05.07.2020: Today's Banking / Financial News at a Glance
🍒 NPA crisis: When it comes to loan losses, PSBs are far ahead of private banks : The March quarter was good for some public sector banks (PSBs), as many turned profitable after posting losses for several quarters in a row. Non-performing assets (NPAs), too, declined for most of them. Even so, the twelve public-sector banks (PSBs) recorded gross NPAs worth Rs 5.47 lakh crore, more than twice the size of the bad-loan pile of 19 private banks, which stood at Rs 2.04 lakh crore, showed data from Capitaline. The actual value of bad assets in PSBs is likely to be much higher as Q4 results for six PSBs, which were merged with other banks during the quarter, have not been made public. Almost all PSBs saw a decline in absolute GNPA numbers, with the exception of Indian Bank and Canara Bank. The sharpest slide in NPA numbers was seen in the case of Bank of Maharashtra (BoM), Indian Overseas Bank (IOB) and Uco Bank, where NPAs fell 23%, 16% and 13% respectively. State Bank of India’s (SBI) gross NPAs fell 6.6% and Bank of Baroda’s (BoB) fell 5%. At the same time, BoB’s bad-loan portfolio shot up 44% on a year-on-year basis, reflecting the bank’s merger with Dena Bank and Vijaya Bank, and possibly foreshadowing asset quality problems in the other four banks which have been amalgamated with six others, effective April 1, 2020. The 12 PSBs together saw a 5% sequential decline in their gross NPAs, while the private pack’s NPA pile fell 6% from the end of the December quarter. This trend may not continue through FY21 as the spread of Covid and the associated lockdowns are expected to exacerbate the stress on banks’ books. Analysts said that the pandemic could have the effect of launching a fresh cycle of bad loans in the Indian banking system. In a recent report, India Ratings & Research said the new cycle of stress could this time come from both corporate and non-corporate segments. “As per India Ratings’ analysis, COVID-19 may drive total slippages of up to Rs 5.5 lakh crore (5.7%) in FY21. The credit costs for the system could increase up to Rs 2.7 lakh crore, of which around 70% could be attributed to the PSBs,” analysts at India Ratings said, adding that if the accelerated provisioning regime is reinstated, then there could be additional credit costs of up to 0.6% for the PSBs. - Financial Express
🍒 India's largest pvt sector lender, HDFC Bank lends Rs 10,800 cr in Q1 FY21 : Country’s largest private sector lender HDFC Bank has lent Rs 10,800 crore in the first quarter ended June 2020 (Q1Fy21), a period marked by lockdowns and partial easing. The Bank’s advances expanded by 21 per cent, on year on year basis, to approximately Rs 10,04,500 crore as of June 30, 2020. The outstanding loans were at 8,29,700 crore as of June 30, 2019 and Rs 9,93,700 crore as of March 31, 2020. During the quarter ended June 30, 2020, the Bank purchased loans aggregating Rs 1,376 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited, according to filing with BSE. Meanwhile, rating agency CARE Ratings in its review said the overall credit growth in the Indian banking sector has remained flat for the fortnight ending June 19, 2020. The credit growth has been nearly at half the level during the last two fortnights at 6.2 per cent, compared to last year’s level of 12 per cent (June 21, 2019) and 12.3 per cent (June 07, 2019). - Business Standard
🍒 RBI has its hands full with Urban Cooperative Banks now unambiguously its responsibility : Last Wednesday (24 June 2020), government announced its decision to bring Urban Co-operative Banks (UCBs) and Multi-State Co-operative Banks totalling 1,482 and 58 respectively as on date, under the supervisory power of the Reserve Bank of India (RBI). This decision, in accordance with an announcement in the Budget speech earlier this year, ‘will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crore will stay safe.’ Wonderful! Except that there’s one fly in the ointment! Rather, two! UCBs were always under RBI’s supervisory control and that has not prevented more than one UCB going up. Two, RBI’s supervisory track record has often fallen short in recent times. According to the Bank’s website, RBI ‘regulates and supervises the banking functions of UCBs under the provisions of Banking regulation Act, 1949. Within the Reserve Bank, a separate department, viz. Urban Banks Department, has been entrusted with these functions. Urban Banks Department functions in close coordination with other regulators viz., Registrar of Cooperative Societies and Central Registrar of Cooperative Societies. - financial express
🍒 Bank deposits growth slides for first time in three months; customers stay away from taking loans : The value of bank deposits in June 2020 fell for the first time in the last three months. After continuously rising from 7.9 per cent in April to 11.3 per cent in June, the growth of bank deposits slid to 11 per cent in the fortnight ending-June 19, according to the RBI’s weekly supplement. After the nationwide lockdown was announced in the last week of March 2020, deposits in banks started to pick up due to the government’s borrowings. Various rating agencies, including Care Ratings and India Ratings and Research (Ind-Ra), had attributed a rise in overall borrowings of both the central and state governments, rather than increased savings, for the spike in deposits. While the deposits grew only 1 percentage point faster than the year-ago level in the fortnight ending-June 19, the growth of bank loans nearly halved from 12 per cent to 6.2 per cent on-year in the same duration. Since the last year 2019, the Reserve Bank of India has been continuously cutting the repo rate to make loans cheaper for consumers. However, despite the efforts, subdued demand in the market has kept borrowers away from taking loans. - financial express
