Good Morning All.
☕ 09.06.2020: Today's Banking / Financial News at a Glance
🍒 A PSU banker’s dilemma: Ready to lend, but where are the takers? : Recently, State Bank of India (SBI) Chairman Rajnish Kumar made an important point on criticism that it is banks' high risk aversion which is creating impediments to effective monetary policy transmission. “As the chairman of the largest bank, I’m saying I have the money, but there are no takers," Kumar said while speaking at the Confederation of Indian Industries (CII) Annual Session 2020. It isn’t just Kumar. This view is shared by many officials in India's state-run banks who are under immense pressure to lend to support an early economic revival but are unable to do so. They say that there are no takers for bank loans in a COVID-19 hit economy. But then, for an economy that is predicted to contract this fiscal year, it is no surprise that bank lending is slowing. No one is looking at fresh projects or capacity expansion. But even then, a series of measures from the Reserve Bank of India (RBI) to boost liquidity should have resulted in higher lending. This hasn’t happened. On Monday, Crisil said that bank credit growth is likely to plummet to a multi-decade low of 0-1 percent in this fiscal in sharp contrast to its earlier estimate of 8-9 percent as COVID-19 has impacted the economic activity in an unprecedented manner. When asked about expectations of default from the bank's moratorium portfolio, he said: "It is very difficult to predict in the current situation. But if there are any pointers, particularly about the loan book of SBI, there may not be elevated defaults as far as this portfolio is concerned." On the asset quality, he added: “I don’t think the current situation is going to be worse than what we had in the previous year." On fundraising plans, Kumar said, “There is no need at this point in time. The more capital you raise, you should have the capability to service that capital. "We believe that we have sufficient cushion in terms of capitalisation and we are optimistic about earnings that we would be able to maintain whatever our plan is. In such a scenario, we don't want to raise capital unnecessarily."- moneycontrol.com
🍒 RBI may tweak norms for loan sales : The Reserve Bank of India (RBI) is planning to do away with the minimum holding period (MHP) for sale of loans, deregulate the price discovery process and rationalise some of the existing conditions for sale of bad loans amid expectation that lenders could face increasing asset quality and liquidity pressures due the ripple impact the Covid-19 pandemic. Further, to encourage securitisation of home loans, the central bank is planning to provide carve outs for lenders for Residential Mortgage Backed Securities (RMBS) vis-a-vis prescriptions such as minimum holding period (MHP), Minimum Retention Requirement (MRR) and reset of credit enhancements. The above mentioned proposals are part of draft frameworks for securitisation of standard assets and sale of loan exposure, which the RBI issued on Monday. - Business Line
🍒 RBI proposes deregulation in price discovery for sale of NPAs : The Reserve Bank of India on Monday proposed to deregulate the price discovery process during sale of bad loans by financial institutions like banks, non-bank financiers and housing finance companies (HFCs). In its draft framework for sale of loan exposures, the regulator proposed that lenders can put in place a board-approved policy on adoption of an auction-based method for price discovery. This is a shift from its earlier stance where it had prescribed the adoption of Swiss Challenge Method for sale of their stressed assets. Under the Swiss Challenge method, a prospective buyer interested in buying a stressed asset may offer a bid to the lender, which then publicly calls for counter bids from other prospective buyers. Once bids are received, the bank first invites the securitisation company, if any, which has already acquired highest significant stake to match the highest bid. Then, the order of preference to sell the asset shall be to the securitisation company, the original bidder and then the highest bidder during the counter-bidding process. - Live Mint
🍒 State Bank of India slashes interest rates : Country’s largest lender State Bank of India (SBI) has reduced its Marginal Cost of funds based Lending Rate (MCLR) by 25 bps across all tenors. The one year MCLR has now fallen to 7 percent per annum from 7.25 percent, with effect from June 10. This is the thirteenth consecutive reduction in the bank’s MCLR. The bank also slahed its base rate by 75 bps to 7.40 percent from 8.15 percent from June 10. SBI said it has passed on the entire 40 bps repo rate cut (announced by the Reserve Bank of India on May 22) to its borrowers availing loans linked to the External Benchmark-linked lending Rate (EBR) as well as Repo Linked Lending Rate (RLLR). As such, SBI’s EBR and RLLR has reduced by 40 bps, as under: - EBR reduced to 6.65 percent per annum from 7.05 percent from July 1 - RLLR reduced to 6.25 percent per annum from 6.65 percent w.e.f June 1. EMIs on eligible home loan accounts linked to MCLR will get cheaper by around Rs. 421 and those linked to EBR/RLLR will get cheaper by around Rs 660 for a 30-year loan of Rs 25 lakh. - Moneycontrol.com
🍒 October-December will be a testing quarter for banks: Union Bank chief : The third (October-December) quarter could be a testing one for banks as slippage in accounts which opted for moratorium between March 1 to August 31, 2020 period, could start showing up if repayments don’t start, according to Rajkiran Rai G, MD & CEO of Union Bank of India. In an interaction with BusinessLine, Rai felt that restructuring viable accounts whose operations have been impacted by the Covid-19 pandemic could be the only saving grace. The chief of India’s fifth largest public sector bank said his bank expects to disburse about ₹10,000 crore by October-end to businesses, including micro, small and medium enterprises (MSMEs), under the Guaranteed Emergency Credit Line (GECL) scheme. - Business Line
