Higher volumes could turn securitisation into key funding source for NBFCs: Crisil

Non-banking finance companies (NBFC) are likely to rely on securitisation as a funding source led by higher volumes, which will lead to increased disbursements by non-banks after a slowdown. Banks can also improve their retail and priority sector targets through securitisation, ratings agency Crisil said in a report.

Securitisation volume grew by 70% to Rs 35,000 crore in the first quarter of the current financial year led by higher participation from public and private sector banks along with other financial institutions. Foreign financial institutions, including banks, acquired 17% of all assets securitised. A stable market environment could mean deeper participation by other large investors, including foreign institutions and mutual funds, the agency said.

Additionally, the base effect caused by low volumes last fiscal due to second wave also led to sharper growth in Q1FY23. The growth in securitization volumes would have been higher if not for higher interest rates, which prompted divergent yield expectations among NBFCs and banks the ratings agency said.

“More than 80 non-bank entities being present in the market in the first quarter, up from 50 last fiscal, indicates strong comfort originators have with the securitisation process. Market activity in the past quarter also reflected the diversity of various asset classes across secured and unsecured loan categories,” Krishnan Sitaraman, senior director and deputy chief ratings officer of CRISIL Ratings said.

Mortgage-backed securitisation (MBS) loans comprised 45% of the total volume compared with 53% in the previous year while asset backed securitisation (ABS) comprised the balance.

Within the ABS category, commercial vehicle (CV) loans comprised 49%, and microfinance 20% of transaction value, with many underlying loans eligible for priority sector lending (PSL) classification. Securitisation in gold loans (14%) continued to rise, while two-wheeler, education, school finance and unsecured loans saw renewed investor interest.

However, any sharp rise in interest rates, high inflation and future waves of the pandemic impacting economic activity could be potential headwinds for securitisation volumes this fiscal, the report 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/DqxTg4A

Read more »

PNB, 3 other PSU banks activate account aggregator system

Public sector lender Punjab National Bank (PNB) has gone live on the account aggregator ecosystem as financial information user (FIU) as well as financial information provider (FIP), the lender said in a press release. Other than PNB, Union Bank of India, Canara Bank and Indian Bank are the three other PSU lenders who have connected to the account aggregator system.

“Punjab National Bank is working on multiple business use cases which can leverage on the account aggregator ecosystem and offer interesting products to its customers. This will further enhance the outreach of the bank to provide customized digital products to its customers,” Atul Kumar Goel, managing director and chief executive officer of PNB said.

Other PSU lenders are in various stages of implementing the process of connecting to the account aggregator system. While State Bank of India (SBI), Bank of Baroda and UCO Bank are in the testing phase, Indian Overseas Bank, Punjab and Sind Bank, Bank of India and Bank of Maharashtra are in the development phase. Central Bank of India is in the evaluation phase, according to information on Sahamati, a member-funded industry alliance.  

Most of the major private sector banks such as HDFC Bank, ICICI Bank, Axis Bank, IndusInd Bank and Kotak Mahindra Bank have also connected with the account aggregator system. As of Monday (July 11), a total of 56 banks, fintechs and non-banking finance companies (NBFC) are live on the system.    

Earlier this month, Union Finance Minister Nirmala Sitharaman had directed all public sector banks to implement the account aggregator system by the end of July. The account aggregator system is a financial data exchange where banks, fintechs or NBFCs can exchange customer data after taking consent from such users. The move is expected to give consumers more control over their data and also bring down processing costs for banks through access to better data. The system was introduced in September 2021.  

Under the account aggregator system, a lender who requests the data is called financial information user (FIU) and the one that provides the data is called financial information provider (FIP). The data cannot be shared without taking consumer’s permission. The entities which facilitate the data exchange are account aggregators. OneMoney, FinVu, CAMS and NADL are providing facilitation services after receiving approval from the Reserve Bank of India (RBI). There are 8 entities awaiting RBI approval for providing account aggregator services, a National Securities Depository Ltd (NSDL) and PhonePe.

Since the launch of the system in 2021, 8.6 lakh accounts are linked by account holders and 8.1 lakh consent requests have been fulfilled so far. 

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/W4EzYQD

Read more »

Lenders may seek review: Banks stare at 8% recovery from first NARCL sale

India’s bad bank has offered to buy the first toxic asset at just 8% of its outstanding loan value, a deal unhappy lenders are planning to negotiate in the hope that the recovery gets better, said two bankers in the know.

