Norms for digital lending, BNPL likely in this month; circular could be released next week

The Reserve Bank of India (RBI) is set to release guidelines for buy now, pay later (BNPL) and digital lending later this month, said two people in the know. A circular could be out as early as next week, one of them said.

On June 20, the regulator wrote to non-bank prepaid payment instrument (PPI) issuers clarifying that such instruments cannot be loaded using credit lines. The communication was seen as a precursor to the release of norms on digital lending and BNPL. Quite a few BNPL players had been using the prepaid card route for lending to customers.

The guidelines may take note of certain dominant trends in the BNPL segment, one of the people said. A report by Dvara Research based on a survey of offerings by 10 BNPL providers found that customers using BNPL incur costs comparable to those using credit cards, and are susceptible to adverse risks emerging from gaps in customer protection.

Customers incur different costs that materialise both before and after defaulting on BNPL repayments, with the annual percentage rate going up to 36%. “BNPL providers’ terms and conditions are misaligned with key customer protection regulations, contravening key conduct obligations,” Dvara Research said. As a result, customers are at risk of unknowingly
incurring debt or taking loans unsuitable for them. They are also subjected to aggressive debt collection practices, the report added.

BNPL has not exactly been a tool for financial inclusion, according to Dvara’s findings and data from TransUnion Cibil. Selection and rejection of credit applications tend to be arbitrary, and being on-boarded by a BNPL provider does not ensure access to credit, Dvara said.

The share of new-to-credit customers is low in the BNPL segment and the average consumer is a little different from a consumer of other unsecured retail loans, according to a separate report by Kotak Institutional Equities based on data from TransUnion Cibil.

The proportion of consumers having other loans stood at 75% for both BNPL and non-BNPL originations. Similarly, the share of consumers who already has at least one live credit card account stands at 35% for BNPL originations and 25% for non-BNPL originations. “This data indicates that BNPL lenders seem less focused on driving credit inclusion than anticipated earlier. Their focus is probably on acquiring new customers through a product that allows them to underwrite on a transaction basis, limiting the risk involved,” KIE said.

At the same time, consumers who held a BNPL account showed a higher delinquency performance on their credit card and personal loan accounts than consumers who did not.

Last month, RBI governor Shaktikanta Das said the regulator would soon issue a framework to curb malpractices in the digital lending segment. “I think very soon we will be coming out with a broad regulatory architecture which should be able to address the challenges that we are confronted with regard to lending through digital platforms, many of which are unauthorised, unregistered and, I should say, illegal,” he said.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/StwErYT

Read more »

HDFC merger may not need CRR-SLR forbearance: Experts

HDFC Bank is well prepared to meet reserve ratio requirements post its merger with its parent and it may not need regulatory forbearance on that count, according to banking sector experts.

Housing Development Finance Corporation (HDFC) carried an average liquidity of Rs 46,000 crore through the year ended March 2022. According to some estimates, HDFC Bank currently holds government securities worth 29% of its deposit base, against the statutory liquidity ratio (SLR) requirement of 18%.

Even though HDFC Bank has asked for relaxation on SLR compliance, it may not really need it, said R Gandhi, former deputy governor, Reserve Bank of India (RBI). “Their G-Sec investments are roughly 29% as a share of deposits today. There should not be a problem for the combined balance sheet because the current SLR requirement is 18%. So, there is ample room for them even if forbearance is not granted,” Gandhi said.

The RBI has issued a no-objection certificate for the proposed amalgamation of HDFC and HDFC Bank. It is not immediately clear if the central bank has allowed the merged entity to comply with cash reserve ratio (CRR) and SLR requirements.

In a report dated July 6, Gaurav Jani and Palak Shah, analysts at Prabhudas Lilladher, said HDFC already has sufficient cash on its balance sheet to make up CRR. “Additional CRR/SLR for HDFC Bank merged may not be required, since HDFC Ltd has adequate cash for CRR, while HDFC Bank may carry excess SLR to serve overall SLR needs,” the report said.

Gandhi observed that a deal of this nature is quite rare, so there is no precedent for it. The only proposal of a similar kind the RBI had received was for the takeover of Lakshmi Vilas Bank by Indiabulls Housing Finance. The proposal was turned down by the regulator in 2019.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/nC1d2Sh

Read more »

Kotak bank acquires agriculture, healthcare finance portfolio from DLL India subsidiary

Private sector lender Kotak Mahindra Bank on Friday said it has acquired agriculture and healthcare equipment financing portfolio of the Indian subsidiary of global asset finance company De Lage Landen International BV (DLL). With this, the bank has secured 25,000 customers with a total credit outstanding of around Rs 582 crore.

The bank has also received an outstanding non-performing assets portfolio of around Rs 69 crore. Launched in September 2021, the bank’s healthcare finance division provides funds of up to Rs 10 crore to hospitals, laboratories, diagnostic centres, nursing homes and clinics. It also finances tractor purchases, crop loans, working capital loans for SMEs.

