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State Bank of India chairman Dinesh Khara in May said that the country's largest lender has visibility on ₹4.6 lakh crore of loans in the corporate segment.
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These ultra-high net worth individuals are using a non-banking finance company - preferably an existing local entity - to sponsor an overseas investment company, a wholly-owned subsidiary, in a financial centre like Dubai.
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State Bank of India (SBI) lost market share in debit card spends between March 2021 and March 2022, even as it managed to hold on to or improve its share in most other lines of business. The lender’s annual report for FY22 showed that its share in debit card spends fell to 27.58% at the end of the year, from 29.23% at the end of March 2021.
SBI grew its share in the network of point of sale (POS) terminals to over 15% from 13% in March 2021. In home loans, too, the bank gained share, accounting for 35.3% of all mortgages given by banks in India, up from 34.53% a year ago. SBI also gained some share in advances and deposits.
Increasing market share in its various lines of business is an important focus area for SBI. In a post-results call with investors last month, chairman Dinesh Khara had said the bank was aware of the areas where it needed to improve its performance. “With economic activity continuing to improve and the resultant higher credit offtake, the bank is aiming to increase its market share in advances,” Khara said. SBI is also focusing on current account deposits to improve its current account savings account (CASA) ratio.“Our long-term goals are very clear and we are committed to maintain our numero uno position in the industry,” Khara said.
Metrics like debit card spends are important to banks as they are key to understanding the potential a customer offers in terms of yielding business for the bank. Strengthening its digital capabilities will be a significant focus area for SBI in FY23, Khara said in his message to shareholders in the annual report.
Among the initiatives on the cards is a plan to accelerate the digital agenda both in the front and back offices. SBI intends to expand the capabilities and reach of its mobile app Yono while also improving the user experience. Partnerships with fintechs and non-banking financial companies will be explored further to increase penetration and reach.
Yono has served SBI well over the past year, with about 26,000 savings accounts being opened on a daily basis through the app. In Q4FY22, SBI disbursed pre-approved personal loans worth Rs 6,500 crore and sanctioned agri gold loans worth about Rs 13,000 crore through Yono. Khara said the app made a contribution of Rs 25,000 crore to the bank’s overall loan book. SBI’s total advances stood at Rs 28.18 trillion at the end of March 2022.
Analysts watching the bank’s performance expect it to harness the Yono platform better, especially in the unsecured personal loans segment. In a post-results report on SBI, Kotak Institutional Equities wrote, “The bank has about 17 million salaried account customers with penetration of 27%, implying further scope for growth.”
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Essar Power Ltd on Friday said it has agreed to sell one of its two electricity transmission lines to Adani Transmission Ltd for Rs 1,913 crore. The sale is a part of deleveraging strategy following which Essar has repaid over Rs 1.8 lakh crore to banks and financial institutions in the last three years - the largest debt repayment in the history.
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Mutual funds are best way to invest your money for the future.
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Credit card usage and spends shrank on a month-on-month (m-o-m) basis in April, shows data released by the Reserve Bank of India (RBI). While the volume of transactions fell 0.37% to Rs 223 million, the value of spends declined 1.5% to Rs 1.05 trillion.
The number of cards in force rose 2% m-o-m in April to over 75 million.
In March 2022, credit card spends across the industry were up 24% m-o-m at Rs 1.07 trillion, leading analysts to expect that spends in April and May would increase further to around Rs 1.1 trillion. A post-pandemic revival in air travel and hospitality were seen to have been driving credit card spends as well as receivables in Q4FY22.
Analysts remain upbeat about a pick-up in payment transactions, encouraged by year-on-year (y-o-y) trends. “Daily payments data for May 2022 from RBI indicates that strong trends in payments continued. We are in a seasonally weak period from a retail spends perspective, but the yearly growth trends are still quite solid, especially when we look at the credit card data,” Kotak Institutional Equities said in a report on Thursday.
On a y-o-y basis, credit card spends jumped nearly 79% in April. However, the RBI data for April 2022 and April 2021 are not strictly comparable, as last year’s numbers do not include the value of credit card transactions made on e-commerce platforms.
Improved utilisation of each outstanding credit card has also encouraged a more upbeat outlook on usage. In a recent report, ICICI Securities pointed out that card receivables have picked up with the outstanding per card at the industry level improving to Rs 20,000 for each month in Q4FY22 from Rs 18,000 in December 2021. “Accordingly, the ratio of credit card to debit card spend at 1.67x as of March 2022 is the highest since April 2019, when it was 1.0x,” the broking firm said.
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Kotak Mahindra Bank, through its subsidiary Kotak Investment Advisors, on Thursday launched an investment management app, Kotak Cherry. The platform will provide investment solutions ranging from stocks, bonds, mutual funds, fixed deposits and national pension scheme to progressive investment opportunities like exchange traded funds.
The app is enabled as a do-it-yourself (DIY) execution platform. The bank plans to add more features to the platform such as stock baskets, robo advisory, life, medical, general insurance and enable international investing. The bank is targeting to build a base of 10 lakh customers in a year. Additional features will be added by October.