According to the bankers cited above, the National Asset Reconstruction Company (NARCL) has bid about Rs 80-85 crore for Rainbow Papers, a non-performing asset which owes banks Rs 1,100 crore.

The consortium is led by Indian Overseas Bank (IOB), which is planning to hold a meeting with other member banks to take a call on the future course of action. “A meeting had been planned for last week, but that got cancelled. IOB is expected to convene another meeting where banks will decide how to go ahead with the resolution. They want to conclude it by end-August,” said one of the bankers.

Emails seeking responses from NARCL and IOB remained unanswered till the time of going to press.

According to the last available annual report for Rainbow Papers for FY18, other bankers to the company were Corporation Bank (now merged into Union Bank of India), Union Bank, Allahabad Bank (merged into Indian Bank), Axis Bank, Bank of India, Punjab National Bank and Dena Bank (merged into Bank of Baroda).

The bid for Rainbow Papers was the first one made by NARCL after repeated delays in the operationalisation of the institution. It had initially missed the March 31, 2022 deadline for acquiring 15 assets with an aggregate exposure of Rs 50,000 crore as hiring for some senior positions took time. The bad bank put in the bid for Rainbow Papers in June, ahead of the June 30 deadline for operationalisation.

Bids made by NARCL are different from those of other ARCs in the way that security receipts (SRs) to be issued by the former will be sovereign-backed. While most deals between banks and ARCs are now all-cash, the NARCL will have an upper hand, having to pay just 15% of the deal amount as upfront cash and the rest in the form of SRs.

According to a paper published as part of the Reserve Bank of India’s February 2022 bulletin, the average rate of recovery for seven bad banks in Asia and Europe ranged between 22% and 87%.

For Indian lenders, recoveries through the Insolvency and Bankruptcy Code (IBC) route have been below par of late. Recovery for financial creditors from the resolution of stressed firms under the code crashed to a record quarterly low of 10.2% of their admitted claims during the three-month period ended March 2022. At Rs 1,288 crore, the realisation for financial creditors in Q4FY22 dropped below the assets’ liquidation value  of Rs 1,316 crore for the first time, according to data from the Insolvency and Bankruptcy Board of India (IBBI).

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/Hd73lvg

Read more »

RBI declines banks’ proposal on treasury loss provisioning

The Reserve Bank of India (RBI) has turned down a proposal to let banks spread provisions against their treasury losses in the June quarter over four quarters. The central bank last week conveyed its decision in a written communication to banks who had sought the concession, according to well-placed sources.

An email sent to the RBI seeking its response remained unanswered till the time of going to press.

Rising bond yields may cause Indian banks to incur mark-to-market (MTM) losses of up to Rs 13,000 crore in their bond portfolios in the quarter ended June 2022 (Q1FY23), according to Icra.

The lack of a dispensation will hurt public sector banks (PSBs) more, given their higher holding of government securities of longer tenor.

Icra estimates MTM losses on bond portfolios to range between Rs 8,000-10,000 crore for PSBs and Rs 2,400-3,000 crore for private banks in Q1. Anil Gupta, vice president, Icra, said that despite the expected MTM losses, net profits of banks will remain steady, with the treasury losses being offset by an expected growth of 11-12% in their core operating profits in FY23. “However, if the yields harden substantially going forward, there could be a sequential moderation in the net profits in FY2023,” Gupta said.

People familiar with the RBI’s thinking said that the central bank believes it has done enough to protect bank treasury books from the effect of rising yields by not launching the standing deposit facility (SDF) before April.

According to the June 2022 edition of the financial stability report (FSR), banks’ trading profit recorded a marked reduction after Q1FY22. During Q4FY22, it fell by 17% on a sequential basis for PSBs, while it increased for private banks. Foreign banks reported trading losses for the fifth consecutive quarter, with trading losses increasing in Q4FY22.

Banks are required to mark down their available for sale (AFS) and held for trading (HFT) bond portfolios on a quarterly basis to account for declines in the valuation of their holdings. In case of MTM losses, they must make provisions against these losses, which hurts their profitability.

The repo rate hike of 90 basis points (bps) in May and June, accompanied by other measures aimed at the withdrawal of system liquidity, have led to a sharp rise in yields during the current quarter. Between March 31 and July, the yield on the benchmark 10-year government bond has risen 59 basis points (bps) to 7.466%.

