.5 per cent on deposits above Rs.5 crore.

Among other private sector banks that offer higher interest rates on SB are YES Bank (6 per cent on deposits up to Rs.1 crore); IndusInd Bank (4 per cent on daily balance up to Rs.5 lakh; 5 per cent on daily balance above Rs.5 lakh and up to Rs.10 lakh; 6 per cent on daily balance above Rs.10 lakh); Lakshmi Vilas Bank (4 per cent on deposits up to Rs.1 lakh; 5 per cent on deposits above Rs.1 lakh and up to Rs.5 lakh; 6 per cent on deposits above Rs.5 lakh; 6.50 per cent on balances above Rs.10 crore).

Source : Thehindubusinessline
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Cost of credit, NPA positioning restricting banks to cut MCLR: SBI

The SBI on Thursday said that though the Marginal Cost of Funds-based Lending Rate (MCLR) is expected to be in tandem with the policy rates, banks are hesitant to reduce it due to cost of credit and deposits and NPAs positioning.

The Reserve Bank of India (RBI) on Wednesday cut the key lending rates by 25 basis points (bps).

"As far as the MCLR is concerned, it is a function of multiple components. It is intended that the MCLR is in tandem with policy rates," State Bank of India (SBI) Managing Director and Chief Executive Officer Dinesh Khara told BTVi in an interview.

"But other factors like the cost of deposit and cost of credit -- which are a critical determinant of MCLR -- and also non-performing assets (NPAs) positioning, are restricting banks from cutting the MCLR... the policy rates are a critical component but not the only component affecting the MCLR," he said.

The banking system is rolling into a lot of liquidity and they would like to deploy that liquidity into the right kind of investments and projects coming up for consuming this kind of liquidity, Khara said.

The advances growth in general is 6 per cent in the current fiscal while the retail advances are doing well at 10-12 per cent.

Retail advances are still linked to base rate while the corporate advances are getting aligned to the MCLR.

"Banks are willing to lend at the right kind of price. But when it comes to investment demand from corporates, that is yet to be seen. My sense is that economic activity through private investment gets revived," he said.

Source : Economic Times
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'SIP' peaks on Google search, attracts investors from small cities

As stocks scale new highs and return from bank deposits dip, even regions that are not typically known as investor hubs are becoming more and more curious about 'Systematic Investment Plan' or SIP.

The search for the keyword, 'Systematic Investment Plan' (SIP), using the Google search engine has peaked. Contrary to general perception, an overwhelming number of people in states like Jharkhand, Sikkim, and Haryana - where Assets Under Management (AUM) as a percentage of respective state domestic products (SDP) is low - are trying to find out more about SIPs.

According to Google data compiled by ETIG, the search for `SIP' has touched a peak score of 100 - a 5-year high. Google score of 100 indicates peak popularity of a term in a defined time frame.

For instance, the search interest for `SIP' is the highest in Jharkhand among all states, an interest score of 100. The eastern state with per capita investment of Rs 3,830 in mutual funds and Rs 12,600 crore of AUM accounts for 0.6 per cent of the total AUM in the country.

Sikkim -with interest score of 89 for Rs SIP' -has per capital investment of Rs 15,010 in MFs -accounts for 0.1 per cent of the total AUM. Surprisingly, no fund house runs a branch in the state.

The total number of SIP accounts in India has grown at a pace that has shadowed the surge in interest on the product. In the past three years, the number of SIP accounts increased from 68 lakh to 1.45 crore in June 2017.

In the past few months, about 7-7.75 lakh SIP accounts have been added with an average investment size of Rs 3,000 per account, according to the Association of Mutual fund of India (AMFI). The average ticket size of SIPs for the same period last year was around Rs 2,200.

The nature of search on the Internet also reflects the entry of otherwise risk averse new investors who are keen to ride the equity boom. For instance, the interest score of 'top mutual funds' has a high positive correlation with the interest score of Rs SIP.'

Globally, the interest score for the term 'best mutual funds' is the highest in India, followed by unrelated terms such as Rs US' and Rs Canada'.

The total SIP book of local MFs was $736 million in June 2017. During FY 16-17, Rs 43,921 crore was collected through SIPs, which is equivalent to 72 per cent of the total inflow into MFs.

