Govt declares ICICI Bank’s IT resources as ‘critical information infrastructure

The government has declared the IT resources of ICICI Bank as ‘critical information infrastructure’, implying any harm to it can have an impact on national security and any unauthorised person accessing it may be jailed for up to 10 years, according to an official notification.

The Ministry of Electronics and IT (MeitY), in the notification dated June 16, declared the IT resources of the private sector lender as critical infrastructure under Section 70 of the IT Act, 2000.

“The Central Government hereby declares the computer resources relating to the Core Banking Solution, Real Time Gross Settlement and National Electronic Fund Transfer comprising Structured Financial Messaging Server, being Critical Information Infrastructure of the ICICI Bank, and the computer resources of its associated dependencies to be protected systems for the purpose of the said Act,” the notification said.

The notification authorises designated employees authorised by ICICI Bank, authorised team members of contractual managed service providers or third-party vendors who have been authorised by the bank for need-based access and any consultant, regulator, government official, auditor and stakeholder authorised by bank on case-to-case basis to access the IT resources of the lender.

“Looking at the recent sophisticated cyber attacks, it is high time all the banks and financial institutions get themselves notified as a protected system.

“Similarly, the control system of all the electricity, oil, airports, railways, metros and transport systems are critical infrastructure and must be declared as a protected system,” SP, Cyber Crime, Uttar Pradesh Police and certified cyber expert Triveni Singh said.

As per the Act, ‘critical information infrastructure’ means a computer resource, the incapacitation or destruction of which, shall have debilitating impact on national security, economy, public health or safety.

Any person who secures access or attempts to secure access to a protected system in contravention of the provisions shall be punished with imprisonment of a term which may extend to 10 years and shall also be liable for a fine, the Act says.

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Moody's upgrades baseline credit assessments of ICICI Bank, Axis Bank

The upgrade of the baseline credit assessments does not result in any change in the deposit ratings because these are already at the same level as the India sovereign rating (Baa3 stable), Moody's said in a statement on Friday.

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Finance minister Nirmala Sitharaman to review large NPAs, asset quality of public-sector banks on June 20

Finance minister Nirmala Sitharaman will meet chiefs of public-sector banks (PSBs) on June 20 here to review large non-performing assets of over Rs 100 crore each and their overall asset quality, sources told FE.

As part of the broader review of the performance of various state-run lenders, Sitharaman will also take stock of credit flow to critical sectors of the economy and get briefed on their capital raising plans.

She will also review the progress of various financial inclusion and other schemes of the govenrment, including those announced as part of the Atmanirbhar Bharat initiative.

The meeting, convened by the department of financial services, comes at a time when the government wants banks to satiate the growing credit appetite of a fast-recuperating economy that is also facing considerable external headwinds in the wake of the Russia-Ukraine conflict.

It’s also convened amid wide expectations that the central bank may be forced to go for a third round of aggressive rate increase in August to contain elevated inflation.

On May 4, the Monetary Policy Committee (RBI) resorted to an out-of-cycle repo rate hike by 40 basis points, the sharpest increase in nearly 11 years, to 4.4% and followed it up with another 50-basis point increase in June.

While credit flow has improved in recent months amid prodding by the government, senior officials believe there is further scope for state-run banks to lend more.

Having remained subdued over most part of the last two years, credit growth has improved in recent months.

Non-food bank credit grew 11.3% on year in April, compared with 9.7% in the previous month and 4.7% a year before.

However, loans to industry grew at a slower pace of 8.1% even on a marginally-contracted base.

Since state-run banks have turned the corner — all of them turned profitable last fiscal — and remain adequately capitalised, they are in a position to further improve lending, the officials said.

The RBI had, in December 2021, warned that bad loans of commercial banks could rise to anywhere between 8.1% and 9.5% under varied degrees of stress by September 2022 from 6.9% in September 2021. Of course, the central bank had highlighted that banks were generally well-placed to weather credit-related shocks.

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Holding back hikes saved economy: RBI governor Shaktikanta Das

Reserve Bank of India (RBI) governor Shaktikanta Das has said that pursuing a 4% inflation target during the pandemic would have been disastrous for the economy, and it would have taken India years to come out of the damage. Das said the decision to tolerate inflation up to 6% was a conscious one and done keeping in mind the legal mandate on the RBI to ensure growth.

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Vision Document: RBI sees digital payment transactions trebling by 2025

The number of digital payment transactions should treble by 2025 and the Unified Payments Interface (UPI) should register an average annualised growth of 50% by then, according to the Reserve Bank of India (RBI).

The central bank expects the Immediate Payment Service (IMPS) and National Electronic Funds Transfer (NEFT) to grow at an annual average of 20%. These are among 10 specific outcomes to be achieved by India’s payments industry over the next three years as part of its Payments Vision document for 2025, the central bank said on Friday.