🍒 The next googly is difficult to predict: Federal Bank chief : Drawing a cricket analogy, Shyam Srinivasan, MD and CEO, Federal Bank, believes that in the current situation of economic uncertainty brought about by the pandemic and the lockdown, one has to “play it session by session”. “The number of googlies coming our way everyday is so different that the ability to predict the next googly is difficult. You have to react to the near term, go through the tough overs and then be ready for the slog at the end of it,” he told BusinessLine. In an interview, the veteran banker said the bank is willing to lend and believes that customers will try and start repaying after the moratorium on term loan lifts. - Business Line
🍒 IDBI Bank now among India's five most valuable private banks : IDBI Bank Ltd is now the fifth most valued private lender replacing Bandhan Bank, Yes Bank and Indusind Bank after its shares surged over 100% in the last three weeks. In overall Indian listed banking sector, it is ranked sixth valued bank. Shares of IDBI Bank surged nearly 102% since 18 May. So far this year it gained 0.81%. The stock started surging after the lender announced a profit for March quarter after 13 consecutive quarter losses. On Monday, the scrip closed at ₹37.30 on BSE, down 2.9% from its previous close with market cap of ₹38,719 crore. HDFC Bank Ltd remains India's most valued bank with market value of ₹5.68 trillion followed by Kotak Mahindra Bank ( ₹2.65 trillion), ICICI Bank Ltd ( ₹2.31 trln), State Bank of India ( ₹1.68 trln) and Axis Bank Ltd ( ₹1.14 trln). IDBI Bank on 30 May reported a net profit of Rs135 crore in the quarter ended March as against a loss of Rs4,918 crore for Q4FY19. However, for FY20, it’s net loss stood at ₹12,887 crore against a loss of ₹15,116 crore in FY19. - Live Mint
🍒 Credit to MSMEs: Tamil Nadu tops in sanctions, disbursals so far : The 100 per cent Emergency Credit Line Guarantee Scheme (ECLGS) to support MSMEs in these troubled Covid-19 times is gathering pace with public sector banks (PSBs) having sanctioned loans worth ₹17,705.64 crore and disbursed as much as ₹8,320.24 crore as of June 5. Tamil Nadu has topped the chart in terms of MSMEs that has got the maximum sanction and disbursements in value terms, data tweeted by the Finance Minister’s Office showed. As many as 33,725 accounts in Tamil Nadu got sanctions worth ₹2,018.89 crore under the ECLGS, the data showed. So far ₹1,325.04 crore has been disbursed to 18,867 accounts, it added. The ECLGS scheme is a specific response to the unprecedented situation of Covid-19 and seeks to provide relief to the MSME sector by incentivising Member Lending Institutions (MLIs) to provide additional credit of up to ₹3-lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their business. - Business Line
🍒 Covid impact: Bank credit growth to touch multi-decade low of 0-1% in FY21, says Crisil : The sharp decline in economic activity due to the coronavirus outbreak may drag credit growth to a multi-decade low of 0-1% in FY21, credit rating agency Crisil said on Monday. “This is in sharp contrast to Crisil’s earlier expectation of 8-9% credit growth before the pandemic struck. In other words, the impact of the pandemic on credit growth will be a whopping 800 basis points (bps)," credit ratings agency said. As per the report, gross bank credit growth was at 3% in FY17, 9% in FY18, 11% in FY19, 6% (estimated) in FY20. Krishnan Sitaraman, senior director, Crisil Ratings said that the crisis is unprecedented and so will its economic fallout be – such as lower capex demand as well as lower discretionary spends, to name some – which will slow down credit offtake. “The corporate loan portfolio, which constitutes almost half of total credit, is expected to be the worst-hit, and de-grow this fiscal. The lockdown has led to significant disruption in operations with limited capacity utilisation across sectors," said Sitaraman. - Live Mint
🍒 Bad bank not a good idea unless key issues are addressed: Uday Kotak : Setting up of a bad bank to deal with the problem of mounting NPAs is not a good idea and will not yield desired results unless some key aspects like transparency and recovery rate are addressed, newly-elected president of CII Uday Kotak said. Citing an example of Stressed Assets Stabilization Fund (SASF), set up by erstwhile Industrial Development Bank of India (IDBI), Kotak said it did not work well. "I think we have tried the bad bank in the past. If you recall when IDBI had challenges in the early 2000s, there was an IDBI SASF, which was created. A part of non-performing assets (NPAs) of IDBI were moved to that SASF," Kotak told PTI in an interview. SASF was constituted by the Government of India pursuant to a provision in the Union Budget 2004-05, a special purpose vehicle (SPV) trust for acquiring NPAs of erstwhile IDBI. As many as 636 stressed and non-performing cases with aggregate loans of over ₹9,000 crore were hived off to this SPV. - Live Mint
🍒 IndusInd Bank promoters to buy more of its shares in secondary market : Private sector lender IndusInd Bank’s promoters – IndusInd International Holdings Ltd and IndusInd Ltd – have informed the bank management that they will buy additional stake in the bank from the secondary market. In a letter to the managing director and chief executive officer of the bank, the promoters have said, they will buy additional shares from open market in India, within the overall regulatory prescribed promoter equity holding cap. Currently, the promoters hold 14.68 per cent of the paid up share capital of IndusInd Bank. As per the banking regulations of the Reserve Bank of India (RBI), the promoters can buy 0.32 per cent additional stake in the bank as of now. According to RBI norms, a bank needs to bring down its promoter shareholding to 40 per cent in the first three years after starting operations. Thereafter, the bank needs to bring down its promoter shareholding to 20 per cent in 10 years and 15 per cent in 15 years. For IndusInd Bank, the promoter equity holding in the bank, as per the RBI norms, is capped at 15 per cent. - Business Standard
🍒 Banking to be a 'strategic sector', govt discussing privatising some PSBs : The Centre is likely to designate the banking/financial sector strategic under the new privatisation policy, the contours of which are nearing finalisation. A top government official said discussions had also been held on privatising some state-owned banks that are not on the consolidation list so far. According to the new privatisation policy, announced by Finance Minister Nirmala Sitharaman as part of the ‘Atmanirbhar Bharat’ package, the government will come up with a list of strategic sectors. In each strategic sector, no more than four state-owned companies will exist. After the latest round of consolidation of public sector banks, there are currently 12 PSBs. - Business Standard
