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Saturday, May 9, 2020

Today's Banking / Financial News 09.05.2020

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☕ 09.05.2020: Today's Banking / Financial News at a Glance

🍒 Covid-19 crisis: It's time for concrete revival plan, says SBI chairman : With the Covid-induced nationwide lockdown likely in its last leg, the time is ripe to come up with a concrete plan for economic revival and support, State Bank of India Chairman Rajnish Kumar has said.Banks are working on measures to provide assistance to customers impacted by the economic disruption. “A comprehensive and concrete plan should come now,” Kumar told Business Standard. “A certainty on regulatory stance, and support that may be coming from the government, is required as we are now in the exit phase of the lockdown.”Asked about the nature of plan, he said it would depend on what would be the exit plan for the lockdown, and how activities would resume. “There has been a lot of learning. Now all are aware Covid is not going away so soon. In my view, time for coordinated action is now,” he added. - Business Standard

🍒 Union Bank of India cuts MCLR by up to 15 bps across all tenors : State-owned Union Bank of India on Friday announced reduction in its marginal cost of funds-based lending rate (MCLR) by up to 15 basis points across all tenors, effective May 11. This is the eleventh consecutive rate cut announced by the bank since July 2019, a release said. The one-year MCLR has been revised downwards by 5 basis points (bps) to 7.70 per cent from 7.75 per cent. Overnight MCLR has been reduced by 15 bps to 7.15 per cent from 7.30 per cent and one-month MCLR by 10 bps to 7.25 per cent. The lender has reduced three-month and six-month MCLR by 5 bps to 7.40 per cent and 7.55 per cent, respectively. The revision in MCLR by the bank comes a day after the country's largest lender State Bank of India (SBI) announced reduction in MCLR by 15 bps across all tenors, effective May 10. SBI's one-year MCLR will stand at 7.25 per cent from 7.40 per cent earlier. - Economic Times

🍒 Indian banks' loans rose 6.7% in two weeks to April 24: RBI : Indian banks' loans rose 6.7 percent in the two weeks to April 24 from a year earlier, while deposits rose 9.8 percent, the Reserve Bank of India's weekly statistical supplement showed on Friday. Outstanding loans fell 693.40 billion rupees ($9.17 billion) to 102.69 trillion rupees in the two weeks to April 24. Non-food credit fell 679.10 billion rupees to 102.17 trillion rupees, while food credit fell 14.30 billion rupees to 526.43 billion rupees. Bank deposits fell 39.32 billion rupees to 137.11 trillion rupees in the two weeks to April 24. - Moneycontrol.com

🍒 SBI shuts Kolkata LHO wing after employee tests positive for COVID-19 : : State Bank of India has closed down a section of the Local Head Office (LHO) here after an employee tested positive for COVID-19, a senior official said on Friday. The employee is associated with the Liability Centralised Processing Centre located at the 'E' wing of the LHO. The SBI official said the employee was not attending office for the last 8-10 days and was later found to have contracted the deadly virus. "Since then, we have sanitised the entire building and the section has been closed till May 11," he said, adding, other departments are functional. The employee is being treated at a private hospital. "As a responsible organisation, we will have to look into the welfare of all employees and follow the protocol in such challenging circumstances," the official said. He said another SBI staff, who had travelled to a foreign country, also tested positive, but has recovered now following treatment at a government hospital. - economic times

🍒 Covid alters India's borrowing plan, target now raised to Rs 12L cr : The government, today, raised the estimated gross market borrowing for FY 2020-21 to Rs 12 lakh crore from the budgeted Rs 7.8 lakh crore, to cushion the blow from the new coronavirus pandemic. The "revision in borrowings has been necessitated on account of the COVID-19 pandemic", the government and the Reserve Bank of India said in two separate releases. Together with the indicated increase in total borrowings for the year, a borrowing calendar for the remainder of the first half of the fiscal year has also been released. As per the revised calendar, the government will borrow Rs 6 lakh crore from the market via gilts through the remaining part of the first half of the year. The auction size for each weekly auction will go up to Rs 30,000 crore from the week of May 11. India has been in a lockdown for eight weeks, causing massive economic losses and prompting Moody's to forecast a 0% growth for the country this year. In March, Economic Affairs Secretary Atanu Chakraborty had said that the government was planning to borrow more aggressively than anticipated in the April-September period to mitigate the coronavirus outbreak. - economic times