🍒 COVID-19 caused huge demand destruction overseas: Bankers : The COVID-19 pandemic has caused "demand destruction" in the overseas markets and it is likely to continue for the next few quarters, eminent bankers said on Saturday. The disruption will last for six to eight months befor business starts to bounce back, they said."There is a huge demand destruction in the overseas markets," MD of Exim Bank David Rasquinha said at a webinar.He said in the years 2017, 2018 and 2019, Indian merchandise exports were robust, while exports of services were even stronger."This was at a time when the Indian rupee had depreciated severely. In March 2020, export growth had fallen due to last-minute invoicing by the exporters, which was soon followed by the lockdown," Rasquinha said. India is a consumption-driven economy where 55 per cent of the spending is on essentials and the balance being discretionary, he said. - economic times
🍒 Equitas Small Finance Bank launches video KYC account : Equitas Small Finance Bank Limited has launched a facility of opening account through video KYC . With this, any person anywhere in the country can open a savings account with Equitas Small Finance Bank, complete the full KYC through video with the Bank employee. “The new video KYC account is a step forward towards our vision. This will ensure contact less, no branch visit and hassle free account opening and transactions for customers," Murali Vaidyanathan, President & Country Head - Branch Banking, Liabilities, Product & Wealth, Equitas Small Finance Bank Limited, said. “The customer has to submit their Aadhaar and PAN details on the video call for bank to verify,"the lender said in a release. - Live Mint
🍒 Indiabulls Housing Finance Q4 net drops 86% to Rs 137 crore on higher provisioning : Indiabulls Housing Finance on Friday reported an 86 percent plunge in consolidated net profit at Rs 137 crore for the March quarter due to higher provisioning. The non-banking finance company had posted a net profit of Rs 1,006 crore during the corresponding January-March period of the preceding fiscal.Total income (consolidated) during the March quarter also fell to Rs 2,954 crore as against Rs 4,344 crore in the same period of 2018-19, Indiabulls Housing Finance said in a regulatory filing. The company said it has chosen to adopt a conservative approach on account of macro uncertainties resulting from COVID-19 and made provisions for 1 percent of its loan book, that is Rs 700 crore. "Adjusted for the COVID-19 related provisions... normalized PAT for the company for the quarter is Rs 841 crore, and for full FY20 is Rs 2,904 crore," it said in a release. - moneycontrol.com
🍒 Anil Ambani’s Reliance Infra defaults seven times to Yes Bank since February : Reliance Infrastructure, led by Anil Ambani, has defaulted seven times since February 1, 2020, in making payments for loans given by Yes bank, as per different disclosures made to the stock exchanges by the company. Similarly, the company had defaulted four times in making payments to Jammu and Kashmir Bank (J&K Bank) and SREI Equipment Finance, the disclosures showed. Reliance Infrastructure could not make timely payments on two term loans of Rs 3,627 crore and Rs 945 crore availed from Yes Bank. Likewise, it had defaulted in making payments on loans of Rs 75 crore from J&K Bank and Rs 27 crore from SREI Equipment Finance. Reliance Infrastructure’s total borrowings from financial creditors stood at Rs 4,675 crore as on May 31, 2020, which included loans from Yes Bank, J&K Bank and SREI Equipment Finance. The total debt of the company, including all short- and long-term loans amounts to Rs 6,325 crore. - Financial Express
🍒 I-T dept amends tax challan to include non-resident e-commerce suppliers for equalisation levy : The income tax department has brought in changes to the challan for paying the equalisation levy by expanding its scope to include non-resident e-commerce players supplying goods or services online. Over two dozen non-resident tech companies would come under the purview of the equalisation levy which was introduced in Budget 2020-21 and has come into effect from April 1, 2020. Its first installment is due on July 7.The 2 percent tax would be levied on consideration received by such companies from e-commerce supply or services. The income tax department has modifies challan ITNS 285 (relating to payment of equalisation levy) to enable payment of the first installment by non-resident e-commerce operators. The amended challan now adds "e-commerce operator for e-commerce supply or services" under 'Type of Deductor - Moneycontrol.com