The FSR said that during FY22, PSBs preferred to augment their allocation in state development loans (SDLs) and wind down their other holdings in the HTM category. Under the then prevailing low interest rate conditions, banks sold a large portion of their HTM portfolio and booked profits.

“Since G-Secs form the largest share of the HTM portfolio, the presence of substantial unrealised losses, especially in respect of PSBs, at the beginning of the interest rate tightening cycle, portends risk to their financial health going forward,” RBI said in the FSR.

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/uMIvGUJ

Read more »

RBI slaps Rs 1.68-crore fine on Ola Financial Services

The Reserve Bank of India (RBI) has imposed a penalty of Rs 1.68 crore on Ola Financial Services for non-compliance with certain provisions of know your customer (KYC) norms, the central bank said in a press release. The RBI has imposed the penalty under the Payment and Settlement Systems Act, 2007, which gives the central bank the authority to impose penalty on companies not complying with norms.

The RBI had issued a notice to the company to show cause and after considering its response, the central bank decided to impose a penalty.

Ola Financial Services, a part of taxi-hailing platform Ola, provides e-wallet services under the brand name Ola Money. The wallet is issued by Zipcash in co-branding with Ola. The company also issues credit cards and offers postpaid services.

Last week, the RBI imposed a fine of Rs 5.72 crore on Federal Bank, Rs 70 lakh on Bank of India, Rs 1 crore each on IndusInd Bank and Kotak Mahindra Bank for non-compliance.

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/BEtP6AW

Read more »

HFC loan portfolio seen growing by 12% in FY23

The housing finance sector is poised for a higher growth in loan disbursals and improvement in asset quality during the current financial year. The loan portfolio of housing finance companies (HFC) is expected to grow by around 12% on year in the current financial year on steady growth in disbursements and improving real estate sector and macro-economic environment, CareEdge said in a report.

HFCs are gaining market share in the housing portfolio market as compared to banks due to a higher growth in loan disbursals. This trend is likely to continue going ahead, the ratings agency said. HFCs witnessed a higher growth rate in loan disbursal compared to banks. HFCs posted a double-digit growth rate at 11% on year, surpassing the 7% growth rate reported by the banks. The growth in the HFC sector in FY22 was driven largely by the prime segment, which grew at 9% on year, an improvement of 100 bps compared to previous year. 

In the affordable HFC space, loan against property (LAP) drove the loan growth with the share of LAP increasing to 25% from 19% on year. Affordable HFCs also benefited from a smaller base due to moderation in growth during pandemic years and the underwriting of loans in the below-prime segment.

Going ahead, the profitability of HFCs is likely to come under pressure on account of rising interest rate scenario. The large HFCs have already started increasing lending rates in line with the increase in their borrowing costs. The full impact of the re-pricing will be visible in FY24 as a lot of resets may happen during the current year, the ratings agency said. Although bank borrowings increased for HFCs in FY22, fundraising through market instruments remains a major source. 

The gross non-performing asset (NPA) ratio is expected to decline by around 10 basis points (bps) on year to around 3.1% in FY23, the ratings agency said. Although the NPA levels are expected to decline, HFCs witnessed higher defaults in their wholesale portfolio in the previous year. HFCs have maintained higher liquidity which will also aid in cushioning future losses, the ratings 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/ZPYUgnJ

Read more »

Banks to report Rs 13,000-crore MTM losses in Q1 on rising bond yields: Icra

Rising bond yields will force banks to report mark-to-market losses of up to Rs 13,000 crore on their investment portfolios in the April-June quarter, a report by Icra said on Tuesday. Profits will moderate for the quarter, but improved loan growth and operating profits will ensure that banks’ bottom lines remain “steady” for FY23, the report said.

The effect of the treasury losses will be felt more by public sector banks as they hold a higher share of government securities (G-Secs) of longer tenure.

Public sector banks are expected to face mark-to-market (MTM) losses to the tune of Rs 8,000-10,000 crore, according to Icra estimates, while private banks may report MTM losses of Rs 2,400-3,000 crore in Q1FY23.

“If the yields harden substantially going forward, there could be a sequential moderation in the net profits in FY23,” Anil Gupta, vice-president of Icra, said.