“Kotak Mahindra Bank’s acquisition of DLL India’s agri and healthcare equipment portfolio reiterates our continued commitment towards a strong presence in this space and gives us access to a high-quality customer base,” D Kannan, group president of commercial banking, Kotak Mahindra Bank, said.

The transfer of the agri and healthcare finance portfolio will take place in a phased manner over the next few months and DLL India will continue to manage the operations till then. DLL Group, a subsidiary of Rabobank, provides vendor finance in agriculture, food, healthcare, clean technology, construction, transportation and industrial sectors.

KPMG acted as the exclusive financial advisor to the shareholders of DLL India for this transaction of portfolio sale to Kotak Mahindra Bank.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/5AsI4JG

Read more »

RBI imposes restrictions, withdrawal caps on 4 co-op banks

The Reserve Bank on Friday imposed several restrictions, including a cap on withdrawals for the depositors, on four cooperative banks for six months given their deteriorating financial positions.

from Business News: Latest News on Business, Stock Markets, Financial News, India Business & World Business News https://ift.tt/NRrj8yc

Read more »

Evidence of negative relationship between banks’ holdings of G-Secs and loan growth: RBI study

Though G-Sec holdings impart liquidity and stability to the banking system, they can crowd out the private sector investment by reducing the pool of the lendable funds available with the banks

from The HinduBusinessLine - Money & Banking https://ift.tt/6UkhzY4

Read more »

FM Nirmala Sitharaman directs PSBs to onboard accounts aggregator system

Finance minister Nirmala Sitharaman on Thursday asked chiefs of state-run banks to onboard the accounts aggregator system, which was introduced in September last year, by the end of this month. In a meeting with chiefs of various public-sector banks (PSBs) and regional rural banks (RRBs) here, the minister also asked sponsor banks to “formulate a clear road map in a time-bound manner to further strengthen the RRBs and support the post pandemic economic recovery”, according to a finance ministry statement.

The account aggregator network is a data-sharing system, which was aimed at heralding the era of open banking in India, and empowering millions of customers to digitally access and share their financial data across institutions in a secure and efficient manner. It was started last year with eight of India’s largest banks. However, some of the PSBs are yet to complete their onboarding.

Highlighting the role of RRBs in pushing credit flow in rural India, Sitharaman impressed on the sponsor banks and the Indian Banks’ Association (IBA) to play a lead role in technological advancements in the RRBs. She also reviewed the operational performance and governance reforms in RRBs. This was the finance ministry’s second meeting with chiefs of state-run banks in three weeks. On June 23, the ministry had reviewed their large non-performing assets of over `100 crore each and overall asset quality.

The minister took stock of the progress under the Kisan Credit Card Scheme (KCC) for the animal husbandry, dairying and fisheries sector, so that these farmers can have access to short-term institutional credit at cheaper rates.

As of July 1, as many as 32.6 million farmers (including 1.95 million farmers belong to the animal husbandry, dairy and fisheries sector) have been covered under the KCC scheme, with a total sanctioned credit limit of `3.7 trillion. Sitharaman also directed banks to ensure time-bound disposal of pending KCC applications.

The meeting, convened by the Department of Financial Services, comes at a time when the government wants lenders to satiate the growing credit appetite of the economy. Non-food bank credit grew 12.6% on year in April, compared with 11.3% in the previous month and 4.9% a year before. However, loans to industry grew at a slower pace of 8.7% even on a favourable base (it was just 0.2% a year before).

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/ae6wnMz

Read more »

Only 40% street vendors repay working capital loan given during Covid-19

The scheme was initiated in July 2020 to help street vendors hit by Covid-19. Under the scheme, street vendors were offered loans in three tranches: '10,000, '20,000 and '50,000.

from Banking/Finance-Industry-Economic Times https://ift.tt/QLxPMr4

Read more »

Re deposits more attractive for banks despite measures from RBI

In FY14, banks had raised a record $27 billion through the FCNR(B) route after the RBI removed interest rate caps and also offered banks a 3.5% interest rate subsidy to prevent the rupee's rout.

from Banking/Finance-Industry-Economic Times https://ift.tt/ZuFNicM

Read more »

We would like to be present in 1,000 towns and cities: Jairam Sridharan, Managing Director, Piramal Finance

Piramal Finance is looking at an 800-strong branch network as it expands to small-town India, managing director Jairam Sridharan tells Shritama Bose in an interview. Interest rates have remained unchanged for that customer segment so far, but they will rise over the next nine months, he adds. Excerpts:

Who is your target customer?
Our target customer is a small-wallet customer from either tier-II, tier-III towns or the outskirts of the tier-I towns. The customer usually would have a monthly income of Rs 15,000-16,000 to Rs 60,000-70,000. A little over half of our customers are self-employed. They could be small shop-owners or have a small factory or trading unit in a small town. They tend to be in their early thirties. Our average home loan ticket size tends to be Rs 15-16 lakh. In our home loans business, we look at purchase of homes or construction of homes. For home enhancement or improvement, we have other product categories, such as loans backed by the home as collateral and unsecured loans. Ours is a multi-product portfolio strategy. We also do small business financing. We do used-car financing and unsecured lending as well. We have recently started our microfinance business. Our objective and intent is to cater to the Bharat market with all core products that are important to the customer base there.

