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Tuesday, May 12, 2020

Today's Banking / Financial News at a Glance 13.05.2020

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☕ 13.05.2020: Today's Banking / Financial News at a Glance

🍒 PM Modi announces Rs 20 lakh crore special economic package : In an effort to revive the economy, Prime Minister Narendra Modi announced a Rs 20 lakh crore package, which combined the government's recent announcements on supporting key sectors as also measures rolled out by the Reserve Bank of India. PM Modi also said that centre will enforce a fourth lockdown- with a lot of modifications. The details of the fourth lockdown will be communicated by May 18, said Modi. He termed it as the 'Atma Nirbhar Abhiyan’ Package. He also hinted at big-ticket economic reforms in coming days, adding details of the economic package will be given by Finance Minister Nirmala Sitharaman starting tomorrow. The package will spur business, attract investment and strengthen our Make in India Mission, reiterated Modi. The package is equivalent to 10 per cent of India's GDP, stated Modi. The Special economic package will have emphasis on land, labour, liquidity and laws. - economic times

🍒 Public sector banks sanction loans worth Rs 6 lakh cr in two months :  Public sector banks (PSBs) have sanctioned loans worth Rs 5.95 lakh crore in the last two months to various sectors, including MSME, agriculture and corporate, hit hard by COVID-19-induced nationwide lockdown. Non-bank finance companies (NBFCs) have received Rs 1.18 lakh crore from these banks during the period between March 1 and May 8."PSBs sanctioned loans worth Rs 5.95 lakh crore for more than 46.74 lakh accounts from the MSME, Retail, Agriculture & Corporate sectors between March 1 and May 8, 2020. Total financing worth Rs 1.18 lakh crore was provided to NBFCs," Finance Minister Nirmala Sitharaman said in a tweet on Tuesday.With the lockdown coming into effect from March 25, state-owned banks opened an additional line of credit of 10 per cent of the existing fund based on working capital limits, subject to a maximum of Rs 200 crore."Between March 20 - May 8, Public Sector Banks contacted 97 per cent of borrowers eligible for emergency credit lines & working capital enhancements and sanctioned loans worth Rs 65,879 crore, up from the Rs 26,500 crore sanctioned as of May 4," Sitharaman said in another tweet. The central government had imposed a 21-day lockdown from March 25 to check the spread of coronavirus. The lockdown has been extended till May 17 with some relaxations. - Economic Times

🍒 About 90% of Bank of Baroda borrowers opt for moratorium on term loan repayment  : State-run Bank of Baroda (BOB) on Monday said nearly 90 per cent of its eligible borrowers have applied for the moratorium offered on repayment of term loans. The Reserve Bank of India (RBI), in March, had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.The RBI allowed to grant the moratorium to all the accounts that are standard as on February 29, 2020. "Close to 90 per cent of our (eligible) clients have elected to use the moratorium," the bank's Managing Director and CEO Sanjiv Chadha said while speaking at a webinar organised by Care Ratings.He said the bank had adopted an opt-out mechanism for the moratorium, which means all eligible borrowers get a moratorium unless someone specifically opts out of it.When asked for his views on extension of loan moratorium beyond May 31, 2020, Chadha said a workable proposition would be to link such an offering to repayment capabilities of the borrowers. "When it comes to extending the moratorium and when we do our working capital assessment, what we try to sort is to make sure that whatever the repayment for term loan is, it is tied to the cash flow of the company," he said. - economic times

🍒 MSMEs need separate rating system to boost credit flow, says CEO of Union Bank of India : There needs to be an “alternative rating mechanism” for the cash-starved MSME sector to help boost credit flow to the sector. Rating agencies currently follow the rules devised for corporates for rating MSMEs as well. According to Rajkiran Rai, MD & CEO, Union Bank of India, while there have been some initial discussions with CIBIL on developing a separate framework for rating MSMEs, nothing much has progressed so far.“An alternative rating mechanism can be developed for the MSMEs….we all have to work together to have a separate benchmark for the sector. There have been some discussions with CIBIL but they have not yet been taken forward. This could be a solution (to enhancing credit flow to the sector),” Rai said, at an e-session organised by the Bharat Chamber of Commerce on Monday. - Business Line

🍒 Banking lobby group proposes bad bank with two-tier structure : The banking lobby group has proposed a bad bank which would have a two-tier structure where the government would own 100 percent owner of the reconstruction company with an investment of Rs. 10,500 crores, the proposal reviewed by ET shows. Banks may shift up to Rs. 70,000 crores of bad loans at a value net off the regulator determined provisions and would review the stressed accounts post the lifting of moratorium and could decide to shift more assets with additional capital from the government, said the IBA proposals.The plan involves setting up of an asset management company with Rs. 100 crore as capital with participation from all banks and a reconstruction company with a potential to buy as much as Rs 70,000 crores of bad loans, it says. The reconstruction firm will have a tenor of 10 years. These would be called the National Asset Management Company (NAMCL) and the National Asset Reconstruction Company (NARCL).“The NARCL will be an SPV constituted to acquire non-performing loans from banks at net book value, the security receipts issued will be held for an interim period and eventually sold to potential investors including alternate investment funds,” a 20 page presentation which was submitted to the government stated. - economic times

