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☕ 12.07.2020: Today's Banking / Financial News at a Glance
🍒 Banks need to raise capital on anticipatory basis: RBI Governor Shaktikanta Das : Banks need to raise capital on anticipatory basis to build up adequate capital buffers to mitigate risks arising out of coronavirus outbreak, RBI Governor Shaktikanta Das said on Saturday. He said building buffers and raising capital will be crucial not only to ensure credit flow but also to build resilience in the financial system. "In such a situation, it has become a lot more important that the banks have to improve their governance, sharpen their risk management skills and banks have to raise capital on an anticipatory basis instead of waiting for a situation to arise."Proactively, it is necessary for both public and private sector banks to build up adequate capital buffers," Das said at SBI's banking and economic conclave.The economic impact of the pandemic - due to lock-down and anticipated post lock-down compression in economic growth - may result in higher non-performing assets and capital erosion of banks, he said.A recapitalisation plan for public sector and private banks has, therefore, become necessary, he added. For the five years - between 2015-16 and 2019-20 - the government had infused a total of Rs 3.08 lakh crore in public sector banks. - economic times
🍒 Union Bank of India, UCO Bank reduce MCLR by 20 bps and 10 bps : Union Bank of India and UCO Bank have reduced their marginal cost of funds-based lending rates (MCLR) by 20 basis points (bps) and 10 bps, respectively, across all tenors. The revised rates in case of Union Bank will come into effect from July 11 and UCO Bank from July 10. In case of Union Bank, the revised one-year rate will be 7.4 per cent, down from 7.6 per cent. UCO Bank’s revised one-year MCLR will be 7.50 per cent, down from the current 7.60 per cent. - Business Standard
🍒 Coronavirus will result in high NPAs and capital erosion: RBI Governor : RBI has taken several measures to protect country's financial system and support the economy amid coronavirus crisis, Governor Shaktikanta Das said on Saturday. Addressing the seventh SBI Banking & Economics Conclave, through a video call, he said that the top most priority for RBI is growth, while financial stability is equally important. "RBI has strengthened its offsite surveillance mechanism to identify emerging risks. RBI is engaged with all stakeholders for resolution for Punjab and Maharashtra Cooperative Bank," Das said. On RBI policy, he said that the action for medium-term will require a careful assessment of how the crisis unfolds. "Coronavirus pandemic will result in high NPAs and capital erosion. Building buffers, raising capital crucial for ensuring credit flows and to build resilience in financial system," he said. - Business Line
🍒 RBI is trying to find workable solution for PMC bank: Governor Shaktikanta Das : Scam-hit Punjab and Maharashtra Co-operative (PMC) Bank’s losses are very high, eroding deposits by more than 50 per cent, according to Governor Shaktikanta Das. The Reserve Bank of India (RBI) is engaged with all stakeholders to find out a workable solution for the Bank, the Governor said the SBI’s 7th Banking and Economic Conclave. PMC Bank plunged into a crisis due to the massive fraud perpetrated by the promoters of a real estate group and some bank officials. Harried depositors of PMC Bank have been running from pillar to post ever since the Bank was placed under Directions (in late September 2019) to get their money back. They want the bank either revived or merged with another bank. - Business Line
🍒 RBI calls for setting up resolution corporation for failed financial firms : eserve Bank of India governor Shaktikanta Das on Saturday called for establishing a resolution corporation to revive failed or stressed financial entities. Addressing the 7th SBI Banking & Economics Conclave, via video conference, Das said such an agency will ensure that a financial firm does not end up being liquidated, as depositors are more likely get a better value in the resolution of a bank as a going concern than in liquidation. The resolution corporation was part of the Financial Resolution and Deposit Insurance Bill, 2017, which was later withdrawn. "For banks and other financial institutions, traditionally the approach has been to merge a failed bank with a larger bank. While that definitely protects the depositors’ interest , it also tends to pull down the balance sheet of the larger bank to which the failed bank is merged...We need legislative backing to have some kind of resolution corporation which has to deal with resolution and revival of stressed financial firms," Das said. - Live Mint