Are you looking at introducing new products?
We will. In the June quarter, we launched our microfinance business and we have gone live in Rajasthan and Bihar. We have applied some intelligence on where we think the best opportunity is in terms of the size of the untapped market, the historical delinquencies, competitive intensity and the size of the micro economies. Based on these, we have chosen six or seven states. Similarly, we are working on a set of products for education financing, loans against securities and some unsecured lending.

You have a high-touch model and that necessitates a strong branch presence.
The Dewan Housing acquisition helped us a lot in that regard. Before the acquisition, Piramal used to have just about 14 branches. Post-acquisition, we had about 301 branches. Since then, we have shut down a few branches and opened a few more. At the end of last quarter, we had 309 active branches. We will continue to invest in it and we would like to be present in 1,000 towns and cities in the country over the near term. If that means having a 700-800-strong branch network, we’d be quite comfortable growing to that size. In segments like affordable housing or SME lending, there are a lot of smaller players, but no major national player. We can be that national-scale player serving these customers across the length and breadth of the country.

How has the experience of transition been in the DHFL portfolio?
It has been quite smooth, to be honest. It is a very large acquisition in terms of the number of customers, employees, branches and lenders that we were taking out. The scale was quite transformational for us as an institution. Under ‘Project Sangam’, we successfully integrated over 3,000 employees of erstwhile DHFL group and created an unified workforce. We have now also integrated all the branches and changed all the products. Likewise, we have integrated the teams, the operational structures have been changed, salaries rationalised, and everybody is now trained on the same products and credit policies. We have been able to reactivate 99% of the branches for disbursements.

We did an employee engagement survey two months ago and the results were very positive. The team felt like they had been part of the organisation for a long time. What’s also helped is that the Dewan Housing portfolio has performed pretty much exactly as we had anticipated. In the last nine months, in terms of credit risk and collections, there have been no surprises. We have also hired people and the number of employees has risen to almost 8,800 people from 3,500 at the time of the transaction.

To what extent have your costs risen?
Our balance sheet is well-positioned for a rising-rate environment. Eighty per cent of our liabilities are fixed-rate and 70% of our assets are variable-rate assets. So our liabilities by and large stay at the same rate, but our assets have the ability to increase in yield as the environment shifts. Our cost of funds hasn’t moved much in the last few months. As for passing higher rates on to customers, while we have the ability, we haven’t passed on anything yet. Our average home loan rate is 11.2%. The sub-prime customer living in tier-II or tier-III locations hasn’t seen a rise yet. Having said that, over six to nine months, rates will rise for these customers as well.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/UZeFbhQ

Read more »

Spike in bond yields: Treasury losses to hurt banks’ income, profitability in Q1

Treasury losses could hurt banks’ earnings for the quarter ended June and erode operating profits by up to 25% on a year-on-year basis, according to analysts tracking the sector.

Banks, especially those in the public sector, are set to book mark-to-market (MTM) losses on their securities portfolios in the first quarter of FY23 as a result of a spike in bond yields. While public sector banks (PSBs) have requested the Reserve Bank of India (RBI) to let them spread the required provisioning against such losses through the four quarters of the current fiscal, the regulator is yet to accede to the request.

Even as lenders book treasury losses, the outlook is not altogether dim for them. Kotak Institutional Equities (KIE) said in a report on Thursday that strong loan growth, healthy recovery in net interest income and a sharp decline in loan-loss provisions would be key positives.

“The treasury losses even if it is a high number, caused by 150-bps (basis points) increase in short-term interest rates during the quarter, should not be too worrisome as it is not a credit risk for banks. Banks partly offset this loss by a higher interest income on their investment portfolio over time,” analysts at KIE said.

A firm trend in loan growth, as evidenced by the double-digit non-food credit growth prints throughout the quarter, is expected to be a significant positive. Motilal Oswal Financial Services (MOFSL) said the disbursement growth across several retail products has surpassed pre-Covid levels, while corporate growth has been led by improved utilisation levels and working capital requirements.

“While an uncertain macro and rising inflation can impact the demand environment, we estimate loans to grow by 12%/13.5% YoY in FY23/FY24,” MOFSL analysts said.

The turn in the rate cycle, initiated with the RBI’s 40-bps rate hike in May and accelerated by a 50-bps hike in June, will affect bank margins differentially. ICICI Securities said the impact on net interest margins could be relatively more adverse for RBL Bank, IDFC First Bank, IndusInd Bank and Kotak Mahindra Bank. State Bank of India and Axis Bank could be impacted favourably. HDFC Bank, IndusInd Bank and RBL Bank have 45-50% of their loan portfolio on fixed rates, and the rise in deposit rates may outweigh lending rate increases in their cases.