Despite the headwind caused by the treasury losses on banks’ profitability, its effect will be offset by improvement in core lending operations. With the rising yields, companies prefer to meet their funding requirement by taking loans, instead of tapping the debt market. This has led to an uptick in corporate credit offtake, complementing other loan segments. The non-food bank credit grew in double digits during Q1FY23. The ratings agency expects incremental bank credit offtake of Rs 12-13 trillion for the current fiscal, higher than Rs 10.5 trillion in FY22.

“Despite these expected MTM losses, we expect the net profits of the banks to remain steady, given the expected growth of 11-12% in their core operating profits in FY23, which will more than offset the MTM losses,” Gupta said.

With 43% of floating rate loans being tied to external benchmarks and a lag in increase in deposit rates, banks are likely to show an improvement in their operating profits. The transmission of changes in policy rates takes place faster in case of externally-benchmarked loans.

On the asset quality front, banks will continue to post improvement on account of lower slippages and credit growth. The gross non-performing asset (NPA) ratio is expected to improve to up to 5.2% by the end of the current financial year, from 6% in the previous year, Icra said. However, the net NPA ratio is likely to remain range bound at around 1.6-1.8% on account of lack of recoveries and upgrades. Slippages are likely to improve further to around 2.5-2.7% in FY23 due to falling bounce rates and overdue loans, the agency said.

Despite the improvement in headline asset quality, stressed assets stood at 3.8% of standard advances as on March 31, 2022, higher than the pre-Covid level of 3.1%, the 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/0pVanlZ

Read more »

Top AMCs lose market share in equity segment

The major players of the mutual fund industry have yielded ground in the equity segment, with the share of the top seven-eight AMCs (asset management companies) witnessing a decline, analysts at Nomura wrote. The market share of these AMCs in the pure equity category has declined to 46%, the lowest in the previous four-five years, they said.

Top AMCs (except SBI MF) lost market share of 310 basis points year-on-year in May 2022 in the pure equity segment. “We note that month-on-month trends are pointing to a market-share loss,” Nomura analysts wrote.

HDFC AMC lost market share of around 100 bps YoY in May despite robust performances of all schemes, while Axis AMC has lost 70 bps, down 20 bps YoY. ICICI Prudential AMC continues to hold up well, maintaining its market share in most of the segments. Nippon witnessed a 90 bps Y-o-Y decline, giving up the recoveries in April when it had rebounded to the December 2021 levels.

SBI MF has bucked the trend, sustaining market share gains, which increased 40 bps in FY22. “That said, M-o-M market share trends, even for SBI MF, point to a market-share loss, and we believe they warrant monitoring,” analysts wrote.

The gross inflows into equities at Rs 28,300 crore have fallen around 40% since March 2022. Net equity flows (including ELSS) have been reasonably good at Rs 15,600 crore, with flows from systematic investment plans (SIPs) holding up well at Rs 12,300 crore (flat month-on-month) and continued positive lump-sum flows despite uncertainties in the stock markets. Smaller redemptions, down 34% from the March levels, and a stable SIP book have supported net inflows into equities.

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/Hf450LI

Read more »

BoB hikes MCLR, BoM cuts the same

Bank of Baroda on Monday increased the marginal cost of funds-based lending rates (MCLR) on some tenures by 10-15 basis points (bps), effective July 12. BoB has increased its one-year MCLR by 15 bps to 7.65%, the lender said in an exchange filing.

The increase in the MCLR by BoB for July was steeper compared with June, when the bank had raised the one-year MCLR by 10 bps. The bank has kept overnight and one-month MCLR unchanged at 6.80% and 7.20% respectively. The 3-month and 6-month MCLR have been raised by 10 bps each to 7.35% and 7.45%, respectively.

Meanwhile, Bank of Maharashtra reduced its MCLR by 20-35 bps across tenures. The bank cut its one-year MCLR by 20 bps to 7.50% in July from 7.70% in the previous month. The bank’s one-year MCLR for June was one of the highest among public sector banks, according to RBI data. The bank’s shorter duration MCLRs for July are in the range of 6.90% to 7.40%.

In FY22, the bank’s deposits stood at Rs 2.02 trillion while current account, savings account (CASA) ratio as of March 31 improved to 58% compared to 54% a year ago. Cost of deposits declined to 3.61% in Q4FY22 from 3.97% in the same quarter last year.

The move comes at the time when most banks have been increasing their MCLR after the Reserve Bank of India initiated a rising policy interest rate cycle.

Earlier, HDFC Bank and ICICI Bank hiked MCLR by 20 bps each.