The vision document took note of the proliferation of Buy Now, Pay Later (BNPL) services which, it said, has developed into a new payment mode alongside the existing payment modes like cards, UPI, and net banking.

“This novel method shall be examined, and issuance of appropriate guidelines on payments involving BNPL shall be explored,” RBI said.

Among other outcomes are a reduction in the volume of cheque-based payments to less than 0.25% of the total retail payments. The industry should target increasing its payment transaction turnover vis-à-vis gross domestic product (GDP) to eight and debit card transactions at point of sale (PoS) by 20%. Debit card usage is to surpass credit cards in terms of value while transactions through prepaid payment instrument (PPI) should rise 150%, says the document.

It further says that card acceptance infrastructure is to increase to 25 million and the registered customer base for mobile-based transactions is to grow 50% on a compound annual growth rate (CAGR) while cash in circulation (CIC) as a percentage of GDP is to be reduced.

The regulator also laid out a set of specific initiatives for the industry. Considering emerging concerns with OTP-based authentication in terms of increasing cases of divulgence of customers’ confidential details, alternate risk-based authentication mechanisms leveraging behavioural biometrics, location, historical payments, digital tokens and in-app notifications shall be explored, the RBI said.

The use of legal entity identifiers (LEI) in areas like sanctions screening, know your customer (KYC), corporate invoice reconciliation and fraud detection shall be explored.

The possibility of interoperability for contactless transit card payments in the offline mode shall be explored to facilitate seamless travel with a single payment instrument usable across different transit operators. A more evolved system for monitoring and reporting of frauds will be worked on.

“To leverage on the payment frauds reported in the Central Payments Fraud Information Registry (CPFIR), it is essential to move towards real/near real-time reporting of payment frauds and put in place an integrated platform for all stakeholders (payment system operators and participants – banks and non-banks, law enforcement agencies, etc.) to share information and initiate necessary corrective action to prevent frauds,” the document said.

The regulator said there have been complaints about credit to unintended beneficiaries due to inadvertent wrong account number entries. Hence, introduction of payee name look-up, a service for checking the beneficiary’s actual name, shall be explored for other fund transfer systems such as RTGS, NEFT and IMPS. A comprehensive review of all aspects related to charges involved in various channels of digital payments shall be undertaken, the RBI added.

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FE Modern BFSI Summit 2022: RBI not in favour of banks floating digital-only arms

The Reserve Bank of India (RBI) is not in favour of existing banks launching digital-only banks as the model carries some risks, Governor Shaktikanta Das said on Friday. The central bank has chosen to not accept suggestions on such arrangements, he added.

“We don’t have a separate regulatory framework for what is called a digital bank,” Das said, speaking at financialexpress.com’s Modern BFSI Summit. “I feel there is no need for any bank to set up a separate digital bank, to have a sort of parallel entity in the same business. What they can achieve by having a parallel entity they can very well achieve as a part of their own organisation. There were some suggestions which came, but we felt that it carries certain risks with it. So we have not accepted that at the moment.”

In November 2021, Niti Aayog had floated a discussion paper offering a roadmap for a regime for licensing and regulation of digital banks in India. The paper had prompted large banks to start devising plans to build digital banks of their own in readiness for a licensing regime.

On the growing presence of large technology companies, or Big Tech, in the financial services space, Das said this poses risks around competition and data protection. The regulator is, therefore, working to evolve an appropriate approach to regulating fintechs, which could be activity-based, entity-based, outcome-based or a mix of all three, he added.

Big Tech companies with a non-financial background which have entered the financial services space could potentially be a source of disruption to the financial system, the governor said. “As you would be aware, such companies, whether from e-commerce, social media and search engine platforms, ride hailing and similar businesses have started to offer financial services in a big way on their own or on behalf of others,” Das said. These companies have an enormous amount of customer data which has helped them to offer tailored financial services to entities and individuals lacking credit history or collateral.

The governor took issue with the trend of banks and other traditional lenders utilising platforms provided by fintech companies in their internal processes for credit risk assessment. “Such large scale use of new methodologies in credit risk assessment can create systemic concerns like over-leverage, inadequate credit assessment etc,” Das said, adding that authorities and regulators will have to strike a fine balance between enabling innovation and preventing systemic risks.

Big Tech also poses concerns related to competition, data protection, data sharing and operational resilience of critical services in situations where banks and non-banking financial services (NBFCs) utilise the services of such tech companies. These concerns could even materialise in sectors other than financial services, Das said.

“The provision of financial services through the digital channel, including lending through online platforms and mobile apps, have brought in issues relating to unfair practices, data privacy, documentation, transparency, conduct, breach of licensing conditions, etc,” Das said, adding that the RBI will soon issue suitable guidelines and measures to make the digital lending ecosystem safe and sound while enhancing customer protection and encouraging innovation.