What's driving the growth in SIP investments? Most retail investors have found SIPs to a convenient and relatively safer way to participate in equities without timing the market. Also, the ticket size can be as low as Rs 500 a month.

Source : Economic Times
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Wednesday, July 19, 2017

A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

From the debris of the Indian banking industry, a small segment of lenders – the old private sector banks – is rising like phoenix with a promise of being profitable, but on a scale that they could afford.

Correction of past mistakes, availability of technology off the shelf, entry of professional managers from large banks, and availability of capital for those with a promise are all helping many laggards of the past turn around.

The transformation in some of these banks is not going unnoticed at the market place with investors cherry picking those banks which are making a difference to the community they serve, and at the same time keep an eye on the financial metrics.

In the growth versus profitability debate too, they appear to be better placed as the state-run banks are likely to be hobbled by lack of capital as they clear the bad loan mess, while large private sector ones would be handicapped by their sheer size tempering their growth.
A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

"There is a bet on select old-generation private sector banks," said A Balasubramanian, chief executive officer at Birla Sun Life Asset Management Company. "Those banks have a balanced mix of retail and corporate loans, which mitigates risks. In the next few years, they should be elevated to mid-sized banks’ league. Their growth will outpace the industry average."

Lakshmi Vilas Bank, Federal Bank, South Indian Bank, DCB Bank, Karur Vysya Bank, Karnataka Bank are on a roll when the banking industry dominated by state-run banks is on the mat. Shares of these banks have outperformed the broader market with them soaring 30-90% in the past year, beating the BSE Bankex's 25% gain.


A lot of these banks are changing with times. Many like Lakshmi Vilas, Federal and Karnataka Bank have professionalised their board of directors and taken their management away from the community that was instrumental in laying the foundation for them.

The Chennai-based Lakshmi Vilas has Parthasarathi Mukherjee as chief executive, a banker who had spent over 20 years in Axis Bank as the head of its corporate relationships. Prior to that, he was with State Bank of India. The lender had in the past appointed PR Somasundaram, formerly with Standard Chartered Bank, as chief executive.

Federal Bank, the Kerala-based lender hired Shyam Srinivasan, who managed consumer banking business at Standard Chartered, as chief executive in 2010. Since then, its loans have surged 132% to Rs 74,091 crore (between FY11 and FY17) and its profits have risen nearly 50% to Rs 257 crore from Rs 172 crore.

"We have broken out the traditional model to scale up," said Srinivasan of Federal Bank. "We have gained acceptance from the markets, customers."

Many of the banks with their new managers from outside the community or the region are beginning to look at the market afresh. They are breaking the barriers of the old by embracing change.

"With a new management at the helm of affairs, our bank is shedding its old image to bring out a new look," said Parthasarathi Mukherjee. "All these are triggering a professional work culture."

The industry comprises four broad segments—state-run banks with about 71% market share, followed by new-age private sector lenders that hold about one-fourth of the market share. The marginal players are the old private sector lenders, which escaped bank nationalisation, and foreign banks together holding less than 5% of the pie.
A look at how laggards like Lakshmi Vilas Bank, Federal Bank and DCB Bank are scripting a turnaround

The old private lenders were a neglected lot with many of them serving a community or, at best, being a regional player, say in a particular state. A Lakshmi Vilas or a Karur Vysya will get dominant business from Tamil Nadu, or Karnataka Bank from the eponymous state. Federal Bank has dominant business from Kerala's diaspora, or DCB Bank from the western region.

Since many had their origins as a community bank, a few controlling dominant groups stifled their growth in some cases. Their financial ratios were the envy of even the dominant ones. Tamilnad Mercantile Bank—which declared a dividend of 1,000% for 2005-06 and 2006-07, and 5,000% in 2007-08— was plagued by fight within the Nadar community. Bank of Rajasthan was under regulatory lens but was forced into a merger with ICICI Bank.


Indian banks in the decade between 2002 and 2012 were binging on the growth in infrastructure and corporate lending. Many of them cut cheques for thousands of crores of rupees for infrastructure projects. The strategy helped them rake in huge profits.

But when the tide turned in 2012 due to a fragile macro-economic condition with high fiscal and current account deficit, excess of imports over exports, banks were left with defaulters. Bad loans have since surged to almost 10% of total loans.