🍒 PSBs to do Covid heavy lifting, will soon need capital support: Experts : State-run banks may soon need government support as the economic fallout from the Covid-19 pandemic could render many borrowers unable to pay back loans, increasing the bad loan burden. Only few such as State Bank of India (SBI) have the capacity to raise money from the market. Fitch Ratings estimates that under a moderate stress scenario, Indian banks are around $15 billion short of the capital required to meet a 10 per cent weighted-average common equity tier 1 ratio.The gap rises to about $58 billion in FY22 under a high-stress scenario, where economic growth fails to sustainably recover despite a phased opening up of the economy. State-run banks are likely to account for the bulk of the capital shortfall, as large private banks should stay above the minimum requirements, despite some capital erosion in a high-stress scenario, Fitch says. - Business Standard
🍒 Indian economy showing signs of returning to normalcy: RBI Governor : The Indian economy has started showing signs of normalcy with ease in lockdown restrictions across the country, RBI Governor Shaktikanta Das said on Saturday. He added that post containment of Covid-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures.The financial sector should return to normal functioning without relying on regulatory relaxation as the new norm, he added. “Indian economy has started showing signs of going back to normalcy after easing of restrictions,” Governor Das said at the 7th SBI Banking and Economics Conclave. While the multi-pronged approach of the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depends on the Covid-19 curve, he said. - Business Line
🍒 Will be mindful while dealing with highly-leveraged companies: Uday Kotak : Billionaire Uday Kotak has raised a red flag on the vulnerable capital position of Indian banks if the Covid-19-induced economic slowdown leads to a surge in bad loans, and has laid out a different strategy for his bank that would be choosy on sectors and decline loans to companies with high operating costs. The perceptions of credit rating agencies could be ignored while the focus should be on economic growth for the next fiscal and after, Kotak said in his annual letter to Kotak Mahindra Bank shareholders.The banking industry, with a combined loan book of Rs 100 lakh crore, has to be conscious of the damage the lockdown and moratorium could cause to their balance sheets. “The total capital of all banks in India is about ₹11 to 12 lakh crore,” wrote Kotak, described by Bloomberg as Asia’s richest banker. “So, if 4-5% of loans turn bad due to Covid, the capital position of the banking sector will get impacted by 40%.” - economic times
🍒 PMC bank: Wadhawans bail rejected, offence grave says court: Economic offence is committed with "cool calculations" for personal profit regardless of consequences to community and need to be viewed seriously, observed a court here while refusing bail to HDIL promoters Rakesh and Sarang Wadhawan. The Wadhawan duo are accused in the multi-crore rupee Punjab & Maharashtra Cooperative (PMC) Bank scam case. They had sought bail claiming no particular section of banking regulations was violated by them, contending that allegations of misdoings were against PMC officials and not them.The prosecution opposed the plea, saying the Wadhawans and other top officials of the bank were "masterminds" and key beneficiariesof the fraud at PMC Bank, and the accused duo also commanded control over the bank.Accepting the prosecution's arguments and perusing evidence on record, Judge SN Yadav rejected their bail on Thursday. "A murder may be committed in the heat of moment upon passion being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community, " he observed. - economic times
🍒 TNGB on an aggressive growth path; reports ₹150 crore profit : Tamil Nadu Grama Bank (TNGB) clocked a net profit of ₹150 crore in its first year of operation. The Salem-headquartered bank is an amalgamated entity of Pallava Grama Bank and Pandiyan Grama Bank and is sponsored by Indian Bank.TNGB has a network of 632 branches across the state, except Chennai.TNGB Chairman S Selvaraj has in a statement said that the bank’s turnover touched ₹25,000 crore, and gross profit stood at ₹438 crore.Net NPA is less than one per cent at 0.87 per cent to the total loan outstanding. Besides offering banking services to the people in rural pockets, the bank is also sensitising them about the various government schemes, the Chairman said. - Business Line
