20.10.2020: Today's Banking / Financial News

20.10.2020: Today's Banking / Financial News at a Glance

🍒 New privatization policy ready; Cabinet to discuss note on 'strategic sectors' soon: After months of inter-government discussions, the proposal to define ‘strategic sectors’ is slated to be taken up by the Union Cabinet within the next few weeks, Moneycontrol has learnt from senior government sources. “The cabinet note was circulated to 49 central ministries and departments. There were a lot of inputs, but the note is now ready,” said a top government official, who spoke on the condition of anonymity. The person added that the note could be up for consideration within 10-15 days. “Banking and insurance will be designated as strategic sectors,” the officials said. - Moneycontrol.

🍒 Centre may have no stake in public sector banks after privatisation : The government is veering towards the view that exiting a public sector bank should be total when it is privatised. To make the sale attractive, however, the government wants the Reserve Bank of India (RBI) to relax the rules on ownership in private-sector banks. A top government source said there had been intense discussion among the Prime Minister’s Office (PMO), the finance ministry, and the RBI on what level of stake should be retained. There have also been talks with specialists outside the government this financial year, particularly since July, when the PMO had asked the officers concerned for a thorough debate on the subject, spread over two days. Since then, after several iterations, government officials have come round to the view not to retain any shareholding in a bank which has to be divested. It will be impossible to make a strategic partner believe the government will stay off board decisions “even if it has only 10 per cent shareholding in a bank”, the source said. For instance, under the Indian Companies Act, a shareholder with 10 per cent of the company’s paid-up share capital, by a written notice, may requisition the board to convene an extraordinary general meeting. There are other ways in which the government will assert its presence and this tension with the new management will not help the bank grow. Business Standard.

🍒 Transmission lower at weakly-capitalised banks during easing cycle, says RBI report : Banks with higher capital ratios transmit monetary policy actions more smoothly than banks with lower capital base. Given that the chunk of the banking sector lending pertains to public sector banks and they do not have excess capital, it is difficult for them to extend credit without improving their capital position during the downturn of the current business cycle. Despite the RBI’s easing policy since 2014 (except for two intermittent rate hikes in 2018), credit growth has not picked up in the past few years, signalling weakening of bank lending channel of monetary policy transmission. These are some of the findings of a recent study by the RBI in its working paper titled ‘Bank Capital and Monetary Policy Transmission in India’.- Business Line

🍒 Banks sanction Rs 1.35 lakh cr concessional loans to 1.5 cr KCC card holder farmers : The Finance Ministry on Thursday said banks have covered 1.5 crore farmers under the Kisan Credit Card (KCC) scheme to sanction credit limit of Rs 1.35 lakh crore to help them meet financial requirements during the COVID-19 crisis. As part of the Aatmanirbhar Bharat Package, the government has announced to cover 2.5 crore farmers under the KCC scheme with a credit boost of Rs 2 lakh crore through a special saturation drive. "As a result of concerted and sustained efforts by the banks and other stakeholders in the direction of providing access to concessional credit by the farmers, including fishermen and dairy farmers, a major milestone target of covering more than 1.5 crore farmers under KCC, with sanctioned credit limit of Rs.1.35 lakh crore has been achieved," an official statement said. - Economic Times

🍒 Bank of Baroda, Accenture complete technology integration of former Vijaya Bank's branches :  Accenture and Bank of Baroda have successfully completed the technology integration of the former Vijaya Banks branches with Bank of Baroda part of the post-merger integration of the three-way merger of public sector banks in India. Accenture is now helping align former Dena Banks IT systems with Bank of Baroda, a joint statement said on Monday. The merger of Vijaya Bank and Dena Bank with Bank of Baroda in 2019 created the country's third largest public sector bank. Upon completion, the combined technology architecture will help the merged entity seamlessly integrate its India- wide customer service and business operations network of nearly 9,000 bank branches and more than 12,000 ATMs, it said.- Economic Times

🍒 Bank of Maharashtra posts 13% rise in Q2 net profit : Bank of Maharashtra (BoM) reported a 13 per cent increase in net profit at ₹130 crore in the second quarter ended September 30, 2020, against ₹115 crore in the year-ago quarter. The Pune-headquartered public sector bank’s net interest income edged up 4 per cent year-on-year (yoy) to ₹1,120 crore (₹1,073 crore in the year-ago quarter). Other income rose 14 per cent yoy to ₹451 crore (₹396 crore). AS Rajeev, MD and CEO, BoM, said only ₹1,000 crore to ₹1,500 crore (or 1-2 per cent of the total advances) of the Covid-19- related stressed accounts will need restructuring. Of this, the bank has so far restructured small accounts, including retail and micro, small and medium enterprise (MSME), aggregating about Rs 42 crore. - Business Line