"These banks are now seeing themselves in a better position to grow as larger peers are saddled with high NPAs and hesitant to further lending," says Kuntal Sur, partner-financial services, PwC, a consultant. "They have capacity to expand, as they have lower non-performing assets compared to larger peers, in particular PSU banks."

Many like the Mumbai-based DCB Bank are seeing opportunities to grow. "Our idea is to double the loan book in three to four years to reach Rs 30,000 crore," says Murali Natarajan, CEO, DCB Bank. "We will be small but we have got to be meaningful in terms of our technology, business and service to customers.


Although many of these banks could not match the size and scale of state-run banks, or the service efficiencies of the new-age private sector lenders such as HDFC Bank and ICICI Bank, the staff of old private sector banks are close to their customers and know their needs. They also bring that personal touch to the table which is usually missing at the banking behemoths.

"Our board wants to see the organisation being handled more professionally. Having said that, what is also important is that we have always treated our customers, staff members and stakeholders as a family and that culture has always been there," said K Venkatraman, chief executive, Karur Vysya Bank.


LVB, DCB and Federal Bank have adopted technology to offer services almost at par with the big four in Indian banking.

The proliferation of technology is making a difference. About two decades ago, when banks wanted to improve the processes, the choice was top guns like an Infosys Technologies or a Tata Consultancy Services.

But in the past few years, many innovations introduced by fintech startups have made life easier. Some technologies like Unified Payments Interface (UPI), Immediate Payment Service (IMPS) or data analytics are available off the shelf that narrowed the gap between a State Bank of India and a Karur Vysya Bank.

"We are spending considerably on technology and that will clearly give us an edge in day-to-day business. Eventually it will lead to substantial savings in operational costs," said Mukherjee of LVB.

Technology is enabling them to acquire customers. Lack of past growth is a blessing in disguise. Billionaire Prem Watsa’s plan to buy a controlling stake in Catholic Syrian Bank may have come a cropper, but is a sign of things to come.

"If they continue to surpass the average banking industry growth in terms of assets and liabilities, these shares will yield above average return to shareholders in coming years," says R Sreesankar, head -institutional equities, Prabhudas Lilladher.

Source : Economic Times
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Thursday, July 13, 2017

Vijaya Bank MD gets Skoch award

Kishore Sansi, Managing Director and CEO of Vijaya Bank, has been conferred the ‘Personality of the Year’ award by Skoch Consultancy Services. The award is part of the ‘Skoch Banking and Financial Leadership’ series. Past recipients of the award include C Rangarajan, Dilip Parekh and Nandan Nilekani.

Source : Thehindubusinessline
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Fee on IMPS transactions under Rs 1000 removed by SBI

State Bank of India (SBI) on Wednesday waived charges on all money transfers of less than Rs 1,000 made through the Immediate Payment System (IMPS) channel, in a bid “to promote small ticket size transactions”. Earlier, any IMPS transfer of up to Rs 1 lakh out of an SBI bank account would attract a charge of Rs 5, in addition to service tax. Those remitting amounts between Rs 1,000 and Rs 1 lakh will continue to shell out the charge of Rs 5. The charge on transactions of over Rs 1 lakh and less than Rs 2 lakh will also remain unchanged at Rs 15. The applicable Goods and Services Tax (GST) rate will apply to all IMPS transactions of over Rs 1,000.

The reset in IMPS charges puts SBI at a disadvantage to its private sector peers. HDFC Bank, SBI’s closest rival in terms of asset-book size, earns a fee on all outgoing IMPS transactions. Account holders at the bank have to pay Rs 5 for all transfers of up to Rs 1 lakh and Rs 15 for transfers of between Rs 1 lakh and Rs 2 lakh. The charges are the same at ICICI Bank. Among other large state-owned lenders, Bank of Baroda (BoB) does not levy any charge on IMPS transactions, while Punjab National Bank (PNB) charges Rs 5 for all IMPS transactions, according to the banks’ websites.

Sources in the know said that SBI’s decision to waive charges on some IMPS transactions may have been the result of more than a nudge from the government. “We have almost been arm-twisted into doing this,” said a senior banker on condition on anonymity.