🍒 NCLT approves Deccan Value Investors' bid for Amtek Auto: The National Company Law Tribunal (NCLT) has approved a Rs 2,700-crore bid by Deccan Value Investors (DVI) for the debt-ridden Amtek Auto Ltd. The Chandigarh bench of the NCLT has approved the resolution plan by DVI for the auto components maker, which has a total debt of around Rs 12,700 crore. The tribunal observed that the resolution plan submitted by DVI fulfils all the requirements of regulations of the corporate insolvency resolution process and has been approved by the Committee of Creditors (CoC)."In view of the above, we accept and approve the Committee of Creditors approved resolution plan of Resolution Applicant-DVI," said a bench of NCLT members Pradeep R Sethi and Ajay Kumar Vatsavayi in its order passed on July 9, 2020. It has also directed to create a committee of five persons for implementation of the plan. - economic times
🍒 PNB Housing Finance to seek shareholders' nod to raise up to ₹45,000 cr : PNB Housing Finance said it will seek shareholders' approval next month to raise up to ₹45,000 crore through debt securities. The company's annual general meeting is scheduled to take place on August 5, 2020.Shareholders are being requested to authorise the board of directors to offer, from time to time, the subscription of redeemable, secured/unsecured non-convertible debentures (NCDs) aggregating up to ₹45,000 crore in one or more tranches, PNB Housing Finance said in a regulatory filing.The housing finance company may issue the bonds through private placement or by way of public issue. As on March 31, 2020, bonds/non-convertible debentures constitute significant portion of the total borrowings of the company, it said. - Live Mint
🍒 Irdai gives go ahead to 29 insurers to market Corona Kavach policy : Amid rapid increase in coronavirus cases in the country, the regulator IRDAI has given green signal to 29 general and health insurers to launch short-term ‘Corona Kavach' health insurance policies to cover medical expenses of coronavirus disease. Several insurers have announced the launch of the ‘Corona Kavach' policies for three -and-a-half months; six-and-a-half months; and nine-and-a-half months with sum insured ranging from Rs 50,000 to Rs 5 lakh (in multiples of Rs 50,000).The 29 general and health insurance companies that have been allowed to market Corona Kavach Policy include state-owned and private insurers like Oriental Insurance, National Insurance, SBI General Insurance, ICICI Lombard, HDFC ERGO, Max Bupa, Bajaz Allianz, Bharti AXA and Tata AIG. Launching the product, Bajaj Allianz General Insurance said premium for the base cover ranges between Rs 447 to Rs 5,630 excluding GST, which varies depending on the age of the person, sum insured and policy period opted. - economic times.
All the Best… Have a Good day.
☕ 12.07.2020: Today's Banking / Financial News at a Glance
🍒 Banks need to raise capital on anticipatory basis: RBI Governor Shaktikanta Das : Banks need to raise capital on anticipatory basis to build up adequate capital buffers to mitigate risks arising out of coronavirus outbreak, RBI Governor Shaktikanta Das said on Saturday. He said building buffers and raising capital will be crucial not only to ensure credit flow but also to build resilience in the financial system. "In such a situation, it has become a lot more important that the banks have to improve their governance, sharpen their risk management skills and banks have to raise capital on an anticipatory basis instead of waiting for a situation to arise."Proactively, it is necessary for both public and private sector banks to build up adequate capital buffers," Das said at SBI's banking and economic conclave.The economic impact of the pandemic - due to lock-down and anticipated post lock-down compression in economic growth - may result in higher non-performing assets and capital erosion of banks, he said.A recapitalisation plan for public sector and private banks has, therefore, become necessary, he added. For the five years - between 2015-16 and 2019-20 - the government had infused a total of Rs 3.08 lakh crore in public sector banks. - economic times
🍒 Union Bank of India, UCO Bank reduce MCLR by 20 bps and 10 bps : Union Bank of India and UCO Bank have reduced their marginal cost of funds-based lending rates (MCLR) by 20 basis points (bps) and 10 bps, respectively, across all tenors. The revised rates in case of Union Bank will come into effect from July 11 and UCO Bank from July 10. In case of Union Bank, the revised one-year rate will be 7.4 per cent, down from 7.6 per cent. UCO Bank’s revised one-year MCLR will be 7.50 per cent, down from the current 7.60 per cent. - Business Standard
🍒 Coronavirus will result in high NPAs and capital erosion: RBI Governor : RBI has taken several measures to protect country's financial system and support the economy amid coronavirus crisis, Governor Shaktikanta Das said on Saturday. Addressing the seventh SBI Banking & Economics Conclave, through a video call, he said that the top most priority for RBI is growth, while financial stability is equally important. "RBI has strengthened its offsite surveillance mechanism to identify emerging risks. RBI is engaged with all stakeholders for resolution for Punjab and Maharashtra Cooperative Bank," Das said. On RBI policy, he said that the action for medium-term will require a careful assessment of how the crisis unfolds. "Coronavirus pandemic will result in high NPAs and capital erosion. Building buffers, raising capital crucial for ensuring credit flows and to build resilience in financial system," he said. - Business Line
