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☕ 07.05.2020: Today's Banking / Financial News at a Glance
🍒 Public Sector Banks: Next round of selection process for MD, CEOs begins : The Finance Ministry has kicked off the process for selection of Managing Director & CEO in certain Public Sector Banks (PSBs). The Department of Financial Services (DFS) has asked all the eleven PSBs to furnish the details of Executive Directors who have completed one year of service and have two years of residual service as on April 1 this year. It is not sure whether candidates currently serving SBI will be considered this time round. Once the details on EDs are available from the PSBs, the DFS is expected to pass the information to Banks Board Bureau (BBB), which will then conduct the process of selection and recommend names to the government. The posts of MD & CEO will fall vacant from July 1 this year for Union Bank and Indian Overseas Bank. Next year (2021), vacancies in MD & CEO posts are expected to arise for six PSBs-- Bank of Maharashtra, Central Bank, Indian Bank, Punjab National Bank, Punjab & Sind Bank and UCO Bank. It maybe recalled that the number of State-owned banks in the country have come down to 12 after the mega bank consolidation that came into effect from April 1. As many as 10 PSBs were amalgamated into four mega banks. General Managers - The DFS has also in a separate communication asked the PSBs to furnish the details of the General Managers who have completed two years of service as GMs and have three years of residual service as on April 1, sources said.The GMs who qualify on this count will be considered by the BBB for appointment as Executive Directors, it is learnt. Banks Board Bureau - It may be recalled that BBB had during the October 2019-March 2020 period recommended candidates for one vacancy of Managing Director of State Bank of India (SBI), after interviewing 17 candidates from PSBs and SBI. It had also completed the process of recommending candidates for the position of MD & CEO in Bank of Baroda, Canara Bank and Bank of India. The Bureau also took cognisance of the announcements on merger of 10 PSBs and changes in the whole time directors (WTD) vacancies in larger PSBs. It accordingly made recommendations to reposition 4 MD & CEO s and 11 WTDs and for extension of term of WTDs. - Business Line
🍒 Government nominates Tarun Bajaj as Director on Board of RBI : The Central Government has nominated Tarun Bajaj, Secretary, Department of Economic Affairs, Ministry of Finance, Government of India, as a Director on the Central Board of Reserve Bank of India (RBI). Bajaj’s nomination follows the retirement of Atanu Chakraborty as Secretary, Department of Economic Affairs, Ministry of Finance.The Reserve Bank’s affairs are governed by a central board of directors. The board is appointed by the Government of India in keeping with the Reserve Bank of India Act. The Board currently has four official directors (full-time comprising the Governor and three deputy governors) and 10 non-official directors. - Business Line
🍒 Bank of Maharashtra introduces new external benchmark based lending rate, cuts MCLR : State-run Bank of Maharashtra on Wednesday said it has introduced a new external benchmark based lending rate linked to six-month treasury bill for better-rated corporate and public sector enterprise customers. For retail and MSME customers, the bank already has repo linked lending rate (RLLR). "We have introduced a new external benchmark rate linked to six month T-bill rate- External Benchmark T-Bill Rate (EBTR) which is 6.50 per cent as on date. The new rates will be applicable to prime corporate and PSU customers," the bank said. From October last year, the Reserve Bank of India (RBI) had mandated banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark . The RBI allowed banks to link their interest rates to repo rate or three-month or six-month treasury bill. The Pune-based bank further announced reduction in its marginal cost of funds based lending rates (MCLR) across all tenors by 10 basis points from Thursday. Its one-year MCLR has been revised to 7.90 per cent from 8 per cent. - Economic Times
🍒 State Bank Of India decides to offer moratorium to NBFC on a case-to-case basis : The executive committee of the State Bank of India (SBI) board has approved extending the Reserve Bank of India granted moratorium to non banking finance companies (NBFCs) which apply for the same. In its weekly meeting on Wednesday the committee decided that NBFCs like other companies will be offered a moratorium on interest payment for three months starting March 1. However, these companies will have to show a cash shortage to prove that they will not use the relief to divert funds for other purposes. "It is not being offered by default. NBFCs will have to apply for it. Our business units will then decide which ones will get the relief. They will have to show their cash inflow and outflow to prove that they need this relief and will not use the money for some other purposes," said a person with direct knowledge of the decision in the SBI meeting. SBI's decision could open the door for other public sector banks to also extend benefits to these lenders. So far SBI has refused to extend it to NBFCs citing misuse by these borrowers. - Economic Times
