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While the central bank may be keeping policy rates unchanged, lenders have to lure depositors with higher rates from real assets such as gold and real estate, considered natural stores of value to beat inflationary pressures.
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Government-run India Post may tie up with a commercial bank to offer various loan products to people and businesses, with a focus on the rural economy. The planned roll-out of 100% core banking solutions (CBS) at all the 1.5 lakh post offices in the country would facilitate the loss-making entity’s transition to the new role as provider of multiple fnancial services, an official source said.
The plan will not only fast-track the process of financial inclusion, but also will make it possible at lower cost to the exchequer. It will be a win-win situation for all stakeholders as it could help India Post have a self-sustainable model over a few years.
In the Budget for FY23, finance minister Nirmala Sitharaman announced that CBS will be implemented in all post offices to provide online transfer of funds between post office accounts and bank accounts.
Apart from providing postal services, India Post runs popular savings schemes. However, it has over the years turned out to be an enormous fiscal burden. The perennial gap in the state-run entity’s revenues and expenditures has widened in recent years and touched a staggering Rs 18,800 crore in FY21.
“There are more post offices than bank branches (1.2 lakh) in the country. So, the objective is to turn around loss-making infrastructure to a universal bank over a period of time,” the official said. With most of the rural bank branches also making losses (20% of PSB branches are in rural areas), there is no point in investing in public sector banks to expand branches in rural areas, he added.
The post offices can act as an extension counter of a commercial bank and extend loans appraised by the bank as India Post doesn’t have underwriting capability, the official said.
Currently, India Post has a subsidiary — India Post Payments Bank (IPPB). Payment banks can accept deposits up to Rs 2 lakh but they can’t lend.
Like other loss-making public sector enterprises, India Post’s finances are weighed down by high pay-and-allowance costs for its 4.16 lakh staff. While losses will be there for a universal service like postal, efforts to improve India Post’s performance and boost its revenue flows haven’t fructified due to a huge mismatch between product costs and pricing as well as the availability of cheaper and faster substitution to traditional mail services.
On the revenue front, India Post is largely dependent on National Savings Schemes and Saving Certificates, which contributed over 70% of its Rs 11,385-crore revenues in FY21. Postal services generated only 23% of revenues.
Earlier, the finance ministry had told the postal department that it has to be self-sufficient by levying adequate user charges as the Centre’s Budget could not absorb such recurring annual losses.
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SBI Capital Markets and BoB Capital Markets are locked in a tough battle to be a process advisor to the committee of creditors (CoC). This is a crucial role in the resolution process as it involves setting the rules, timelines and important decisions like evaluation of bids.
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"Consequently, he has stepped down as the CEO of the Company and ceases to be a Key Managerial Personnel of the Company from the close of business hours of 4 March 2022," the company said in a regulatory filing.
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Reserve Bank of India (RBI) governor Shaktikanta Das on Friday said "monetary policy is an art of managing expectations" as he emphasised the need for an effective communication strategy amid concerns over rising inflation fuelled by geopolitical developments.
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The weighted average lending rate (WALR) on fresh loans rose by 10 basis points (bps) for the banking system to 7.82% in January from the previous month, as per data released by the Reserve Bank of India (RBI). This marks the steepest increase in fresh loan rates since April 2021, resulting from a rise in money market rates and an improvement in credit offtake.
As banks roll back their special festive season pricing offers and the recovery in credit growth becomes more entrenched, analysts and sector experts are taking the view that lending rates may be bottoming out. At 12 bps, the WALR hike was most pronounced at private banks, while public sector banks’ (PSBs) WALR on fresh loans rose 8 bps.
Bankers said that the RBI’s variable rate reverse repo (VRRR) operations have taken the operative rate in the market much closer to the repo rate of 4% than the reverse repo rate of 3.35%. A senior executive with a mid-sized private bank said that since banks are able to place their surplus liquidity with the RBI at a higher rate, the rate of deployment of money is on the rise. “Rates on existing loans cannot increase suddenly because they are linked to the repo, unless the credit ratings change. So higher rates are being seen on new loans where there is more room for better pricing,” he said.