The regulator’s approach to Big Tech regulation is to closely watch the terms of partnerships between banks, NBFCs and fintechs, as there must be dos and don’ts with regard to what regulated entities can and cannot outsource to fintechs.

While making a case for better management of risks by fintechs, Das observed that the RBI does not want to stifle innovation in the early stages of development of an ecosystem like Buy Now, Pay Later (BNPL). “Our job as a regulator is to keep assessing what kind of leverage is being built up in the system and if it will pose a challenge at the systemic level. We watch very clearly what kind of BNPL products the major players are offering and what kind of leverage they are building up,” Das said, adding, “As and when required, we will come up with guidelines, but at a very incipient stage, we should not interfere and kill some new business methods or models.”

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Equitas Small Finance Bank to launch exclusive savings account for kids

ENJOI account holders will also have access to exclusive deals from ed-techs and online learning providers

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RBI allows Mastercard to add new customers again

The Reserve Bank of India (RBI) has lifted the ban on Mastercard from onboarding new customers. The payment giant was barred from issuing fresh cards on July 14, 2021 for non-compliance with RBI’s regulations on localised storage of payment system data.

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Provisioning by banks: RBI considering expected credit loss income method, says RBI deputy governor M Rajeshwar Rao

The Reserve Bank of India is considering a mandate under which banks will be required to switch to the expected credit loss (ECL) income while making provisions, rather than an incurred loss method, in order to better manage the asset quality, Reserve Bank of India deputy governor M Rajeshwar Rao said. Under this system, bigger non-banking financial companies are required to consider the credit loss provision on a forward-looking basis.

Currently, banks are required to make loan loss provisions under the incurred loss model, where the provision is made after the occurrence of default. However, loan default itself being an indicator of stress, the RBI is in the process of issuing a discussion paper on introduction of a framework on expected credit loss for banks, Rao said.

The idea is to formulate principle-based guidelines supplemented by regulatory backstops, wherever necessary. The discussion paper would seek to solicit comments from all stakeholders, including the business community, on the proposed approach, and the final contours or the transition will take into account the feedback received,” Rao said.

Even as the asset quality has improved compared to the pre-pandemic levels and overall banking sector is in a healthy state, banks should take measures to pinpoint whether it has occurred due to improvement in the business fundamentals or due to various dispensations provided during the pandemic period, he said. At the same time, lenders should stress-test their existing loan books and estimate their capacity to absorb losses.

In September 2019, gross non-performing assets (NPA) of the banking system stood at 9.23% while net NPAs were at 3.66%. Compared to that, gross NPAs currently are at 5.97% and net NPAs at 1.7%. Banks’ provision coverage ratio improved from 77% in September 2019 to 86.8% in March 2022.

Although the RBI seeks comfort from the improving asset quality and loan growth, Rao said the central bank has to ensure that the financial system escapes unscathed as the banking system exits from the pandemic-driven regulatory forbearance.

The pandemic also saw the financial sector enjoying favourable momentum with increase in liquidity, flow of credit and normal spending on relief programmes. It is getting increasingly debated in the global fora as to whether the pandemic-induced measures have led to build-up of leverage and debt overhang in the non-financial sector,” he said.

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RBI Governor to inaugurate FE’s BFSI meet today; CEA, industry leaders to share perspective

Reserve Bank of India Governor Shaktikanta Das will inaugurate the FE Modern BFSI Summit today (June 17). The unique conference, being organised by FE.com, will see the coming together of the best and the brightest minds from the banking, financial services and insurance arena.

What also adds weight to the event is the keynote address by Anantha Nageswaran, chief economic advisor, government of India. Ajay Piramal, chairman, Piramal Group, and heads of India’s leading banks and financial institutions will also be speaking at the day-long event.

Some of the other leading names from the industry attending the summit include Amitabh Rajan, Chairman, Reserve Bank of India (Services Board), Dinesh Kumar Khara, chairman, State Bank of India, Zarin Daruwala, CEO, Standard Chartered Bank, India, Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, and Murali Ramakrishnan, MD & CEO, South Indian Bank.

Some of the other thought leaders from the industry include R M Vishakha, MD & CEO, IndiaFirst Life, Mahesh Kumar Sharma, MD&CEO, SBI Life, Ravi Subramanian, MD&CEO, Shriram Housing Finance, Jairam Sridharan, MD, Piramal Capital & Housing Finance Ltd, apart from Shiv Kumar Bhasin, group chief technology & operations officer, National Stock Exchange, Deepak Sharma, president & chief digital officer, Kotak Mahindra Bank.

A session on the small finance banks will see its leaders including Sanjay Agarwal, MD&CEO, AU Small Finance Bank and Samit Kumar Ghosh, chairman, Ujjivan Financial Services.

