☕15.06.2020: Today's Banking / Financial News at a Glance
🍒 Govt unlikely to go for privatisation of public sector banks this fiscal : Privatisation of any public sector bank (PSB) during the current fiscal is very unlikely due to their low valuations and mounting stressed assets amid the COVID-19 crisis, sources said. At present, four public sector banks are under the RBI’s Prompt Corrective Action (PCA) framework, which puts several restrictions on them, including on lending, management compensation and directors’ fees. So, it does not make any business sense to sell these lenders — Indian Overseas Bank (IOB), Central Bank of India, UCO Bank and United Bank of India — as there will not be any suitors for them from the private banking space, the sources said. The government will refrain from distress sale of its entities, especially if they are in strategic sectors, they added. Forget outright sale, hardly any public sector bank has gone for stake dilution in the last many years as valuations have been very depressed, sources said, adding the government stake in some PSBs has gone past 75 per cent due to successive capital infusions for meeting mandatory regulatory ratios. The COVID-19 pandemic has not only halted the process of recovery of PSBs but it is going to have an adverse impact on financial health of private sector banks too, they said. Sanguine about better financial health of the PSBs, Finance Minister Nirmala Sitharaman had not announced any capital infusion for them in Budget 2020-21 in February this year. - Finacial Express
🍒 PNB extends credit line of Rs 750 cr for Gorakhpur Link Expressway : In a major boost to infrastructure projects in Uttar Pradesh post the Covid-19 lockdown, public sector lender Punjab National Bank (PNB) has extended a credit line of Rs 750 for the Gorakhpur Link Expressway, estimated to cost Rs 5,876 crore. The 91-km expressway will connect Gorakhpur district, the pocket borough of Chief Minister Yogi Adityanath, with another expressway project, the 340-km Purvanchal Expressway.The cheque for Rs 750 crore was handed over by the PNB officials to the chief minister at his official residence last evening. In his address, Adityanath spoke about the role played by the banks in improving the people’s living standards and enhancing access to resources.According to UP Expressway Industrial Development Authority (UPEIDA) CEO Awanish Kumar Awasthi, who is also the state additional chief secretary, the government had arranged for Rs 2,250 loan for the Gorakhpur Link Expressway, including the Rs 750 crore credit line from the PNB. Gorakhpur Link Expressway is the fifth greenfield expressway project in UP after Yamuna Expressway, Agra-Lucknow Expressway, Purvanchal Expressway and Bundelkhand Expressway. - Business Standard
🍒 RBI proposals may impact top management at private banks : Private sector banks, including City Union Bank, AU Small Finance Bank, Bandhan Bank, Equitas Small Finance Bank, IDFC First Bank and Kotak Mahindra, could see significant changes, going by the Reserve Bank of India’s discussion paper on corporate governance and setting up of an internal working group to review guidelines on ownership and corporate structure. “We believe the term cap of 10 years may impact the term of Uday Kotak, promoter-cum-Managing Director and CEO of Kotak Mahindra Bank, ending in December 20 and Sanjay Agarwal of AU SFB (recently incorporated in 2017),” said Emkay Global Financial Services in a recent report. “Kotak Bank might be affected more as Kotak has completed 17 years as CEO and term may end by September 2022 or April 2023. Other banks affected may be Federal and RBL Bank albeit with a lag,” Jefferies said in a note. According to the note by Emkay Global Financial Services, lenders like City Union Bank, Bandhan Bank, Equitas Small Finance Bank and IDFC First Bank could also be impacted by this move. - Business Line
🍒 Avoid middlemen to source deposits in view of frauds in banks: Canara Bank's alert to branches : Banks would do well to avoid middlemen who canvass bulk deposits from organisations/ individuals as they could fall prey to fraud, going by Canara Bank’s alert to its branches and controlling offices. The Bengaluru-headquartered public sector bank recently drew attention of its branches/ circle and regional offices to two high value frauds that took place in the banking system vis-a-vis bulk deposits of government organisations in the last six-seven months. The amounts involved were Rs 47 crore and Rs 100 crore.Elaborating on the reported modus operandi, the Bank, in an inter-office memorandum, said a branch in Bengaluru got a lead for canvassing a bulk deposit of Rs 100 crore from a government organisation. The branch got the Controlling Office’s permission to accept the deposit at the card rate. After confirming the interest rate for one year and one day, an amount of Rs 100 crore was transferred from another bank on November 18, 2019. - Business Line
🍒 RBI approves re-appointment of Kaizad Bharucha as Executive Director of HDFC Bank : The Reserve Bank of India has approved the re-appointment of Kaizad Bharucha as Executive Director of HDFC Bank for a period of three years with effect from June 13, 2020, the private sector lender said in a regulatory filing. “Bharucha's re-appointment is subject to the approval of the shareholders at the ensuing Annual General Meeting of the Bank,” it further said. - Business Line