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🍒 NPA crisis: When it comes to loan losses, PSBs are far ahead of private banks : The March quarter was good for some public sector banks (PSBs), as many turned profitable after posting losses for several quarters in a row. Non-performing assets (NPAs), too, declined for most of them. Even so, the twelve public-sector banks (PSBs) recorded gross NPAs worth Rs 5.47 lakh crore, more than twice the size of the bad-loan pile of 19 private banks, which stood at Rs 2.04 lakh crore, showed data from Capitaline. The actual value of bad assets in PSBs is likely to be much higher as Q4 results for six PSBs, which were merged with other banks during the quarter, have not been made public. Almost all PSBs saw a decline in absolute GNPA numbers, with the exception of Indian Bank and Canara Bank. The sharpest slide in NPA numbers was seen in the case of Bank of Maharashtra (BoM), Indian Overseas Bank (IOB) and Uco Bank, where NPAs fell 23%, 16% and 13% respectively. State Bank of India’s (SBI) gross NPAs fell 6.6% and Bank of Baroda’s (BoB) fell 5%. At the same time, BoB’s bad-loan portfolio shot up 44% on a year-on-year basis, reflecting the bank’s merger with Dena Bank and Vijaya Bank, and possibly foreshadowing asset quality problems in the other four banks which have been amalgamated with six others, effective April 1, 2020. The 12 PSBs together saw a 5% sequential decline in their gross NPAs, while the private pack’s NPA pile fell 6% from the end of the December quarter. This trend may not continue through FY21 as the spread of Covid and the associated lockdowns are expected to exacerbate the stress on banks’ books. Analysts said that the pandemic could have the effect of launching a fresh cycle of bad loans in the Indian banking system. In a recent report, India Ratings & Research said the new cycle of stress could this time come from both corporate and non-corporate segments. “As per India Ratings’ analysis, COVID-19 may drive total slippages of up to Rs 5.5 lakh crore (5.7%) in FY21. The credit costs for the system could increase up to Rs 2.7 lakh crore, of which around 70% could be attributed to the PSBs,” analysts at India Ratings said, adding that if the accelerated provisioning regime is reinstated, then there could be additional credit costs of up to 0.6% for the PSBs. - Financial Express
🍒 India's largest pvt sector lender, HDFC Bank lends Rs 10,800 cr in Q1 FY21 : Country’s largest private sector lender HDFC Bank has lent Rs 10,800 crore in the first quarter ended June 2020 (Q1Fy21), a period marked by lockdowns and partial easing. The Bank’s advances expanded by 21 per cent, on year on year basis, to approximately Rs 10,04,500 crore as of June 30, 2020. The outstanding loans were at 8,29,700 crore as of June 30, 2019 and Rs 9,93,700 crore as of March 31, 2020. During the quarter ended June 30, 2020, the Bank purchased loans aggregating Rs 1,376 crore through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited, according to filing with BSE. Meanwhile, rating agency CARE Ratings in its review said the overall credit growth in the Indian banking sector has remained flat for the fortnight ending June 19, 2020. The credit growth has been nearly at half the level during the last two fortnights at 6.2 per cent, compared to last year’s level of 12 per cent (June 21, 2019) and 12.3 per cent (June 07, 2019). - Business Standard
🍒 RBI has its hands full with Urban Cooperative Banks now unambiguously its responsibility : Last Wednesday (24 June 2020), government announced its decision to bring Urban Co-operative Banks (UCBs) and Multi-State Co-operative Banks totalling 1,482 and 58 respectively as on date, under the supervisory power of the Reserve Bank of India (RBI). This decision, in accordance with an announcement in the Budget speech earlier this year, ‘will give an assurance to more than 8.6 crore depositors in these banks that their money amounting to Rs 4.84 lakh crore will stay safe.’ Wonderful! Except that there’s one fly in the ointment! Rather, two! UCBs were always under RBI’s supervisory control and that has not prevented more than one UCB going up. Two, RBI’s supervisory track record has often fallen short in recent times. According to the Bank’s website, RBI ‘regulates and supervises the banking functions of UCBs under the provisions of Banking regulation Act, 1949. Within the Reserve Bank, a separate department, viz. Urban Banks Department, has been entrusted with these functions. Urban Banks Department functions in close coordination with other regulators viz., Registrar of Cooperative Societies and Central Registrar of Cooperative Societies. - financial express
🍒 Bank deposits growth slides for first time in three months; customers stay away from taking loans : The value of bank deposits in June 2020 fell for the first time in the last three months. After continuously rising from 7.9 per cent in April to 11.3 per cent in June, the growth of bank deposits slid to 11 per cent in the fortnight ending-June 19, according to the RBI’s weekly supplement. After the nationwide lockdown was announced in the last week of March 2020, deposits in banks started to pick up due to the government’s borrowings. Various rating agencies, including Care Ratings and India Ratings and Research (Ind-Ra), had attributed a rise in overall borrowings of both the central and state governments, rather than increased savings, for the spike in deposits. While the deposits grew only 1 percentage point faster than the year-ago level in the fortnight ending-June 19, the growth of bank loans nearly halved from 12 per cent to 6.2 per cent on-year in the same duration. Since the last year 2019, the Reserve Bank of India has been continuously cutting the repo rate to make loans cheaper for consumers. However, despite the efforts, subdued demand in the market has kept borrowers away from taking loans. - financial express