🍒 Differentiated bank holdco norms on cards; Bandhan, IDFC First may benefit : The Reserve Bank of India (RBI) may consider adopting a differentiated strategy to implement a holding company structure for banks. Lenders that do not have subsidiaries in insurance, asset management, and broking may be exempt from having a non-operative financial holding company (NOFHC).In the case of those having operations in other non-lending domains, however, the banking regulator may insist on an NOFHC to anchor these subsidiaries.Among mainstream or universal banks, IDFC First and Bandhan received their banking licences in 2014 and were mandated by the licensing norms to have an NOFHC. IDFC Financial Holding Company (wholly-owned subsidiary of IDFC) and Bandhan Financial Holdings are the respective NOFHCs. The norms mandate the NOFHCs to reduce their stake in banks to 40 per cent within five years of commencement. Both banks will complete five years in October. While IFDC First’s holdco owns 40 per cent in the bank, Bandhan’s holdco is yet to comply, with 60.95 per cent stake at present. - Business Standard

🍒 Bandhan Bank profit falls 21% on higher provisioning : Bandhan Bank posted a 21 per cent drop in net profit for the quarter ended March 31, 2020, when compared to ₹651 crore in the same period last year on the back of higher provisioning and contingencies. Provisions and contingencies rose by close to 440 per cent to ₹827 crore during the quarter under review, against ₹153 crore last year. The bank has taken Covid-19-related provision, amounting to ₹690 crore, during the quarter. This provision is higher than the RBI’s minimum required provision. With this provision and additional standard assets provision that it is carrying in the micro banking portfolio, the total additional provision in books stands at ₹1,000 crore, said a press statement issued by the bank. - Business Line

🍒 Lenders want bad bank to take NPAs :  Lenders led by State Bank of India (SBI) are pushing for a ‘bad bank’ in the form of an asset reconstruction company (ARC), preferably sponsored by the government, which can take over loans that have been largely provided for by them. These include the historical bad debts that were expected to be resolved under the insolvency process and do not reflect their value in the books of banks, but consume significant management bandwidth. A senior banker told TOI that the concept of a bad bank is being actively pursued by lenders. “The government should come in with some contribution as this will help to free the bank of bad loans. This will not require more than Rs 15,000-20,000 crore to take over bad loans,” the banker said. The bad bank will also rope in private lenders that have a large share of bad loans in some accounts. The concept of a bad bank was floated by the committee headed by former Punjab National Bank chairman Sunil Mehta, which came out with project Sashakt. One of the five proposals to manage bad loans was transfer of NPAs above Rs 500 crore to an independent asset management company (AMC) supported by institutional funding through alternate investment funds. - economic times

🍒 Lenders confused over the status of non-admitted IBC cases : Stressed-asset companies, banks and other creditors, and insolvency, as well as resolution professionals, are in a quandary in the absence of any clarity about the fate of applications filed under the Insolvency & Bankruptcy Code (IBC) before the Covid-19 outbreak in India. The government on March 24 raised the threshold for invoking IBC proceedings to Rs 1 crore from Rs 1 lakh, to prevent triggering of insolvency cases against small and medium enterprises facing the brunt of the pandemic. On March 29, the Insolvency & Bankruptcy Board of India decided to not include the lockdown period in any ongoing corporate insolvency resolution process. Lawyers, resolution professionals and stakeholders ET spoke to said the announcements were silent on the already-filed applications where the disputed amount was less than Rs 1 crore and which were yet to be admitted by the National Company Law Tribunal (NCLT). “The notification does not clearly specify the date on which the higher threshold becomes effective,” said Sudip Mahapatra, a partner at law firm S&R Associates. “The general presumption under the law would be that the change is prospective. Therefore, it would not apply to existing proceedings.” - economic times