🍒 RBI is trying to find workable solution for PMC bank: Governor Shaktikanta Das : Scam-hit Punjab and Maharashtra Co-operative (PMC) Bank’s losses are very high, eroding deposits by more than 50 per cent, according to Governor Shaktikanta Das. The Reserve Bank of India (RBI) is engaged with all stakeholders to find out a workable solution for the Bank, the Governor said the SBI’s 7th Banking and Economic Conclave. PMC Bank plunged into a crisis due to the massive fraud perpetrated by the promoters of a real estate group and some bank officials. Harried depositors of PMC Bank have been running from pillar to post ever since the Bank was placed under Directions (in late September 2019) to get their money back. They want the bank either revived or merged with another bank. - Business Line
🍒 RBI calls for setting up resolution corporation for failed financial firms : eserve Bank of India governor Shaktikanta Das on Saturday called for establishing a resolution corporation to revive failed or stressed financial entities. Addressing the 7th SBI Banking & Economics Conclave, via video conference, Das said such an agency will ensure that a financial firm does not end up being liquidated, as depositors are more likely get a better value in the resolution of a bank as a going concern than in liquidation. The resolution corporation was part of the Financial Resolution and Deposit Insurance Bill, 2017, which was later withdrawn. "For banks and other financial institutions, traditionally the approach has been to merge a failed bank with a larger bank. While that definitely protects the depositors’ interest , it also tends to pull down the balance sheet of the larger bank to which the failed bank is merged...We need legislative backing to have some kind of resolution corporation which has to deal with resolution and revival of stressed financial firms," Das said. - Live Mint
🍒 PSBs to do Covid heavy lifting, will soon need capital support: Experts : State-run banks may soon need government support as the economic fallout from the Covid-19 pandemic could render many borrowers unable to pay back loans, increasing the bad loan burden. Only few such as State Bank of India (SBI) have the capacity to raise money from the market. Fitch Ratings estimates that under a moderate stress scenario, Indian banks are around $15 billion short of the capital required to meet a 10 per cent weighted-average common equity tier 1 ratio.The gap rises to about $58 billion in FY22 under a high-stress scenario, where economic growth fails to sustainably recover despite a phased opening up of the economy. State-run banks are likely to account for the bulk of the capital shortfall, as large private banks should stay above the minimum requirements, despite some capital erosion in a high-stress scenario, Fitch says. - Business Standard
🍒 Indian economy showing signs of returning to normalcy: RBI Governor : The Indian economy has started showing signs of normalcy with ease in lockdown restrictions across the country, RBI Governor Shaktikanta Das said on Saturday. He added that post containment of Covid-19, a very careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures.The financial sector should return to normal functioning without relying on regulatory relaxation as the new norm, he added. “Indian economy has started showing signs of going back to normalcy after easing of restrictions,” Governor Das said at the 7th SBI Banking and Economics Conclave. While the multi-pronged approach of the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depends on the Covid-19 curve, he said. - Business Line
🍒 Will be mindful while dealing with highly-leveraged companies: Uday Kotak : Billionaire Uday Kotak has raised a red flag on the vulnerable capital position of Indian banks if the Covid-19-induced economic slowdown leads to a surge in bad loans, and has laid out a different strategy for his bank that would be choosy on sectors and decline loans to companies with high operating costs. The perceptions of credit rating agencies could be ignored while the focus should be on economic growth for the next fiscal and after, Kotak said in his annual letter to Kotak Mahindra Bank shareholders.The banking industry, with a combined loan book of Rs 100 lakh crore, has to be conscious of the damage the lockdown and moratorium could cause to their balance sheets. “The total capital of all banks in India is about ₹11 to 12 lakh crore,” wrote Kotak, described by Bloomberg as Asia’s richest banker. “So, if 4-5% of loans turn bad due to Covid, the capital position of the banking sector will get impacted by 40%.” - economic times