The waiver is likely to impact a sizeable chunk of IMPS users. While bank-wise data for IMPS transactions is unavailable, SBI is widely accepted to be the market leader in terms of digital transactions in general and internet banking in particular. It has a 52% market share in mobile banking, deputy managing director Manju Agarwal had told FE in March.

Like most other modes of digital payments, IMPS had seen a surge in transaction volumes amid the cash crunch arising from the government’s November 8 decision to withdraw high-value currency notes from circulation.

IMPS volumes in June added up to 65.8 million, 82% higher than the November figure of 36.2 million transactions. Transaction values for IMPS aggregated Rs 59,650 crore in June, 83.6% higher than Rs 32,480 crore in November. This puts the average IMPS transaction value at around Rs 9,065.

Source : Financial Express
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Gross NPA divergence at Rs 6,816 crore by Mar 2016: IDBI Bank

Public lender IDBI Bank’s gross NPAs by the end of March 2016 were lower than the Reserve Bank’s estimate, with a divergence of Rs 6,816.60 crore, its annual report shows. As of March 31, 2016, the bank had reported gross non- performing assets (NPAs) or bad loans to the tune of Rs 24,875.07 crore, according to the bank’s annual report for 2016-17. The Reserve Bank (RBI) had put gross bad loans on the bank’s balancesheet at Rs 31,691.67 crore by 2016 March-end, which works out to a difference of Rs 6,816.60 crore.

In case of net NPAs by this period, the divergence is of Rs 4,755.60 crore. The lender had reported net NPAs worth Rs 14,643.39 crore as against RBI’s estimate of Rs 19,398.99 crore. During 2015-16, the bank had reported a net loss of Rs 3,664.80 crore because of a surge in bad loans on its books. This led to an overall divergence in the bank’s provisioning at Rs 2,061 crore.

The annual report data further showed that the bank’s total exposure of 20 largest borrowers and customers by the end of March 2016 stood at Rs 62,329.21 crore (14.55 per cent of total advances), which further increased to Rs 63,967.81 crore (15.53 per cent) as of March 31, 2017. The total exposure to top four NPA accounts was Rs 11,576.97 crore at the end of the fiscal ended March 2016 and Rs 13,172.74 crore by March 31, 2017.

In his message to shareholders, MD and CEO Mahesh Kumar Jain said that good performance during 2016-17 was overshadowed because of deterioration in asset quality. As a consequence of higher NPAs and stressed assets, the provisioning rose, which in turn negatively impacted the bottom line of the bank and raised concerns on the capital adequacy front, he said. “These developments have led to implementation of prompt corrective action (PCA) framework on your bank by RBI. We are ensuring the RBI guidelines relating to distribution of dividend, branch expansion, capital expenditure, investment in subsidiaries are followed,” he said.

Jain said the bank has devised a comprehensive turnaround strategy that seeks to leverage its strengths and entail identification of areas for containing cost and revenue maximisation that would ensure sustainable growth and profitability. Earlier in May, IDBI Bank came under RBI’s PCA watch because of high level of bad loans on its balancesheet.

In April this year, RBI had issued a set of enabling provisions under the revised PCA framework with a clause that if the bank does not improve, it could either be merged or taken over by another bank. Under PCA, RBI has powers to curb a bank’s capacity of giving fresh loans, besides putting restrictions on dividend distribution, among others. Banks are now required to state their bad loan divergence in their financial statements if it exceeds 15 per cent. The sock of IDBI Bank traded at Rs 56.85 on the BSE, up 0.89 per cent from its previous close.

Source : Financial Express
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Initiative for merger should come from banks: Former RBI Governor C Rangarajan

Former RBI Governor C Rangarajan today said bank merger should be need-based and the initiative should come from the lenders themselves.

"Initiative for merger should come from banks themselves and there must be felt a need for it. Therefore, the world over, the larger banks are coming into cooperation," he said.

Recently, the State Bank Of India merged five associates with itself and the government is looking to consolidate few more with the objective of creating five global-sized lenders.

Five associates and the Bharatiya Mahila Bank became part of the State Bank of India (SBI) beginning April 1 this year, catapulting the country's largest lender to among the top 50 banks in the world.

On NPA resolution, he said, the clean-up exercise has to be done and some 'haircut' is inevitable.

Rangarajan was speaking to reporters here today on the sidelines of a NABARD event.