🍒 Instances of cloned ATM cards in Delhi; affected customers to get refund: SBI : State Bank of India (SBI) on Tuesday said instances of use of cloned ATM cards have been reported from the national capital and refund will be processed for the affected customers. All suspicious transactions should be reported to the home branch, the lender said. "Cases of using cloned #ATMCards have been reported in Delhi. There appears to be a possible compromise at an ATM of another bank. Affected SBI customers are being helped & refunds will be processed as per the procedure," it said in a tweet. As a caution and safety measure for customers, SBI has also advised the account holders to change the ATM PIN at regular intervals, cover ATM/POS keypad while entering the PIN, memorize the security transaction number rather than writing it down on the card or anywhere else. SBI has also urged customers to avoid using birthdays and anniversary dates as PIN and to ensure that their mobile numbers linked to the account are updated so that they do not miss the transaction related SMS. Among others, it has also asked customers not to share their PIN with anybody, not to allow anyone inside the ATM while taking out money as well as not to respond to any e-mail, SMS etc asking for their confidential data. - economic times

🍒 Seeking enhanced access to deposits, PMC Bank’s senior citizen depositors move Delhi High Court : Seeking relief, senior citizen depositors of scam-hit Punjab & Maharashtra Co-operative (PMC) Bank have moved the Delhi High Court, asking that they be allowed to withdraw more money from their deposits as they face great hardships amid the pandemic.  Krishna Kumar Dixit, Sandeep Bhalla and others, in separate petitions, emphasised that many senior citizen customers of PMC Bank were dependent on the interest income on the deposits to meet day-to-day expenses. The RBI is among the respondents in the cases. The Mumbai-based co-operative bank, whose financial position deteriorated drastically due to alleged fraud/financial irregularities and manipulation of books of accounts, was placed under the RBI’s All-Inclusive Directions with effect from the close of business on September 23, 2019, following which the deposit withdrawal was capped. Following protests from depositors, the RBI enhanced the limit for withdrawal from ₹1,000 (on September 24, 2019) to ₹50,000 (November 5) of the total balance in their accounts, in four stages. - Business Line

🍒 Transparency imperative for competitive companies: ICICI Lombard GIC : CICI Lombard GIC is putting technologies at work to build the pillar of digital trust. Trust is a significant problem for insurers, but today’s digital solutions have provided insurers with a multitude of ways to become more transparent.Sanjay Datta, Chief, Underwritings, Claims and Reinsurance, ICICI Lombard GIC told BusinessLine that transparency and ‘plain talk’ are imperative for companies looking to compete and gain an edge in the digital world; more so in Covid-19 times. “Insurers need to maintain honesty and transparency in all interactions — beginning from sale of the product until claims to win the trust of customers. Insurers should proactively educate their customers about the coverage of Covid-19 in their respective products,” said Datta. - Business Line

🍒 Life insurance premium collections fall by 32% for the second consecutive month in April : Disruption in business owing to the ongoing Covid-led lockdown has impacted the premium collection of all life insurers in the month of April. According to data put out by IRDAI, new business premium for all life insurance companies have fallen by a notable 32.6 per cent YoY in April. Both private life insurers (33.2 per cent fall) and LIC (32 per cent) have seen a similar fall in their overall new business premiums. The hit in premium collection, which was only expected, follows the 32 per cent decline in premiums in March, when the first phase of lockdown caused disruption in the last week of March. Given that in India, insurance policies are mostly sold with a ‘tax-saving’ pitch, business is usually strong in the fag end of the financial year. The pandemic outbreak has hence hit premium collection sharply in the past two months. Also, IRDAI had announced additional grace period of 30 days for premiums falling due in March and April; this has now been extended to May 31. This has possibly led to the postponement of premium payments. Group renewable premium fell by a steep 62 per cent YoY in April, after a 31 per cent fall in March. - Business Line

🍒 Bad bank may start with Rs 60K-crore NPAs; govt may put in Rs 10K crore : Banks are likely to move big-ticket bad loans amounting to over Rs 60,000 crore to an asset reconstruction company (ARC), which will focus on turning around non-performing assets (NPAs) and enhancing value. Banks are likely to transfer more stressed assets going forward. The government could invest up to 50 per cent of the capital in the “bad bank” with a contribution of about Rs 9,000-10,000 crore, said sources. The ARC is expected to take up both old and new cases, bankers said. Banking lobby group Indian Banks’ Association (IBA) is expected to take the proposal, which is on the lines of the Sashakt panel recommendations, to the finance ministry this week. - Business Standard

🍒 Japan's Nippon Life eyes strategic investment in IndusInd Bank : Private lender IndusInd Bank Ltd is in discussions with at least three strategic investors including Japan's Nippon Life as the bank plans to raise more than $500 million to shore up its balance sheet, said two people aware of the development. The talks with these strategic investors follows the bank's earlier efforts to tap financial players such as private equity (PE) and pension funds and sovereign investors for fundraising.Mint had reported on 6 April that IndusInd Bank was in talks with Canada’s largest pension fund manager, Canada Pension Plan Investment Board (CPPIB), and Singapore’s state investor, GIC, among others, for capital infusion. Investment banks Citi and Morgan Stanley are advising IndusInd Bank on the fundraise. "They are in discussions with at least three groups including Nippon Life and a major financial institution from Europe for the fundraise. These talks are at an initial stage and no non-binding bids have been submitted yet by these strategic investors," said one of the people cited above, requesting anonymity. - Live Mint