Software giant SAS has collaborated as the gold partner, digital innovation expert Adobe is the silver partner and the Finance Industry Development Council (FIDC), a representative body of assets and loan financing NBFCs, is the supporting partner for the event.

The summit will be a grand congregation of over 50 speakers featuring over 10 power-packed panel discussions and over 500 delegates from the BFSI industry.

Register now at https://www.financialexpress.com/events/modern-bfsi-summit-2022 to watch the best of the Indian BFSI sector.

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Panel proposes timelines for approving resolution plans

Insolvency Law Committee, headed by corporate affairs secretary Rajesh Verma, has suggested measures including introduction of timelines for approval or rejection of resolution plans and use of digital databases for claim submission from creditors.

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Many resolution professionals under scanner for misconduct

People with direct knowledge of the matter said some of the RPs were allegedly delaying the resolution process and instead pushing for liquidation of the company since the latter would bring them higher fees.

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Allow app pings instead of SMS: Banks

Several banks are making a case for an alternative to SMS alerts due to the growing costs and security risks that they pose. Private lenders are calling for alternatives such as app notifications and password generators to replace the text alerts that banks have to mandatorily send out to customers.

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Fed rolls out biggest rate hike since 1994, flags slowing economy

Fed cuts growth projection, sees rising unemployment

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HDFC to sell four large stressed accounts before merger

BSE-listed Siti Networks is the biggest of the four accounts in this portfolio, accounting for ₹198.5 crore. The other three accounts are those of MEP Infrastructure Developers, with a principal loan of ₹125 crore, Hotel Horizon at ₹163 crore, and Sterling Urban Development at ₹90 crore.

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Stocks hold gains after Federal Reserve hikes rates to fight inflation

The increase of three-quarters of a percentage point was three times as big as the central bank usually makes. The Fed signaled more increases are on the way as it tries to tackle the worst inflation in four decades.

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Credit growth will drive liquidity normalisation: Dinesh Kumar Khara, chairman, State Bank of India

Demand for credit will lead to excess liquidity being deployed as loans in the normal course and there may be no further hikes in the cash reserve ratio (CRR), State Bank of India (SBI) chairman Dinesh Kumar Khara told Shritama Bose. The country’s largest lender will take its Yono app to customers of all banks, with payments and analytics playing a major role in the process, he added. Edited excerpts:

How do you see interest rates panning out at this stage in the cycle?

It has a direct correlation with the inflation numbers which are coming in, and also the policy announcements by the Reserve Bank of India. The inflation number has come down from 7.79% to 7.04%. That is essentially a reflection of the fiscal and the monetary policy put together. The steps taken by the government in terms of reducing the taxes on petrol and diesel and import duties on edible oil have played a role in reducing the inflation number. As the situation stands, if inflation gets tamed and comes within 6%, I expect this interest rate cycle to see a different trajectory altogether.

Term deposit rates have risen, but could we see savings rates rising?

Deposit rates started sometime back, but essentially from the ALM point of view. Of late, the trend we are observing is that the loan book is growing faster for the system as a whole, as compared to the deposit book. Also, since inflation is on the higher side, to the extent possible, we are passing on the benefit to the depositors. On savings rates, we’ll have to take a call at the appropriate time. As of now, since the ALM suggests that we raise rates in certain brackets, we have done that. I don’t think savings rates are going to see any change.

Is the industry concerned about the pace of liquidity normalisation?

The CRR hike of 50 bps resulted in sucking out of liquidity to the tune of Rs 87,000 crore. At one point in time, the system had excess liquidity of almost Rs 5.35 trillion, from where it has come down to about Rs 3.3-3.4 trillion. For a system of this size, excess liquidity to the tune of Rs 1.5 trillion is a very well-received number. I don’t expect any further CRR hikes because the way loan growth has started happening, the excess liquidity in the system will get deployed in the loan growth.

How do you see corporate loan growth for the rest of the year?

Loan growth is directly linked to capacity utilisation, which has already moved to 74.5%. With the improved capacity utilisation, working capital limits are set to see better utilisation. What we normally see is that as and when capacity utilisation inches towards 85%, investments pick up. In some sectors, we have seen capacity being built up and fresh investment proposals being entertained. Government initiatives like the National Monetisation Pipeline, National Infrastructure Pipeline, Gati Shakti and PLI are facilitative for fresh investments, and we expect to see traction under these programmes during the current year. We have seen growth in airports, ports, iron and steel and renewable energy.

Are private banks also participating? What about pricing?

Some of them are showing interest. We normally try to underwrite and then downsell, depending upon the appetite of other banks. On pricing, at one point of time, there were issues. But as the excess liquidity dries up, even pricing power will come back to banks. It has improved marginally so far.

Will higher rates affect demand or repayment capability for retail or MSME customers?