It will truly revolutionise the world of retail investing. We aim to unlock all features, including exhaustive personalisation, open architecture and diverse investment features in a phased manner by October,” KVS Manian, president – corporate, institutional & investment banking, Kotak Mahindra Bank, said at the launch.
In this digital age of automation and one-size-fits all, we at Cherry believe in offering curated solutions that will help de-clutter investment options for our customers. Led by a solid team of credible and experienced professionals, we believe deep domain experience will matter when it comes to investing. It is a one-stop platform that will help people invest like experts,” Srikanth Subramanian, CEO-designate of Kotak Cherry, said.
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As the credit growth picks up, top bankers are optimistic that the momentum will sustain in the coming quarters as the economy opens up. Offshoots of growth in corporate loan were visible, but retail and MSME remained the drivers of credit growth during the previous financial year.
While the rise in total advances for public sector banks was 7.2% in FY22, the growth rate of private banks was at nearly 16%, according to data compiled by Capitaline. “Recovery in economic activity, derivative effect of increased investments and spending on consumption may sustain the momentum of over 12% growth over FY22-FY25,” ICICI Securities said in a report.
For SBI, the retail segment was the key driver for loan growth, according to ICICI Securities. SBI’s retail loans grew 15%. A bulk of these loans consisted of home loans, which grew 11.5% on year. Chairman Dinesh Khara expects the current loan growth momentum to sustain, both in the retail and corporate portfolios.
HDFC Bank expects demand for credit to remain strong. The lender is likely to witness a 15-16% loan growth in the medium term, according to Kotak Institutional Equities Research. The bank’s credit will be supported by retail and commercial segments. Retail loans of the bank faced significant headwinds since the onset of the Covid, but the brokerage expects the hurdles to abate as the impact of the pandemic recedes.
To give credit growth a leg-up, ICICI Bank is ramping up its insta-biz platform for SME business, Jefferies said in a report. The brokerage expects this segment to grow at a CAGR of 25% between FY22 and FY24.
The loan growth momentum of Bank of Baroda was at 11.6% in Q4FY22. The growth was driven by retail loans, including home, auto and gold loans. The bank has stepped up on unsecured personal loans, but the base is quite small, Nomura Research said in a report. The management said it will maintain its loan growth in line with the industry standard of 7-10%, but wants to focus on segments such as retail which will allow it to protect margins.
Punjab National Bank MD & CEO Atul Kumar Goel is optimistic of improvement in loan disbursal in the current fiscal. The management has given a guidance of 10% credit growth in FY23, compared with a 6.2% credit growth achieved in FY22.
Credit deployment data released by the Reserve Bank of India for April suggest that retail loans will continue the upward trajectory. Non-food credit growth rose by double-digit, but that is also due to lower base in April 2021.
Despite a significant improvement in net profits in Q4FY22, pre-provisioning profits of lenders remained in single digits.
ICICI Bank was the outlier in terms of a weak recovery in operating profit. The lender posted 19% growth in core operating profit to Rs 10,293 crore. Lower provisioning, along with a sharp decline in credit costs, aided the profitability in Q4, Jefferies said.
Since banks will have free capital due to lower provisioning, analysts expect that the loan growth momentum will help drive the growth in operating profits.
HDFC Bank’s pre-provisioning profit rose by 5.3% to Rs 16,357 crore in Q4. “We believe that strong retail credit demand will be the key for preserving pre-provisioning profit growth for the banking system in the current environment,” Nomura Research said.
Non-interest income of public sector banks in the pool took a notable hit of 27% in Q4FY22 due to unfavourable movement in the government securities market. SBI’s other income declined close to 27% to Rs 11,880 crore. G-Sec yields sharply reacted to policy measures which will have an adverse impact on the treasury performance and banks are likely to report mark-to-market losses in the first quarter of FY23, Motilal Oswal said in a report.
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The size of the India’s digital payments market is likely to grow more than threefold from $3 trillion at present to $10 trillion by 2026, said a report by PhonePe and Boston Consulting Group (BCG). As a result of this unprecedented growth, digital payments will constitute two out of every three payment transactions by 2026, the report said.
Simplified customer on-boarding, continued push for consumer awareness, expanding merchant acceptance, greater merchant access to credit, infrastructure upgrades and setting up of a financial services marketplace are set to drive growth in under-penetrated regions. The Internet of Things, 5G connectivity and the launch of a central bank digital currency will provide further impetus to growth, according to the report.
Karthik Raghupathy, head of strategy and investor relations, PhonePe, said Unified Payments Interface (UPI) has supercharged India’s transition to non-cash payments when it comes to both person-to-person (P2P) and person-to-merchant (P2M) transactions.
The volume of UPI transactions rose to about 46 billion in FY22 from 5 billion in FY19, accounting for more than 60% of all non-cash transaction volumes in FY22, Raghupathy said. In May 2022, the payment channel clocked a record transaction value of Rs 10 trillion. “While tier I-II cities have witnessed high acceptance of digital payments, penetration in tier III-VI cities shows headroom for growth. The next wave of growth will now come from tier III-VI locations, as evidenced in the past two years wherein tier III-VI cities have contributed to nearly 60-70% of new customers for PhonePe,” he said.