🍒 Private banks delaying implementation of Rs 3-lakh crore MSME loan scheme: RSS-affiliated body tells FM : Private banks are dilly-dallying in implementing the Rs 3-lakh crore credit scheme for the MSME sector, RSS-affiliated industry body Laghu Udyog Bharti (LUB) informed Union Finance Minister Nirmala Sitharaman on Monday. Sitharaman had called Laghu Udyog Bharti general secretary Govind Lele to seek feedback on the implementation of Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector, which has been hit hard by the coronavirus-induced lockdown. Lele said he informed the minister that prominent public sector banks like State Bank of India and Bank of India have started extending loans as per the scheme.But at the branch level, three-year projections of revenue and profitability are sought before sanction, he said."Private banks are dilly-dallying in implementing the scheme. Hence, they are required to be immediately instructed to implement the scheme," Lele told the finance minister. He said to complete their target, bank officials are giving preference to high-value loan accounts therefore it is important that the government should instruct for proportionate sanctioning of funds in the scheme. - Business Standard
🍒 India is mulling a new way to bring its bad loan burden under control : India is considering a new category of alternate investment fund which will focus on acquiring stressed assets from banks and shadow lenders, a move aimed at resolving some of the highest bad debt in the world. The fund will be allowed to buy stressed assets directly from the banks and non-banking financial companies, people with knowledge of the matter said, asking not to be identified as the matter is not public. At present, investors can only access bad loans through securities issued by asset reconstruction companies, but the new fund category will allow them to do so directly. This will give foreign investors including global hedge funds easier access to the mountain of local bad debt. The discussions are at a very preliminary stage and the aim is to supplement the efforts of asset reconstruction companies in reducing the bad loans of these lenders, the officials said. A finance ministry spokesman was not immediately available for a comment. - economic times
🍒 Housing finance firms comfortably placed to meet debt obligations: Report ; Having raised nearly Rs 34,000 crore from the debt market and the National Housing Bank (NHB) in the past two months, housing finance companies (HFCs) are comfortably placed to meet their debt obligations despite lower collections, according to a report. The total maturing debt of HFCs for 2020-21 is estimated to be Rs 2.9-3.2 lakh crore, of which Rs 1.4 lakh crore is accounted for by debt markets, rating agency ICRA said in the report. "As HFCs raised approximately Rs 34,000 crore through debt market route and from NHB during April and May 2020, it is expected that most of the HFCs will maintain an adequate liquidity profile for meeting their debt obligations even with lower collection levels (50-80 per cent ) in the portfolio," ICRA Vice-President (Financial Sector Ratings) Supreeta Nijjar said in the report. - economic times
🍒 Complete IBC suspension for defaults may hurt creditors : The government's ordinance giving a perpetual holiday from the Insolvency and Bankruptcy Code (IBC) for defaults between March and September has left banks and investors in a lurch as it leaves them with only recovery options which have proven to be ineffective. Lawyers say that a complete suspension of IBC cases for defaults occuring during the six month period is regressive and takes away the fear of default from promoters. Particularly hit will be investors in market intruments like bonds, external commercial borrowings (ECBs) and trade credits which have recourse only to the delay prone ebt recovery tribunals (DRTs).Moreover, the illconceived ordinance could put India back on eyes of international investors who bet on legal frameworks for recoveries and hit fund raising through bond sale. "A perpetual suspension of a creditor’s right to file insolvency resolution applications for defaults occurring during the 6 month period starting March 25 is excessive. It means that for any default during this peiod the doors of the IBC are closed. Unsecured creditors anyway don't have recourse to SARFAESI which leaves them with only civil courts like DRT where the process is painfully time consuming," said Aashit Shah, partner, J Sagar Associates. - economic times
🍒 Bharti AXA Life renewal premium up 17 per cent : Bharti AXA Life Insurance, a private life insurer, has registered a 17 per cent growth in its renewal premium for the fiscal year 2019-20 at ₹1,359 crore, as against ₹1,164 crore registered in the previous financial year 2018-19. However, the Covid-19 induced lockdown impacted the performance in March — a crucial month for life insurance industry — bringing down the new business premium for 2019-20 to ₹829 crore from ₹911 crore in the previous fiscal. The total premium income grew 5 per cent in 2019-20 to ₹2,187 crore (₹2,076 crore). Parag Raja, Managing Director and Chief Executive Officer, Bharti AXA Life Insurance, said, “We grew and registered steady performance on many business parameters in the financial year 2019-20, despite the disruption caused by the spread of coronavirus pandemic and the subsequent lockdown in the crucial month of March, which adversely affected the domestic life insurance industry in terms of new business. Our new business premiums contracted mainly due to a shortfall in March, an important month for new business in the industry, which was triggered by the Covid19 lockdown and social distancing.” - Business Line
🍒 IL&FS sells 50% stake in GIFT City to Gujarat government for Rs 33 crore : Debt-laden IL&FS on June 4 said it has completed the sale of its 50 percent stake in Gujarat International Finance Tec-City (GIFT City) to the Gujarat government for Rs 32.71 crore. The stake sale will help the group pare its debt by Rs 1,230 crore. The group's current outstanding debt is around Rs 94,000 crore."IL&FS has duly received Rs 32.71 crore as equity value for shares as a sale consideration," it said.The stake sale was approved by the National Company Law Tribunal (NCLT) last month. - moneycontrol.com