"With the haircut, loans should become performing. Some adjustment is needed. After all, we have always done one-time adjust in the past. The size of NPAs has become big so this step is required. Without finding solution to NPA, we will not be able to move forward in terms of stimulating economy and investment," he said.

Rangarajan said the NPA resolution process would take at least a year to complete.

Last month, the RBI identified 12 accounts for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting to 25 per cent of the total NPAs of banks.

These 12 accounts would qualify for immediate reference under the Insolvency and Bankruptcy Code (IBC), the RBI said.

The banking sector is saddled with non-performing assets (NPAs) of over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).

The Reserve Bank had set up an Internal Advisory Committee (IAC), comprising a majority of its independent board members, to advise it with regard to the cases that may be considered for reference for resolution.

Source : Economic Times
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Sunday, July 9, 2017

SBI launches INTOUCH, digital village initiatives in Nepal

The State Bank of India (SBI) has launched its flagship service INTOUCH in Nepal, an official spokesperson said here on Saturday. The sbiINTOUCH, inaugurated by SBI Chairperson Arundhati Bhattacharya, will offer customers products like Savings Bank, Saral Bachat Account and Combo Savings Account and the branch will have facilities like kiosks for account opening, debit card printing, and ATM. Bhattacharya, along with its subsidiary, Nepal State Bank Ltd (NSBL) also inaugurated the NSBL Digital Village, Jaharsing Pauwa, which would be the first of its kind digital initiative in Nepal banking industry along with INTOUCH, on Friday.

Under the Digital Village Initiative, the NSBL has adopted Jaharsing Pauwa village to provide financial literacy centres and other banking facilities to the 2,200 villagers. The services to the 443 households would include an internet banking kiosk, free WiFi, POS utility at four merchant outlets, cash recycle machines.

In the non-banking services, the villagers will get solar street lights, medicines and medical equipments to the local health centres, books and stationery to the village government school and other facilities under the NSBL’s CSR activities. Both the initiatives are unique to the Nepalese banking industry and first time taken by an foreign offices of the SBI.

The SBI has experience of making 21 Indian villages digital with a target of 101 in the next few months, and it has 250 outlets under sbiINTOUCH. The NSBL is among the fastest growing commercial banks in Nepal and enjoys a lead position in terms of penetration of technology products. NSBL is a JV between SBI and the Employees Provident Fund, Nepal, the spokesperson said.

Source : Financial Express
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UCO Bank officers to strike work on July 15

The All India UCO Bank Officers’ Federation has called for a one-day all-India strike on July 15 to express its resentment on the unrest prevailing in the bank.

Voicing his resentment to the unilateral and arbitrary actions resorted to by the UCO Bank management, the general secretary of the All India Bank Officers’ Confederation (AIBOC) D Thomas Franco urged the management of the bank to intervene and resolve the issue.

The arbitrary action of the management is causing large-scale discrimination against majority of the officers. The confederation will not be a witness to these attacks, rather the AIBOC would be compelled to express its total solidarity with UCO Bank officers by resorting to agitation in all banks, Franco said in a statement. He further pointed out that AIBOC has been continuously working out strategies, holding workshops to see that the bank turns around.

Source : Thehindubusinessline
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Axis Bank emerges the frontrunner to acquire FreeCharge

Axis Bank, India’s third-largest private sector lender, has emerged the frontrunner to acquire FreeCharge, the digital payments platform owned by troubled ecommerce marketplace Snapdeal, according to three people aware of the development.

The payments unit has been seeking a buyer for several months now, even as its parent negotiates the terms for its own sale.

Mumbai-headquartered Axis Bank is currently conducting due diligence on FreeCharge, according to the three sources cited above, who estimate that a potential deal could deliver a payout of up to $100 million to cash-starved Snapdeal.

This, however, could not be independently verified by ET. Axis Bank and Snapdeal did not reply to emailed queries.

In May, ET had reported that two domestic banks and a couple of private equity firms had expressed interest in Bengaluru-based Free-Charge, once described as Snapdeal’s crown jewel by its chief executive Kunal Bahl.

FreeCharge was acquired by Jasper in 2015 in a cash-and-stock deal estimated at $400-450 million in what was then the largest acquisition in the Indian startup landscape.