🍒 ICICI Bank Q4 results preview: Profit to soar four-fold on low base, all eyes on Covid-19 provisioning : ICICI Bank is all set to report a four-fold jump in net profit for the March quarter, thanks to a low base. Net interest income (NII) could rise 15 per cent while loan growth is seen at 12-15 per cent. Net interest margin (NIM) is likely to stay stable. All eyes will be on lockdown-related provisioning. The management commentary on below-investment-grade portfolio and loan book growth will also be keenly followed. The fourth quarter profit would be high as the March quarter of 2019 witnessed higher than normal credit cost and due to the private lender's move to shift to new corporate tax regime, said Edelweiss Securities. This brokerage expects net profit for the lender to rise 278 per cent YoY to Rs 3,664 compared with Rs 969 crore in the year-ago quarter. Net interest income (NII), - economic times

🍒 Need for non-collateralized reverse repo operations: SBI Report : With government borrowings likely to increase in the current fiscal, there is a need to increase the demand for bonds and conduct reverse repo as well as term reverse repo operations without placing any collateral with the Reserve Bank of India, says a report. For conducting such reverse repo operations, the Reserve Bank of India Act needs to be amended, the research report by State Bank of India (SBI) - Ecowrap noted. "Given that 2020 is going to be an exceptional year with government borrowings set to jump, we believe the time has now come for increasing the demand for bonds by having the necessary amendment in the RBI Act used effectively so that conduct of reverse repo and term reverse repo operations are completely non-collateralized," it said. Reverse repo is lending of funds against buying of securities with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent. Under reverse repo operations, banks deposit excess funds with the Reserve Bank of India (RBI) and earn interest on it. - economic times

🍒 Loan moratorium should be in place till December 31: Yes Bank MD & CEO Prashant Kumar : Businesses will not be in a position to resume normal activity for a long time after the lockdown is lifted and the loan moratorium should be extended to December 31, 2020, Yes Bank MD & CEO Prashant Kumar told Shritama Bose. The bank is working to take its current account savings account (CASA) ratio to above 40% over the next one to three years, he added. - Financial Express

🍒 Over 90% gold loan customers have not opted for moratorium: VP Nandakumar, MD and CEO, Manappuram Finance : In the gold loan category, which accounts for 87% of the standalone portfolio at Manappuram Finance, over 90% customers are servicing their dues without opting for the moratorium, said MD & CEO VP Nandakumar in an interview with Hariprasad Radhakrishnan. He further said physical distancing is here to stay, which would lead to increased adoption of digital and phygital modes of business, adding that the company disbursed loans worth Rs 200 crore online during the lockdown to existing customers whose gold is already pledged with the company.  - Financial Express

🍒 DHFL creditors to meet via videoconference on 12 May : Lenders to Dewan Housing Finance Corp Ltd (DHFL) have decided to hold a videoconference on 12 May to discuss, among other issues, the impact of covid-19 induced disruptions on the resolution process and the company's operations, said a person aware of the development. The lenders will also discuss updates on the resolution process and the transaction audit by Grant Thornton. This is the fifth meeting of the committee of creditors (CoC). The person quoted above also said administrator, R. Subramaniakumar, will present an updated status of claims made by DHFL’s creditors. A transaction audit of DHFL by Grant Thornton had indicated instances of “avoidance transactions" by the housing finance company and had informed creditors on 20 February. The report was presented to the administrator on 12 February and he believes certain transactions by the company are related to Sections 43, 45, 50 and 66 of the Insolvency and Bankruptcy Code (IBC). These sections deal with preferential transactions, undervalued transactions, extortionate (on unfair terms) transactions and fraudulent trading, respectively and are collectively termed avoidance transactions. - Live Mint

🍒 With large loan books under moratorium, asset quality concerns could resurface : Banks may see a spike in bad assets after providing the three-month moratorium which is due to end on 31 May, as the covid induced lockdown continues to exacerbate the repayment capabilities of borrowers. Banks like RBL Bank and Yes Bank have recently disclosed that at least 33% of their loan books are under moratorium at the moment. The deferment on repayments was permitted by RBI on 27 March. While RBL Bank said that one-third of its total loan book is under moratorium, another private sector lender, Yes Bank said between 35-45% of its loan book by value is under moratorium. Experts pointed out that this could become a problem going ahead as borrowers who have availed of the deferment will find it difficult to repay all the accrued interest as soon as the relaxations are lifted. Bad loans in the banking sector are expected to rise to 11-11.5% of the total advances by March 2021 from 9.6% estimated in March this year and will be a result of sharply lower recoveries and rising slippages, according to rating agency Crisil. - Live Mint