🍒 Punjab National Bank extends moratorium to NBFC : Punjab National Bank is one of the first lenders to blink in extending moratorium to non-banking finance companies (NBFC) after Reserve Bank of India cleared doubts over the issue on Saturday. The second largest state-owned lender has communicated to its NBFCs clients about the same this week. "We have sent mails to all NBFCs for expressing their desire to avail moratorium. We are taking a call based on that," a senior executive at PNB told ET. Banks were earlier divided over the issue. While some started offering it from early April, State Bank of India and several others were against it. SBI has convened a board meeting today to review it, according to reports. It was earlier against extending moratorium on loan payments to non-bank lenders. ET was first to highlight that banks would review their earlier decision after RBI nudged them to do so.- Economic Times
🍒 Protest against move to dilute audit process of PSU banks : Jaagrata Foundation, the Kochi-based professional forum, has come out against the move of PSU banks to upset the present system of branch audit. The forum, which is constituted by experts in the field of law, finance and auditing, said the present system of selection of branch auditors by bank managements from a panel of auditors recommended by the RBI is an effective system that ensures reliability and credibility to the annual results published by PSU banks. However, there is an organised attempt by bank managements to upset the existing system through imposing unreasonable and impracticable conditions on the auditors. Jaagrata Foundation alleged that such a move is intended towards branding the branch auditors and branch audit system as ineffective and to make way for a centralised audit that may reduce the quality of the audit process and the creditability of the annual results.- Business Line
🍒 RBI clears fog on special provisioning : The Reserve Bank of India (RBI) has cleared the fog on ‘special provisioning’ of loans which are under moratorium — a clarification that has come as a relief to many banks. In a recent conversation with bank CEOs, senior regulatory officials have spelt out that provisioning should be considered only for loans where principal or interest payments are overdue between 61 and 90 days as on March 1, 2020. Such loans are categorised as SMA2 — or, special mention accounts (SMA) -2. “Several banks were under the impression that all SMA accounts as on 1st March would have to be provided for. This would have significantly consumed banks’ capital and lowered their ability to give fresh loans,” a senior banker told ET.- Economic Times
🍒 KVGB launches emergency loan facility for farmers : The Dharwad-headquartered Karnataka Vikas Grameen Bank (KVGB) has launched an emergency loan facility for farmers. Quoting Gopi Krishna, Chairman of KVGB, a press statement by the bank said on Wednesday that the loan facility will be for the existing farmers who have been regular as on February 29. A maximum loan of up to ₹50,000 will be provided to meet unforeseen expenses. It is repayable within a period of three years. He said that Covid-19 has affected farmers and workforce in the informal sector as well. As a result, farmers with small and marginal holdings are facing financial crisis. To meet the emergency requirements for agriculture and domestic purposes, the bank has come forward with this loan facility. He appealed to the farming community to approach their nearby KVGB branches for this loan facility. - Business Line
🍒 RBI may cut reverse repo rate again : The Reserve Bank of India (RBI) may cut the reverse repo rate further as banks continue to increasingly deploy surplus funds with it despite the same being cut twice since March 27 to nudge them to lend. This deployment of funds with RBI is an indication of risk aversion and lack of credit appetite amid the COVID-19 pandemic. Reverse repo rate, which is the interest rate that the central bank pays banks for parking surplus funds with it, has been cut twice -- from 4.90 per cent to 4 per cent on March 27 and from 4 per cent to 3.75 per cent on April 17 -- to encourage banks to deploy these surplus funds in investments and loans in productive sectors of the economy. .- Business Line
🍒 SC ruling on SARFAESI Act will help co-op banks reduce NPAs: NAFCUB : With the Supreme Court (SC) ruling that the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act is applicable to co-operative banks, these banks will be encouraged to pursue recoveries of long pending dues with renewed enthusiasm and reduce their non-performing assets (NPAs). According to Jyotindra Mehta, President, National Federation of Urban Co-operative Banks and Credit Societies (NAFCUB), SARFAESI Act is a particularly valuable tool for cooperative banks, as their loan ticket size is smaller than that of commercial banks and the cost of protracted litigation many a time becomes disproportionately high. “The judgment has come as a great relief for the 1,540 urban cooperative banks, as a very large number of borrowers, who were wilful defaulters, were taking advantage of the ambiguity in interpretation of the SARFAESI Act by various courts and were not returning the loan amounts for years,” Mehta said. - Business Line
🍒 ED files charge sheet against Rana Kapoor in Yes Bank case : The Enforcement Directorate (ED) on Wednesday filed a charge sheet against Yes Bank co-founder Rana Kapoor, arrested on money laundering charges, in a special court here. Kapoor, former MD and CEO of Yes Bank, was arrested by the ED on March 8 under the Prevention of Money Laundering Act (PMLA). He is accused of sanctioning loans to certain firms against kickbacks.Among other things, the central probe agency is investigating Rs 600 crore received by a company allegedly controlled by Kapoor, his wife and three daughters from an entity linked to the scam-hit Dewan Housing Finance Limited (DHFL). Kapoor and his family members allegedly got benefits worth Rs 4,300 crore through the companies controlled by them as kickbacks for sanctioning huge loans, the ED has alleged. He is also accused of receiving bribes for going easy on recovery of loans given to some big corporate groups which had turned into non-performing assets (NPAs). .- Economic Times