🍒 CSB Bank Q2 profit jumps to Rs 69 crore : CSB Bank on Monday reported over two-fold jump in net profit at Rs 68.9 crore for the quarter ended September 30, 2020. It had posted a net profit of Rs 24.6 crore in the second quarter of 2019-20. The bank’s half-yearly profit after tax is at a record high of Rs 122.50 crore with Return on Assets or RoA (annualised) of 1.13 per cent despite having made a healthy provision of Rs 58.2 crore for COVID-19 during April-September, CSB Bank said in a regulatory filing. Total income grew to Rs 567.55 crore during September quarter of 2020-21 as against Rs 431.07 crore in the year-ago period. The bank registered a rise in gross non-performing assets (NPAs) to 3.04 per cent of gross advances at September-end 2020 from 2.86 per cent by the same period of 2019. - financial express

🍒 Centre to ensure interest waiver benefits to small borrowers by Nov 2 : The Union government is set to pass on the benefits of the compound interest waiver to small borrowers before November 2. Banks, on the other hand, have started making additional provisioning based on their own judgment of the loan books in balance sheet for the second quarter following the Supreme Court’s standstill order on classifying loans as non-performing assets (NPA). “We are putting all our efforts to ensure that we pass on compound interest waiver to borrowers before the SC deadline,” a top government official said, requesting anonymity. Both state-owned and private lenders will be asked to refund the compound interest waiver sum to all borrowers, with loans up to Rs 2 crore, before November 2 and file a claim with the government subsequently. However, the government is likely to frame a scheme that will spell out the modalities to be followed by lenders. It will be applicable to all borrowers — irrespective of whether they availed moratorium or not but the calculation of computing waiver by banks may vary according to the type of loan. - Business Standard.

🍒 India must not neglect bank recapitalisation despite pandemic, says Viral Acharya : India is neglecting bank recapitalisation as it focuses on debt moratoriums and interest waivers for borrowers amid the COVID-19 pandemic, a former central bank official told Reuters on Monday. Indian banks are saddled with over $120 billion in bad debt, and in severely stressed conditions the bad-loan ratio could nearly double by March, according to Reserve Bank of India projections. Restoring banks' capital is critical for aiding a meaningful recovery, but there has been little focus on the matter, former RBI Deputy Governor Viral Acharya said. "This lack of focus is tantamount to kicking the can down the road and jettisoning financial stability for short-term gains," said Acharya, who recently wrote a book titled the "Quest for Restoring Financial Stability in India". "This repeated mistake has prevented India from recovering well from adverse shocks," Acharya said. His comments came weeks after India offered to waive the compounded interest component on all loans up to 20 million rupees following a legal challenge to the terms of a six-month moratorium.- Economic Times

🍒 Accumulated losses vs share premium a/c balances: PSB proposal will improve ability to service AT-I bonds: ICRA : The recent proposal by some public sector banks (PSB) to set-off their accumulated losses against the share premium account balances could improve the ability of these PSBs to service their AT (Additional Tier)-I bonds, according to ICRA. Four PSBs – Bank of India (BoI), Bank of Maharashtra (BoM), Punjab National Bank (PNB) and Union Bank of India (Union) – recently secured shareholders’ approval to set-off their accumulated losses against the share premium account balances and await regulatory approval. - Business Line

🍒 NCLT approves JSW Steel’s resolution plan for Asian Colour Coated Ispat Ltd : The Delhi Bench of National Company Law Tribunal on Monday approved the resolution plan submitted by JSW Steel to acquire bankrupt steel company Asian Colour Coated Ispat Ltd (ACCIL) for Rs 1,550 crore. “JSW Steel Coated Products, wholly owned subsidiary of JSW Steel, to acquire Asian Colour Coated with certain modification in the resolution plan approved by the lenders,” JSW Steel said in a statement. The written order is awaited. In 2018, ACCIL was included in the Reserve Bank of India’s second list of defaulters on which banks were asked to take corrective action. State Bank of India, Punjab National Bank and JM Financial are among the lenders to Asian Colour Coated Ispat.- Economic Times

🍒 Fino Payments Bank to add 300 more points at BPCL outlets in Tamil Nadu :  Fino Payments Bank is planning to add another 300 points at BPCL outlets to its existing 1,075 in Tamil Nadu, to help truck drivers to get fleet cards recharged by paying equivalent cash, without any hassles, a top official said on Monday. Recharging the Bharat Petroleum (BPCL) SmartFleet cards that are used to pay for fuel has been a challenge to truck drivers for quite some time and in order to ease this discomfort, Fino with BPCL has started such facilities, its State head, Dhanasekaran said. The digitised cash in the form of prepaid fleet cards allows drivers to make payments for fuel at BPCL outlets, which also completely frees BPCL from handling the cash given by the drivers, Dhanasekaran told reporters here after inaugurating a facility at Perundurai in Erode district.- Economic Times