🍒 PNB Housing Finance posts net loss of Rs 242 crore in Q4 : PNB Housing Finance on Saturday reported net loss of Rs 242.06 crore for the fourth quarter ended March 31, mainly due to higher provisioning amid COVID pandemic. The housing finance company (HFC) had registered a net profit of Rs 379.77 crore during January-March quarter in 2018-19. “Profit after tax degrew by 163.7 per cent primarily on account of higher provisions, including COVID-19 provision of Rs 471 crore, resulting in the loss of Rs 242.1 crore from profit of Rs 379.7 crore,” it said in a regulatory filing. Adjusted for COVID-19 provision, the profit after tax (PAT) for Q4 FY20 would have been approximately Rs 122 crore, PNB Housing Finance said. The company’s income during the March quarter of FY20 also fell to Rs 1,951.84 crore as against Rs 2,148.19 crore, mainly on account on fall in interest income - Financial Express
🍒 RBI mulls export of UPI, NEFT, other payment solutions as many countries seek to ‘replicate’ them : Stressing on the presence of low-cost payment solutions available in India such as NACH, NEFT, UPI etc, the Reserve Bank of India on Saturday indicated the scope of expanding these solutions to other countries. In its note on ‘Oversight Framework for Financial Market Infrastructures and Retail Payment Systems’, the central bank said, “many countries have expressed interest in partnering in this growth and replicating our products based on their country-specific requirements.” While currently there are no payment system operators authorized by RBI to provide such services outside India, the bank said that “specific interests/requests” are being received for setting up cheque truncation system (CTS), NEFT, UPI, messaging solutions, etc. India already has in place cross-country cooperation with Bhutan “with our CTS, NACH and NEFT operational there as well. NEFT is available for one-way transfers from India to Nepal,” RBI said. Even as RBI underscored the efforts underway to boost the usage and coverage of Rupay card scheme and UPI to enhance their brand value internationally, the central bank also cautioned about the possible ‘high’ risks associated with some of these solutions. “The participants in a domestic system might become dependent on the funds they are to receive in an offshore system to fund their domestic debt position, leading to possible liquidity risk issues,” RBI said. This could also be due to different time zones and lacking nature of “suitable depth in the currency markets” of such countries, particularly during the financial distress. During such scenarios, RBI said that constant cooperation with the concerned central banks and other regulatory authorities would be required. - Financial Express
🍒 Uday Kotak not averse to takeover of weak businesses during COVID-19 crisis : Newly elected CII president Uday Kotak has said he was not averse to the idea of takeover of weak businesses by financially strong entities as long as it is in the interest of investors. Why should an investor be barred from selling his investments, which are currently hammered on account of coronavirus pandemic, Kotak said, adding the decision on taking a call should be left to the investor. However, he said, the government could take steps to prevent and protect domestic India businesses from predatory takeover from the investors belonging to certain specific nations because of strategic reasons."Is this money coming from countries where we have a strategic level issue, then it's a very separate issue by itself. And even the US wants to protect some key strategic sectors, from some countries for good reason. So, I would say that is a very different reason," Kotak said. As far as other takeovers by domestic investors are concerned, he said, "we have to look at the interests of both sides. On the one side is the interest of an existing entrenched management, who's going through a tough time, on the other side is a very poor performance of the investors' money". - Moneycontrol.com
🍒 NBFCs not mandated to automatically offer moratorium, avers Bajaj Finance : Refuting allegations about not following the RBI's direction on offer of moratorium to its customers , Bajaj Finance has clarified that the banking regulator has “permitted NBFCs”, but “not mandated to automatically offer moratorium” to all customers. Reacting to allegations, the NBFC has categorically stated that the RBI has not restricted them from presenting the customers’ EMI cheques to the bank if they had not opted for moratorium. Further, the EMI mandate bounce charges were not credited to the company’s account. Bajaj Finance offered EMI moratorium from one to six months to eligible customers for unpaid EMI for instalments due between March 1 and August 31. However, this offer could be availed only by those that maintained a consistent repayment track record, did not have more than two EMI’s due in any of their loans and above all, should have reached out to the company with a moratorium request, the NBFC said in a release. - Business Line