🍒 Covid-19 impact: Global pension funds pause India investment : Top global pension funds have suspended India investment plans until they come to grips with the damage Covid-19 does to global and local economies, and their portfolios stabilise amid extreme market volatility and uncertainty. Ontario Teachers’ Pension Plan (OTPP), Canada Pension Plan Investment Board (CPPIB), Australian Super and Caisse de Dépôt et Placement du Québec (CDPQ), among others, had slated billions of dollars in India directly, via private equity (PE) or other funds, but have either put plans on hold or are reconsidering, two people with direct knowledge of the matter said. “Some pension funds had given commitments to PE investors or were planning to invest in certain assets directly; all that has come to a screeching halt as this set of investors are focusing inwards,” one of them added. Canadian pension funds were looking to invest in renewable energy and private debt, people in the know told ET. “All commitments to investments in illiquid assets — direct or through a fund — have been put on hold,” said a PE fund manager. - economic times

🍒 Amazon in insurance push, working with Acko to offer more products, better experience  : Amazon is betting big on insurance and is working with Bengaluru-based startup Acko to offer a wider range of products and a smoother buying experience to customers on its platform in India. The “deep integration” with the online insurance company will be the next big financial offering from the American ecommerce major after it launched digital payments through Amazon Pay. It will make insurance, like payments, an integral offering. “… we are constantly evaluating new areas and opportunities to connect with and serve our customers, insurance being one of them. We are looking at various insurance solutions that provide a convenient and seamless experience for our customers,” an Amazon Pay spokesperson said. At present, Amazon Pay offers products like merchant payments, recharges, FASTags and gift cards. It will soon add insurance for vehicles on the platform and this is being powered by Acko. - moneycontrol.com

🍒 SEBI eases compliance norms on consolidated results for banks, insurance companies : Markets regulator SEBI on Tuesday gave relaxation to listed banks and insurance companies for publishing consolidated financial results for June quarter in the wake of coronavirus pandemic. In addition, it has extended the exemption given to listed companies from publication of advertisement in newspapers about their board meetings, financial results and other events till June 30, SEBI said in a circular. Earlier, the exemption was given till May 15. - moneycontrol.com

🍒 Markets Live: Sensex settles 190 points lower at 31,371, RIL down 6 per cent : Equity benchmark Sensex slipped over 190 points on Tuesday, dragged by a massive loss in index heavyweight Reliance Industries amid weak cues from Asian peers, as fears of a second wave of coronavirus infections spooked global investors. After plunging over 716 points during the day, the 30-share index pared some losses, but still settled 190.10 points or 0.60 per cent lower at 31,371.12. Similarly, the NSE Nifty declined 42.65 points, or 0.46 per cent, to 9,196.55.Reliance Industries was the top loser in the Sensex pack, plunging over 6 per cent, followed by Asian Paints, Kotak Bank, HUL, HDFC Bank and ONGC. On the other hand, NTPC, Bharti Airtel, ITC and IndusInd Bank and PowerGrid were among the top gainers.

🍒 Rupee settles 22 paise higher at 75.51 against US dollar : The rupee surged 22 paise to close at 75.51 (provisional) against the US dollar on Tuesday, amid a weak American currency in the overseas market.  At the interbank foreign exchange, the rupee opened at 75.89, then pared the initial losses to finally settle at 75.51 against the US dollar, registering a rise of 22 paise over its previous close. During the day, the domestic unit hit an intra-day high of 75.49 and a low of 75.95 against the greenback. On Monday, the rupee had settled at 75.73 against the US dollar.

🍒 Gold up Rs 98 to Rs 45,883 per 10 gram, silver slips : Gold prices rose Rs 98 to Rs 45,883 per 10 gram in the Mumbai bullion market on May 12 a weaker dollar but stronger rupee capped the gain. However, the precious metal found support on the downside from the emergence of a new wave of coronavirus infection reported in some countries. The rate of 10 gram 22-carat gold in Mumbai was Rs 42,028 plus 3 percent GST, while 24-carat 10 gram was Rs 45,883 plus GST. The 18-carat gold quoted at Rs 34,412 plus GST in the retail market. Silver prices fell Rs 195 to Rs 43,005 per kg from its closing on May 11.

🍒 Shares of Central Bank of India in Stock Market : 50% of moneycontrol users recommend buying Central Bank of India. In BSE, share closed at Rs.14.55 againt Prev Close Rs.14.70.  In NSE, shares closed at Rs.14.55 against Prev Close Rs.14.70..


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