“Retail term deposit rates have risen across the board but not commensurate with repo hike. Wholesale term deposit rates have witnessed the sharpest spike of 100-170 bps in the one-year bucket,” ICICI Securities said in a report on Thursday. The 50-bps hike in the cash reserve ratio will hit NIMs only marginally due to the presence of excess liquidity, the brokerage added.

Analysts expect the asset quality to improve, going by a strong upgrades-to-downgrades ratio in the corporate sector and lower bounce rates on debit requests made through the National Automated Clearing House channel. However, they will closely watch banks’ commentary on repayment trends in their restructured and emergency credit line guarantee scheme (ECLGS) portfolios, which have now started to emerge from their moratoria.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/4cyqoMY

Read more »

Banks working with CEIB on data sharing to curb frauds

"We will have a uniform format for obtention of information and further aim towards digitisation of the whole information network, so that banks have real-time information," he said, adding that earlier this year the Reserve Bank had also given its nod on the Standard Operating Procedure (SOP) that the banks had proposed for submission of information or documents with the CEIB.

from Banking/Finance-Industry-Economic Times https://ift.tt/VGCQvPB

Read more »

RBI cancels license of Pune-based Shri Anand Co-operative Bank

The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has been asked to issue an order for winding up the bank and appoint a liquidator for the bank.

from Banking/Finance-Industry-Economic Times https://ift.tt/WJsaRH6

Read more »

Chip woes slow vehicle loan growth in May

By Shashank Didmishe

The growth in vehicle loans issued by the banks continued on a downward trajectory in May as semiconductor shortages weighed on production which also impacted sales. Banks’ vehicle loans outstanding as on May 31 was at Rs 4.2 trillion, which was up by 1.2% month-on-month. The growth in the vehicle segment has slowed for two consecutive months, according to the latest Reserve Bank of India (RBI) data.

In April, vehicle credit outstanding grew by 2.7% on month. In contrast, banks’ vehicle loan portfolio improved by a robust 22.2% on-month in March and 17.1% in February.

“The semiconductor shortage still persists and has impacted the original equipment manufacturers’ (OEM) ability to meet demand,” H T Solanki, general manager of mortgages & other retail assets at Bank of Baroda said. While expressing the same view, Krishnan Sitaraman, senior director and deputy chief ratings officer of CRISIL Ratings said that the semiconductor situation is definitely improving and that is beginning to be reflected in the volumes.

Sales of passenger vehicles declined sharply by nearly 10% month-on-month in April and marginally by 0.2% month-on-month in May. With this fall on a month-on-month basis, the sales of the passenger vehicle segment remained below the 2018 level in May, according to Society of Indian Automobile Manufacturers (SIAM).

Banks have 70-75% market share in passenger vehicle loans as it is an interest rate sensitive segment, but have a lower share of around 40% in the commercial vehicle (CV) loan segment. “Hence, growth trends in vehicle loans in the banking sector are more driven primarily by what happens in the car loan segment,” Sitaraman said.

Additionally, pent-up demand for vehicle loans may have led to February and March posting higher loan outstanding in the segment and there is the typical year end push from lenders in March which provides tailwinds to volumes at the end of a financial year, Sitaraman said.

Vehicle loans form a major chunk of the personal loan portfolio of the banking sector, contributing 19% of the total personal loans. Personal loans, which are currently driving the total credit growth for banks, constitute more than 25% of the total bank credit outstanding, RBI data shows.

Despite the slowing growth in the vehicle loan segment, there are expectations of banks’ vehicle loans regaining momentum. Bank of Baroda expects the upcoming festive season to be a strong one. In Q3FY22, the lender posted 19.5% on year growth in its auto loan book. With the resolution of supply side issues and some new launches in the pipeline, Sitaraman expects a structural shift driving car sales and demand for finance.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/68fcTht

Read more »

Indian Overseas Bank seeks buyers for 344 bad loans

Aban Holdings has outstanding loans of ₹1,271 crore, the largest account on the list. Two Essar companies are Essar Oil & Gas Exploration with ₹77.8 crore outstanding, and Essar Power Gujarat with ₹148 crore. Other big-ticket accounts include Rotomac Global with loans of ₹750 crore, Frost International with ₹839 crore, Era Infrastructure (₹567 crore) and Vadraj Cement (₹521 crore).

from Banking/Finance-Industry-Economic Times https://ift.tt/TDW2Vjp

Read more »

Bajaj Finance books 7.4 million loans in Q1

Non-banking financial company Bajaj Finance on Wednesday said it had recorded the highest-ever quarterly increase in its customer franchise at 2.7 million during Q1FY23.

The NBFC’s customer franchise as of June 30 stood at 60.3 million compared to 50.5 million a year ago. New loans booked by the company during Q1FY23 were 7.4 million compared to 4.6 million in Q1FY22.

Core assets under management (AUM) grew 31% year-on-year to Rs 2,04,000 crore as of June 2022 compared to Rs 1,56,115 crore as of June 30. Core AUM in Q1FY23 grew by Rs 11,900 crore, the company said in a regulatory filing on its provisional first-quarter performance.