🍒 Urban unemployment fell to 8.4% in July-September 2019: Government : Unemployment in urban areas fell to 8.4% in July- September 2019 from 8.9% in the June quarter last year, data released by the Ministry of Statistics and Programme Implementation (MoSPI) in the quarterly bulletin of the Periodic Labour Force Survey (PLFS) showed. Urban unemployment in the age group 15-29 years was 20.6%. Among states, urban unemployment was higher than the national average in Kerala, Uttar Pradesh, Rajasthan, Andhra Pradesh, Delhi, Bihar, Chhattisgarh, Madhya Pradesh and Telangana, among others. The rate of urban joblessness in the quarter ended September 30, 2018 was 9.7%. Urban unemployment declined in the three quarters spanning January till September 2019. - Economic Times

🍒 IBA move on officers’ wage revision: Bank unions to embark on action programmes : Bank officers, owing allegiance to four unions, have decided to embark on action programmes, including withdrawal of extra cooperation, work only till 6 pm and not work on Sundays and holidays, after the Indian Banks’ Association (IBA) informed their them of its inability to conclude and ink the joint note pertaining to officers’ wage revision. The four officers unions that have decided to retaliate with agitational programmes in a phased manner are: the All-India Bank Officers’ Confederation (AIBOC), the All-India Bank Officers’ Association (AIBOA), the Indian National Bank Officers’ Congress (INBOC), and the National Organisation of Bank Officers (NOBO). A memorandum of understanding was signed on July 22, where an amount of ₹7,898 crore was allocated representing 15 per cent hike in wages with effect from November 1, 2017, in the banking industry, the unions said in a joint statement. - Business Line

🍒 Paytm aims to issue 20 lakh co-branded credit cards in next 12-18 months : Homegrown digital financial services platform Paytm plans to issue 20 lakh co-branded credit cards over the next 12 to 18 months for which it will partner with various card issuers. In a statement on Monday, Paytm said it is working to democratise access to a formal credit system for the masses and is building the country’s ‘next generation credit cards’. “The company is aiming to transform the credit market by enabling ‘new to credit’ users to join the digital economy,” it said, adding that it is designing an innovative digital experience on its app allowing users to manage their overall spends and have full control over the card usage.- Business Line

🍒 HDFC Life Insurance Q2 net profit up 5.6% : Private sector HDFC Life Insurance registered a 5.6 per cent increase in net profit for the quarter ended September 30, 2020, at ₹326.09 crore. Its net profit amounted to ₹308.69 crore in the same period a year ago. It registered a 34.8 per cent increase in its net premium income to ₹10,045.44 crore in the July to September quarter this fiscal, compared to ₹7,453.68 crore a year ago. In a statement on Monday, HDFC Life said its private market share within the group and overall new business segment stood at 27.4 per cent and 23.3 per cent, respectively, in the first half of this fiscal. - Business Line

🍒 Vineet Nayyar resigns as Executive Vice-Chairman of IL&FS Group : Vineet Nayyar has resigned as Executive Vice-Chairman of IL&FS Group citing medical reasons. “The board of IL&FS Group today announced the resignation of Vineet Nayyar as the Executive Vice-Chairman of IL&FS Group. Nayyarhas requested the board to relieve him of his duties as Executive Vice-Chairman of IL&FS with effect from October 31on grounds of indifferent health,” said a statement from IL&FS  - Business Line

🍒 Transfer pricing: CBDT notifies tolerance range for AY 2020-21 : The Central Board of Direct Taxes (CBDT) has notified the “tolerance range” of transfer price for the assessment year 2020-21. It has re-notified the prevailing 1 per cent tolerance range for wholesale trading and the 3 per cent range for all other transactions undertaken during the financial year ending March 31, 2020. The notified tolerance range has been consistently at 1 per cent and 3 per cent in the recent years. If the CBDT had been bit magnanimous, it could have expanded it and provided more comfort to MNCs, claimed tax experts. “This is an opportunity lost as the CBDT could have used this to give more comfort to the multinational companies in the current Covid-19 times,” said Amit Agarwal, Partner, Nangia & Co. - Business Line