Prateek Roongta, managing director & partner, BCG, said by 2026, 65% of all transactions in India will be made digitally, as against 40% today. “Merchant payments will emerge as the most powerful driver of this growth, especially in the offline segment, due to growing QR code deployments. We expect that merchant payments will soon outpace person-to-person fund transfers,” Roongta said.
According to the latest available data from the National Payments Corporation of India, P2M transactions accounted for over 40% of UPI transactions by volume and 18% in value terms.
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The loan sale was concluded even as the wind energy company was in the midst of its second bank-led restructuring initiated in 2020. The REC and IREDA-led refinance would extend the tenure of Suzlon's loans and would also bear a lower interest rate than what it was paying banks, multiple people familiar with the contours of the deal said.
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Unified Payments Interface (UPI) transactions continued to grow in May with the platform processing transactions of Rs 10 trillion during the month. In volume terms, transactions were at 5.95 billion during the month, according to data released by the National Payments Corporation of India.
UPI transactions more than doubled on a year-on-year basis, in terms of both volume and value. In May 2021, the value of UPI transactions stood at Rs 4.91 trillion while the number of transactions totalled to 2.54 billion.
On a month-on-month basis, the number of transactions grew by close to 7% while the value rose nearly 6%. The value of such transactions stood at Rs 9.83 trillion in April.
For the previous financial year, the value of UPI transactions was at Rs 83.45 trillion.
UPI continues to dominate daily debit transactions, Nomura Research said in a report earlier this month. Similar spending per transaction in UPI and debit cards, on the back of a strong growth in volumes for UPI, implies that UPI could be eating into the debit card and small-ticket spending pie, the report said.
The Reserve Bank of India’s focus on digital payments and banking will further aid the growth of the UPI platform. In its annual report for FY22, the central bank said it is planning to link UPI to its foreign counterparts. The RBI is already working with the monetary authority of Singapore towards linking UPI with PayNow. The linkage is expected to be completed by the second half of 2022.
NPCI also released data for other payment systems as well. The number of Immediate Payments System (IMPS) transactions in May stood at 484.8 million, compared with 471.6 million a month ago. The value of IMPS transactions in May was at Rs 4.5 trillion, against Rs 4.44 trillion in the previous month.
In May, vehicle owners paid toll of Rs 43.7 billion via Fastag, against Rs 42.2 billion in the previous month. Fastag transactions in May stood at 285 million, compared with 266 million a month ago.
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State Bank of India (SBI) will accelerate its digital agenda at the level of its front and back offices in the current financial year, chairman Dinesh Khara said in the bank’s annual report for FY22. The lender intends to expand the scope and reach of its app Yono and enhance the user experience of the platform.
In business operations, your bank will leverage advanced analytics for deeper insights on internal data and its best possible usage,” Khara said in his message to shareholders. Mutually-beneficial partnerships with fintechs and non-banking financial companies will be further explored to increase the penetration and reach of the bank, he added. As of March 2022, SBI had 22,266 branches, over 68,000 business correspondents and more than 65,000 ATMs.
SBI is comfortably placed in terms of growth capital for the current year, Khara said. Opportunities for lending in promising sectors, such as those identified under the production linked incentive (PLI) scheme and renewables, as well as electric mobility, will be explored to diversify the portfolio.
Khara observed that FY22 was a much better year compared to FY21, with the pace of economic activity picking up. The momentum is expected to continue, he said. SBI’s standalone net profit for FY22 rose 55% over the previous year to Rs 31,676 crore in FY22. Its advances grew 11% during the year to Rs 28.18 trillion, better than the 4.8% growth clocked in FY21. Total deposits grew 10.06% to surpass the Rs 40-trillion mark.
Khara said SBI has been taking several initiatives to upgrade its technology infrastructure. It has been working on upgrading ATM connectivity by arranging 4G connectivity to off-site ATMs. Alternate secondary links to branches and offices have been put in place to improve the network experience and minimise outages.
The bank has devised an early warning and insights mechanism related to cybersecurity threats to comply with the RBI’s cybersecurity framework by arranging a honeypot solution. To increase penetration and nudge customers into adopting technology, the Yono Lite app has been made available in 12 Indian languages and the Yono Krishi app in 10 languages.
While SBI plans to eventually extend the Yono platform to customers of all banks, insiders say there are challenges. “Many of SBI’s own customers are not using Yono to an optimum level. We would like to first upgrade the app and make most of our customers active users. Thereafter, we can think about opening APIs (application programming interfaces) to customers of other banks,” said a senior banker.
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State Bank of India (SBI) will accelerate its digital agenda at the level of its front and back offices in the current financial year, chairman Dinesh Khara said in the bank’s annual report for FY22. The lender intends to expand the scope and reach of its app Yono and enhance the user experience of the platform.
In business operations, your bank will leverage advanced analytics for deeper insights on internal data and its best possible usage,” Khara said in his message to shareholders. Mutually-beneficial partnerships with fintechs and non-banking financial companies will be further explored to increase the penetration and reach of the bank, he added. As of March 2022, SBI had 22,266 branches, over 68,000 business correspondents and more than 65,000 ATMs.