Bajaj Finance said its liquidity position remained strong with a consolidated net liquidity surplus at Rs 11,550 crore as of June 30. The company said it continued to remain well-capitalised with a capital adequacy ratio (CRAR) of 26.2% as of June 30.

Bajaj’s deposit book grew by 22% year-on-year to Rs 34,100 crore as of June 30 compared to Rs 27,972 crore a year ago.
During the quarter, the company invested Rs 2,500 crore in equity shares of Bajaj Housing Finance, a wholly-owned subsidiary of the company.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/EVqplPx

Read more »

Fintech companies, NBFCs funded by Chinese money generated Rs 950-cr slush funds in India: ED

The Enforcement Directorate (ED), therefore, recently attached Rs 86.65 crore worth funds lying in a total of 155 bank and payment gateway accounts of NBFCs like Kudos Finance and Investments Private Limited, Acemoney (India) Limited, Rhino Finance Private Limited and Pioneer Financial and Management Services Private Limited and their linked fintech companies.

from Banking/Finance-Industry-Economic Times https://ift.tt/Uzw9rIH

Read more »

RBI announces measures to boost forex inflows

Growth prospects strong and all capital flows barring portfolio investments remain stable, said RBI

from The HinduBusinessLine - Money & Banking https://ift.tt/I0ptwaJ

Read more »

RCap resolution: Bidders prefer consortium approach

Large number of subsidiaries turning out to be a challenge for bidders as many want to acquire only the insurance arm

from The HinduBusinessLine - Money & Banking https://ift.tt/QpzMoLg

Read more »

Irdai permits general insurers to issue sophisticated add-ons for motor insurance

"The Concept of Motor Insurance is constantly evolving. The advent of technology has created a relentless pace for the insurance fraternity to rise up to interesting yet challenging demands of the millennials. The general insurance sector needs to keep pace with and adapt to the changing needs of the policyholders," Irdai said in a statement.

from Banking/Finance-Industry-Economic Times https://ift.tt/h1zxsEO

Read more »

Crypto lender Nexo to acquire Vauld

The completion of this transaction is pending due diligence

from The HinduBusinessLine - Money & Banking https://ift.tt/6YAifc0

Read more »

Poonawalla Fincorp Q1 disbursements jump 98 per cent YoY

Company’s disbursements during the first quarter of 2022-23 surpassed the fourth quarter of 2021-22

from The HinduBusinessLine - Money & Banking https://ift.tt/ab5RSOH

Read more »

Yes Bank advances rise 14%, RBL Bank’s up 7% in June quarter

Yes Bank on Tuesday said its loans and advances grew 14% year on year (YoY) on a provisional basis to Rs 1.87 trillion as on June 30, 2022. In a similar business update, RBL Bank said its gross advances grew 7% YoY, slower than its peers, to Rs 62,095 crore, while South Indian Bank’s loan book grew 11% YoY to Rs 64,760 crore.

Yes Bank’s deposits grew 18.3% YoY to Rs 1.93 trillion as on June 30, 2022. However, the lender saw its deposit base shrinking 2% on a sequential basis. Its low-cost current account savings account (CASA) ratio improved to 31.6% from 28.1% a year ago.

“With respect to deposits, daily average deposit balances in Q1FY23 have sequentially grown by 4.4% on the back of sequential growth of 9.2% in daily average CASA balances,” Yes Bank said in a communication to the stock exchanges.

RBL Bank’s total deposits grew 6% YoY to Rs 79,217 crore, with the CASA ratio improving to 36% from 33.7% a year ago. The bank’s retail advances de-grew 5% YoY and 3% sequentially while wholesale advances grew 22% YoY and 4% sequentially for the quarter ended June 30, 2022. Retail advances accounted for 51% of the loan book. “Asset quality parameters on the portfolio continue to see improvement in Q1FY23, in line with the improving trend of the past few quarters,” RBL Bank said.

South Indian Bank’s total deposits grew 4% YoY to Rs 88,202 crore as on June 30, 2022. The CASA ratio improved to 34% from 30% a year ago. Most private banks who have shared business updates for the quarter ended June have seen double-digit growth, in line with overall banking system growth. While non-food credit growth improved to 12.6% in May, the pick-up in demand has been uneven and concentrated in metropolitan markets, analysts said.

“We believe that the lenders would continue to remain optimistic of growth and would probably be comfortable to take more risks. This would be reflected in the quality of loan growth where we would look at expansion into MSME (micro, small and medium enterprises), self-employed segments or towards a marginally higher risk-reward segment,” Kotak Institutional Equities said in a recent report.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/Unu3SNm

Read more »

Payment operators need RBI nod for M&A

The RBI has said that non-bank payment system operators (PSOs) will need prior permission before a takeover of any company or transfer of payment activity.

from Business News: Latest News on Business, Stock Markets, Financial News, India Business & World Business News https://ift.tt/EteH6kP

Read more »

HDFC merger gets RBI nod, will up pvt banks’ mkt share

from Business News: Latest News on Business, Stock Markets, Financial News, India Business & World Business News https://ift.tt/mfjEYlc

Read more »

Private banks report strong loan growth in Q1FY23

A clutch of private banks reported strong provisional loan growth numbers for the quarter ended June. HDFC Bank, Federal Bank, IndusInd Bank, CSB Bank and AU Small Finance Bank (SFB) reported double-digit loan growth in Q1FY23. Deposits grew slower than loans for most banks during the quarter.