🍒 PNB Housing Finance cuts lending rates by 15 bps for existing customers : Mortgage financier PNB Housing Finance on Friday announced reduction in retail lending rates, including individual home loans and loans against property, by 15 basis points for its existing customers, effective from May 9, 2020. This reduction is for all existing retail customers who have availed the loan before February 2020 on floating rates, a release said. "We have decided to take this initiative to help our customers to overcome this pandemic and drive growth in the housing sector. With this, over 235,000 of our customers will be positively impacted irrespective of their base loan amount," PNB Housing Finance Managing Director and CEO Neeraj Vyas said. The company offers its retail customers housing and non-housing loans. It also gives construction finance loans to real estate developers for residential housing. - Business Standard

🍒 SBI Card net up 44% in FY19-20 : SBI Cards and Payment Services Ltd (SBI Card) on Friday reported a 44 per cent increase in net profit for the financial year ended March 31, 2020 at ₹1,245 crore (₹865 crore in FY18-19). For the fourth quarter ended March 31, the company reported a net profit of ₹84 crore (₹249 crore). Excluding the Covid-19 impact, the profit after tax for fiscal 2019-20 would have been ₹1,662 crore, up 92 per cent over net profit of ₹865 crore in the previous fiscal, SBI Card said in a statement. Considering the possible effects from the pandemic relating to Covid-19, the company has performed sensitivity analysis and based on current estimates created specific Covid-19 related provision of ₹489 crore for FY19-20. The Board of Directors have recommended an interim dividend of ₹1 (10 per cent) for 2020-21. - Business Line

🍒 Paytm Payment Bank sees sharp rise in fixed deposits : Paytm Payment Bank on Friday said it has crossed Rs 600 crore in fixed deposit accounts, held with its partner IndusInd Bank. “During this period of volatility in other asset classes, a large number of PPB bank account holders are moving their savings into fixed deposits during the ongoing lockdown,” it said in a statement.The bank had earlier crossed Rs 1,000 crore in savings account and has issued over 5.7 crore digital debit cards. The bank offers its customers to opt for a fixed deposit account with its partner bank, allowing them to earn up to seven per cent interest annually. The customers can instantly redeem the partial or complete amount from their fixed deposit at any time free of charge. - Business Line

🍒 Govt borrowing in FY21 to jump to Rs 12 lakh crore from Rs 7.80 lakh crore projected earlier : The Government’s estimated gross market borrowing in the financial year 2020-21 will jump to ₹12 lakh crore against ₹7.80 lakh crore estimated in the budget on account of the COVID-19 pandemic, the Reserve Bank of India (RBI) said in a statement. As per the revised calendar, the government will borrow Rs 6 lakh crore from May 11, 2020 to September 30, 2020 through issuance of Government Securities (GSecs). Since the beginning of this fiscal, the government has borrowed Rs 98,000 crore via GSecs so far. So, in the first half of FY2021, the government’s borrowing programme has increased to Rs 6.98 lakh crore against the original Rs 4.88 lakh crore. Experts say with the health and social sector spending to tackle the COVID-19 pandemic expected to increase significantly, the government has no choice but to borrow more. - Business Line

🍒 Covid-19 impact : Banks see spike in digital adoption by corporates : It takes less than five minutes to transfer funds, make bill payments or even open a new bank account through mobile phones or net banking. But the corporate world operates in a different realm, where physical (paper-based) transactions still rule the roost. For instance, a simple fund transfer or a fixed deposit placement requires manual letter instructions signed by two or more authorised persons of the company. The instruction is then faxed, mailed or couriered to the banks for processing. The more advanced a transaction, more are the paperwork and procedures. It is not that digital transactions were unavailable to the corporates. While banks have the ability and infrastructure to process almost all kinds of transactions digitally, adoption from the corporate side remains abysmally low. But it has been accelerating in the last few weeks due to the Covid-19 pandemic.  - Business Line

🍒 Samsung Pay debit card with cash management account to be launched soon : Samsung will soon be launching a Samsung Pay debit card, the company announced on Thursday. The South Korean tech giant has partnered up with personal finances company SoFi t develop a smart debit card.“This summer Samsung in partnership with SoFi will introduce a new Samsung Pay experience with an innovative debit card backed by a cash management account,” Sang Ahn, vice president and general manager of Samsung Pay in North America said in a blog post.The card will be linked to a checking account. The company plans to expand its custom payment service Samsung Pay, expanding it to help users “manage money” as well. So far, no details regarding the card or how will it work have been shared yet. The company will be sharing more information about the card in the coming weeks, Sang Ahn said. - Business Line