SBI is comfortably placed in terms of growth capital for the current year, Khara said. Opportunities for lending in promising sectors, such as those identified under the production linked incentive (PLI) scheme and renewables, as well as electric mobility, will be explored to diversify the portfolio.
Khara observed that FY22 was a much better year compared to FY21, with the pace of economic activity picking up. The momentum is expected to continue, he said. SBI’s standalone net profit for FY22 rose 55% over the previous year to Rs 31,676 crore in FY22. Its advances grew 11% during the year to Rs 28.18 trillion, better than the 4.8% growth clocked in FY21. Total deposits grew 10.06% to surpass the Rs 40-trillion mark.
Khara said SBI has been taking several initiatives to upgrade its technology infrastructure. It has been working on upgrading ATM connectivity by arranging 4G connectivity to off-site ATMs. Alternate secondary links to branches and offices have been put in place to improve the network experience and minimise outages.
The bank has devised an early warning and insights mechanism related to cybersecurity threats to comply with the RBI’s cybersecurity framework by arranging a honeypot solution. To increase penetration and nudge customers into adopting technology, the Yono Lite app has been made available in 12 Indian languages and the Yono Krishi app in 10 languages.
While SBI plans to eventually extend the Yono platform to customers of all banks, insiders say there are challenges. “Many of SBI’s own customers are not using Yono to an optimum level. We would like to first upgrade the app and make most of our customers active users. Thereafter, we can think about opening APIs (application programming interfaces) to customers of other banks,” said a senior banker.
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Punjab National Bank (PNB), ICICI Bank and Housing Development Finance Corporation (HDFC) went for a fresh round of hikes in lending rates on Wednesday. Most lenders had raised rates after the monetary policy committee hiked the repo rate by 40 basis points (bps) on May 4.
PNB raised its marginal cost of funds-based lending rate (MCLR) by 15 bps across tenures and ICICI Bank hiked MCLRs of all tenures by 30 bps. PNB’s one-year MCLR now stands at 7.4%, while ICICI Bank’s one-year MCLR is at 7.55%. HDFC raised its retail prime lending rate by 5 bps. Loans from the mortgage lender will now attract interest rates ranging from 7.05-7.5%, up from 7-7.45% earlier.
Another hike in the repo rate is expected at the MPC meeting next week, which will immediately result in some retail and small business loans turning pricier. External benchmark-linked loans with the repo rate as the benchmark are set to pinch borrowers harder.
Bankers have put on a brave front in the face of the rate hikes, claiming that the growth in the economy will be enough to offset the impact of higher interest rates on customers. State Bank of India chairman Dinesh Khara said in May that hikes should not hurt retail borrowers. “Even if interest rates go up, salaries are also expected to be at pre-Covid levels,” Khara said. As for corporates, the impact on their finance cost may be limited, he added. “If at all there is demand, there is going to be capacity, there is going to be production and there are going to be loans, “ Khara said.
However, analysts are not fully convinced by the argument. In a report on Wednesday, India Ratings said the sensitivity of interest rates over aggregate demand has increased in a meaningful way. “Therefore, a faster and higher transmission of interest rate could become onerous for a section of borrowers. The situation will aggravate if real income does not improve,” the agency said.
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The merger of Housing Development Finance Corporation (HDFC) into HDFC Bank offers a significant opportunity for the bank to scale up and will help it double its balance sheet every five years, HDFC Bank MD and CEO Sashidhar Jagdishan said.
Addressing sector analysts at an interaction on Tuesday, Jagdishan sought to allay the investor community’s concerns about the proposed merger. “Growth is not going to be an issue at all. It’s going to be pouring out of your ears,” Jagdishan said. The only limiting factor will be liabilities and the bank has a strategy for that, he said.
The bank expects mortgage penetration to drive its growth after the merger. Despite being the largest private bank in India with a 9.5% market share in deposits, the market share of the lender in home loans stands at under 2%. What’s more, the bank found that 5% of its 71-million customer base had taken home loans from other banks.
With the merger taking effect, HDFC Bank expects to add 9-10 million mortgage customers per annum. It will also take care of inefficiencies inherent in the current arrangement of HDFC Bank sourcing loans for HDFC. Jagdishan said as things stand, the turnaround time for mortgages sourced by the bank ranges from eight to 10 days, and there have been requests to crunch it to six to seven days.
Mortgages will help the bank expand its cross-selling opportunities in terms of consumer durable financing, unsecured lending and liabilities. With the merger, the share of unsecured loans in the book will fall to 20-25%, offering room for further growth.
The bank expects that on the effective date of the merger, it will have $6-7 billion worth of profits accruing on an annual basis. With a growth rate of 18-22% over the five-year period thereafter, profits would expand to $14-15 billion.