🍒 Edelweiss Asset Management raises ₹6,600 crore in ESOF III : Edelweiss Alternative Asset Advisors (EAAA) on Monday announced the final close of its ₹6,600-crore alternative investment fund, ESOF III. “This fund raise, amidst the subdued economic climate, is a strong endorsement of the opportunities in the Indian alternative asset management space, as well as the robust and unique private debt platform of Edelweiss Asset Management (EAM),” Edelweiss Financial Services said in a statement. The ESOF III strategy has generated strong investor interest and has received commitments from marquee global institutional investors, which include recent investments by the Canadian Ontario Teachers’ Pension Plan Board, Florida’s State Board of Administration, Swedish Pension Fund-AP4 and a European Insurance Investor, among others, it further said. - Business Line

🍒 As realty sector revives, LIC Housing aims for double-digit growth in FY21 : LIC Housing Finance sees bright prospects to record double-digit growth this fiscal, supported by the return of home loan growth to pre-Covid-19 levels, government push, revival in affordable housing segment, and its new products and support measures. “As of now, sentiments are improving day by day. We expect a positive rub-off in the realty space, with the overall economy opening in phases. A big chunk of an upwardly mobile middle-class segment, urbanisation rates, and the emerging concept of work from home will be able to sustain the demand. At the current rate, we can look forward to a double-digit growth towards the end of the current financial year,” Siddhartha Mohanty, MD and CEO of LIC Housing Finance, told BusinessLine. - Business Line

🍒 Kapil Wadhwan offers to settle all claims of DHFL; alleges 'outside forces trying to depress DHFL asset value’ : In what could throw a spanner in the ongoing debt resolution process of scam-hit Dewan Housing Finance Corporation Ltd, its former promoter Kapil Wadhwan has written to the RBI-appointed administrator of DHFL, claiming attempts by “outside forces” to depress the value of the assets. Pegging the total estimated profit from about 10 projects of DHFL at close to ₹44,000 crore, Wadhawan, who is currently lodged in a Mumbai jail, has alleged an attempt to suppress the true value. The letter was written from inside Taloja Jail on October 17, which was the last day for submission of bids for the debt-laden housing finance company under the insolvency process.  - Business Line

🍒 Experts moot widening microinsurance sector on the lines of SFBs : A committee of experts on insurance has recommended to IRDAI amendments in the current regulatory framework and relaxing the entry-level rules for standalone microinsurance entities, including co-operatives. In the backdrop of the pandemic, experts have underlined the immediate need to expand the coverage of microinsurance sector on the lines of what small finance bank have done for financial inclusion – catering to the underprivileged low-income groups. The Insurance Regulatory and Development Authority of India (IRDAI), in February, appointed an expert committee to come up with recommendations on feasibility of standalone microinsurance through co-operatives, mutual or companies. - Business Line

🍒 No more extension of BPCL privatisation bid deadline: DIPAM Secy : BPCL privatisation bid deadline will not be extended for the fifth time, as the government’s strategic disinvestment programme that was hit by the pandemic is back on track, DIPAM Secretary said Monday. The government had on four occasions extended the date of putting in the preliminary expression of interest for buying out the majority stake in Bharat Petroleum Corp Ltd (BPCL). The current deadline is November 16. “We had a serious COVID impact on strategic disinvestment, investors asked for time, particularly with respect to key transactions. I hope that further extensions may not be there, especially in BPCL where the current date is November 16.?So hopefully, we will be able to move through,” Tuhin Kanta Pandey, Secretary in the Department of Investment and Public Asset Management (DIPAM), told PTI. - financial express

🍒 Gold prices today fall for second day, silver rates drop sharply : Gold and silver prices in India edged lower today, tracking muted global rates. On MCX, December gold futures fell for the second day as prices slipped 0.22% to ₹50437 per 10 gram while silver futures fell 0.7% to ₹61,250 per kg. In the previous session, gold had settled 0.3% lower while silver had edged up 0.2%. In India, gold prices have lost momentum since hitting a record high of ₹56,200 in August, following the same trajectory as that of global rates. 

🍒 Sensex rallies 449 pts; Nifty tops 11,850 : Equity benchmark Sensex rallied 449 points on Monday, led by heavy buying in banking and financial counters amid largely positive cues from global markets. The 30-share BSE index ended 448.62 points or 1.12 per cent higher at 40,431.60. The broader NSE Nifty surged 110.60 points or 0.94 per cent to 11,873.05. ICICI Bank was the top gainer in the Sensex pack, jumping over 5 per cent, followed by Axis Bank, Nestle India, SBI, HDFC, ONGC and Kotak Bank. On the other hand, Bajaj Auto, TCS, Bharti Airtel, M&M and Maruti were among the laggards.

🍒 Rupee falls 2 paise to 73.37 against US dollar : The rupee settled on a flat note and fell 2 paise to 73.37 against the American currency on Monday even as the domestic equity market was trading with significant gains. The local unit opened at 73.38 against the US dollar at the interbank forex market and finally finished the day at 73.37 against the greenback, down by just 2 paise over its previous close of 73.35.