HDFC Bank’s advances grew 21.5% year on year (YoY) to Rs 13.95 trillion as on June 30, 2022. Gross of transfers through inter-bank participation certificates and bills rediscounted, the bank’s advances grew 22.5% over June 30, 2021. Retail loans at the country’s largest private lender grew 21.5% YoY in Q1, commercial and rural banking loans grew 29%, and corporate and other wholesale loans grew 15.5%.

During the quarter, HDFC Bank purchased loans worth Rs 9,533 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation (HDFC).

HDFC Bank’s deposits aggregated to Rs 16.05 trillion as of June 30, 2022, up 19.3% YoY. Its low-cost current account savings account (CASA) ratio stood at 46% as of June 30, 2022, as compared to 45.5% a year ago.

Federal Bank’s gross advances grew 16.3% YoY to Rs 1.54 trillion as of June 30, 2022. Its retail credit book grew 16.7% while the wholesale credit book grew 15.8%. Total deposits grew 8.2% YoY to Rs 1.83 trillion as of June 30, 2022. The bank’s CASA ratio improved to 36.84% from 34.81% a year ago.

IndusInd Bank’s net advances grew 18% YoY to Rs 2.5 trillion as of June 30, 2022, while its deposits grew 13% to Rs 3.03 trillion. Its CASA ratio rose to 43.2% from 42.1% a year ago.

CSB Bank’s gross advances grew 16.16% YoY to Rs 16,333 crore and its total deposits grew 8.65% to Rs 20,267 crore. The lender’s gold loan portfolio grew over 26% YoY to Rs 7,099 crore.

AU SFB’s gross advances grew 42% YoY to Rs 49,366 crore and its deposits grew 48% to Rs 54,631 crore.

While FY23 has so far been marked by double-digit growth in credit for the banking system, analysts observed that the growth has not been evenly spread out across segments. In a report dated June 30, Kotak Institutional Equities (KIE) said loan growth is being led by the metropolitan segment off a low base.

“Growth is stronger in smaller ticket loans. Demand on working capital is improving but still weak. Even as private banks are leading on loan growth, we are seeing recovery in public banks as well,” KIE said.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/K6h0mQ3

Read more »

RBI slaps Rs 1-crore penalty each on KMB, IndusInd

The Reserve Bank of India (RBI) on Monday said it has imposed monetary penalties on Kotak Mahindra Bank and IndusInd Bank for failing to comply with various regulations.

Kotak Mahindra Bank was fined Rs 1.05 crore for non-compliance with directions on limiting liability of customers in unauthorised electronic banking transactions, and statutory and other restrictions governing loans and advances.

The RBI imposed the fine on the bank after conducting statutory inspection with reference to its financial positions as on March 31, 2018 and March 31, 2019. The examination revealed that in certain instances of unauthorised transactions, the bank had failed to credit the eligible amount to the depositor education and awareness fund within the period prescribed and to credit the amount involved in the transactions to the customers’ account within 10 working days from the date of notification by the customer. Kotak Mahindra Bank was also found to have not maintained or applied margin on advances to stock brokers.

IndusInd Bank was fined Rs 1 crore for not following KYC directions. A statutory inspection of the bank with reference to its financial position as on March 31, 2020 revealed that the bank had failed to adhere to the customer due diligence procedure in the accounts opened using one time password (OTP)-based e-KYC, in the non-face-to-face mode. In some accounts, the aggregate of all credits in a financial year, in all the deposits taken together, exceeded Rs 2 lakh, and some fixed deposit accounts were opened for amounts exceeding Rs 1 lakh, of which some deposits were for more than Rs 2 lakh.

Both banks were issued notices asking them to show cause as to why penalties should not be imposed on them. After considering the banks’ replies, oral submissions made during personal hearings and examination of additional submissions made by them, the RBI came to the conclusion that the charges of non-compliance were substantiated and warranted imposition of fines.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/CfgZ2Wi

Read more »

RBI move on lending rate to spur NBFC-MFIs profitability: Crisil

Enhanced flexibility to set lending rates for microfinance borrowers will be one of the drivers of revival in profitability for non-banking financial company-microfinance institutions (NBFC-MFIs) this fiscal, rating agency Crisil Ratings said on Monday.

This emanates from the Reserve Bank of India’s removal of the interest margin cap on lending rate under its new regulatory framework for microfinanciers. The other factors that will support an improvement in profitability include reduction in credit cost and increase in permissible household income limit according to the new framework, the agency said in a release.

“These, in turn, will help enlarge the market in terms of target borrowers and geographies, especially in the hinterland. Additionally, the current rising interest rate environment is not expected to impair the profitability of NBFC-MFIs as higher borrowing costs would be offset by steeper lending rates, cushioning net interest margins,” Crisil said.

