☕ 25.05.2020: Today's Banking / Financial News at a Glance
🍒 Government pushes PSU banks to provide cheaper loans to small businesses : The government is pushing public sector banks to provide additional working capital to small businesses at 7.5% interest under the loan guarantee scheme that proposes to provide up to Rs 3 lakh crore, while also asking them to ensure that senior citizens earn higher returns on their fixed deposits. While paring deposit rates-to ensure that all borrowers benefit from the lower rate regime-bankers have been asked to ensure widespread implementation of the Pradhan Mantri Vaya Vandana Yojana, which has been extended by three years up to March 2023. Under the scheme, senior citizens will be paid 7.4% interest during the current financial year with the rate to be reset next year.With the Reserve Bank of India repeatedly reducing rates, the State Bank of India has reduced its peak fixed deposit rate to 5.7% for funds parked for 5-10 years. In case of senior citizens, the bank is paying 6.5% a year.The message was conveyed to the bank chiefs during a meeting convened by finance minister Nirmala Sitharaman on Friday with implementation of the Covid package being the key focus to ensure that cash-strapped small businesses can access funds, and at lower cost. Currently, small businesses are borrowing at 11-12% from state-run lenders. - economic times
🍒 Bank of Maharashtra sanctions Rs 2,789 crore loans over 3 months to MSMEs, others : State-owned Bank of Maharashtra on Sunday said it has sanctioned loans worth Rs 2,789 crore to MSME, self-help group, agricultural and retail borrowers to help them meet their liquidity mismatches caused due to coronavirus crisis over the last three months. The lender had launched various COVID-19 emergency credit lines for its existing customers in March. "We have sanctioned loans amounting to Rs 2,789 crore under agriculture, SHGs, Retail, MSMEs with almost one lakh beneficiaries between March 2020 and May 2020," the lender said in a statement.It had used various channels such as webinars, calls, SMSes and emails to raise awareness about these credit lines and to reach out to its borrowers.The bank said it is now gearing up to extend the stimulus package announced by Finance Minister Nirmala Sitharaman aimed at restarting business activities. Recently, the government had announced a Rs 20 lakh crore (nearly 10 per cent of GDP) package to support the economy headed for its first full-year contraction in more than four decades. - economic times
🍒 How RBI crack teams in isolation keeping financial system working : Since the national lockdown was announced in late March, a team of more than 200 personnel from the Reserve Bank of India and services providers are holed up in four locations to ensure that the financial markets and the system across the country works uninterrupted and provides glitch free service to users. Top RBI officials went into a huddle immediately after the lockdown was announced and a team was set up to ensure that services are provided 24x7 without any interruptions including payments and settlements. A team of officers and technical experts was moved into a hotel in Mumbai and another team was stationed in Khargar on the outskirts of Mumbai to work remotely and ensure that the wheels of the economy keep moving. "Now we have a team of 200 including service providers from some of the top tech and telecom companies. There are four teams which are responsible for smooth functioning of the financial system including payments. Apart from the teams in Khargar and Mumbai and there are two more in Nagpur and Hyderabad," said a source. He said that the team includes some senior officers from RBI and the 200 members of the four teams have been away from their families since the lockdown was announced."It was voluntary. In fact people were asked whether they want to go home after 25-days and all of them said they would like to continue to ensure that there is no interruption in the function of the financial system. This speaks highly of the commitment of the teams," the source said, adding that they are working with some of the best technology available to keep the systems on despite the strict lockdown measures. - economic times