🍒 PMC bank: Wadhawans bail rejected, offence grave says court: Economic offence is committed with "cool calculations" for personal profit regardless of consequences to community and need to be viewed seriously, observed a court here while refusing bail to HDIL promoters Rakesh and Sarang Wadhawan. The Wadhawan duo are accused in the multi-crore rupee Punjab & Maharashtra Cooperative (PMC) Bank scam case. They had sought bail claiming no particular section of banking regulations was violated by them, contending that allegations of misdoings were against PMC officials and not them.The prosecution opposed the plea, saying the Wadhawans and other top officials of the bank were "masterminds" and key beneficiariesof the fraud at PMC Bank, and the accused duo also commanded control over the bank.Accepting the prosecution's arguments and perusing evidence on record, Judge SN Yadav rejected their bail on Thursday. "A murder may be committed in the heat of moment upon passion being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community, " he observed. - economic times
🍒 TNGB on an aggressive growth path; reports ₹150 crore profit : Tamil Nadu Grama Bank (TNGB) clocked a net profit of ₹150 crore in its first year of operation. The Salem-headquartered bank is an amalgamated entity of Pallava Grama Bank and Pandiyan Grama Bank and is sponsored by Indian Bank.TNGB has a network of 632 branches across the state, except Chennai.TNGB Chairman S Selvaraj has in a statement said that the bank’s turnover touched ₹25,000 crore, and gross profit stood at ₹438 crore.Net NPA is less than one per cent at 0.87 per cent to the total loan outstanding. Besides offering banking services to the people in rural pockets, the bank is also sensitising them about the various government schemes, the Chairman said. - Business Line
🍒 NCLT approves Deccan Value Investors' bid for Amtek Auto: The National Company Law Tribunal (NCLT) has approved a Rs 2,700-crore bid by Deccan Value Investors (DVI) for the debt-ridden Amtek Auto Ltd. The Chandigarh bench of the NCLT has approved the resolution plan by DVI for the auto components maker, which has a total debt of around Rs 12,700 crore. The tribunal observed that the resolution plan submitted by DVI fulfils all the requirements of regulations of the corporate insolvency resolution process and has been approved by the Committee of Creditors (CoC)."In view of the above, we accept and approve the Committee of Creditors approved resolution plan of Resolution Applicant-DVI," said a bench of NCLT members Pradeep R Sethi and Ajay Kumar Vatsavayi in its order passed on July 9, 2020. It has also directed to create a committee of five persons for implementation of the plan. - economic times
🍒 PNB Housing Finance to seek shareholders' nod to raise up to ₹45,000 cr : PNB Housing Finance said it will seek shareholders' approval next month to raise up to ₹45,000 crore through debt securities. The company's annual general meeting is scheduled to take place on August 5, 2020.Shareholders are being requested to authorise the board of directors to offer, from time to time, the subscription of redeemable, secured/unsecured non-convertible debentures (NCDs) aggregating up to ₹45,000 crore in one or more tranches, PNB Housing Finance said in a regulatory filing.The housing finance company may issue the bonds through private placement or by way of public issue. As on March 31, 2020, bonds/non-convertible debentures constitute significant portion of the total borrowings of the company, it said. - Live Mint
🍒 Irdai gives go ahead to 29 insurers to market Corona Kavach policy : Amid rapid increase in coronavirus cases in the country, the regulator IRDAI has given green signal to 29 general and health insurers to launch short-term ‘Corona Kavach' health insurance policies to cover medical expenses of coronavirus disease. Several insurers have announced the launch of the ‘Corona Kavach' policies for three -and-a-half months; six-and-a-half months; and nine-and-a-half months with sum insured ranging from Rs 50,000 to Rs 5 lakh (in multiples of Rs 50,000).The 29 general and health insurance companies that have been allowed to market Corona Kavach Policy include state-owned and private insurers like Oriental Insurance, National Insurance, SBI General Insurance, ICICI Lombard, HDFC ERGO, Max Bupa, Bajaz Allianz, Bharti AXA and Tata AIG. Launching the product, Bajaj Allianz General Insurance said premium for the base cover ranges between Rs 447 to Rs 5,630 excluding GST, which varies depending on the age of the person, sum insured and policy period opted. - economic times.
All the Best… Have a Good day.
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