25.10.2020: Today's Banking / Financial News

25.10.2020: Today's Banking / Financial News at a Glance

🍒 Credit outstanding of banks up ₹74,734 cr : Scheduled banks probably saw the highest fortnightly offtake of credit in the current financial year so far, with their overall credit outstanding going up by ₹74,734 crore. Deposits of scheduled banks during the reporting fortnight ended October 9 lagged credit growth for the first time in the current financial year, growing ₹43,893 crore in the reporting fortnight, according to the Reserve Bank of India’s (RBI) data on scheduled bank’s statement of position in India. The revival in credit growth comes in the backdrop of the economy entering the so- called “busy season” for credit offtake amid the raging pandemic. It may be pertinent to mention here that the RBI Governor Shaktikanta Das, on Wednesday, said that the country is almost at the doorstep of revival process. However, since the beginning of the current financial year, the scheduled banks’ credit outstanding is down by ₹30,069 crore. - Businesss Line.

🍒 ICICI Bank shuts down operations in Sri Lanka : ICICI Bank on Saturday said it has shut down operations in Sri Lanka after getting approval from the Sri Lankan monetary authority. The Monetary Board of the Central Bank of Sri Lanka, having considered the request made by ICICI Bank, has granted approval to close down business operation of the bank in Sri Lanka and cancel the licence issued to it, ICICI Bank said in a regulatory filing. “The Director of Bank Supervision being satisfied with the bank complying with the terms and conditions imposed by the Monetary Board, the licence issued to the bank to carry on banking business in Sri Lanka is cancelled with effect from October 23, 2020,” the private sector lender said.- Businesss Line.

🍒 Covid relief: No interest on interest for any loan up to Rs 2 crore : Bringing financial relief to millions of borrowers from financial system, the Department of Financial Services in the Finance Ministry has finally rolled out a much anticipated scheme that will provide interest compounding relief for the six month moratorium extended to mitigate COVID19 effect. The relief will come to borrowers in the form of grant of ex-gratia payment of difference between compound interest and simple interest for six months (from March 1 to August 30). This scheme has been rolled out after the Supreme Court directed the Centre to implement the relief as soon as possible and ahead of upcoming Diwali. Put simply, borrowers will need to pay interest only on simple basis for their outstanding borrowing (only those with aggregate borrowing upto ₹ 2 crore) during the six months COVID-19 induced lockdown period. The compounding effect will be made good by the government reimbursing the lending institutions. - Busines Line

🍒 Loan moratorium: Finance ministry issues guidelines to implement interest waiver : The finance ministry on Saturday announced the details of the implementation of the waiver of ‘interest on interest’ on loans of up to ₹2 crore for the six-month moratorium that was rolled out to mitigate the hardship of borrowers hit by the coronavirus pandemic. The Centre approved the scheme for ‘grant of ex-gratia payment of difference between compound and simple interest to borrowers of specified loan accounts’ from March 1-August 31. The ‘ex-gratia payment’ or the benefit will have to be routed through lending institutions, the ministry said in a circular addressed to banks and other lending institutions on October 23. The lender has to credit the amount to the account of the borrower on or before 5 November, giving relief to borrowers ahead of Diwali. Thereafter, lenders will have to claim reimbursement from the government by December 15. - Live Mint

🍒 NBFCs ask RBI again to open TLTRO window to access funds : Nonbank finance companies (NBFCs) have again called on the Reserve Bank of India (RBI) to give them access to the on-tap TLTRO (targeted long term repo operations) window, which provides long-term funds to banks at the policy rate. Despite the RBI introducing several tools to prop up bank funding to non-banks, the latter have been complaining of a persistent lack of liquidity, especially the smaller ones. The Finance Industry Development Council (FIDC), the NBFC lobby group, has urged RBI governor Shaktikanta Das to direct banks to lend to NBFCs under this scheme to ensure benefits reach a wider segment of borrowers. “We sincerely appeal to kindly consider our request to carve out a part of the on-tap TLTRO funds for the NBFCs including small NBFCs to avail of loans from banks under the aforesaid scheme for the purposes of on-lending to the desired sectors only,” FIDC said in a letter, a copy of which ET has seen. “We note that while sections including agriculture, MSME and retail are covered, NBFCs have not been included as a sector which could avail of the facility.” - economic times