🍒 Most MSMEs opt for interest deferment on working capital: SBI Ecowrap report : Majority of MSMEs (micro, small and medium enterprises) and possibly around half of corporates have opted for deferment of interest on working capital facilities, opined State Bank of India’s economic research department in its report “Ecowrap”. With around 75 per cent of such debt is “A” and above rated, the report expects the aforementioned entities to be able to pay the accumulated interest as scheduled or convert it into FITL (Funded Interest Term Loan). “Though, majority of MSMEs will opt for FITL, it is important to see their repaying capacity/cash flows as the same needs to be paid within this financial year itself,” the report said. As the MSME book from banking system stands at around ₹14 lakh crore, assuming that two-third have opted for moratorium and 70 per cent of it is working capital, the interest on around ₹6-7 lakh crore of loans, which is required to be funded through FITL, works to around ₹30,000-35,000 crore, per the calculations made by the department. - Business Line
🍒 Banks face a dilemma on lowering deposit rates any further : Banks are staring at the unpleasant decision of reducing interest rates for millions of depositors already getting poor returns, as they try to protect margins while passing on the benefit of the Reserve Bank of India’s (RBI’s) latest repo rate cut to borrowers. As deposits form a big chunk of banks’ sources of funds, any lending rate cut is either followed or preceded by a similar cut in deposit rates. Moreover, if borrowers who are currently under moratorium ultimately fail to repay, lenders stand to lose as well. While Bank of Baroda (BoB) has 90% of its eligible borrowers utilizing the moratorium, the number is 20% in case of State Bank of India (SBI).According to the chief executive of a mid-sized public sector bank, a cut in deposit rates is inevitable and it is not clear any longer as to what the terminal rate or the lowest possible rate could be. At a time when large banks like State Bank of India (SBI) are lowering lending and deposit rates, smaller banks cannot afford to stay put, the banker said on condition of anonymity. “I will have to survive in the loan market and if I do not lower interest rates on my loans, some other bank will take away the customer. But if I lower my deposit rates, my depositor base will suffer. It is quite a difficult situation," said the banker cited above. - Live Mint
🍒 Present situation due to COVID-19 pandemic not suitable for raising funds overseas: Exim Bank : Premier export finance institution Exim Bank said on Sunday that the present scenario arising out of the COVID-19 outbreak is not suitable to raise resources from overseas markets. Under such circumstances, the lender had requested the Reserve Bank of India (RBI) for a credit line of USD two billion, an official of the Export-Import Bank of India said."The mandate for Exim Bank is to raise resources from overseas markets primarily for disbursement under concessional finance programme on behalf of the government," he said. Due to COVID-19 outbreak, the market now is not suitable for raising funds abroad, the official said. - Moneycontrol.com
🍒 Franklin Templeton's debt funds hit as Essel Infra defaults on NCDs : In a fresh jolt to investors, Franklin Templeton Mutual Fund (MF) has said that Essel Infraprojects (EIL) has defaulted on its non-convertible debentures (NCDs). Four of the fund house's debt schemes that are being wound up had made investments in these NCDs. Though the fund house has said that the event does not have any impact on the net asset value (NAV) of the scheme, it has not entirely marked down its investments. “These NCDs are currently valued at Rs 92 crore in our portfolios, i.e., at 15 per cent of the maturity value after providing a haircut of 85 per cent,” the fund house said in a statement. The four schemes had a maturity value (including redemption premium) of Rs 616 crore. - moneycontrol.com
🍒 Gold imports dip for fifth consecutive month in April, fall by almost 100% : India's gold imports contracted for the fifth consecutive month in a row, falling by about 100 per cent to USD 2.83 million in April due to the lockdowns imposed globally on account of coronavrius outbreak. The import of the yellow metal stood at USD 3.97 billion in April 2019, according to the commerce ministry's data.The decline in gold imports has helped in narrowing the country's trade deficit to USD 6.8 billion during the last month as against USD 15.33 billion a year ago. Gold imports have been recording negative growth since December last year.- moneycontrol.com
🍒 Four of top-10 companies add Rs 1.12 lakh crore in m-cap; TCS leads : Four of the 10 most valued companies together added Rs 1,12,121.1 crore in market valuation last week, with Tata Consultancy Services topping the chart. Bharti Airtel, Infosys and ITC were the other gainers from the top-10 list.On the other hand, RIL, HUL, HDFC Bank, HDFC, Kotak Mahindra Bank and ICICI Bank cumulatively lost Rs 98,890 crore in market capitalisation during the week ended Friday. The market valuation of TCS zoomed Rs 47,148.71 crore to Rs 7,57,587.71 crore, the biggest rise among the top-10 firms.- moneycontrol.com.
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