🍒 PNB scam: Court allows confiscation of Nirav Modi’s assets : A special court here on Monday allowed confiscation of assets owned by diamantaire Nirav Modi, a key accused in the multi-crore Punjab National Bank (PNB) scam, under the Fugitive Economic Offenders Act (FEOA). This is the first order of confiscationpassed under the FEO Act,enacted two years ago, anywhere in the country. Special Judge V C Barde permitted the Enforcement Directorate (ED) to confiscate those assets owned by Nirav Modi that are not mortgaged or hypothecated to the PNB. The court, in its order, said the assets shall be attached by the ED under the provisions of the FEO Act within one month. After that, the said properties/assets shall stand confiscated to the Central government under section 12(2) and 8 of the FEO Act, the judge said. Senior advocate Nitesh Jain from Shardul Amarchand Mangaldas law firm, who appeared for PNB, said the court has allowed those assets that have not been mortgaged, secured or hypothecated to the bank to be confiscated. - Financial Express
🍒 Govt yet to put in place SPV structure for Rs 30,000-crore NBFC liquidity scheme : Nearly a month after Finance Minister Nirmala Sitharaman announced the Rs 30,000 crore special liquidity scheme for non-banking financial companies (NBFCs), the government is yet to put in place the structure to operationalise the scheme. According to the details available so far, the scheme was supposed to be implemented through a special purpose vehicle (SPV) set up by a large PSU bank. This SPV will issue bonds guaranteed by the government which will be purchased by the Reserve Bank of India (RBI). The money will then be used by the SPV to acquire the debt of at least investment grade of short duration (residual maturity of up to three months) of eligible NBFCs / HFCs, the government had said. This scheme was announced on May 13 and the details of the scheme were announced on May 20 after Cabinet approval. - Moneycontrol.com
🍒 Soon, ‘Treasury Single Account’ for all ministries, departments : The government mulls putting in place a ‘Treasury Single Account’ for all Central ministries and departments to help lower the cost of borrowing and enhance efficiency in fund flows. “Pilot is on to implement Single Treasury Account for some autonomous bodies. Based on the outcome, the effort would be to use the system for all the Central Government ministries and departments,” a senior Finance Ministry official told BusinessLine. It is going to be a long-drawn process as it needs much bigger capacity of the Reserve Bank of India, the official said, adding, alternatively, some other bank/banks could be designated along with RBI. - Business Line
🍒 IRDAI asks insurers to hasten processing of claims related to cyclone Nisarga : All general insurers and standalone health insurers should take immediate steps to register and quickly dispose off all claims related to cyclone Nisarga. In the guidelines issued on Monday, the Insurance Regulatory and Development Authority of India (IRDAI) asked insurance companies to appoint a nodal officer for the affected States. The nodal officer should be coordinating the receipt and processing and settlement of all eligible claims. Similarly a district nodal officer should also be appointed. “If there are any death claims and there is difficulty in obtaining a death certificate due to a non-recovery body, the process followed in the case of Jammu and Kashmir floods may be followed,” IRDAI informed in the circular. In view of the Covid-19 pandemic, insurers should also encourage policyholders to use digital means, the regulator said. - Business Line
🍒 Nifty fails to hold 10,200, Sensex erases morning gains; : BSE Sensex and Nifty 50 traded volatile in Monday’s session and settled a tad higher led by buying private bank stocks and financials. The top index contributors were Infosys, Axis Bank, Bajaj Finance, TCS and Hindustan Unilever (HUL). The 30 share index Sensex fell 558 points from day’s high to end 83 points or 0.24 per cent up at 34,370. While the broader Nifty 50 index slipped over 160 points from intraday’s high to settled at 10,167. “The market sentiment remained muted in the afternoon session as profit-booking by traders, after an almost 1,200 point rally in Nifty since last week, led to a decline in the markets,” said Narendra Solanki, Head Fundamental Research at Anand Rathi Shares and Stock Brokers. IndusInd Bank shares gain 7%: IndusInd Bank was the top Sensex gainer after promoters of the bank announced to acquire shares of the bank from the secondary market. The other gainers on the index were Axis Bank, Bajaj Finance, ONGC and Titan Company. On the other hand, M&M was the top Sensex laggard, down 2.73 per cent. Among other losers were UltraTech Cement, HDFC Bank, Tata Steel, Nestle India and ITC.
🍒 Rupee settles 3 paise higher at 75.55 against US dollar : The rupee settled on a muted note, up 3 paise, at 75.55 (provisional) against the US dollar on Monday as dollar-buying by banks as well as importers and rebounding crude prices restricted gains of the local unit. Forex traders said positive domestic equities, sustained foreign fund flows and the revival of business activity are supporting the rupee, but dollar demand and rising crude oil prices are weighing on the domestic unit.
🍒 Gold slips Rs 217 per 10 gram, silver remains flat : Gold prices slipped Rs 217 to Rs 46,479 per 10 gram in the Mumbai bullion market on the back of a strengthening dollar against the rupee. The precious metal had come under sharp selling pressure on June 5 after the US non-farm payrolls data showed a surprise rise of 2.5 million jobs in May, boosting optimism about an economic recovery and denting gold's safe-haven appeal. The rate of 10 gram 18-, 22- and 24-carat gold in Mumbai was Rs 34,859, Rs 42,575 and Rs 46,479 plus 3 percent GST. Silver prices remained unchanged at Rs 47,800 per kg from its closing on June 5.
🍒 Shares of Central Bank of India in Stock Market : 94% of moneycontrol users recommend buying Central Bank of India Shares. In BSE, shares closed at Rs.16.76 against Prev Close Rs.16.47. In NSE, shares closed at Rs.16.75 against Prev Close Rs.16.45...
… Have a Good day.