In retail, we go by the EMI-to-NMI (net monthly income) ratio. With inflation going up, monthly incomes have also gone up. We are seeing pre-Covid-level salary increases in the corporate sector. Even if the EMI goes up, it will not go up as much. In terms of the leverage on individuals’ balance sheets, there is still ample scope for it to rise. As incomes and aspirations go up, the retail engine should continue to do well. On MSMEs, of course, there could be some pressure. But, if they have the ability to pass on the interest rate increases, then perhaps they will not face stress. So far, we have seen no major issues.

How are you prepping Yono for an era of digital banks?

Yono is already a digital bank within the bank. So far it was for our existing-to-bank customers. We are trying to rope in new-to-bank customers as well, initially through the payment mechanism. Thereafter, we can offer them our large range of services. Yono 1.0 has seen good traction. We have started leveraging the analytics lever and with it, we are customising our offerings. All that will be rolled out with Yono 2.0 which is meant for every Indian. We have already hired a DMD for digital technology from the market and he is helping us with this.

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Indian Bank makes pregnant women 'temporarily unfit' for joining

As per the guidelines and criteria for physical fitness for pre-employment recently issued by Indian Bank, candidates would be re-examined six weeks after delivery for the appointment of selected post.

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Non-govt a/c additions to double to 20L in NPS in FY23

The Pension Fund Regulatory and Development Authority expects enrolments from non-government subscribers to the National Pension System (NPS) to double from 9.7 lakh in March this year to 20 lakh in March 2023 with growth having reaching an inflection point in March 2020. It also granted approval to Max Life Insurance, Tata Asset Management and Axis Bank to promote pension management firms.

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RBI flags lack of due diligence in bank funding to govt-owned entities

The Reserve Bank of India (RBI) on Tuesday flagged instances of poor due diligence by banks while funding government-owned entities. As a corrective measure, the regulator has asked banks to compile comprehensive reports on the status of compliance with a set of instructions on the criteria for financing within three months.

We have come across instances where banks have not been strictly complying with our extant instructions on assessment of commercial viability, ascertainment of revenue streams for debt servicing obligations and monitoring of end use of funds in respect of their financing of infrastructure/ housing projects of government-owned entities,” the RBI said in a notification.

Banks and financial institutions have also been found to have violated the central bank’s instructions which require that in case of projects undertaken by government-owned entities, term loans should be sanctioned only for corporate bodies, due diligence should be carried out on viability and bankability of projects to ensure that revenue stream from the project is sufficient to take care of the debt servicing obligations, and that the repayment or servicing of debt is not from budgetary resources.

Laying down a set of specific instructions in an annex accompanying Tuesday’s circular, the RBI reiterated that banks must follow them in letter and spirit.

Banks are advised to carry out a review and place before their boards a comprehensive report on the status of compliance with the instructions within three months from the date of this circular,” the notification said.

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Govt appoints 4 non-official directors on RBI central board

The government on Tuesday appointed Anand Mahindra, Venu Srinivasan, Pankaj Ramanbhai Patel and Ravindra Dholakia as part-time non-official directors on the central board of Reserve Bank of India (RBI). The appointment will remain valid for four years with effect from June 14, the central bank said in a press release.

Anand Mahindra is chairman of the Mahindra Group, non-executive chairman of Mahindra & Mahindra and Tech Mahindra. Venu Srinivasan is chairman emeritus of two-wheeler maker TVS Motor Company. Pankaj Patel is chairman and managing director of Zydus Lifesciences while Ravindra Dholakia is the former member of the Monetary Policy Committee.

With the appointments, the RBI’s central board now consists of five official members and 10 non-official members. RBI governor Shaktikanta Das and deputy governors Mahesh Kumar Jain, MD Patra, M Rajeshwar Rao and T Rabi Sankar are the official directors.

Revathy Iyer, Sachin Chaturvedi, Satish Kashinath Marathe, Swaminathan Gurumurthy, Ajay Seth and Sanjay Malhotra are non-official directors of the central bank.

The central board of the RBI comprises official directors, which include the governor and four deputy governors. The government appoints 10 non-official directors, two directors are government officials while four directors are appointed from each of the four local boards.

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RBI: Banks violating government entity lending guidelines

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New entity with wider mandate to replace BBB

The government is planning to introduce a new entity in place of the Banks Board Bureau (BBB), with a wider and more legally tenable mandate, to recommend candidates for appointments to senior management-level posts in state-run banks, insurance companies and other financial institutions, sources told FE.
“The work is going on at a fast pace. But it’s taking a bit of time. The government is seized of the matter and a decision will be made soon,” an official source said. As FE had reported last month, the extended term of the BBB members ended on April 10 and the government was contemplating a revamped mechanism in its place.

Another source said the new entity will consist of some of the current BBB members as well, given their experience in handling such appointments. “Appointments to such posts that are lying vacant or going to be vacant will be cleared once the new entity comes into force. The government will continue to maintain an arm’s length distance on matters of such appointments,” he added.

