28.11.2020 : Today's Banking / Financial News

28.11.2020 : Today's Banking / Financial News at a Glance

🍒 Lending institutions have returned Rs. 4300 crore in compound interest: SC on RBI loan moratorium case : The Supreme Court on Friday recorded in a judgment that lending institutions have returned over Rs. 4300 crore in compound interest collected from small borrowers during the moratorium period.  The ex-gratia payments have been made into 13.12 crore bank accounts across the country as of November 13, 2020, the court noted the submission made by Solicitor General Tushar Mehta for the government. The payments were made in compliance to a government pay-back scheme introduced on October 23 to waive the difference in the compound interest and simple interest charged between March 1 and August 31 (moratorium period) for eight categories of loans worth up to Rs. 2 crore. - Business Line

🍒 RBI has set precedence in LVB bond write-off, will hurt other banks: Report : The write-off of Rs 318-crore tier-II bonds by Lakshmi Vilas Bank (LVB) ahead of its merger with DBS Bank is a precedent set by the Reserve Bank of India (RBI) and will hurt the private sector lender's peers, according to a report. During the Yes Bank rescue earlier this year also, there was an over Rs 7,000-crore bond write-off, but that involved a different instrument called additional tier-I bonds. In the case of LVB, which is being merged with DBS in a scheme proposed by the RBI, investments of Rs 318.20 crore in bonds issued by LVB will be written-off, the lender informed the exchanges late Thursday night. "RBI has set a precedence with the proposed write-off as it's first time a tier-II bond is being written off," ratings agency ICRA said in the report on Friday. - Economic Times

🍒 Madras HC refuses to stay LVB-DBS Bank merger, adjourns AUM Capital plea : The Madras High Court has refused to stay the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India. The court adjourned the plea moved by AUM Capital Market Pvt Ltd challenging the merger to January 21. It may be noted, on Thursday, the Bombay High Court refused to grant stay on the final scheme of amalgamation between DBS bank and Lakshmi Vilas Bank which will come into effect on Friday. Today, a division bench of the Madras High Court consisting of Justice Vineet Kothari and Justice M S Ramesh said "no blanket interim order can be granted against the merger as the scheme has already come to operation". They said the Centre and RBI are free to proceed further with the merger as per the scheme. The bench adjourned the hearing to January 21 and asked the Centre and the RBI to file counters, while rejecting RBI and DBS India request to keep in abeyance the order not to take any further actions prejudicial to the shareholders of LVB for three weeks.  - Business Standard

🍒 Court rejects ED intervention plea against closure report in MSC Bank case : A court here on Thursday rejected the Enforcement Directorate's plea seeking to intervene in the hearing on a closure report of Mumbai Police in the alleged Rs 25,000 crore Maharashtra State Co-operative Bank scam. Maharashtra Deputy Chief Minister Ajit Pawar had been named as an accused in the case. The Economic Offences Wing (EOW) of city police filed a closure report in September before the special Anti- Corruption Bureau (ACB) court. The EOW claimed that its special investigation team found no criminal aspect to the case. The ED contended that the probe was flawed, and sought to intervene in the hearing, demanding that the closure report be rejected. Special ACB judge Ajay Champaklal Daga, however, rejected the central probe agency's intervention plea. Hearing on the closure report will go on. - economic times

🍒 Adani tops DHFL bid, says its bid gives maximum to lenders; rivals want it out of race : Billionaire Gautam Adani's roads-to-mining group outbid US-based Oaktree with a Rs 33,000 crore bid for collapsed housing lender, DHFL, but rival bidders want it out of the race for allegedly missing the deadline - a charge Adani Group denies saying it followed due process and the "cartel" wants to prevent value maximisation. Four entities - Adani Group, Piramal Group, US-based asset management company Oaktree Capital Management and SC Lowy - submitted bids for DHFL in October, sources with DHFL lenders and industry said. But lenders, who are getting DHFL auctioned to recover unpaid loans, wanted suitors to revise their bids as original offers were low. - Economic Times

🍒 DHFL suitors get time till Dec 10 to submit bids : The lenders to troubled Dewan Housing Finance Corporation Ltd (DHFL) have extended the timeline for submission of bids to December 10 as they look to trim their losses. This comes even as a section of lenders to DHFL want to examine the Binani Cement resolution case where a late bid from Aditya Birla group was allowed since it was higher. The CoC of DHFL led by State Bank of India has called for revised bids after Adani Enterprises submitted a revised bid for the whole book of the housing finance company as against its earlier bid of just the wholesale and SRA portfolio, which led to a protest from Piramal Enterprises. - Business Line

🍒 Wadhawan moves NCLT against CoC, Administrator : DHFL’s erstwhile Director Kapil Wadhawan has moved the National Company Law Tribunal with a plea that it direct the housing finance company’s Administrator, the Committee of Creditors and the Reserve Bank of India to consider the draft resolution plan prepared by the company last year for its revival . In the alternative to the above, Wadhawan (Applicant), who is currently in judicial custody, has sought the Tribunal’s direction that DHFL’s resolution plan be submitted to an independent expert appointed by the Tribunal along with the bids received from the other Resolution Applicants. Further, he prayed that the expert be directed to submit a report giving opinion to the Tribunal with regard to the most appropriate plan to be considered in the interest of all stakeholders. - Business Line