☕ 09.06.2020: Today's Banking / Financial News at a Glance
🍒 A PSU banker’s dilemma: Ready to lend, but where are the takers? : Recently, State Bank of India (SBI) Chairman Rajnish Kumar made an important point on criticism that it is banks' high risk aversion which is creating impediments to effective monetary policy transmission. “As the chairman of the largest bank, I’m saying I have the money, but there are no takers," Kumar said while speaking at the Confederation of Indian Industries (CII) Annual Session 2020. It isn’t just Kumar. This view is shared by many officials in India's state-run banks who are under immense pressure to lend to support an early economic revival but are unable to do so. They say that there are no takers for bank loans in a COVID-19 hit economy. But then, for an economy that is predicted to contract this fiscal year, it is no surprise that bank lending is slowing. No one is looking at fresh projects or capacity expansion. But even then, a series of measures from the Reserve Bank of India (RBI) to boost liquidity should have resulted in higher lending. This hasn’t happened. On Monday, Crisil said that bank credit growth is likely to plummet to a multi-decade low of 0-1 percent in this fiscal in sharp contrast to its earlier estimate of 8-9 percent as COVID-19 has impacted the economic activity in an unprecedented manner. When asked about expectations of default from the bank's moratorium portfolio, he said: "It is very difficult to predict in the current situation. But if there are any pointers, particularly about the loan book of SBI, there may not be elevated defaults as far as this portfolio is concerned." On the asset quality, he added: “I don’t think the current situation is going to be worse than what we had in the previous year." On fundraising plans, Kumar said, “There is no need at this point in time. The more capital you raise, you should have the capability to service that capital. "We believe that we have sufficient cushion in terms of capitalisation and we are optimistic about earnings that we would be able to maintain whatever our plan is. In such a scenario, we don't want to raise capital unnecessarily."- moneycontrol.com
🍒 RBI may tweak norms for loan sales : The Reserve Bank of India (RBI) is planning to do away with the minimum holding period (MHP) for sale of loans, deregulate the price discovery process and rationalise some of the existing conditions for sale of bad loans amid expectation that lenders could face increasing asset quality and liquidity pressures due the ripple impact the Covid-19 pandemic. Further, to encourage securitisation of home loans, the central bank is planning to provide carve outs for lenders for Residential Mortgage Backed Securities (RMBS) vis-a-vis prescriptions such as minimum holding period (MHP), Minimum Retention Requirement (MRR) and reset of credit enhancements. The above mentioned proposals are part of draft frameworks for securitisation of standard assets and sale of loan exposure, which the RBI issued on Monday. - Business Line
🍒 RBI proposes deregulation in price discovery for sale of NPAs : The Reserve Bank of India on Monday proposed to deregulate the price discovery process during sale of bad loans by financial institutions like banks, non-bank financiers and housing finance companies (HFCs). In its draft framework for sale of loan exposures, the regulator proposed that lenders can put in place a board-approved policy on adoption of an auction-based method for price discovery. This is a shift from its earlier stance where it had prescribed the adoption of Swiss Challenge Method for sale of their stressed assets. Under the Swiss Challenge method, a prospective buyer interested in buying a stressed asset may offer a bid to the lender, which then publicly calls for counter bids from other prospective buyers. Once bids are received, the bank first invites the securitisation company, if any, which has already acquired highest significant stake to match the highest bid. Then, the order of preference to sell the asset shall be to the securitisation company, the original bidder and then the highest bidder during the counter-bidding process. - Live Mint
🍒 State Bank of India slashes interest rates : Country’s largest lender State Bank of India (SBI) has reduced its Marginal Cost of funds based Lending Rate (MCLR) by 25 bps across all tenors. The one year MCLR has now fallen to 7 percent per annum from 7.25 percent, with effect from June 10. This is the thirteenth consecutive reduction in the bank’s MCLR. The bank also slahed its base rate by 75 bps to 7.40 percent from 8.15 percent from June 10. SBI said it has passed on the entire 40 bps repo rate cut (announced by the Reserve Bank of India on May 22) to its borrowers availing loans linked to the External Benchmark-linked lending Rate (EBR) as well as Repo Linked Lending Rate (RLLR). As such, SBI’s EBR and RLLR has reduced by 40 bps, as under: - EBR reduced to 6.65 percent per annum from 7.05 percent from July 1 - RLLR reduced to 6.25 percent per annum from 6.65 percent w.e.f June 1. EMIs on eligible home loan accounts linked to MCLR will get cheaper by around Rs. 421 and those linked to EBR/RLLR will get cheaper by around Rs 660 for a 30-year loan of Rs 25 lakh. - Moneycontrol.com
🍒 October-December will be a testing quarter for banks: Union Bank chief : The third (October-December) quarter could be a testing one for banks as slippage in accounts which opted for moratorium between March 1 to August 31, 2020 period, could start showing up if repayments don’t start, according to Rajkiran Rai G, MD & CEO of Union Bank of India. In an interaction with BusinessLine, Rai felt that restructuring viable accounts whose operations have been impacted by the Covid-19 pandemic could be the only saving grace. The chief of India’s fifth largest public sector bank said his bank expects to disburse about ₹10,000 crore by October-end to businesses, including micro, small and medium enterprises (MSMEs), under the Guaranteed Emergency Credit Line (GECL) scheme. - Business Line