The move followed a directive late last year by the Delhi High Court, which held that the BBB cannot select the general managers and directors of state-run general insurers, as it was not a competent body. Subsequently, at least half a dozen newly-appointed directors of non-life insurers had to vacate their positions.

This ruling came on a case filed by National Insurance Company general manager Ravi, who had complained that people junior to him were selected by the BBB for the position of directors in public-sector general insurers twice. The court also set aside relevant circulars that enabled the BBB to make such selections.
This prompted the government to replace the BBB, which was set up to recommend names of top executives of state-run banks and financial institutions, with a new entity that would not just do the same job but also have a wider mandate.

Before the BBB took over appointments relating to PSU insurance, the government used to notify them after shortlisting eligible candidates. One of the sources said work at general insurers hasn’t quite suffered, as there is not much difference between the functioning of the general manager (GM) and a GM who is a director.

As for the BBB, it’s now practically non-functional. In April 2020, the Appointments Committee of the Cabinet (ACC) had approved the extension of the term of the BBB’s part-time chairman BP Sharma and other members for a period of two years, which has now ended. Other part-time members were Vedika Bhandarkar, former managing director (MD) of Credit Suisse; Panja Pradeep Kumar, former MD of SBI; and Pradip P Shah, founder MD of rating agency Crisil.

Sharma had been heading the BBB since 2018 after the tenure of its first chairman and former controller and auditor general of India Vinod Rai got over.
The government set up the BBB in 2016 with an aim to “search and select apposite personages” for the boards of public-sector banks, financial institutions and insurance companies and “recommend measures to improve corporate governance in these institutions. It was also tasked with engaging with the directors of PSBs to prepare strategies for their growth and development.

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NBFC borrowing costs seen rising 85-105 bps: Crisil

With the Reserve Bank of India (RBI) raising policy rates two times in just over a month, borrowing costs for non-banking financial companies (NBFCs) are seen rising by 85-105 basis points in the current financial year, Crisil Ratings said in a report.

While NBFCs should be able to pass on higher rates to home loan borrowers since lending rates are typically floating in nature, they will be unable to pass on entire borrowing costs due to competition from banks, Crisil said. Other segments such as vehicle finance and MSME financing typically have fixed-rate loans, so only new loans would be charged at higher interest rates.

NBFCs are likely to face borrowing cost of 7.2%-7.4% in FY23, compared to 6.4% last year. However, the borrowing cost will be around 50 basis points lower compared to the pre-Covid level, an analysis by Crisil shows.

The impact of the rising borrowing cost will vary depending on the mix of fixed and floating rate borrowings of NBFCs. Of the total debt maturing in FY23, 42% is based on floating rates such as treasury bills, marginal cost of funds-based lending rate and repo-linked rates. NBFCs have a higher share of MCLR-linked loans compared to housing finance companies (HFC), the agency said.

The transmission of rate changes now takes place at a faster rate as floating loans are externally benchmarked to the repo from October 2019.

A total of Rs 15 trillion in debt is due for repricing in FY23 due to interest reset or maturity. An additional debt amount of Rs 3 lakh crore is likely to be raised by NBFCs to support the expected growth in lending.

gOur study shows increases or decreases in MCLR over the past five fiscals have not kept pace with changes in the repo rate. At the same time, interest rates on repo-linked bank facilities do reflect such changes very quickly. Extrapolating that, and after baking in the total 165-bps hike likely in the repo rate this fiscal, we see the overall cost of borrowings for NBFCs rising 85-105 bps,” Krishnan Sitaraman, deputy chief ratings officer, Crisil Ratings said.

Despite rising borrowing costs, the overall profitability of NBFCs is expected to remain steady, aided by a fall in credit costs, as NBFCs have made additional provisioning buffers in the Covid period, the report said.

gLast fiscal, many NBFCs had released their provisioning buffers partially, which had reduced their credit costs. There is still a reasonable amount of cushion available ― 0.5% to 2% of assets ― as contingency provisioning. That means incremental provisioning would be lower. Consequently, profitability is likely to be nearly stable this fiscal compared with last,” Ajit Velonie, director, Crisil Ratings, said.

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IDBI Bank raises interest rates on retail term deposits by up to 25 bps

IDBI Bank on Tuesday said it has raised interest rates by up to 25 basis points (bps) on retail term deposits of less than Rs 2 crore. The revised rates would be applicable across various tenors for domestic term deposits, non-resident ordinary (NRO) and non-resident external (NRE) term deposits, effective June 15, a release said.

The lender has increased the interest rate by 25 basis points to 4 per cent from 3.75 per cent on retail term deposits maturing between 91 days and six months. For fixed deposits maturing in 3 years to less than 5 years, the rate has been hiked by 10 bps to 5.60 per cent, compared to 5.50 per cent earlier.