🍒 Need cautious approach in further IBC suspension extension beyond December 25: SBI MD : State Bank of India (SBI), the country’s largest commercial bank, has advised a cautious approach in taking crucial decisions such as any extension of insolvency and bankruptcy code (IBC) suspension beyond December 25, stating that one would have to weigh pros and cons in continuing a relaxed environment.“RBI and government have rightfully (in the current Covid-19 times) given a relaxed environment till the months of September or October. Taking this beyond will actually give an impression that the borrowers are fundamentally weak and banks are likely to go back to square one where we are seen as promoting ever-greening etc. If that were to come as perception in the minds of investors, that would be a major negative for our economy,” Arijit Basu, Managing Director, SBI said at an international conference on IBC, organised by the Indian Institute of Insolvency Professionals of ICAI. - Business Line

🍒 Franklin Templeton can’t wind up 6 MF schemes without consent from unitholders: Karnataka High Court : In a big victory to investors, the High Court of Karnataka on Saturday said that the Franklin Templeton Trustees Services (FT Trustees) Pvt Ltd cannot implement its decision of prematurely winding-up six open ended debt oriented Mutual Fund (MF) schemes without obtaining the consent of the unitholders in the form of a simple majority. The consent of unitholders is mandatory as per Regulation 18(15)(a) of the Security Exchange Board of India (Mutual Funds) Regulations, 1996 when the majority of the trustees decide to wind up or prematurely redeem the units, the HCK said while declining to interfere with the FT Trustees’ April 20, 2020 decision to prematurely wind-up the six schemes. A Division Bench comprising Chief Justice Abhay Shreeniwas Oka and Justice Ashok S Kinagi delivered the verdict while disposing of the petitions filed by unitholders, who had challenged the decision of the FT Trustees to wind-up the schemes without duly following the MF regulations.- Business Line

🍒 YES Bank: Gradual improvement in metrics...but a long road to recovery : Bolstered by the capital raised (nearly ₹15,000 crore) through the further public offering (FPO) in July, YES Bank has certainly eased concerns on the bank’s ability to continue as a going concern, with key capital and liquidity ratios (which were in breach in the March quarter) moving above the RBI’s regulatory requirement. But even as the bank’s earnings have moved into the black over the past two quarters and asset quality has remained stable, there are several risks that need a close watch. As such, most metrics indicate a long road to recovery for the beleaguered bank. In the latest September quarter, YES Bank reported a profit of ₹129 croreagainst a profit of ₹45 crore in the June quarter. A marginal improvement in core net interest income (3 per cent sequential growth) and fall in operating expenses (by 4.5 per cent QoQ) have aided earnings. Gross NPAs remained stable at ₹32,344 crore in the September quarter (₹32,703 crore in the June quarter). Advances saw a slight uptick (1.5 per cent QoQ), while deposits have grown 15 per cent sequentially. The bank’s Tier I capital ratio stood at 13.6 per cent (above the regulatory requirement of 8.875 per cent) thanks to the capital infusion through the FPO. Liquidity coverage ratio, too, has moved up to 107 per cent from about 40 per cent in the March quarter. - Business Line

🍒 Risk averse banks continue to lend with caution; bank credit up marginally, deposit growth stable : Bank credit grew marginally during the fortnight ending October 9 when compared to the previous 14 days that ended September 25, hinting at risk aversion in the banking industry. Total bank credit at the end of October 9 stood at Rs 103 lakh crore, compared to Rs 102.7 lakh crore at the end of September 25, data sourced by Care Ratings shows. When compared to the previous year, credit growth registered an increase of 5.7% on-year. On the other hand, deposits growth was at 10.5% on-year basis and remained largely stable from the previous fortnight. While bank credit might have grown marginally the growth levels registered during the same period last year were higher. “The credit growth decelerated to 5.1% and 5.7% during the last two fortnights, compared to last year’s level of 8.8% and 8.9% respectively reflecting weak demand and risk aversion in the banking system due to COVID-19 pandemic,” the report said. Asset quality concerns have kept commercial banks on the edge during the pandemic. Despite the slow credit growth, disbursements for medium, micro and small enterprises (MSME) continued to be strong under the Emergency Credit Line Guarantee Scheme. Over half the amount under the scheme has been sanctioned so far. - financial express.