Jagdishan said the bank was the one to initiate talks for a merger in October-November 2021 and HDFC came back to it in February. The nitty-gritties were thrashed out over the next two months. “Contrary to the belief, we batted on the front foot. Normally for 25-year history, we were always on the back foot, saying that we are not too keen or not too sure about it. But this time around, we went on the front foot, saying we want this merger,” Jagdishan said.
HDFC Bank will not need to raise incremental liabilities to meet regulatory requirements on statutory liquidity ratio because it is sitting on an excess, Jagdishan said. The ability to meet priority sector requirements is also much better now.
Half of what the bank will need to meet its priority sector requirements will be raised through priority sector lending certificates. “The balance 50% of Rs 80,000-90,000 crore is something that we have 33 months from today to generate liabilities in any form and put it in priority sector assets or even in rural infrastructure development bonds,” Jagdishan said.
Analysts who attended the conference continue to have questions on HDFC Bank’s ability to raise incremental liabilities. Emkay Global Financial Services said in a report the additional PSL requirement of Rs 2.1 trillion in FY25 remains a key regulatory drag. “Overall, factoring in the regulatory requirements and assuming 20% of high-cost HDFC borrowing are replaced, our workings suggest that the bank will have to mobilise deposits to the tune of Rs 5.5 trillion over FY24-25, which need to be met through a combination of growing vintage of branches and accelerated growth via some rate tinkering,” the report said.
Others expect the bank’s stock performance to improve gradually. HDFC Bank remains among preferred picks for Motilal Oswal Financial Services. “We expect the stock to recover gradually as revenue and margin revive over FY23, while further clarity emerges on several aspects related to its merger with HDFC,” the brokerage said on Wednesday.
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The momentum is expected to continue, he said, adding opening up of the economy has reduced the need for a fresh stimulus package and the current momentum appears sustainable. Thus, for the bank, it is imperative that the business keeps adapting to the new operating environment, he said in his letter to shareholders published in the annual report for FY22.
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Former State Bank of India (SBI) executive Natarajan Sundar has been appointed MD & CEO of the National Asset Reconstruction Company (NARCL) with effect from May 30. Another former SBI employee, Karnam Sekar, who also headed Indian Overseas Bank (IOB) till June 30, 2020, has been appointed non-executive chairman of the bad bank. Sundar retired on April 30 as deputy managing director and chief credit officer at the bank, after having worked there for over 37 years.
“After his name was recommended for the position by NARCL board, the fit and proper approval was granted by the sectoral regulator, RBI on May 24, 2022. The previous incumbent, Mr. Padmakumar Nair, who was on a secondment basis from SBI has since been repatriated to the parent bank,” SBI said in a statement on Tuesday.
Malvika Sinha, who retired as executive director of the Reserve Bank of India (RBI), also joined the NARCL board as an independent director last week. In addition to the three new appointees, the board has five nominee directors from shareholder banks and another independent director is expected to join the board shortly. “With this the Board will have its full complement of 9 directors,” SBI said.
Fifteen Indian banks hold stakes in NARCL, with Canara Bank being the sponsor bank. Together with India Debt Resolution Company (IDRCL), NARCL is presently engaged in completing the financial and legal due diligence of the identified stressed accounts for acquisition. The bad bank is expected to make binding financial offers for a few accounts shortly, SBI said.
Once the bad bank makes binding offers, the next step will be for the lead lenders to convene joint lender meetings and then run a Swiss challenge auction with the NARCL’s offers as anchor bids.
The plan for asset transfer has been delayed on multiple occasions amid regulatory concerns about the dual structure of the bad bank. NARCL has already missed its March 31, 2022 deadline for acquisition of 15 assets worth Rs 50,000 crore.Executive vacancies at the bad bank have also slowed down its work. All the vacancies at NARCL are now set to be filled and the RBI’s approvals will be sought wherever required, SBI said earlier this month.
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Jagdishan said the banking regulator had asked it to keep the structure of the merged entity simple, with HDFC Bank being the holding company.
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Bank credit to industry grew at its fastest pace in eight years in April 2022, showed sectoral data released by the Reserve Bank of India (RBI) on Tuesday. The value of loans deployed in the industrial sector — including large, medium, small and micro industry — grew 8.1% year-on-year (y-o-y) to `31.52 trillion as on April 22.
Credit to medium enterprises grew at the fastest pace of 53.5% y-o-y, while loans to micro and small enterprises grew 29%. Growth in the large enterprises segment lagged at 1.6%. Over the last two years, banks have increased their exposure to medium and small enterprises while implementing the government’s Emergency Credit Line Guarantee Scheme (ECLGS), aimed at supporting small business through the pandemic.
Of late, banks have turned aggressive in the MSME segment, hoping to cash in on the recovery being witnessed across sectors. Earlier this month, State Bank of India (SBI) chairman Dinesh Khara told investors that the bank expects to see stronger growth coming in the SME segment in the quarters ahead. “We have structurally strengthened our delivery process in SME in the last one year, so that should help,” Khara said, adding that the lender is still upgrading its processes. “So, that should help us in seeing better numbers in SME.”
ICICI Bank, too, has enhanced its focus on the small business segment. In April, the private lender launched a digital platform aimed at offering comprehensive business solutions to its SME customers, similar to what it offers for corporates.