Retail term deposits with a maturity of more than 5 years and up to 7 years will now fetch an interest rate of 5.75 per cent against 5.60 per cent. The interest rate on fixed deposits maturing above 7 years and up to 10 years has been revised to 5.75 per cent from 5.50 per cent.

The country’s largest lender State Bank of India (SBI) has raised interest rates by 0.20 per cent on domestic term deposits of below Rs 2 crore for select tenors. The revised interest rates on retail domestic term deposits (below Rs 2 crore) come into effect from June 14, 2022, State Bank of India (SBI) informed on its website.

For deposits of 211 days to less than 1 year, the lender will offer an interest rate of 4.60 per cent against 4.40 per cent earlier. Senior citizens will be offered an interest of 5.10 per cent compared to 4.90 per cent earlier.

Likewise, for domestic term deposits of 1 year to less than 2 years, customers can earn interest of 5.30 per cent, up by 0.20 per cent. For senior citizens, the interest rate will be higher by a similar margin at 5.80 per cent.

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Piramal Alternatives plans to raise $1 billion

Multiple people familiar with the fundraising told ET that the proceeds will be deployed to meet the capital needs of local companies seeking funds through a mix of either debt and equity, or through customised financing options.

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Sensex crashes 1,457 points; Nifty settles at 15,774: Top reasons

Global rout in stock markets dragged domestic indices lower on Monday as fears over inflation and the related response of central banks made investors jittery. The 30-share BSE index crashed 1,457 points or 2.68 per cent to close at 52,847; while the broader NSE Nifty settled 427 points or 2.64 per cent lower at 15,774.

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'Compelled by circumstances': some banks forecast 75bp Fed hike

Investment banks have ramped up projections for US interest rate rises following a hotter-than-expected inflation reading, with several now forecasting a 75-basis-point hike this week.

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NACH auto debit transactions: Bounce rates at near three-year low in May 2022

The bounce rate was at 29 per cent in volume terms during the month

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Mutual funds witness record surges in two years as pandemic instils financial discipline

Covid-19 lockdowns and low-interest rates have encouraged investors to invest more in mutual funds.

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Bitcoin tumbles to 18-month low as US inflation impact spreads

The world’s largest digital token tumbled as much as 8.9 per cent to $24,903.49—its lowest since December 2020

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Bad bank AMC hits regulatory hurdle; transfer of bad loans delayed

The Reserve Bank of India (RBI) has raised concerns over the lack of clarity on the regulatory oversight of an asset management company (AMC) that was proposed to be set up under the overarching structure of the National Asset Reconstruction Company Ltd (NARCL), or the so-called bad bank, people familiar with the matter told FE.

This, coupled with some other operational issues, has delayed the transfer of large bad loans of about Rs 50,000 crore to the NARCL in the first phase from the initial targeted deadline of March 2022.

“The RBI has asked while it will have regulatory/supervisory role over the NARCL, whom is this AMC accountable to? It’s a valid question and the matter is expected to be resolved soon. Bad loans can then be transferred to the NARCL,” said one of the sources. Another source said the issue is still “under examination”.

A banking source said the RBI may soon take a decision on the matter, having discussed the issue with relevant stakeholders. As the NARCL concept is new to India, once regulatory clarity is established, it will pave the way for the setting up of similar entities in future, he said.

In January, State Bank of India (SBI) chairman Dinesh Khara said the NARCL had received all approvals to start operations and a total of 38 non-performing asset (NPA) accounts worth Rs 82,845 crore were already identified to be transferred to the NARCL in phases.

As per the plan, the NARCL will acquire bad assets by making an offer to the lead bank. Once its offer is accepted, the India Debt Resolution Company (IDRCL), which is being set up as an AMC under the NARCL, will manage the bad loans, add value to them and finally sell them off. In all, large NPAs worth Rs 2 trillion were estimated to be transferred to the NARCL over five years.

The NARCL has shareholding from 15 lenders, mainly public-sector banks (PSBs), and Canara Bank is the sponsor bank. According to the earlier plan, PSBs will hold 51% in NARCL and private players will own the rest. Similarly, state-run banks and public financial institutions will have a 49% stake in IDRCL, and the rest will be held by private lenders.

In September 2021, the Cabinet had approved a proposal to offer sovereign guarantee on the security receipts (SRs) issued by the NARCL, which is estimated to cost the exchequer Rs 30,600 crore over five years. Although the government is giving guarantee on the SRs, it has not contributed to the equity of the bad bank. In the Budget for FY22, finance minister Nirmala Sitharaman had announced the initiation of the process to set up the bad bank.

Explaining the reason as to why it chose to back the NARCL when 28 private ARCs are already operational, government officials had said that these entities had lacked adequate financial and operational muscle to work out large stressed assets of Rs 500 crore or more — the kind of NPAs that would be transferred to the bad bank.