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/udFCEhU

Read more »

PSB leadership plan: IBA seeks bids from advisory companies

The IBA has invited bids from advisory firms and institutes to design and deliver a leadership development programme for public sector banks (PSBs) to prepare a pipeline of leaders in tune with the increasing competitive landscape.The selected entity will design and deliver the training programme for senior officers of PSBs, including chief general managers (CGMs), general managers (GMs) and deputy general managers (DGMs).

The training programme can be delivered through three modes — online as e-learning modules, online through live webinars/meetings and through in-person mode, a public notice said.The objective is to develop future generation of leaders who are digitally savvy, strategic thinkers with capability to build highly collaborative teams and create customer-centric organisations that thrive in a very dynamic competitive environment, it said.

“The Indian Banks’ Association (IBA) has been requested by the Financial Services Institutions Bureau (FSIB) to appoint an Agency/ Firm/ Institution to design and deliver a leadership development programme for Public Sector Banks in India,” it said.The FSIB is an autonomous body of the Government of India. The mandated objectives of the Bureau include training and development of managerial personnel in nationalised banks and financial institutions in the public sector.The FSIB aims to provide best-in-class training and development opportunities to the senior management
of PSBs.

The programme aims to groom business leaders of the PSBs who shall be ready to assume top management and board-level positions and to drive long-term sustainable business in a competitive market place, it said.The bidder is expected to have proven abilities to design, develop and deliver such a programme, including online e-learning modules on a standard Learning Management Solution (EDX, Coursera etc), it added.

The bidder will be selected under the Quality cum Cost Based System (QCBS) with weightages of 80:20 (80% for technical proposal and 20% for financial bid). The last date for submission of bids is July 30. The pre-bid meeting will be held on July 16.

With inputs from PTI

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/nqhXsWi

Read more »

Dues recovery: Banks invoke Sarfaesi against telecom infrastructure provider GTL

Following delays in transfer of loans of telecom infrastructure provider GTL to the bad bank, lenders have now invoked the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to recover their dues. The recovery action has been initiated by IDBI Bank on behalf of lenders, whose total exposure to GTL stood at Rs 7,250 crore as of December 31, 2021.

Bankers FE spoke to said that it makes more sense to pursue recovery by all means possible rather than to wait for the full operationalisation of the National Asset Reconstruction Company (NARCL).

“It has been a long time since the original list of assets was drawn up. It’s only natural for banks to pursue all means at their disposal to recover what they can,” said a senior banker. Similarly, other accounts that were intended for sale to NARCL in the first tranche have been appearing on the lists of non-performing assets (NPAs) circulated by banks for sale to asset reconstruction companies (ARCs).

Names like VOVL, Jaypee Infratech, Meenakshi Energy, Consolidated Construction Consortium, Sion Panvel Tollways, Supreme Panvel Indapur Tollway, Helios Photo Voltaic, Chhapra-Hajipur Expressways, Mittal Corp, Worlds Window Impex and SSA International feature on the list of 168 accounts State Bank of India (SBI) has drawn up for sale to ARCs during the current year. These 11 accounts owe SBI an aggregate Rs 9,186 crore.

Bankers said that the original list of 15 assets with an exposure of Rs 50,000 crore is bound to undergo revisions. In May, Mint had reported, citing unnamed sources, that 20% of the NPAs identified for transfer to the NARCL, amounting to Rs 40,000 crore, had already been resolved.

Meanwhile, NARCL is counting on its sole bid for the loans of Rainbow Papers to avert a renewal of its ARC licence, which was valid till June 30. It has written to the Reserve Bank of India (RBI) to consider the bid as a mark of operationalisation of the bad bank. It is not yet clear if the central bank has responded to the request.

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/Byc41rR

Read more »

IBA seeks bids from advisory firms for designing leadership development programme for PSBs

Industry body IBA has invited bids from advisory firms and institutes to design and deliver a leadership development programme for public sector banks (PSBs) to prepare a pipeline of leaders in tune with the increasing competitive landscape.

The selected entity will design and deliver the training programme for senior officers of PSBs, including chief general managers (CGMs), general managers (GMs) and deputy general managers (DGMs).

The training programme can be delivered through three modes — online as e-learning modules, online through live webinars/meetings and through in-person mode, a public notice said.

The objective is to develop future generation of leaders who are digitally savvy, strategic thinkers with capability to build highly collaborative teams and create customer-centric organisations that thrive in a very dynamic competitive environment, it said.