🍒 Small lenders to pay the price as RBI writes off debt of Lakshmi Vilas Bank : India’s smaller banks will likely face higher funding costs and reduced investor appetite for their bonds just as non-performing loans spread, after the central bank moved to write off debt of an ailing lender. The Reserve Bank of India on late Thursday said Rs 3.18 billion ($43 million) of Tier 2 bonds of Lakshmi Vilas Bank Ltd. will be fully written down as DBS Group Holdings Ltd. acquires the lender. The announcement comes as a surprise after the RBI-appointed administrator said last week DBS would take over all obligations, including bonds. b“Financing costs may inch up and the appetite shall be lower especially for the lower-rated private and small finance banks,” said Ajay Manglunia, managing director and head at JM Financial Products Ltd. “Such lenders will have to rely more on equity raise as investors shall be a bit more skeptical to take risk now.” ‘ - Business Line

🍒 Risk premiums for Tier-2 Bonds may go up for weaker private banks’ : Risk premiums for Basel-III complaint Tier-2 Bonds could go up for weaker private banks following the Reserve Bank of India’s (RBI) advice to  Lakshmi Vilas Bank (LVB) to write down these bonds aggregating ₹318.2 crore before its amalgamation with DBS India Ltd (DBIL) comes into effect. The amalgamation comes into force on the appointed date – November  27. All branches of the troubled LVB will function as branches of DBIL, which is awholly-owned subsidiary of DBS Bank, Singapore, with effect from Friday.  Anil Gupta Sector Head – Financial Sector Ratings, ICRA, said the RBI has set a precedence with the proposed write down as it is the first time that a Tier II bond is being written off. He opined that investors should factor in the risk in Basel III instruments, as these instruments can be completely written down in case a bank gets into trouble.- Business Line

🍒 Private banks’ average lending rate on new loans move up nearly 40 bps in October : With the RBI’s next policy meet around the corner and the market debating over the possibility of further rate cuts, the sudden jump in average lending rate of private banks may need some attention.  According to the latest data released by the RBI on banks’ lending rates, the weighted average lending rate on fresh loans for private banks have gone up by 36 bps in October to 9.02 per cent from 8.66 per cent in September. With the lending rates on new loans for foreign banks too moving up by about 30 bps, the overall weighted average lending rate on fresh loans for all banks has gone up by about 9 bps in October. The RBI had last cut its key policy repo rate in May by 40 bps to 4 per cent and since then held rates owing to rise in inflation. While banks’ tardiness to cut lending rates sharply may be understandable — as the RBI is expected to remain in a pause mode in the near term — lending rates moving up at a time when the economy is starting to recover could be worrisome. - Business Line

🍒 Bank credit to industry recorded negative growth in October: RBI : Non-food credit growth of scheduled commercial banks (SCBs) decelerated to 5.6 per cent in October from 8.3 per cent in October 2019, mainly due to contraction in credit to industry and deceleration in personal loans growth. Credit to industry contracted by 1.7 per cent as compared with 3.4 per cent growth in October 2019, according to Reserve Bank of India’s data on sectoral deployment of bank credit. This data has been collected from select 33 SCBs which account for about 90 per cent of the total non-food credit deployed by all SCBs. - Business Line

🍒 IRDAI okays Bharti AXA, ICICI Lombard deal : The Insurance Regulatory and Development Authority of India (IRDAI) has given in-principle approval to the acquisition of non-life insurance business of Bharti AXA by ICICI Lombard General Insurance. “IRDAI ... has granted in-principle approval under Section 35 to 37 of the Insurance Act, 1938 read with IRDA (Scheme of Amalgamation and Transfer of General Insurance Business) Regulations, 2011 with respect to the said transaction,” ICICI Lombard General Insurance said in a regulatory filing on Friday. The two companies had announced the proposed merger on August 21 this year. “ICICI Lombard is progressing applications for receipt of requisite approvals from other concerned regulators for the transaction,” the insurer said in the statement. - Business Line

🍒 NPCI expands its shareholding pie : Retail payments body National Payments Corporation of India (NPCI) has completed private placement of 4.63% of its equity shares worth ₹81.64 crore, allowing small finance and payment banks as well as fintechs to be shareholders in the entity, it said on Thursday. NPCI had made an offer for the private placement to 131 Reserve Bank of India (RBI) regulated entities, of which 19 showed interest and were allotted shares in NPCI. Small finance and payment banks such as AU Small Finance Bank Ltd, India Post Payments Bank Ltd, and digital payment fintechs including BillDesk, Amazon Pay, PayU India, PhonePe, Pine Labs and MobiKwik have thus joined NPCI’s shareholding with up to 0.44% each in the retail payment entity. There are a total of 67 shareholder entities for NPCI now.  - Live Mint