🍒 The next googly is difficult to predict: Federal Bank chief : Drawing a cricket analogy, Shyam Srinivasan, MD and CEO, Federal Bank, believes that in the current situation of economic uncertainty brought about by the pandemic and the lockdown, one has to “play it session by session”. “The number of googlies coming our way everyday is so different that the ability to predict the next googly is difficult. You have to react to the near term, go through the tough overs and then be ready for the slog at the end of it,” he told BusinessLine. In an interview, the veteran banker said the bank is willing to lend and believes that customers will try and start repaying after the moratorium on term loan lifts. - Business Line
🍒 IDBI Bank now among India's five most valuable private banks : IDBI Bank Ltd is now the fifth most valued private lender replacing Bandhan Bank, Yes Bank and Indusind Bank after its shares surged over 100% in the last three weeks. In overall Indian listed banking sector, it is ranked sixth valued bank. Shares of IDBI Bank surged nearly 102% since 18 May. So far this year it gained 0.81%. The stock started surging after the lender announced a profit for March quarter after 13 consecutive quarter losses. On Monday, the scrip closed at ₹37.30 on BSE, down 2.9% from its previous close with market cap of ₹38,719 crore. HDFC Bank Ltd remains India's most valued bank with market value of ₹5.68 trillion followed by Kotak Mahindra Bank ( ₹2.65 trillion), ICICI Bank Ltd ( ₹2.31 trln), State Bank of India ( ₹1.68 trln) and Axis Bank Ltd ( ₹1.14 trln). IDBI Bank on 30 May reported a net profit of Rs135 crore in the quarter ended March as against a loss of Rs4,918 crore for Q4FY19. However, for FY20, it’s net loss stood at ₹12,887 crore against a loss of ₹15,116 crore in FY19. - Live Mint
🍒 Credit to MSMEs: Tamil Nadu tops in sanctions, disbursals so far : The 100 per cent Emergency Credit Line Guarantee Scheme (ECLGS) to support MSMEs in these troubled Covid-19 times is gathering pace with public sector banks (PSBs) having sanctioned loans worth ₹17,705.64 crore and disbursed as much as ₹8,320.24 crore as of June 5. Tamil Nadu has topped the chart in terms of MSMEs that has got the maximum sanction and disbursements in value terms, data tweeted by the Finance Minister’s Office showed. As many as 33,725 accounts in Tamil Nadu got sanctions worth ₹2,018.89 crore under the ECLGS, the data showed. So far ₹1,325.04 crore has been disbursed to 18,867 accounts, it added. The ECLGS scheme is a specific response to the unprecedented situation of Covid-19 and seeks to provide relief to the MSME sector by incentivising Member Lending Institutions (MLIs) to provide additional credit of up to ₹3-lakh crore at low cost, thereby enabling MSMEs to meet their operational liabilities and restart their business. - Business Line
🍒 Covid impact: Bank credit growth to touch multi-decade low of 0-1% in FY21, says Crisil : The sharp decline in economic activity due to the coronavirus outbreak may drag credit growth to a multi-decade low of 0-1% in FY21, credit rating agency Crisil said on Monday. “This is in sharp contrast to Crisil’s earlier expectation of 8-9% credit growth before the pandemic struck. In other words, the impact of the pandemic on credit growth will be a whopping 800 basis points (bps)," credit ratings agency said. As per the report, gross bank credit growth was at 3% in FY17, 9% in FY18, 11% in FY19, 6% (estimated) in FY20. Krishnan Sitaraman, senior director, Crisil Ratings said that the crisis is unprecedented and so will its economic fallout be – such as lower capex demand as well as lower discretionary spends, to name some – which will slow down credit offtake. “The corporate loan portfolio, which constitutes almost half of total credit, is expected to be the worst-hit, and de-grow this fiscal. The lockdown has led to significant disruption in operations with limited capacity utilisation across sectors," said Sitaraman. - Live Mint
🍒 Bad bank not a good idea unless key issues are addressed: Uday Kotak : Setting up of a bad bank to deal with the problem of mounting NPAs is not a good idea and will not yield desired results unless some key aspects like transparency and recovery rate are addressed, newly-elected president of CII Uday Kotak said. Citing an example of Stressed Assets Stabilization Fund (SASF), set up by erstwhile Industrial Development Bank of India (IDBI), Kotak said it did not work well. "I think we have tried the bad bank in the past. If you recall when IDBI had challenges in the early 2000s, there was an IDBI SASF, which was created. A part of non-performing assets (NPAs) of IDBI were moved to that SASF," Kotak told PTI in an interview. SASF was constituted by the Government of India pursuant to a provision in the Union Budget 2004-05, a special purpose vehicle (SPV) trust for acquiring NPAs of erstwhile IDBI. As many as 636 stressed and non-performing cases with aggregate loans of over ₹9,000 crore were hived off to this SPV. - Live Mint
🍒 IndusInd Bank promoters to buy more of its shares in secondary market : Private sector lender IndusInd Bank’s promoters – IndusInd International Holdings Ltd and IndusInd Ltd – have informed the bank management that they will buy additional stake in the bank from the secondary market. In a letter to the managing director and chief executive officer of the bank, the promoters have said, they will buy additional shares from open market in India, within the overall regulatory prescribed promoter equity holding cap. Currently, the promoters hold 14.68 per cent of the paid up share capital of IndusInd Bank. As per the banking regulations of the Reserve Bank of India (RBI), the promoters can buy 0.32 per cent additional stake in the bank as of now. According to RBI norms, a bank needs to bring down its promoter shareholding to 40 per cent in the first three years after starting operations. Thereafter, the bank needs to bring down its promoter shareholding to 20 per cent in 10 years and 15 per cent in 15 years. For IndusInd Bank, the promoter equity holding in the bank, as per the RBI norms, is capped at 15 per cent. - Business Standard
🍒 Banking to be a 'strategic sector', govt discussing privatising some PSBs : The Centre is likely to designate the banking/financial sector strategic under the new privatisation policy, the contours of which are nearing finalisation. A top government official said discussions had also been held on privatising some state-owned banks that are not on the consolidation list so far. According to the new privatisation policy, announced by Finance Minister Nirmala Sitharaman as part of the ‘Atmanirbhar Bharat’ package, the government will come up with a list of strategic sectors. In each strategic sector, no more than four state-owned companies will exist. After the latest round of consolidation of public sector banks, there are currently 12 PSBs. - Business Standard