RBI norms mandate that banks must link the pricing of loans to individuals and small businesses to an external benchmark. Since most banks have adopted the repo rate as the external benchmark, rates cannot rise in a big way unless there is a hike in the repo. Changes in spread are allowed only in case of a change in the borrower’s credit rating. These constraints are holding back larger rate hikes, according to bankers.
Loan growth has picked up momentum, clocking rates of around 8% through January and February. This, too, is allowing banks to hike rates. “Once the growth cycle picks up, the pricing takes into account the risk aspect and the expected loss aspect. So there will be some increase, too, in the rates, but there won’t be any meaningful shift until policy rates start going up,” said a senior executive with a large private bank.
Analysts are seeing the emerging trend as a sign of a turn in the rate cycle. Motilal Oswal Financial Services (MOFSL) said in a note on Wednesday, “With the ongoing tightness in rate environment along with potential policy rate hikes by the RBI, MOFSL expects banks to gradually see an increase in their lending yields…Banks with a higher mix of floating rate book stand to benefit from the turn in rate cycle.”
Care Ratings expects loan demand from corporates to return, which should increase banks’ pricing power. “Further with G-sec yields rising, bond yields would also witness an increase, pushing some corporates to the banking system for their borrowing requirements,” analysts at Care said.
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Advent International also likely to pick up a similar stake int he bank; both PEs looking at board seat.
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“The customer will get an Phygital (Physical plus Digital) experience from Muthoot Blue where, MFC’s priority is to be at the doorstep of the unbanked customers in the semi urban and rural areas,” said Thomas John Muthoot, chairman - Muthoot Pappachan Group and Managing Director - Muthoot Fincorp in a release.
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The ban on Russian lenders from the SWIFT financial messaging system has been limited to seven banks that are connected to the government and have a direct link with the defence sector.
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Banks have turned significant players in the gold loan market over the last two years as the pandemic made them look for safer avenues of credit growth. The rate of growth in fresh gold loans at banks has been stronger than at non-bank lenders over the same period, industry experts said.
RBI data showed that the value of outstanding gold loans by banks jumped 65% year-on-year between January 2020 and January 2021 and another 33% between January 2021 and January 2022 to Rs 69,521 crore. In contrast, a recent report by India Ratings and Research showed that the top seven NBFCs engaged in the gold loan business grew their books at just over 20% between March 2020 and March 2021, before slowing down over the nine-month period to December 2021.
Prakash Agarwal, director and head – financial institutions, India Ratings, said, “Within the organised segment, growth in the banking sector has been higher vis-a-vis non-banks. Banks have been fairly aggressive in this space over the last two years,” Agarwal said.
Apart from the safety of capital traditionally associated with gold loans, banks have been able to cash in on the increased acceptability of gold loans as a product. “Of course, we took advantage of the market opening up in the early months of Covid, but people are now more open to mortgaging jewellery, especially in states like Maharashtra,” said a top executive with a mid-sized private bank.
On their part, large NBFCs in the gold loan space have started taking measures to fend off competition from banks. VP Nandakumar, MD & CEO, Manappuram Finance, told investors in November that some of the company’s high-value customers were especially targeted by banks. “We have analysed and found where we lost high-ticket customers. There we have introduced attractive schemes just to attack high-ticket loans,” he said.
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The bank does not have adequate capital and earning prospects and has also failed to comply with various regulatory requirements. The bank with its present financial position would be unable to pay its present depositors in full. “ Public interest would be adversely affected if the bank is allowed to carry on its banking business any further” RBI said in a release.
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Russia's largest lender, Sberbank, is leaving the European market as its subsidiaries there face large cash outflows and threats to the safety of employees and property, the bank said on Wednesday.
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Indian stock market could see additional foreign fund flows as in the wake of sanctions on Russian banks and businesses, global fund managers have started exiting Russia.