Krishnan Sitaraman, senior director and deputy chief ratings officer at Crisil, said, “A number of NBFC-MFIs have increased their lending rates by 150-250 basis points in recent months. This provides reasonable headroom to absorb higher borrowing costs. Lenders can also dip into their contingency provision buffer created over the past two fiscals to manage asset-quality challenges, if any, in specific states due to natural calamities or socio-political issues — without material impact on profitability.”

Over the past two fiscals, the annual credit cost of NBFC-MFIs had shot up to around 4-5% because of pandemic-related provisioning. Credit costs were around 1.5-2.0% prior to Covid. With asset quality pressures gradually easing and sizeable provision buffers being created, credit cost is expected to decline to around 2.5-2.8% this fiscal.

In this context, the new RBI framework augurs well for the next phase of growth for NBFC-MFIs. The higher income eligibility threshold and enhanced flexibility to price loans will spur deeper penetration into existing markets and entry into new geographies. That, together with rising demand for loans in rural India, should drive NBFC-MFIs’ credit growth, which is expected at 25-30% this year, the release said.

Poonam Upadhyay, director, Crisil Ratings, said: “One issue that this segment has been facing for some time now is potential over-indebtedness of borrowers. The introduction of a cap on total monthly repayment obligations of borrowers will persuade lenders to tighten the processes to assess borrower indebtedness. That will induce sustainable growth over the long run.”

The new regulatory guidelines also focus on the assessment of household income of the borrower, besides credit assessment. The robustness of the income assessment framework and related policies that NBFC-MFIs will implement in the revised dispensation will remain monitorable, the rating agency said.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/LoQ7t5A

Read more »

RBI gives green signal to HDFC, HDFC Bank merger proposal

HDFC Bank on Monday said it has got banking sector regulator RBI's nod for the merger proposal of its parent HDFC Ltd with itself. Touted as the biggest transaction in India's corporate history, HDFC Bank on April 4 agreed to take over the biggest domestic mortgage lender in a deal valued at about $40 billion, creating a financial services titan.

from Business News: Latest News on Business, Stock Markets, Financial News, India Business & World Business News https://ift.tt/DrWZRku

Read more »

RBI approves merger of HDFC Bank with parent HDFC Corp

“HDFC Bank has received a letter dated July 04, 2022 from the Reserve Bank of India whereby the RBI has accorded it’s ‘no objection’ for the Scheme, subject to certain conditions as mentioned therein,” the bank said in an exchange filing. Earlier HDFC Bank had stated that it has applied to the RBI seeking leeway to meet certain regulatory conditions.

from Banking/Finance-Industry-Economic Times https://ift.tt/BGjUHNP

Read more »

RBI's deposit insurance arm to pay depositors of two co-operative banks in August

Eligible depositors of Shankarrao Pujari Nutan Sahakari Bank will get the payment on August 10, and those of Harihareshwar Sahakari Bank on August 28, according to a DICGC circular.The Reserve Bank of India (RBI) had imposed several restrictions, including on withdrawals by depositors, on these two banks in May in the wake of their deteriorating financial positions.

from Banking/Finance-Industry-Economic Times https://ift.tt/cBd8EVO

Read more »

Banking frauds of over ₹100 crore declined in FY22

In terms of cumulative amount, it has come down to ₹28,000 cr from ₹65,900 cr in FY21 for PSBs

from The HinduBusinessLine - Money & Banking https://ift.tt/MbDXecH

Read more »

Banking frauds of over Rs 100 cr see significant decline in FY’22

Frauds in the banking sector involving sums of over Rs 100 crore have declined significantly, with banks reporting cases worth Rs 41,000 crore in 2021-22 compared to Rs 1.05 lakh crore in the previous year. According to official data, the number of fraud cases in private as well as public sector banks dropped to 118 in FY22 from 265 in 2020-21.

In the case of public sector banks (PSBs), the total number of fraud cases of over Rs 100 crore declined to 80 from 167 in FY’21, while for private sector lenders such cases reduced to 38 in FY’22 from 98 earlier, as per the data. In terms of cumulative amount, it has come down to Rs 28,000 crore from Rs 65,900 crore in FY’21 for PSBs. For private sector banks, the reduction is from Rs 39,900 crore to Rs 13,000 crore in FY’22.

In a bid to check frauds, the RBI has been taking several steps including improving efficacy of Early Warning System (EWS) framework, strengthening fraud governance and response system, augmenting data analysis for monitoring of transactions and introduction of dedicated Market Intelligence (MI) Unit for frauds.

During 2021-22, the Reserve Bank of India (RBI) carried out a study on the implementation of EWS framework in select Scheduled Commercial Banks, in collaboration with the Reserve Bank Information Technology Private Limited (ReBIT).
Further, the effectiveness of EWS was assessed in select banks by using Machine Learning (ML) algorithms.