🍒 SBI scouts for PR agency to devise brand building strategies : As part of the brand building exercise, the State Bank of India (SBI) is looking for a public relations agency to help it become the preferred choice of customers for their banking needs. The country's largest lender, SBI has a network of more than 22,000 branches spread across India. It is also present in over 30 countries. "SBI is looking to engage with a public relations agency for providing public relation services (conceptualisation and implementation/execution of public relations campaigns)," it said in a request for proposal (RFP). In its RFP document for selection of a PR agency, the bank said it aspires to give an impetus to its marketing efforts to develop a highly favourable brand perception from what it is today, and at the same time, the lender endeavours to become the preferred choice of customers. The selected agency will be responsible for developing and implementing public relation activities to be organised by the bank. The agency may also be required to engage with any specialist service providers such as film production house, event venues, travel agents, or other relevant service providers to deliver holistic solutions, the document said. - Business Line
🍒 Banks denying loans to MFIs, even for amounts sanctioned : Several banks are declining loan demands by microfinance institutions (MFIs), even for those within the sanctioned limits, which may choke the credit flow in the micro and self-employed segments. While the denial of liquidity support from banks has already made life difficult for the MFIs, the refusal of even sanctioned loans is further crippling them. This could result in lower on-lending to end-borrowers leading to a surge in defaults by them, even after the moratorium is lifted. Many of the businesses dependent on MFIs can’t survive without the money flow. The situation is more stifling for smaller and medium-sized entities. Even the bigger firms in top-10 list are not comfortable either, said people familiar with the matter. At least three chief executives ET spoke to said that either they have not received communication from their lenders or it’s being moved slowly. “Everything is at standstill now,” said one of them. - Economic Times
🍒 Bajaj Allianz Life Insurance retains all 10,000 plus employees in time of crisis : Private life insurer Bajaj Allianz Life is focusing on a slew of steps to align its sales and business processes to ‘the new normal’. The company has been focusing on adopting and leveraging virtual platforms within its sales, servicing and business functions to ensure its commitment towards customers’ life goals remain on track. The organisation is looking to retain all its 10,000 plus employees, making sure that they have the protection and support they need in the current environment.The firm is also investing towards retraining them to be prepared for the new way of business, post the crisis. Training modules are designed to enable employees to also manage their work and home life, while the lockdown continues. “These are unusual times, and it is our primary goal to ensure our employees, as well as all our stakeholders, have our support. We are confident that with the focused training modules, our employees will be better aligned to the new ways of work. Furthermore, with the digital access points provided to our customers, we are seeing that they continue to be invested in their life goals journey with us,” said Tarun Chugh, MD and CEO, Bajaj Allianz Life.- Economic Times
🍒 Short-term life policies soon to support Covid-19 warriors : Short-term life-cover policies will be available soon to instil confidence among front line staff fighting Covid-19 as well as individuals. “We have asked insurers to come up with short-term life insurance products. A few insurance companies have responded and actuarials are being worked for the products,’’ Subhash C Khuntia, Chairman, Insurance Regulatory and Development Authority of India (Irdai), told BusinessLine on Tuesday. The term of the policies could be minimum three months to about six months. Such policies, according to Khuntia, will provide moral support and protection to the corona warriors. - Business Line
🍒 Delinquencies in the credit card industry improved by 5 bps in 2019 : The overall volume delinquency (90-day) in the credit card industry improved by 5 basis points (bps) in 2019 and stood at 0.8 per cent, with private banks improving their performance compared to other card financiers. According to a report by credit bureau CRIF High Mark, “Volume delinquency 30+ (30-day) or private banks improved by two basis points over the previous year while volume delinquency 90+ improved by seven basis points as of Dec 2019. Volume delinquency 30+ for other card financiers remained high, increasing by 14 bps Y-o-Y in Dec 2019, while volume delinquency 90+ remained stable but above 1 per cent in Dec 2019”. As of December 2019, there were more than 50 million credit cards in circulation, clocking a 25 per cent growth over the preceding year, with 69 per cent of them issued by private banks and the rest 31 per cent by public sector banks and foreign banks. The outstanding portfolio of private banks in the credit card space has increased by 59 per cent year-on-year while other issuers saw a 20 per cent growth in 2019 over 2018. - Business Standard.