Rakesh Jha, chief financial officer, ICICI Bank, told analysts after the bank’s Q4FY22 results that the bank is focusing on all aspects of its SME customers’ business. “So it’s not just about the loan, but also the float income on the current account side, FX and trade and all the other income that we get from the customers,” Jha said. The bank’s strong growth in the segment is the result of the investments it has made in technology for servicing the customers in this segment, he added.
Growth in the corporate segment has also been improving for most banks, with commodity price inflation and an improvement in consumption driving demand for loans. SBI’s corporate book grew 6.35% y-o-y during the quarter ended March, and the bank attributed it to good demand in the infrastructure segment.
However, much of the wholesale lending in the banking sector remains tied to working capital and capex-led demand is yet to become entrenched.
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The bank decided to hold a Swiss auction to avoid glare from investigative agencies in future, a bank executive said on condition of anonymity. "The bank would not like to be questioned for selling loans without attempting to get the best offer," the person said.
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The quarterly profit was on account of a rise in recovery of loans, which helped total income to grow, and a sharp fall in expenditure. Total income rose to ₹795 crore from ₹595 crore, while expenses fell to ₹482 crore from ₹3,986 crore.
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Housing sales have continued to slump, indicating a lack of appetite for mortgages and subdued credit demand among developers and sectors linked to the property industry.
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Credit to large companies rose 1.6% in April from the same month a year earlier, when it had contracted 3.6%, according to latest data on sectoral flow of bank credit released by the Reserve Bank of India. Credit to medium industries increased 53.5% year-on-year in April this year compared with 44.8% last year.
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A report by State Bank of India (SBI) has said that state governments have gained Rs 49,229 crore from value-added tax (VAT) revenue on fuel when oil prices were increasing and will forego Rs 15,021 crore because of the cut in excise duty.
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A few HDFC Bank account holders in the city became rich for a few hours on Sunday after their bank balances shot up by lakhs and even crores in certain cases.
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The government is at an advanced stage of finalising plans to privatise two state-run banks in sync with the Budget announcement made last year.
Speaking at an event here on Monday, financial services secretary Sanjay Malhotra said, “In so far as bank privatisation is concerned, there is already a statement on the floor of the House by the finance minister for making enabling provision. Advance action on this is under way.”
In the Budget for 2021-22, the government had announced its intent to privatise two public sector banks and one general insurer. Sources had earlier said NITI Aayog had recommended Central Bank of India and Indian Overseas Bank as possible candidates to the core group of secretaries on disinvestment for privatisation.
The Banking Laws (Amendment) Bill, 2021, was listed as part of the legislative business for the winter session of Parliament that concluded on December 23, 2021. However, the government deferred the plan amid protests by bank unions.
Speculations about the government reviving the proposal gained traction after the assembly polls in key states, including Uttar Pradesh, concluded earlier this year.
The draft Bill may suggest the requirement that minimum government holding in PSBs be trimmed to 26% from 51%. The government may also be open to giving up its entire stake in select banks subsequently to garner investors’ interests.
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Stressed assets of non-banking financial companies-microfinance institutions (NBFC-MFIs) has declined to around 14% as of March 2022 on account of improved economy and increased collections, Crisil Ratings said in a report.
The current stressed assets of NBFC-MFI, which include loans that were unpaid for more than 30 days, declined by 800 basis points in March from 22% in September 2021.
However, the stressed assets are significantly higher than the pre-pandemic levels of 3%.
“The reduction in stressed assets, along with improved collection efficiencies mark a recovery in the asset quality of NBFC-MFIs, supported by economic revival, limited impact of the omicron variant, and acclimatisation to the post-pandemic ‘new normal’,” the report said.
The new loan book of NBFC-MFIs, which include loans disbursed after July 2021, has witnessed stressed assets of up to 1-2%. Overall monthly collection efficiency averaged at 97-100% in the quarter ended March 31.
“The microfinance sector restructured 10% of its loan book…in the wake of the second Covid-19 wave, compared with a mere 1-2% in the first. The extent of this varied between entities from 2% to 17% and had a strong correlation with the regional impact of the second wave, which had affected the informal economy and rural India more drastically than the first,” Krishnan Sitaraman, senior director and deputy chief ratings officer, CRISIL Ratings, said in the report.
“Collection efficiency of the restructured book, billing for which began in the final quarter of last fiscal, is currently at 60-65%. This indicates higher probability of slippages,” he further said.
2:11 AM
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By Shashank Didmishe
With the June-end deadline for the mandated card-on-file tokenisation system fast approaching, bankers are concerned that the payments ecosystem as well as most of the merchants are unprepared for the new regime. Given that a significant volume of transactions take place through cards, they fear this could result in some loss of business.
The Bank of Baroda (BoB) management said with merchants unable to migrate to the new system, we could see some breakdown in settlements, reconciliation and services such as refunds, cash-backs and charge-backs. BoB has so far tokenized more than 20% of its active e-commerce debit card base. “From the perspective of an acquirer, we will rollout the solution for merchants within the timeline,” the lender said. BoB had enabled debit card tokenization before December 31, 2021.