The RBI had, in December 2021, warned that bad loans of commercial banks could rise to anywhere between 8.1% and 9.5% under varied degrees of stress by September 2022, from 6.9% in September 2021. In this light, swift operationalisation of the NARCL assumes importance. Of course, the central bank had highlighted that banks were generally well-placed to weather credit-related shocks, thanks to sound capital adequacy.

NARCL last month roped in former SBI deputy managing director Natarajan Sundar as its MD and chief executive. Similarly, it appointed Karnam Sekar, former MD & CEO of Indian Overseas Bank, as its non-executive chairman last month.

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IRDAI's new norms to prompt insurers to launch innovative policies swiftly: Experts

The Insurance Regulatory and Development Authority of India (IRDAI) last week extended the 'use and file' procedure for most of the life insurance products, thereby allowing insurers to launch new products without prior approval of the regulator.

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Bankers hail RBI's monetary policy focus on taming inflation

SBI chief said that enabling more headroom for urban and rural cooperative banks to finance the housing sector will bring about a level-playing field in the cooperatives space, while linking Rupay credit cards to UPI will add more avenues for growth and financial inclusion and convenience to customers.

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RBI approves appointment of R Subramaniakumar as MD & CEO of RBL Bank

Subramaniakumar is a veteran banker with over 40 years of experience

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DHFL administrator R Subramaniakumar is RBL Bank chief

The Reserve Bank of India (RBI) has cleared the appointment of R Subramaniakumar as managing director and chief executive officer of RBL Bank for a period of three years, the lender said on Saturday. Subramaniakumar has earlier overseen the insolvency process of Dewan Housing Finance Corporation (DHFL) in his capacity as administrator.

“Please note that a meeting of the board of directors of the bank will be convened in due course upon the completion of requisite formalities, inter alia to approve the appointment of Mr R Subramaniakumar as an additional director and as the managing director & CEO of the bank and the approval of the shareholders shall be obtained thereafter as per the applicable provisions of the Companies Act, 2013 and Sebi listing regulations,” RBL Bank said in a communication to the exchanges.

The bank received the communication approving Subramaniakumar’s appointment from the RBI on Friday. Subramaniakumar has 40 years of experience as a banker. He started his career at Punjab National Bank (PNB) in 1980 and went on to head business transformation at the bank for three years. He was later appointed executive director at Indian Bank and Indian Overseas Bank (IOB). He also held the position of MD & CEO of IOB. He is currently an independent director on the board of LIC Pension Fund.

At present, RBL Bank is being led by interim MD & CEO Rajeev Ahuja. In December, the bank’s board had constituted a search committee to identify a new CEO. The change in guard was necessitated by the bank’s former CEO Vishwavir Ahuja going on leave on December 25 after the RBI appointed its executive Yogesh Dayal to the bank’s board as an additional director. Vishwavir Ahuja went on leave roughly six months ahead of the end of his tenure.

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Banker to 467 million Indians says loan demand is bouncing back

The rising demand for loans means SBI will have to shore up its capital adequacy ratio, since it is hovering at less than two percentage points over the minimum regulatory requirement. The bank’s overall capital buffer of 13.8% is the lowest among the top lenders in the country.

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RBI names new RBL Bank CEO

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DHFL administrator R Subramaniakumar is RBL Bank chief

The Reserve Bank of India (RBI) has cleared the appointment of R Subramaniakumar as managing director and chief executive officer of RBL Bank for a period of three years, the lender said on Saturday. Subramaniakumar has earlier overseen the insolvency process of Dewan Housing Finance Corporation (DHFL) in his capacity as administrator.

“Please note that a meeting of the board of directors of the bank will be convened in due course upon the completion of requisite formalities, inter alia to approve the appointment of Mr R Subramaniakumar as an additional director and as the managing director & CEO of the bank and the approval of the shareholders shall be obtained thereafter as per the applicable provisions of the Companies Act, 2013 and Sebi listing regulations,” RBL Bank said in a communication to the exchanges.

The bank received the communication approving Subramaniakumar’s appointment from the RBI on Friday. Subramaniakumar has 40 years of experience as a banker. He started his career at Punjab National Bank (PNB) in 1980 and went on to head business transformation at the bank for three years. He was later appointed executive director at Indian Bank and Indian Overseas Bank (IOB). He also held the position of MD & CEO of IOB. He is currently an independent director on the board of LIC Pension Fund.

At present, RBL Bank is being led by interim MD & CEO Rajeev Ahuja. In December, the bank’s board had constituted a search committee to identify a new CEO. The change in guard was necessitated by the bank’s former CEO Vishwavir Ahuja going on leave on December 25 after the RBI appointed its executive Yogesh Dayal to the bank’s board as an additional director. Vishwavir Ahuja went on leave roughly six months ahead of the end of his tenure.

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