🍒 Axis Bank's Q4 loss reflects rise in systemic risks in banking sector: S&P : Rating agency Standard and Poor’s (S&P) said today that private sector lender Axis Bank Ltd's results for the year ended March 31, 2020, underscore high levels of stress and uncertainty across the Indian banking system. Lender reported loss of Rs 1,400 crore in the fourth quarter as bank made a higher provision for bad loans including those relating to Covid-19 pandemic. Axis' credit costs for the quarter ended March 31, 2020 are higher than anticipated, but some of it is precautionary. Prudent provisioning will certainly help the bank take care of future credit costs, S&P said.Axis identified that more than 10% of its customers (25% of its loan book by value) as at April 25, 2020, availed a payment moratorium. The significant number of the bank's borrowers opting for moratorium could be partly due to some of the stronger borrowers also opting to conserve liquidity in these tough times. “We will compare the proportion of customers availing the moratorium to see if Axis is an outlier to peers”, it added. - Business Standard
🍒 No takers for Covid-special credit lines, banks park record Rs 8.4 lakh crore with RBI : Having come up with emergency credit lines to help businesses weather the Covid storm, banks are seeing little demand for fresh credit at this stage. With large parts of the country still under lockdown and sales of non-essential goods non-existent, companies have no appetite for fresh loans. To push credit growth under pressure from the government, banks are now unilaterally sanctioning enhancements to borrowers’ credit limits, even as they lie unused. The lack of demand for credit has been leading banks to park huge amounts under the Reserve Bank of India’s (RBI) reverse repo window, going up to as much as Rs 8.42 lakh crore on Monday, the largest single-day amount ever. Public-sector banks (PSBs) such as State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), Canara Bank, Union Bank of India and Bank of India (BoI) launched these special credit facilities in late March soon after the nationwide lockdown began. - Financial Express
🍒 Yes Bank expected to report loss of ₹4,219 crore for Q4 : Private lender Yes Bank Ltd is likely to post a net loss of ₹4,218.9 crore for the three months to March 2020, as against a loss of ₹1,507 crore in the same period last year, according to average estimates of four analysts polled by Bloomberg. The bank will declare its Q4 FY20 results on Wednesday. Analysts at Emkay Research expect Yes Bank may report a heavy loss due to business de-growth and higher provisions for non-performing assets (NPAs). Slippages could remain elevated as the bank may continue to recognise stress in its pool, Emkay said. The brokerage believes that private banks will report a 7% decline in earnings in Q4, mainly dragged by Yes Bank, due to moderate net interest margins (NIMs) and higher bad loan provisions. - Live Mint
🍒 Sensex ends 232 points higher; Telecom, banking up 2% : Equity benchmark indices Sensex and Nifty ended higher today on a day marked with sharp volatility. After moving lower earlier in the day, the market steadily recouped losses due to some smart buying amid short covering in banks, realty and auto stocks. While Sectors such as Banking, Auto, Realty and Healthcare posted gains, other sectors such as IT, FMCG, Oil & Gas and Capital Goods met with losses due to selling pressure. The 30-share index ended higher by 232.24 points or 0.74 per cent, at 31,685.75, and the NSE Nifty too ended higher by 65.30 points, or 0.71 per cent, to 9,270.90. After opening at 9,226.08, it touched an early low of 9,116.50, before recouping losses. M&M was the top gainer in the Sensex pack, rallying nearly 6 per cent, followed by Bajaj Finance, HDFC Bank, Bharti Airtel, ICICI Bank and Hero MotoCorp On the other hand, ITC, Hind UniLever, TCS, Infosys, Titan, Nestle and Asian Paint were the losers. - Business Line
🍒 Rupee slips 16 paise to 75.79 against US dollar in early trade : The rupee depreciated 18 paise to 75.81 against the US dollar in opening trade on Wednesday amid strengthening American currency overseas and sustained foreign fund outflows. Forex traders said the weakness in the rupee was largely due to the strengthening US dollar. Moreover, rising coronavirus cases in the country also weighed on the local unit. The local unit opened weak at 75.77 at the interbank forex market and then fell further to 75.81.
🍒 Gold rises by Rs 307 to Rs 45,864, silver up Rs 1,150 : Gold prices rose Rs 307 to Rs 45,864 per 10 gram in the Mumbai bullion market on May 6 on a weak rupee. The rate of 10 gram 22-carat gold in Mumbai was Rs 42,011 plus 3 percent GST, while 24-carat 10 gram was Rs 45,864 plus GST. The 18-carat gold quoted at Rs 34,398 plus GST in the retail market. Silver prices jumped Rs 1,150 to Rs 41,750 per kg from its closing on May 5.
🍒 Share of Central Bank of India in Stock Market : 100% of moneycontrol users recommend *selling* Central Bank of India Shares. In BSE, shares closed at Rs.14.450 against Prev Close Rs.14.70. In NSE, shares closed at Rs.14.50 against Prev Close Rs.14.70.
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