🍒 SC directs govt to ensure implementation of decision to forego interest during loan moratorium period : The Supreme Court Friday directed the government to ensure that all steps be taken to implement its decision to forego interest on eight specified categories of loans paid upto Rs two crore in view of the coronavirus pandemic. A bench headed by Justice Ashok Bhushan said the COVID-19 pandemic has not only caused serious threat to the health of the people but has also cast its shadow on the economic growth of the country as well as other countries in the entire world. The eight categories of loans are MSME (Micro, Small & Medium Enterprises), Education, Housing, Consumer durable, Credit card, Automobile, Personal and Consumption.  “Due to lockdown imposed by the Government of India in exercise of powers under the Disaster Management Act, 2005, there can be no denial that most of the businesses including private sector as well as public sector has been adversely affected.  - financial express           

🍒 Over Rs 10 lakh crore loans under Mudra Yojana created 51 lakh entrepreneurs between 2015-18: Irani : Union Minister Smriti Irani on Thursday said over Rs 10 lakh crore has been leveraged under the Pradhan Mantri Mudra Yojana, thereby creating 51 lakh new entrepreneurs in the country between 2015 and 2018. Addressing an awards ceremony virtually, the Minister for Women and Child Development and Textiles also thanked Covid warriors, many of whom died in the line of duty across the country. She said from 2016 till today, the government recognised start-ups stand at over 32,000 in the country.  “A country which has seen decades where the poor were disenfranchised to receive access to banking credit and facilities today celebrates the fact that under the MUDRA Yojana over Rs 10 lakh crore has been leveraged, thereby giving birth between the year 2015 to 2018 (to) 51 lakh new entrepreneurs,” Irani said.  - financial express

🍒 RBI has set precedence in LVB bond write-off, will hurt other banks: Report : The write-off of Rs 318-crore tier-II bonds by Lakshmi Vilas Bank (LVB) ahead of its merger with DBS Bank is a precedent set by the Reserve Bank of India (RBI) and will hurt the private sector lender’s peers, according to a report.  During the Yes Bank rescue earlier this year also, there was an over Rs 7,000-crore bond write-off, but that involved a different instrument called additional tier-I bonds. In the case of LVB, which is being merged with DBS in a scheme proposed by the RBI, investments of Rs 318.20 crore in bonds issued by LVB will be written-off, the lender informed the exchanges late Thursday night. “RBI has set a precedence with the proposed write-off as it’s first time a tier-II bond is being written off,” ratings agency ICRA said in the report on Friday. - financial express

🍒 Sensex drops 110 points; RIL, IT stocks weigh : Equity benchmark Sensex ended 110 points lower after a choppy session on Friday, dragged by losses in index majors Reliance Industries, Infosys and TCS despite a positive trend in global markets. The 30-share BSE index closed 110.02 points or 0.25 per cent lower at 44,149.72. The broader NSE Nifty slipped 18.05 points or 0.14 per cent to 12,968.95.PowerGrid was the top laggard in the Sensex pack, shedding over 2 per cent, followed by HCL Tech, ONGC, M&M, Axis Bank, TCS, Reliance Industries and Infosys.On the other hand, Asian Paints, Titan, Tata Steel, Bajaj Finance and Bajaj Auto were among the gainers. 

🍒 Forex reserves rise to $575.29 b : The country’s foreign exchange reserves rose by $2.518 billion to a new record high of $575.29 billion in the week ended November 20. Since March-end, the reserves jumped by $97.48 billion. “Past data indicate it was only in FY08 that RBI had accumulated forex reserves more than this amount. In FY08, forex reserves increased from $200 billion to $309 billion,”according to SBI’s research report ‘Ecowrap’.  - business line

🍒 Rupee trading with a positive bias : The rupee (INR), which rallied to mark an intraday high of 73.74 on Thursday, gave up the gains and ended the session almost on a flat note at 73.88. On Wednesday, it had closed at 73.91. Nevertheless, the local currency has closed above the key barrier of 74, opening the door for further strengthening. Following this, INR opened with a gap-up at 73.78 today, thereby crossing over the resistance of 73.85. Further appreciation from the current level can take the rupee to 73.7 – a resistance level. Above that level, it can advance to 73.5. But if the domestic currency weakens, it can find support at 74. Support below that level can be spotted at 74.3.

🍒 Gold prices today fall for fifth day in a row, silver rates drop : Gold and silver prices in India edged lower today amid weak global trend. On MCX, gold futures dipped 0.03% to ₹48,501 per 10 gram while silver futures fell 0.5% to ₹59,570 per kg. In the previous session, gold prices had slipped 0.11% while silver had ended flat. In five days, gold rates in India have dropped nearly ₹1,700 per 10 gram, in line with a similar fall in global rates. In global markets, gold prices edged 0.3% lower to $1,810.44 an ounce. For the week, gold remains down over 3% as progress in Covid-19 vaccine development and US President-elect Joe Biden's transition to the White House bolstered risk sentiment. Among other precious metals, silver today fell 0.9% to $23.25 per ounce, while Platinum fell 0.1% to $961.18 and palladium was up 0.3% at $2,391.19. - Live Mint.