🍒 FY21 will test RBL Bank on many fronts, investors advised caution : Even as RBL Bank posted an in-line performance for the March quarter (Q4FY20), with net interest income growth of 38 per cent and net interest margin (NIM) of 4.9 per cent, its stock fell by 7.4 per cent to Rs 119.35 on Friday. The reason for such a reaction is that the Street is worried about the sustainability of this performance, and more importantly, the likely pressure on asset quality. While high NIMs put the bank’s pricing power in good light, some reversal is expected in FY21 due to surplus liquidity, change in mix and a likely rise in bad loans. The fourth quarter's (Q4FY20) loan growth at 7 per cent is also the weakest ever. While the pullback may be attributed to a shrinking of its corporate book (down 16 per cent year-on-year), what may not comfort investors is RBL’s dependence on its credit card portfolio, which almost doubled year-on-year even in Q4. - Business Line

🍒 Lockdown 3.0: Banks may need more regulatory support amid Covid-19 crisis : With the nationwide lockdown extended to May 17, banks are once again seeking some regulatory dispensation and relaxation in asset recognition norms. The most popular of all demands is an extension of the three-month moratorium, which is set to end on May 31. “When the moratorium was announced on March 27, the anticipation was that the lockdown will end by April 15 and businesses will resume to near-normal operations. All that has been pushed back,” said a senior executive of a private bank, who feels it’s logical for the Reserve Bank of India (RBI) to extend the period of moratorium given the current situation. News reports also suggest that a move of this sort is quite likely, especially after a meeting between the RBI governor and banks executives last Saturday. - Business Standard

🍒 YES Bank auditor red-flags multiple breaches of RBI's norms in FY20 : The auditor of YES Bank has pointed out multiple breaches of the Reserve Bank of India’s (RBI’s) norms and loan covenants by the private bank in the financial year ended March 2020, warning that these may impact the bank’s ability to continue as a going concern. The auditor, BSR & Co, also said that as the fate of the bank’s additional tier-1 (AT-1) bonds remained uncertain — as the matter is pending in court — any adverse judgment would affect it adversely. The bank has breached the regulatory requirements of the RBI regarding maintaining the minimum common equity tier-1 (CET-1) and tier-1 capital ratios, which indicates the position of capital adequacy of a bank. “The breach is primarily on account of the increase in the provision for advances during the year ended March 31, 2020, as the bank has decided, on a prudent basis, to enhance its provision coverage ratio on its non-performing asset (NPA) loans over and above minimum RBI loan level provisioning,” the auditor’s report said. - Business Standard

🍒 RBI gets robust bidding for 10-year GSec at auction : The Reserve Bank of India (RBI), on Friday, received robust bidding amounting to 4.8 times the notified amount of ₹10,000 crore at the auction of the new 10-year benchmark Government Security (GS). This GS, which is maturing in 2030 and carries 5.79 per cent coupon, got 466 bids aggregating ₹48,040 crore. Given the robust robust bidding, the RBI exercised the green shoe option of ₹2000 crore for this security. What this means is that it allocated GS worth ₹12,000 crore against the notified amount of ₹10,000 crore. RK Gurumurthy, Head-Treasury, Lakshmi Vilas Bank, said excess liquidity is driving down yields in the government security market, with the yield on the existing 10-year benchmark going down below 6 per cent. - Business Line

🍒 Caspian Debt gets $20 million funding from US International Development Finance Corporation : Digital corporate lending financial services company, Caspian Debt, announced an investment of $20 million by US International Development Finance Corporation (DFC) as long-term debt. The new investment will support Caspian Debt in providing customised, collateral-free loans digitally to professionally-managed enterprises operating in high impact sectors in India, including micro-finance, SME finance, affordable housing, affordable healthcare, sustainable agri-business and education. - Business Line

🍒 Amend RBI Act for non-collateralised reverse repo operations: SBI report : The time has come to make amendments to the RBI Act so that the conduct of reverse repo and term reverse repo operations are completely non-collateralised, according to State Bank of India’s economic research report, ‘Ecowrap’. As lending to the central bank has no credit risk, there is no need to provide government securities as collateral when a market participant places its funds with the RBI, the report said. Further, the report underscored, as the RBI inventory of government papers is getting depleted and it is unable to increase the stock due to fiscal ramifications, a low remunerated standing deposit facility needs to be introduced. This will require amendment to the RBI Act and may replace reverse repo in the long run. Also, as in other countries, it is perfectly justified to empower the Indian central bank to float its own securities, said Ecowrap.  - Business Line