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The expulsion of Russia from the global messaging platform was announced by European and US authorities. However, the operation of the ban was yet to be announced by SWIFT, which is a cooperative of global banks.
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By Salman SH
BharatPe co-founder and managing director Ashneer Grover resigned minutes after receiving an upcoming board meeting agenda, which included consideration of action against him based on an investigation report into allegations of financial irregularities submitted by advisory firm PwC.
The development brings to an end a series of controversies that started emanating in the public domain around two months back when an audio clip surfaced where he was allegedly heard hurling abuses at an employee of Kotak Wealth Management over the bank’s inability to secure financing for the IPO of Nykaa.
In his letter to the board, Grover said that he is quitting as MD “effective immediately” due to “baseless and targetted attacks” against him and his family. He also took a dig at BharatPe investors, accusing them of using the board investigation as a “charade” to defame him.
“It is sad that you have even lost touch with the founder…For you, the founder of this company has been reduced to a button to be pressed when needed. I cease to be a human for you. Today, you have chosen to believe gossip and rumours about me instead of having a frank conversation,” he added.
BharatPe confirmed Grover’s departure from the company in an official statement. “Ashneer Grover resigned as managing director and board director of BharatPe minutes after receiving the agenda for upcoming board meeting that included submission of the PWC report regarding his conduct and considering actions based on it. The board reserves the right to take action based on the report’s findings,” the statement said.
The letter to the board came just a day after Grover’s emergency arbitration plea before the Singapore International Arbitration (SIAC) was dismissed. In his plea, Grover had sought quashing of the BharatPe board’s investigation into the alleged financial fraud and mishandling of company funds.
The SIAC plea was largely seen as Grover’s attempt to seek indemnity for many future liabilities while selling his stake back to the company.
The emergency arbitrator (EA) of the special arbitration court, however, rejected all five grounds of his appeal and declined to provide any relief. Grover is now expected to move the Delhi High Court bench.
Grover was represented by Karanjawala & Co, while BharatPe was represented by senior counsel Abhishek Singhvi.
In his pleas before the SIAC, Grover had said the “review committee” formed by the BharatPe board earlier this month to look into the allegations of financial fraud was violative of the terms approved under the shareholder’s agreement (SHA).
The plea also quoted various clauses under the SHA and the articles of association (AoA) between Grover and the company as the primary basis to strike down the independent committee appointed by the board. In addition, it sought an order directing the BharatPe board “not to rely on the reports delivered by the Review Committee in its current form and constitution…”.
Grover had also sought SIAC’s intervention to keep in abeyance the appointment of Suhail Sameer as director of the company, pending the arbitration.
A preliminary report of the investigation, prepared by Alvarez and Marsal and PwC, has reportedly indicted Grover and his wife Madhuri Jain (controller of finance) of committing financial fraud.
The report has outlined two instances of financial transactions approved by Jain using invoices that were made to “non-existent” vendors.
Prior to the investigation, Grover had gone on a voluntary leave of absence from BharatPe till March end.
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Interest rate on fixed deposits for tenure 1 year has been increased to 5.1 per cent while for one-two years it is raised to 5.15 per cent from 5 per cent, it said.
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"No transactions involving entities, banks, ports or vessels appearing" on a U.S., European Union or United Nations sanctions list shall be processed irrespective of the currency of the transaction, said a letter sent by State Bank of India (SBI) to certain clients.
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The Gujarat National Company Law Tribunal also disqualified Citi Securities and Financial Services from being part of the committee of creditors (CoC) according to an order dated February 22.
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Jain will take over from Samrat Khosla, who is moving to a new role within the bank.
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The ruble plunged to a record low of less than 1 US cent in value Monday after Russia was cut off from the global bank payments system in retaliation for Moscow's invasion of Ukraine. The Russian currency dropped nearly 26% to 105.27 per dollar, down from about 84 per dollar late Friday.