Last month, market leader and rival Paytm had signed a non-exclusive term sheet while making a bid of $10-15 million for FreeCharge, according to two sources familiar with the matter.

The surprise emergence of Axis Bank as a potential buyer indicates that Jasper Infotech — the holding company of Snapdeal — had been hawking FreeCharge to others as well, sources said.

Shares of Axis Bank closed down 1.25% at Rs 503.30 on the BSE on Friday. The sale of FreeCharge and logistics unit Vulcan Express would provide much-needed relief to Jasper’s balance sheet. The embattled Gurgaon-based company is separately negotiating the sale of Snapdeal to rival Flipkart.

At one point, Jasper was eyeing a valuation of close to $1 billion for Free-Charge, as it tried to raise cash for the unit, a process that began in late 2015. The reversal in the fortunes of Snapdeal had a drastic effect on Free-Charge, which saw the volume and value of transactions fall sharply.

The company is estimated to have recorded Rs 300 crore in transaction revenue on about 12 million transactions in April.

In its heyday, the payments company had forecast 7 million daily transactions and gross merchandise transactions of Rs 20,000 crore by the end of fiscal 2017.

Over the past six months, Jasper has pumped more than Rs 440 crore into FreeCharge, according to documents filed with the registrar of companies. The latest development comes days after the Jasper board rejected an initial offer of $800-$900 million for Snapdeal from Flipkart.

Source : Economic Times
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IDFC-Shriram Group agree to finalise merger in 90 days

IDFC and the Shriram Group have agreed to finalise a merger of their financial services business in an attempt to create a financial supermarket with offerings from motorcycle credit to lending for multibillion-dollar power projects.

IDFC Bank CEO Rajiv Lall called the proposed merger a "marriage made in heaven" while founder chairman Deepak Parekh said that IDFC gets "readymade branches" and "hope the marriage happens" and the deal goes through amid likely regulatory obstacles. The two have agreed to hold exclusive talks and finalise the merger in 90 days.

All operating businesses of the two groups will come together under IDFC Ltd. The retail consumer centric business of Shriram Capital — Shriram City Union Finance — will be merged into IDFC Bank. The transport finance business will remain a standalone non-banking finance company that would become a subsidiary of IDFC Ltd. The share swap ratio and other details of the merger would be worked out in the next 90 says.

"In the long run, if ever there is a black swan event, you do need a fallback and that’s where a bank will help," said Ajay Piramal, the single largest individual shareholder in the Shriram Group.

The proposed merger will create a financial giant with a market value of at least Rs 72,000 crore that will have businesses like mutual funds and insurance. "It is a chance to create a financial conglomerate that could become India’s largest mass retail platform, to deliver full range of financial products," said Piramal.

The merger of the two group businesses may be the first of its kind in India with different businesses located in different companies. These companies straddle various regulators, from the RBI to SEBI.

An approval from RBI may be the trickiest one, with the central bank having expressed reservations in the past about the holding structure when it comes to banks. It had insisted all the lending businesses be brought under the bank umbrella for a universal bank licence.

"This is a complex transaction," said Lall. "Our expectation is that the whole transaction that is perceived as single scheme of amalgamation, will be approved only once by our boards, but it will take 12 months." "Shriram needs wholesale assets and IDFC needs retail assets," said Parekh. "There’s a lot of work ahead."

Source : Economic Times
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Thursday, July 6, 2017

Citi India profit rises 12% in FY17

Citi India on Tuesday reported a 12.2% rise in FY17 profit after tax (PAT) to Rs 3,626 crore. The bank said its pre-tax profit grew 7% to Rs 6,185 crore in the same period. Its net interest margin — a key measure of profitability — stood at 5.4% in FY17, up 30 basis points (bps) from the previous year. The bank reported no change in its net non-performing asset (NPA) ratio at 0.5% of its net advances in FY17 and its capital adequacy ratio improved 180 bps to 17.6%. For Citi India in aggregate, total assets, including credit extended to Indian corporate clients from offshore Citi entities, stood at Rs 2.02 lakh crore. 

During FY17, Citi India said it disbursed Rs 2.34 lakh crore of loans, including those booked in offshore locations, representing a 13.4% growth over the prior year. Citi India CFO Niraj Parekh said in the statement, “Our results are a consequence of our execution focus, judicious expense controls and sound risk management. Citi in India is well placed and committed to supporting our clients’ investments and growth.”