Other banks, too, have pointed out that while bigger merchants are ready with the tokenization system, smaller ones may not be ready by July 1.
Dewang Neralla, CEO of NTT DATA Payment Services, observed that while generating token numbers for plain vanilla transactions involving credit and debit cards should not pose too many problems, customers are likely to face some issues when it comes to recurring payments, EMIs, offers, refunds and charge backs. “Merchants involved in recurring transactions may not be able to generate token numbers,” he said.
Rohit Kumar, co-founder of policy consultancy firm The Quantum Hub, pointed out that it was not merely a question of generating a token number, but also the time taken for processing the token. “So far, some of the major players are able to process eight to 10 transactions per second, but the ideal processing speed should be around 2,000 transactions per second,” he said.
Vishal Mehta, chair of the governing council of the Merchant Payments Alliance of India, said despite claims of readiness with tokenisation, the reality is that the back-end infrastructure is not ready to create tokens and process payments simultaneously. Nor is it ready to process large transaction volumes on tokens created in real time,” Mehta said.
In December last year, the Reserve Bank of India (RBI) had extended the deadline for card tokenization by six months till June 30, 2022 following requests from both payments players and merchants. The RBI wants all customer card details stored by merchants and payment gateways to be purged by June 30, 2022. The new system will not store the 16-digit card number and the expiry date when a digital transaction is done on a website. The payment will be made through a process called tokenisation by which card details are replaced by a random or unique code or token. This prevents the card details from being exposed, and enhances data security. Only card issuers and card networks can store customer data.
In addition to tokenisation, industry players may devise alternative mechanisms to handle recurring e-mandates, dispute resolution or reward programmes which currently involve storage of CoF (card-on-file) data by entities other than card issuers and card networks. Aggregators and merchants cannot store data.
2:11 AM
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The Reserve Bank of India (RBI) is working to establish Unified Payments Interface (UPI) as a channel for making cross-border remittances. In its recently-released annual report for FY22, the central bank said the enablement will help reduce the cost of remittance transactions.
The first such linkage between UPI and another country’s fast payments system was the link with Singapore’s PayNow, activated in September 2021. “While the efforts with various countries are at various stages, the interlinking of UPI with PayNow has been formally announced and is expected to be operationalised in the second half of 2022,” the report said.
The interlinking will further anchor trade, travel and remittance flows between the two countries and lower the cost of cross-border remittances. It would also serve as an example of interlinking of respective fast payment systems to achieve instant remittances in a cost-effective manner, the RBI said.
The UPI-PayNow linkage will enable users of the two systems to make instant fund transfers without the need to get on-boarded onto the other system. “In other words, a user of UPI does not require to be a part of PayNow system to be able to transfer funds to a PayNow user in Singapore and vice versa,” the RBI said.
The linkage builds upon the earlier efforts of NPCI International Payments (NIPL) and Network for Electronic Transfers (NETS) of Singapore to facilitate QR code-based payments through UPI in the country.
Mandar Agashe, founder and MD, Sarvatra Technologies, said that India should explore similar partnerships to deepen collaborations with overseas partners, especially with countries where a large working population of Indians lives. “Like in UPI, such tech integrations will go a long way in building robust payment solutions that can be taken to global markets, while collaborating with local payment system operators,” he said.
1:10 AM
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The government will soon finalise a consultation paper on cryptocurrencies with inputs from various stakeholders and institutions, including the World Bank and the IMF, economic affairs secretary Ajay Seth said on Monday.
9:10 AM
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Public sector banks (PSBs) have doubled their net profit during financial year 2021-22. The collective profit of 12 state-owned banks during 2021-22 worked out to Rs 66,539 crore, an increase of 110% over Rs 31,816 crore in FY21.
9:10 AM
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Union Bank of India aims to bring down the government’s stake in the lender to around 75% from 83% by raising fresh equity capital.
6:11 AM
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The government is considering a proposal to grant greater protection to senior executives of state-run banks, akin to the immunity enjoyed by government servants, to shield them from easy arrests and harassment for “honest business errors” and encourage them to lend without fear, official and banking sources told FE.
One of the proposals being weighed aims to ensure that public-sector bankers are granted protection (like government officials) under Section 197 of the Code of Criminal Procedure (CrPC). This section prohibits the courts from taking cognisance of criminal charges against government servants without prior sanction of the competent authority.
“The finance ministry and the Indian Banks’ Association (IBA), which has been pushing for higher protection to bankers, are in talks on this issue,” said one of the sources. Once the finance ministry endorses the proposal, it will be sent to the ministry of law for vetting, he added.
Bankers say, according to extant guidelines, to arrest senior officials of a PSB up to the level of general managers, the approval of the managing director of the bank is required. Similarly, the approval of the department of financial services is needed to arrest the MDs or executive directors of PSBs. However, these guidelines have often been flouted by state police on one pretext or another, which will only change once the protection is enshrined in the CrPC, they added.