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The US and the European Commission on Saturday issued a joint statement to exclude some Russian banks from the SWIFT messaging system. TOI takes a look at what this means...
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The government hasn't given any official instructions on blocking the banks, said a person familiar with the matter. It will be business as usual till the government orders otherwise. The official added that the sanctions imposed by the US and its allies will not impact trade flows between India and Russia.
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The insurance cover of more than ₹43,200 crore is sought for the under-construction units 3 and 4 of the Kudankulam Nuclear Power Plant. The annual premium is more than ₹150 crore.
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The TPG-IndusInd combination is competing with three other such groups that have got formed ahead of the mid-March binding bid deadline. It is after a long time that each of the shortlisted contenders - home-grown banks and global asset management firms - in the fray has tied up with a private equity firm.
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Weak public sector lenders like Central Bank of India and Punjab & Sind Bank will get the lion’s share of the Rs 15,000 crore earmarked for capital infusion in state-owned banks for the current fiscal.
This will help these public sector banks (PSBs) meet regulatory requirements.
The capital infusion of Rs 15,000 crore would go mostly to banks which had got money through non-interest-bearing bonds in the previous year as the RBI had raised some concerns on the fair valuation of these instruments, sources said.
As per the RBI, the net present value of infusion made last year through zero-coupon bonds is much lower than face value as they were issued at discount, the sources added.
These special securities with tenure of 10-15 years are non-interest bearing and valued at par. Such bonds usually are non-interest bearing and issued at a deep discount to the face value. So, the effective Tier 1 capital levels for the banks could be lower than the regulatory requirement.
According to India Ratings and Research, fair valuing of the equity infused by the Government of India (GoI) in five PSBs last year through zero-coupon bonds could lower the banks’ effective Tier 1 capital levels in the range of 50-175 basis points than reported.
Earlier this month, Punjab & Sind Bank got board approval to raise equity capital worth Rs 4,600 crore by issuing preference shares to the government.
This would help the bank augment capital to the required level and save it from coming under the prompt corrective action (PCA) framework.
Similarly, sources said, the decision for the quantum for other banks would be taken in March and subsequently funds would be infused.
The net worth of zero-coupon bonds could be lower by almost 50 per cent at end-FY’22 at the outset than similar maturity government papers in the market, given they do not carry any interest, India Ratings said, adding the illiquid, non-trading nature of these securities could add to the discount.
These banks have moderate competitiveness (albeit better than last year) to raise equity and would need to offer materially higher yields to raise Additional Tier 1 (AT1) capital from the markets. Valuing these zero-interest bonds at a fair level could coerce these banks to raise either equity or AT1 in the near term solely on account of this factor, it said.
In the Budget 2022-23, the government trimmed the capital infusion target to Rs 15,000 crore from Rs 20,000 crore estimated earlier for 2021-22.
The first capital infusion through non-interest-bearing bonds was in Punjab & Sind Bank in the third quarter of 2020-21. It was followed by Rs 14,500 crore into four lenders — Bank of India, Indian Overseas Bank, Central Bank of India and UCO Bank in March 2021.
Central Bank of India received Rs 4,800 crore, UCO Bank Rs 2,600 crore, Bank of India Rs 3,000 crore and Indian Overseas Bank Rs 4,100 crore.
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The homegrown NPCI is an umbrella organisation for facilitating retail payments and settlement in India through the RuPay gateway. It is an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) to create a robust payment and settlement system.
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In December, the RP of a Faridabad-based firm that owns a shopping mall and has a debt of over Rs 300 crore, raised interim finance to run the day-to-day operations even as the company was going through the corporate insolvency resolution process (CIRP).
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The Indian union cabinet has approved a policy amendment allowing foreign direct investment of up to 20% in Life Insurance Corp of India (LIC), a government source said. This move is aimed at easing the much anticipated listing of the state-run insurer.
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Russia invaded Ukraine by land, air and sea on Thursday in the biggest attack on a European state since World War Two, prompting tens of thousands of people to flee their homes.
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