Earlier this year, State Bank of India (SBI) reported one of the biggest bank frauds in the country totalling Rs 22,842 crore, perpetrated by ABG Shipyard and their promoters.
This was much higher than the case involving Nirav Modi and his uncle Mehul Choksi, who allegedly cheated Punjab National Bank (PNB) of around Rs 14,000 crore through issuance of fraudulent Letters of Undertaking (LoUs).
Last month, the Central Bureau of Investigation (CBI) booked Dewan Housing Finance Ltd (DHFL), its former CMD Kapil Wadhawan, director Dheeraj Wadhawan and others in a fresh case involving Rs 34,615 crore, making it the biggest bank fraud probed by the agency.
A consortium of lenders led by Union Bank of India has alleged that the company had availed credit facility to the tune of Rs 42,871 crore between 2010 and 2018 from the consortium under various arrangements but started defaulting on repayments from May 2019 onwards.
The accounts were declared non-performing assets at different points of time by banks.
The bank alleged that the promoters along with others siphoned off and misappropriated a significant portion of the funds by falsifying the books of DHFL and dishonestly defaulted on repayment of dues.
This caused a loss of Rs 34,615 crore to the 17 banks in the consortium

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/HnaZyST

Read more »

HDFC Ltd receives observation letters from BSE, NSE for proposed merger

No adverse observations from BSE, no objection from NSE

from The HinduBusinessLine - Money & Banking https://ift.tt/JQGnS0K

Read more »

Banking frauds of over Rs 100 cr see significant decline in FY'22

In a bid to check frauds, the RBI has been taking several steps including improving efficacy of Early Warning System (EWS) framework, strengthening fraud governance and response system, augmenting data analysis for monitoring of transactions and introduction of dedicated Market Intelligence (MI) Unit for frauds.

from Banking/Finance-Industry-Economic Times https://ift.tt/WPgX9CT

Read more »

Financial Services Institutions Bureau: FSIB to be much more than just a headhunter

The Financial Services Institutions Bureau (FSIB), which will replace the Banks Board Bureau (BBB), will be much more than a mere headhunter to fill in key posts at state-run banks, insurers and other financial institutions (FIs).

According to an official order, reviewed by FE, the FSIB will advise the government on a suitable performance appraisal system for whole-time directors and non-executive chairmen of the state-run financial services institutions. It will build a data bank relating to the performance of public-sector banks (PSBs), FIs and insurance companies. It will advise the government on “formulation and enforcement of a code of conduct and ethics for whole-time directors” in these institutions. The FSIB will even help these state-run banks, FIs and insurers in developing business strategies and capital raising plans, etc.

These functions will be in addition to its role in recommending candidates for appointment as whole-time directors and non-executive chairpersons of public-sector banks (PSBs), financial institutions and public-sector insurers (PSI).

The FSIB will comprise a chairperson nominated by the central government; the secretaries of the departments of financial services and public enterprises; the chairman of the Insurance Regulatory and Development Authority of India; and a deputy governor of the Reserve Bank of India (RBI). Apart from them, there will be three members with knowledge of banks and other financial institutions, and three more with knowledge of insurance, according to the order.

Former BBB chairman Bhanu Pratap Sharma has been selected to head the FSIB for two years or until further orders. Sharma was at the helm of the BBB since 2018 until his term ended in April 2022. The government has also appointed three part-time members of the new entity (FSIB) who will be looking after affairs relating to PSBs and FIs–Animesh Chauhan, former chairman and managing director of Oriental Bank of Commerce; Shailendra Bhandari, former managing director and chief executive of ING Vysya Bank; and former Reserve Bank of India executive director Deepak Singhal.

Similarly, the government has decided to appoint three more part-time members to handle affairs relating to insurance—Usha Sangwan, former managing director of LIC; AV Girija Kumar, former CMD of Oriental Insurance and Sujay Banarji, former whole-time director of IRDAI.

In future, the FSIB chairman and the three members handling affairs relating to banking and financial institutions will be selected by a search committee that will comprise the governor of the Reserve Bank of India (RBI) and the secretaries of the departments of financial services and personnel and training (or such other secretary as may be approved for this purpose by the Appointments Committee of the Cabinet). Similarly, the part-time members relating to the insurance sector would be chosen by the chairman of the IRDAI and the secretaries of the departments of financial services and personnel and training.

“To avoid conflict of interest, the part-time members shall be either retired or, if working, be required to discontinue work. Further, such members shall have no commercial relationship with any commercial entity that has commercial relationship with any PSB or FI or PSI, and the central government may consult the regulator concerned in this regard,” according to an order by the department of financial services. The FSIB chairperson and part-time members will get a fee of Rs 50,000 per sitting.

“FSIB shall be a professional body with autonomy in its affairs and shall have its own secretariat. It may appoint a person, or take on deputation from RBI a person in the rank of chief general manager or general manager in RBI, to act as full-time secretary of its secretariat,” the DFS said.

from "Banking & Finance News: Banking & Finance News Today, Indian Banking & Finance News, World Banking & Finance News Today - The Financial Express " | The Financial Express https://ift.tt/mSVgM3o

Read more »