🍒 COVID-19 caused huge demand destruction overseas: Bankers : The COVID-19 pandemic has caused "demand destruction" in the overseas markets and it is likely to continue for the next few quarters, eminent bankers said on Saturday. The disruption will last for six to eight months befor business starts to bounce back, they said."There is a huge demand destruction in the overseas markets," MD of Exim Bank David Rasquinha said at a webinar.He said in the years 2017, 2018 and 2019, Indian merchandise exports were robust, while exports of services were even stronger."This was at a time when the Indian rupee had depreciated severely. In March 2020, export growth had fallen due to last-minute invoicing by the exporters, which was soon followed by the lockdown," Rasquinha said. India is a consumption-driven economy where 55 per cent of the spending is on essentials and the balance being discretionary, he said. - economic times
🍒 Equitas Small Finance Bank launches video KYC account : Equitas Small Finance Bank Limited has launched a facility of opening account through video KYC . With this, any person anywhere in the country can open a savings account with Equitas Small Finance Bank, complete the full KYC through video with the Bank employee. “The new video KYC account is a step forward towards our vision. This will ensure contact less, no branch visit and hassle free account opening and transactions for customers," Murali Vaidyanathan, President & Country Head - Branch Banking, Liabilities, Product & Wealth, Equitas Small Finance Bank Limited, said. “The customer has to submit their Aadhaar and PAN details on the video call for bank to verify,"the lender said in a release. - Live Mint
🍒 Indiabulls Housing Finance Q4 net drops 86% to Rs 137 crore on higher provisioning : Indiabulls Housing Finance on Friday reported an 86 percent plunge in consolidated net profit at Rs 137 crore for the March quarter due to higher provisioning. The non-banking finance company had posted a net profit of Rs 1,006 crore during the corresponding January-March period of the preceding fiscal.Total income (consolidated) during the March quarter also fell to Rs 2,954 crore as against Rs 4,344 crore in the same period of 2018-19, Indiabulls Housing Finance said in a regulatory filing. The company said it has chosen to adopt a conservative approach on account of macro uncertainties resulting from COVID-19 and made provisions for 1 percent of its loan book, that is Rs 700 crore. "Adjusted for the COVID-19 related provisions... normalized PAT for the company for the quarter is Rs 841 crore, and for full FY20 is Rs 2,904 crore," it said in a release. - moneycontrol.com
🍒 Anil Ambani’s Reliance Infra defaults seven times to Yes Bank since February : Reliance Infrastructure, led by Anil Ambani, has defaulted seven times since February 1, 2020, in making payments for loans given by Yes bank, as per different disclosures made to the stock exchanges by the company. Similarly, the company had defaulted four times in making payments to Jammu and Kashmir Bank (J&K Bank) and SREI Equipment Finance, the disclosures showed. Reliance Infrastructure could not make timely payments on two term loans of Rs 3,627 crore and Rs 945 crore availed from Yes Bank. Likewise, it had defaulted in making payments on loans of Rs 75 crore from J&K Bank and Rs 27 crore from SREI Equipment Finance. Reliance Infrastructure’s total borrowings from financial creditors stood at Rs 4,675 crore as on May 31, 2020, which included loans from Yes Bank, J&K Bank and SREI Equipment Finance. The total debt of the company, including all short- and long-term loans amounts to Rs 6,325 crore. - Financial Express
🍒 I-T dept amends tax challan to include non-resident e-commerce suppliers for equalisation levy : The income tax department has brought in changes to the challan for paying the equalisation levy by expanding its scope to include non-resident e-commerce players supplying goods or services online. Over two dozen non-resident tech companies would come under the purview of the equalisation levy which was introduced in Budget 2020-21 and has come into effect from April 1, 2020. Its first installment is due on July 7.The 2 percent tax would be levied on consideration received by such companies from e-commerce supply or services. The income tax department has modifies challan ITNS 285 (relating to payment of equalisation levy) to enable payment of the first installment by non-resident e-commerce operators. The amended challan now adds "e-commerce operator for e-commerce supply or services" under 'Type of Deductor - Moneycontrol.com
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