🍒 Private banks delaying implementation of Rs 3-lakh crore MSME loan scheme: RSS-affiliated body tells FM : Private banks are dilly-dallying in implementing the Rs 3-lakh crore credit scheme for the MSME sector, RSS-affiliated industry body Laghu Udyog Bharti (LUB) informed Union Finance Minister Nirmala Sitharaman on Monday. Sitharaman had called Laghu Udyog Bharti general secretary Govind Lele to seek feedback on the implementation of Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector, which has been hit hard by the coronavirus-induced lockdown. Lele said he informed the minister that prominent public sector banks like State Bank of India and Bank of India have started extending loans as per the scheme.But at the branch level, three-year projections of revenue and profitability are sought before sanction, he said."Private banks are dilly-dallying in implementing the scheme. Hence, they are required to be immediately instructed to implement the scheme," Lele told the finance minister. He said to complete their target, bank officials are giving preference to high-value loan accounts therefore it is important that the government should instruct for proportionate sanctioning of funds in the scheme. - Business Standard
🍒 India is mulling a new way to bring its bad loan burden under control : India is considering a new category of alternate investment fund which will focus on acquiring stressed assets from banks and shadow lenders, a move aimed at resolving some of the highest bad debt in the world. The fund will be allowed to buy stressed assets directly from the banks and non-banking financial companies, people with knowledge of the matter said, asking not to be identified as the matter is not public. At present, investors can only access bad loans through securities issued by asset reconstruction companies, but the new fund category will allow them to do so directly. This will give foreign investors including global hedge funds easier access to the mountain of local bad debt. The discussions are at a very preliminary stage and the aim is to supplement the efforts of asset reconstruction companies in reducing the bad loans of these lenders, the officials said. A finance ministry spokesman was not immediately available for a comment. - economic times
🍒 Housing finance firms comfortably placed to meet debt obligations: Report ; Having raised nearly Rs 34,000 crore from the debt market and the National Housing Bank (NHB) in the past two months, housing finance companies (HFCs) are comfortably placed to meet their debt obligations despite lower collections, according to a report. The total maturing debt of HFCs for 2020-21 is estimated to be Rs 2.9-3.2 lakh crore, of which Rs 1.4 lakh crore is accounted for by debt markets, rating agency ICRA said in the report. "As HFCs raised approximately Rs 34,000 crore through debt market route and from NHB during April and May 2020, it is expected that most of the HFCs will maintain an adequate liquidity profile for meeting their debt obligations even with lower collection levels (50-80 per cent ) in the portfolio," ICRA Vice-President (Financial Sector Ratings) Supreeta Nijjar said in the report. - economic times
🍒 Complete IBC suspension for defaults may hurt creditors : The government's ordinance giving a perpetual holiday from the Insolvency and Bankruptcy Code (IBC) for defaults between March and September has left banks and investors in a lurch as it leaves them with only recovery options which have proven to be ineffective. Lawyers say that a complete suspension of IBC cases for defaults occuring during the six month period is regressive and takes away the fear of default from promoters. Particularly hit will be investors in market intruments like bonds, external commercial borrowings (ECBs) and trade credits which have recourse only to the delay prone ebt recovery tribunals (DRTs).Moreover, the illconceived ordinance could put India back on eyes of international investors who bet on legal frameworks for recoveries and hit fund raising through bond sale. "A perpetual suspension of a creditor’s right to file insolvency resolution applications for defaults occurring during the 6 month period starting March 25 is excessive. It means that for any default during this peiod the doors of the IBC are closed. Unsecured creditors anyway don't have recourse to SARFAESI which leaves them with only civil courts like DRT where the process is painfully time consuming," said Aashit Shah, partner, J Sagar Associates. - economic times
🍒 Bharti AXA Life renewal premium up 17 per cent : Bharti AXA Life Insurance, a private life insurer, has registered a 17 per cent growth in its renewal premium for the fiscal year 2019-20 at ₹1,359 crore, as against ₹1,164 crore registered in the previous financial year 2018-19. However, the Covid-19 induced lockdown impacted the performance in March — a crucial month for life insurance industry — bringing down the new business premium for 2019-20 to ₹829 crore from ₹911 crore in the previous fiscal. The total premium income grew 5 per cent in 2019-20 to ₹2,187 crore (₹2,076 crore). Parag Raja, Managing Director and Chief Executive Officer, Bharti AXA Life Insurance, said, “We grew and registered steady performance on many business parameters in the financial year 2019-20, despite the disruption caused by the spread of coronavirus pandemic and the subsequent lockdown in the crucial month of March, which adversely affected the domestic life insurance industry in terms of new business. Our new business premiums contracted mainly due to a shortfall in March, an important month for new business in the industry, which was triggered by the Covid19 lockdown and social distancing.” - Business Line
🍒 IL&FS sells 50% stake in GIFT City to Gujarat government for Rs 33 crore : Debt-laden IL&FS on June 4 said it has completed the sale of its 50 percent stake in Gujarat International Finance Tec-City (GIFT City) to the Gujarat government for Rs 32.71 crore. The stake sale will help the group pare its debt by Rs 1,230 crore. The group's current outstanding debt is around Rs 94,000 crore."IL&FS has duly received Rs 32.71 crore as equity value for shares as a sale consideration," it said.The stake sale was approved by the National Company Law Tribunal (NCLT) last month. - moneycontrol.com