🍒 Health insurance claims not contestable after 8 years of premium payment: IRDAI : Health insurance companies will not be allowed to contest claims once the premium has been paid for a continuous period of eight years, regulator IRDAI said in a fresh set of guidelines. IRDAI said the objective of the guidelines is to standardise the general terms and clauses incorporated in indemnity based health insurance (excluding personal accident and domestic/overseas travel) products by simplifying the wordings of general terms and clauses of the policy contracts and ensure uniformity across the industry.“All policy contracts of the existing health insurance products that are not in compliance with these guidelines shall be modified as and when they are due for renewal from April 1, 2021 onwards. “After completion of eight continuous years under the policy no look back to be applied...After expiry of moratorium period (of eight years) no health insurance claim shall be contestable except for proven fraud and permanent exclusions specified in the policy contract,” Insurance Regulatory and Development Authority (IRDAI) said. - Business Line
🍒 Banks rely on 'soft calls' to keep recoveries flowing amid lockdown : Indian banks are relying on 'soft calls' and nudge to recover overdue loans from delinquent borrowers as restrictions on the movement of collection executives remain despite easing of the nationwide lockdown from 1 June onwards. State Bank of India (SBI), for instance, has increased the frequency of such calls to borrowers, which unlike recovery calls, are meant to keep customers educated about the implications of defaults. In the past, banks, especially in the private sector, have been criticised for taking forceful recovery measures, including threats by musclemen. “Let me tell you that our soft calls, not the recovery call but our customer engagement during this period has increased because people are working from home and they have been told to do soft calls on the customers," SBI chairman Rajnish Kumar told analysts on 5 June. - Live mint
🍒 FPIs invest Rs 20,574 crore in June so far : Foreign portfolio investors (FPIs) have pumped in a net Rs 20,574 crore into the Indian capital market in June so far amid increasing inflows into emerging markets due to high liquidity. As per the latest depositories data, FPIs invested a net Rs 22,840 crore in equities but pulled out Rs 2,266 crore from the debt segment between Jun 1-12. This translates into a cumulative inflow of Rs 20,574 crore. Prior to this, FPIs were net sellers for three consecutive months. They pulled out Rs 7,366 crore in May, Rs 15,403 crore in April and a record Rs 1.1 lakh crore in March. - Moneycontrol.com
🍒 Franklin Templeton Mutual Funds receives Rs 103 crore, Nippon India Rs 9.31 crore and UTI Mutual Funds 13.5 crore : There is some good news for debt investors of mutual funds. Vodafone Idea has paid the annual interest on the debt raised, which will now be distributed among investors. In February, most mutual funds, including Franklin Templeton Mutual Fund, Nippon India Asset Management Company and UTI Mutual Fund, had side-pocketed the investment and investors were issued units in segregated accounts.Six schemes of Franklin Templeton will distribute ₹103 crore, while Nippon India Hybrid Bond Fund has received ₹9.31 crore. UTI Mutual Fund had received ₹13.5 crore. Nippon India, in a statement, said the part-payment will be credited in investors’ accounts in three days and they are confident of receiving the full payment. - Business Line
🍒 Seven of top-10 firms lose Rs 78,127 crore in m-cap; HDFC Bank takes biggest hit : Seven of the 10 most valued domestic companies together lost Rs 78,127.74 crore in market valuation last week, with HDFC Bank taking the biggest knock. From the top-10 list, only Reliance Industries Limited, Hindustan Unilever Limited (HUL) and HDFC ended the week with gains. HDFC Bank's market valuation plunged Rs 28,391.71 crore to Rs 5,39,305.38 crore.The market capitalisation of Bharti Airtel tumbled Rs 13,638.89 crore to reach Rs 3,05,456.66 crore and that of Kotak Mahindra Bank tanked Rs 11,882.72 crore to Rs 2,53,197.91 crore. ICICI Bank's valuation diminished by Rs 8,411.45 crore to Rs 2,22,918.94 crore and that of ITC went lower by Rs 7,313.87 crore to Rs 2,38,469.29 crore. The m-cap of Infosys dipped Rs 4,961.86 crore to Rs 2,94,772.86 crore and that of Tata Consultancy Services (TCS) fell by Rs 3,527.24 crore to Rs 7,64,998.67 crore. - Business Line
🍒 Rupee may continue upmove towards 76.4-77, deploy unconventional 'Bull Put Spread' : After the recent mild correction, the United States Dollar/Indian Rupee gained strength over the week and closed with the weekly gain of approximately 49 paise at 76.05 per USD. Active participation of bulls have been witnessed in the currency pair from the lower-end of the trading range as bears could not extend the fall and took the back seat. Technically, for the last few days we have been highlighting that the currency pair is establishing a foundation for a big move and it could be seen in the coming days. - Moneycontrol.com.
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