🍒 Covid-19: Asian Infrastructure Investment Bank to offer loan of $500 million to aid efforts : Beijing-backed Asian Infrastructure Investment Bank will offer a $500 million loan to aid India’s Covid-19 efforts. The financing will enable the Government of India to scale up efforts to limit the transmission of cases, strengthen the health system to expand its response capacity and enhance preparedness to manage future outbreaks, AIIB said in a statement. The project is funded by AIIB’s Covid-19 Crisis Recovery Facility created to adapt to urgent financing needs of the Bank’s members impacted by the pandemic. It was created as part  of the coordinated international response to counter the Covid-19 crisis, has an initial size of $5-10 billion to support AIIB members’ urgent economic, financial and public health pressures and quick recovery from the crisis, the company said. - Business Line

🍒 Raghuram Rajan says monetisation neither a game changer nor catastrophe : Raghuram Rajan, former Reserve Bank of India governor, waded into the debate over monetisation of government's debt, given the covid-19 pandemic and the resultant lockdown has ravaged the economy which would require massive stimulus to get back on track. Monetisation is neither a game changer nor a catastrophe in abnormal times, Rajan, now professor at the University of Chicago Booth School of Finance, said in a post on his LinkedIn account. "It helps a little at the margin, but does not solve the government’s fiscal problems nor does it lead to runaway inflation." But Rajan was clear that the government should be concerned about protecting the health of the economy and should spend what is needed. "...It should also worry about getting the fiscal deficit and its debt back in shape over the medium term...However, its inability to finance itself or fears of monetization should not be a constraint." - Live Mint

🍒 Yes Bank plans second funding round, to raise Rs 5,000 crore : Yes Bank has kick-started the process for the second tranche of capital raising and is looking to raise Rs 5,000 crore, sources told CNBC-TV18. The bank may look at various options including QIP, rights issue, and preference issue.According to sources, the private lender has appointed six merchant bankers for its proposed capital raising. These are Axis Capital, Kotak Investment Banking, SBI CAPS, Bank of America, Citi and HSBC Capital Market. The bank has approvals in place to raise up to Rs 15,000 crore, which will take care of the bank's capital requirement for three years. - Moneycontrol.com

🍒 Gold price up Rs 428 to Rs 46,292, silver rises Rs 850 : A weak US dollar pushed by gold prices by Rs 428 to Rs 46,292 per 10 gram in the Mumbai bullion market on May 8. The metal gained Rs 559, or 1.22 percent, for the week. The US dollar index, measured against a basket of six currencies, declined 0.16 percent to 99.74. The rate of 10 gram 22-carat gold in Mumbai was Rs 42,403 plus 3 percent goods and services tax (GST), while 24-carat 10 gram was Rs 46,292 plus GST. The 18-carat gold quoted at Rs 34,719 plus GST in the retail market. Silver prices rose Rs 850 to Rs 42,600 per kg from its closing on May 6.

🍒 India's forex reserves up $1.62 million at $481.08 billion : India's foreign exchange reserves increased by $1.622 million to $481.078 billion in the week to May 1, due to rise in the foreign currency assets, according to RBI data. In the previous week, the reserves had declined by $113 million to $479.455 billion. The forex reserves had touched a life-time high of $487.23 billion in the week to March 6, after it rose by $5.69 billion. During FY20, the country's foreign exchange reserves had risen by almost $62 billion.

🍒 Rupee settles 18 paise higher at 75.54 against US dollar : The rupee appreciated 18 paise to provisionally settle at 75.54 against the US dollar on Friday, tracking higher domestic equities and weakness in the American currency. Forex traders said positive cues from domestic equities and significant foreign fund inflows supported the local unit. At the interbank foreign exchange, the rupee opened at 75.36, then pared some initial gains to finally close at 75.54 against the US dollar, registering a rise of 18 paise over its previous close.During the day, the domestic unit hit an intra-day high of 75.27 and a low of 75.59 against the US dollar. On Wednesday, the rupee had settled at 75.72 against the US dollar.

🍒 Share of Central Bank of India in Stock Market : 71% of moneycontrol users recommend *selling* Central Bank of India Shares.  In BSE, shares closed at Rs.14.85 against Prev Close Rs.14.60. In NSE, shares closed at Rs.14.80 against Prev Close Rs.14.60..

… Have a Good day..

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