🍒 PNB scam: Court allows confiscation of Nirav Modi’s assets : A special court here on Monday allowed confiscation of assets owned by diamantaire Nirav Modi, a key accused in the multi-crore Punjab National Bank (PNB) scam, under the Fugitive Economic Offenders Act (FEOA). This is the first order of confiscationpassed under the FEO Act,enacted two years ago, anywhere in the country. Special Judge V C Barde permitted the Enforcement Directorate (ED) to confiscate those assets owned by Nirav Modi that are not mortgaged or hypothecated to the PNB. The court, in its order, said the assets shall be attached by the ED under the provisions of the FEO Act within one month. After that, the said properties/assets shall stand confiscated to the Central government under section 12(2) and 8 of the FEO Act, the judge said. Senior advocate Nitesh Jain from Shardul Amarchand Mangaldas law firm, who appeared for PNB, said the court has allowed those assets that have not been mortgaged, secured or hypothecated to the bank to be confiscated. - Financial Express
🍒 Govt yet to put in place SPV structure for Rs 30,000-crore NBFC liquidity scheme : Nearly a month after Finance Minister Nirmala Sitharaman announced the Rs 30,000 crore special liquidity scheme for non-banking financial companies (NBFCs), the government is yet to put in place the structure to operationalise the scheme. According to the details available so far, the scheme was supposed to be implemented through a special purpose vehicle (SPV) set up by a large PSU bank. This SPV will issue bonds guaranteed by the government which will be purchased by the Reserve Bank of India (RBI). The money will then be used by the SPV to acquire the debt of at least investment grade of short duration (residual maturity of up to three months) of eligible NBFCs / HFCs, the government had said. This scheme was announced on May 13 and the details of the scheme were announced on May 20 after Cabinet approval. - Moneycontrol.com
🍒 Soon, ‘Treasury Single Account’ for all ministries, departments : The government mulls putting in place a ‘Treasury Single Account’ for all Central ministries and departments to help lower the cost of borrowing and enhance efficiency in fund flows. “Pilot is on to implement Single Treasury Account for some autonomous bodies. Based on the outcome, the effort would be to use the system for all the Central Government ministries and departments,” a senior Finance Ministry official told BusinessLine. It is going to be a long-drawn process as it needs much bigger capacity of the Reserve Bank of India, the official said, adding, alternatively, some other bank/banks could be designated along with RBI. - Business Line
🍒 IRDAI asks insurers to hasten processing of claims related to cyclone Nisarga : All general insurers and standalone health insurers should take immediate steps to register and quickly dispose off all claims related to cyclone Nisarga. In the guidelines issued on Monday, the Insurance Regulatory and Development Authority of India (IRDAI) asked insurance companies to appoint a nodal officer for the affected States. The nodal officer should be coordinating the receipt and processing and settlement of all eligible claims. Similarly a district nodal officer should also be appointed. “If there are any death claims and there is difficulty in obtaining a death certificate due to a non-recovery body, the process followed in the case of Jammu and Kashmir floods may be followed,” IRDAI informed in the circular. In view of the Covid-19 pandemic, insurers should also encourage policyholders to use digital means, the regulator said. - Business Line
🍒 Nifty fails to hold 10,200, Sensex erases morning gains; : BSE Sensex and Nifty 50 traded volatile in Monday’s session and settled a tad higher led by buying private bank stocks and financials. The top index contributors were Infosys, Axis Bank, Bajaj Finance, TCS and Hindustan Unilever (HUL). The 30 share index Sensex fell 558 points from day’s high to end 83 points or 0.24 per cent up at 34,370. While the broader Nifty 50 index slipped over 160 points from intraday’s high to settled at 10,167. “The market sentiment remained muted in the afternoon session as profit-booking by traders, after an almost 1,200 point rally in Nifty since last week, led to a decline in the markets,” said Narendra Solanki, Head Fundamental Research at Anand Rathi Shares and Stock Brokers. IndusInd Bank shares gain 7%: IndusInd Bank was the top Sensex gainer after promoters of the bank announced to acquire shares of the bank from the secondary market. The other gainers on the index were Axis Bank, Bajaj Finance, ONGC and Titan Company. On the other hand, M&M was the top Sensex laggard, down 2.73 per cent. Among other losers were UltraTech Cement, HDFC Bank, Tata Steel, Nestle India and ITC.
🍒 Rupee settles 3 paise higher at 75.55 against US dollar : The rupee settled on a muted note, up 3 paise, at 75.55 (provisional) against the US dollar on Monday as dollar-buying by banks as well as importers and rebounding crude prices restricted gains of the local unit. Forex traders said positive domestic equities, sustained foreign fund flows and the revival of business activity are supporting the rupee, but dollar demand and rising crude oil prices are weighing on the domestic unit.
🍒 Gold slips Rs 217 per 10 gram, silver remains flat : Gold prices slipped Rs 217 to Rs 46,479 per 10 gram in the Mumbai bullion market on the back of a strengthening dollar against the rupee. The precious metal had come under sharp selling pressure on June 5 after the US non-farm payrolls data showed a surprise rise of 2.5 million jobs in May, boosting optimism about an economic recovery and denting gold's safe-haven appeal. The rate of 10 gram 18-, 22- and 24-carat gold in Mumbai was Rs 34,859, Rs 42,575 and Rs 46,479 plus 3 percent GST. Silver prices remained unchanged at Rs 47,800 per kg from its closing on June 5.
🍒 Shares of Central Bank of India in Stock Market : 94% of moneycontrol users recommend buying Central Bank of India Shares. In BSE, shares closed at Rs.16.76 against Prev Close Rs.16.47. In NSE, shares closed at Rs.16.75 against Prev Close Rs.16.45...
… Have a Good day.
No comments:
Post a Comment