The move to accord greater protection to PSB staff on honest commercial decisions comes at a time when the government is nudging state-run banks to satiate the growing credit appetite of investors and help spur economic growth. Following a spate of high-profile arrests in recent years, public-sector bankers feel the extant mechanism has proved to be inadequate to curb arbitrary actions, especially by local police. The arrests also prompted them to turn more risk-averse, which weighed on the broader credit disbursement.
Having remained subdued over most part of the last two years, credit growth has improved in recent months, and the government wants this momentum to accelerate further. Non-food bank credit grew 9.7% in March, compared with 8% in the previous month and 4.5% a year before. However, loans to industry grew at a slower pace of 7.1% even on a marginally-contracted base.
The clamour for a more robust protection mechanism grew shriller after former State Bank of India (SBI) chairman Pratip Chaudhury was suddenly arrested by Rajasthan police in an alleged loan fraud case last year, long after his retirement, on the basis of a warrant issued by the Jaisalmer court. The allegations (labelled by defaulters) against Chaudhuri included borrowers’ properties worth Rs 200 crore being sold for Rs 25 crore after SBI had seized them for non-repayment of the loan. The bank sold the properties to Alchemist Asset Reconstruction Company a good six months after Chaudhuri had retired. SBI defended its former chairman. Chaudhuri got bail, but not before 8-9 days.
Similarly, in 2018, Bank of Maharashtra chief executive Ravindra Prabhakar Marathe, his predecessor and other top officials were arrested in a Rs 2,043-crore loan fraud case. However, within about four months, the Pune police filed a closure report for lack of evidence.
To discourage such actions, the department of personnel & training, in a circular in September 2021, stipulated standard operating procedures for tackling cases under Section 17A of the Prevention of Corruption Act (PCA). The circular says any police investigation on decisions taken by public servants while discharging their duties will require prior approval from the competent authority. In fact, Section 17A was inserted in the PCA in July 2018. Still, these measures didn’t stop the arrests of bankers by state police.
“Despite good intention and the support for bankers announced by the central government, bankers are still being hounded, mainly by state police. Moreover, it is observed that senior bankers are targeted, often by defaulters, after their retirement. All these have to stop,” said the executive director of a state-run bank.
Late last year, the government finalised a consolidated staff accountability framework for bad loan accounts up to Rs 50 crore. The framework, which came into force on April 1, 2022, is meant to identify and punish only those bank officers who are prima facie responsible for the lapses or non-compliance of laid-down procedures or misconduct and/or non-adherence to the “due-diligence” norms.
3:02 AM
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While Sanofi, like many other multinationals, settled this with the taxman under India's plan to rescind the indirect transfer of assets amendment or retrospective tax amendment in December, the appeal in Supreme Court was yet to be withdrawn. In a May 6 order, the apex court dismissed all the appeals. "In terms of the request made before the court, the appeals are dismissed as withdrawn," the court ruled.
1:02 AM
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Due to the freeze, those customers could not transfer any fund to other accounts but could receive cash. A small number of remaining ones, according to the bank, will be completed soon within the next few hours. About two and half years ago, the central bank had ordered the bank to temporarily hold all digital launches and new sourcing of credit card customers.
3:02 PM
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The fourth-largest private sector bank clocked the highest ever quarterly growth with over 1.1 million credit card acquisitions in the March quarter of 2021-22.
2:11 PM
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State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and deposit growth in percentage terms during 2021-22. The Pune-headquartered lender recorded a 26 per cent increase in gross advances at Rs 1,35,240 crore at the end of March 2022, according to the BoM data.
It was followed by State Bank of India and Union Bank of India with 10.27 per cent and 9.66 per cent growth, respectively.
However, in absolute terms, aggregate loans of SBI were nearly 18 times higher at Rs 24,06,761 crore while Union Bank of India’s five times higher at Rs 6,99,269 crore compared to that of BoM’s at the end of fourth quarter.
With regard to deposit growth, BoM witnessed a 16.26 per cent growth and mobilised Rs 2,02,294 crore at the end of March 2022. Union Bank of India was second with an 11.99 per cent growth in deposits (Rs 10,32,102 crore) while Indian Bank recorded a 10 per cent increase at Rs 5,84,661 crore, according to the published data.
Total business growth of BoM was also the highest at 20 per cent at Rs 3,37,534 crore followed by Union Bank of India at 11.04 per cent at Rs 17,31,371 crore at the end of FY’22. In terms of RAM (retail, agriculture and MSME) segment, BoM registered the highest growth rate of 18.65 per cent at Rs 80,669 crore.
The bank’s gross NPAs nearly halved to 3.94 per cent from 7.23 per cent in March 2021, while net NPAs more than halved to 0.97 per cent from 2.48 per cent in March 2021.
For the full year to March, the lender saw its net profit rising two-fold to Rs 1,152 crore as against Rs 550 crore in FY21.mBoM is eyeing a 25-30 per cent growth in its net profit in the current financial year, aided by a healthy growth in net interest income (NII) and fall in provisions for bad assets.
NII grew by 23.42 per cent on a year-on-year basis to Rs 6,044 crore in FY2022, as against Rs 4,897 crore in FY2021.
1:09 PM
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