“The Indian Banks’ Association (IBA) has been requested by the Financial Services Institutions Bureau (FSIB) to appoint an Agency/ Firm/ Institution to design and deliver a leadership development programme for Public Sector Banks in India,” it said.

The FSIB is an autonomous body of the Government of India. The mandated objectives of the Bureau include training and development of managerial personnel in nationalised banks and financial institutions in the public sector.

The FSIB aims to provide best-in-class training and development opportunities to the senior management of PSBs.

The programme aims to groom business leaders of the PSBs who shall be ready to assume top management and board-level positions and to drive long-term sustainable business in a competitive market place, it said.

The bidder is expected to have proven abilities to design, develop and deliver such a programme, including online e-learning modules on a standard Learning Management Solution (EDX, Coursera etc), it added.

The bidder will be selected under the Quality cum Cost Based System (QCBS) with weightages of 80:20 (80 per cent for technical proposal and 20 per cent for financial bid).

The last date for submission of bids is July 30. The pre-bid meeting will be held on July 16.

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/K8NdFnO

Read more »

Digital banking to get human touch with metaverse

By Shubhangi Shah

Banking is already on our fingertips via mobile phones. The next leap of technology promises to bring a human touch to the digital experience with virtual interactions in the metaverse. Like what Union Bank of India did on Friday by launching its metaverse virtual lounge, through which customers can visit a bank without actually visiting the bank. As the bank’s chief technology officer (CTO) Rajiv Mishra told FE, “You choose a digital avatar for yourself, enter the bank lounge and access the available banking services. Currently, we are giving informative services through which customers can seek details on social security services, loans and other banking products,” adding that the service can be availed on both desktop and through virtual reality headsets.

With this, the bank has joined international and foreign banks such as JP Morgan Chase, HSBC and South Korea’s Kookmin Bank, which have already made strides into the metaverse.

Digital banking is set to become bigger, which will not only allow for remote access to services, but add a personal touch, as Rajesh Mirjankar, CEO of Kiyaverse, India’s first metaverse banking platform, explained. Launched by digital service provider firm Kiya.ai last month, Kiyaverse has witnessed keen interest from private and public sector banks and NBFCs (non-banking financial companies).

Pointing out what sets this new technology apart from the existing one, like mobile banking, Mirjankar said, “While digital banking is functionally interdependent and inclusive, it is all too often seen as being emotionally detached. The metaverse allows banks to use cutting-edge technology with a human touch that will significantly deepen and personalise customer interaction. It is an opportunity to restore the dialogues lost in digital channels.”
Sonali Kulkarni, lead, financial services at Accenture India, feels the same.

“Besides its potential regarding product and service innovation in payments, investment, insurance and loans, the metaverse is an opportunity for banks to foster deeper customer connects,” she said, adding, “It can help restore the in-person dialogues that are currently missing in digital channels and help create memorable experiences for the next generation of banking customers, many of whom may never need to step into a bank branch in their lives.”

Both Kiyaverse and Union Bank’s metaverse work on similar technological lines involving virtual reality and digital avatars. Right now, the Union Bank is “not going into the next phase where transactions and other services can be provided,” said the bank’s CTO, explaining that there are security and regulatory aspects that need to be taken care of.

Mirjankar also admits that the banking industry is still at a ‘nascent’ stage in the metaverse and that banks must consider adopting immersive technologies “for the future of business”.

Similarly, Kulkarni said as the world is moving ahead, “banks in India need to start evaluating their technological readiness for the metaverse, develop prototypes to help their employees understand its potential, and finally get ready to scale these prototypes rapidly.”

Emphasising ‘trust’, she terms it ‘paramount’ to the adoption of new experiences and that the metaverse must be developed with responsibility at the core – concerning ownership of data, security, inclusion and diversity, risk management, and other parameters.

Speaking about the need for a talented and skilled workforce, she said, “Just as banks need to cultivate digital, data, and cloud skills in their workforce to enable digital-native business models, they will need to hire talent or build skills for a future driven by the metaverse.” These include 3D artists, game designers, platform experts, and professionals with expertise in multiple blockchains.

Meanwhile, on being the earlier ones in India to launch into the metaverse, Union Bank’s CTO said other banks will be coming up with the same soon. “It is just a matter of days. Today, it was us who did it, tomorrow you will find others,” 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/xYDieMG

Read more »

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 »

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 »

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 »

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 »