In FY17, it added 2,039 employees, bringing the total number of employees to 14,543 as on March 31, 2017. It added that of the total employee base, Citi Service Centers housed under Citicorp Services India (CSIPL), engages 8,748 professionals.

Source : Financial Express
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Axis Bank launches super bikes loans; to fund 95% of costs

As the higher engine displacement 'super bikes' catch fancy of the Indian consumer, Axis Bank on Wednesday introduced a special loan product, offering to fund up to 95 per cent of the costs.

The loans, which are for motorcycles with an engine displacement of over 500 cubic centimetres (cc), will come at a price tag of 10-11 per cent per annum.

The third largest private sector lender's executive director Rajiv Anand said many Indians are aspirational of owning iconic brands like Harley Davidson and Triumph which made the bank launch the offer.

In a statement, the bank said the leisure biking segment is expected to grow at 30 per cent per annum over the next three years on high consumer spending and increasing population of high net worth individuals.

While calculating the loan to value ratio which has been capped at 95 per cent, the bank will consider accessory funding along with the cost of the bike, it said.

There are over a dozen brands which are offering bikes in the segment with almost all of them having entered the country in the last decade. These bikes come with a price tag between Rs 5 to Rs 50 lakh. The segment had witnessed sale of over 3,000 units last year.

Axis Bank said the average age of customers buying such bikes has declined to the 30s from the 40s two years ago, and the sales are helped by riding clubs and other adventure activities.

Sales of these bikes are not limited to the metros alone, with tier-II and tier-III cities also witnessing some traction, the bank said.

It can be noted that the high percentage of stressed loans, coupled with waning demand, from the corporate side is making all the banks focus more on the resilient retail lending segment. Axis Bank is among the worst hit private sector lenders on NPAs.

Source : Economic Times
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PSB mergers should be between equals: SBI Chief Arundhati Bhattacharya

State Bank of India chairman Arundhati Bhattacharya said the merger of public sector banks should be between equals and added that things will start getting better on asset quality by the second half of the year. In an exclusive interview to ET, Bhattacharya said union of state-run banks is feasible but the lenders should be given time to ensure the mergers work.

There can’t be a one-size-fits-all approach, and the temptation to merge the weaker ones with the stronger ones should be resisted as it leads to the stronger one losing strength, she said.

“It (merger of banks) is feasible. It has been done in other countries. But you will have to give them time to do it and be able to show a turnaround. You cannot expect it to happen tomorrow and (hope that) day after things will be fine.

It won’t work like that. They will need 3-4 quarters to put it all together and come out on top,” Bhattacharya said.

The clamour to merge 21 PSU banks is getting louder with the government nearly shutting the capital tap. While investors are likely to provide capital to strong ones like SBI, which raised Rs 15,000 crore in a share sale, many others are likely to be shut out from the market. Some will have to be merged so that the capital requirement comes down and resources are better utilised.

“The smaller SOE (state-owned banks) are short of capital and it will be a struggle for them to raise funds unlike the larger banks, which may be able to access equity markets,” said Sumeet Kariwala, analyst at Morgan Stanley.

“Hence, the government may look at merging smaller, weaker banks with larger and relatively stronger lenders.”

Bhattacharya, however, said that may not be the right thing to do. The chief of SBI, which recently completed the merger of six banks with itself, said there should be a merger of equals so that synergies can be derived.

“It should be strong to strong and weak to weak, because if you do a strong and weak it doesn’t really make much sense since it unnecessarily pulls down the strong bank also to some extent,” she said. “And, of course, they need to look at other synergies… there might be synergies of systems, synergies of reach, synergies of different portfolios of business, synergies of cultural fit.

So it cannot be one size fits all.” Banks’ journey to becoming stronger entities may be full of surprises and painful events, but that is inevitable in the process of growing up, she said. “The alternatives are very few, so to that extent this seems to be the best way out,” said Bhattacharya.

“And, probably, this will be painful. But a maturing process and growth is always painful. You ask any teenager they will tell you, and it’s just like that for the country. We need to grow, we need to evolve.”

Source : Economic Times
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