Current Affairs and General Knowledge

31.12.2020: Today's Banking / Financial News at a Glance

🍒 Union Bank gets shareholder approval to raise up to Rs 6,800 crore : Shareholders of Union Bank of India on Wednesday approved the bank's proposal for raising up to Rs 6,800 crore equity capital to fund business growth. During the Extraordinary General Meeting (EGM), the shareholders passed the special resolution with the requisite majority for raising capital through FPO (Follow-on Public Offering) /Rights or QIP (Qualified Institutional Placement) or preferential allotment, the bank said in a regulatory filing. It would raise the fund during the current fiscal. "In order to meet the minimum capital and leverage ratio requirements under the Basel III guidelines for the expansion of business assets and based on the estimated growth, your directors have decided to raise equity share capital up to Rs 6,800 crore," the bank had said in its EGM notice to shareholders. The bank will utilise the raised capital for general business purposes, it said. - Business Standard

🍒 SBI to roll out new cheque payment system from January 1 : State Bank of India (SBI) will implement the 'positive pay system' for cheques from January 1, 2021. Re-confirmation of key information will be required for payments beyond Rs 50,000. SBI said on its website, "As per RBI guidelines, we are introducing Positive Pay System (PPS) w.e.f. 01/01/2021 to ensure added security where the cheque issuer now needs to provide details such as account number, cheque number, cheque amount, cheque date payee name with respect to the cheque payments." A couple of months ago, the Reserve Bank of India (RBI) took a decision to launch a 'positive pay system' for cheque. In August MPC, RBI governor Shaktikanta Das announced this system to keep customers safety in focus and to decrease the cases of crime and fraud with regard to cheque payment. - moneycontrol.com

🍒 RBI may red-flag Punjab and Sind Bank's Rs 5,500-crore zero-coupon bonds : The Reserve Bank of India (RBI) may red-flag the Rs 5,500-crore zero-coupon bonds issued towards recapitalising (recap) Punjab and Sind Bank (P&SB) in its current form, and ask it to hold the instrument in the held-to-maturity (HTM) portfolio at a discount and not at face value. “This (structure) has to be reworked. It is bad accounting, and has implications for the broader debt market. You can’t create equity out of thin air,” said a top source. “It can be abused as an instrument if such accounting norms are allowed,” said another source. It was, however, pointed that while zero-coupon bonds per se towards bank recap – a novel idea – is not a problem, it is the accounting treatment that has created opposition to the idea. And to that extent, the Centre may have to rethink its fiscal maths if it is to use the instrument for recap. - Business Standard

🍒 Yes Bank elevates Niranjan Banodkar as CFO, Adlakha as HR head : Yes Bank, which was rescued by the Reserve Bank in March after a huge run-on, on Wednesday promoted two key senior management personnel as the chief financial officer and head of human resources. The bank, now majority-owned by State Bank of India, has promoted Niranjan Banodkar as the group Chief Financial Officer(CFO) and Anurag Adlakha as the group Chief Human Resources Officer. In an exchange filing, Yes Bank said these appointments were approved by the board, on the recommendation of the nomination and remuneration committee and also of the audit committee. New HR head replaces Deodutta Kurane, who will be retiring from the bank soon, it said adding both the appointments will be effective January 1. - economic times

🍒 Small yet focused approach makes City Union Bank an interesting bet : With every disruption in the banking sector, whether asset quality-led or caused by a change in preference, the industry has reinvented itself to offer new products or to diversify into new territories. The 115-year-old Tamil Nadu-headquartered City Union Bank (CUB), however, is an exception. After starting as an outfit catering to small businesses, CUB remains committed to the segment and draws roughly 72 per cent of business from Tamil Nadu, and nearly 90 per cent from southern India. Being a small and medium enterprise (SME) centric bank, on a steady state basis it has drawn 35 per cent of its business from SMEs and about 15 – 17 per cent from the traders (see table), irrespective of the environment for SMEs. Normally, the Street is wary of banks with a high concentration risk. CUB, however, enjoys preference with 18 out of 28 analysts polled by Bloomberg recommending ‘buy’ (8 ‘hold’ ratings). At 2.8x FY21 estimated book, the stock also trades at a premium to larger peers such as Federal Bank and RBL Bank. - Business standard

🍒 Yes Bank appoints Anurag Adlakha as Chief Human Resources Officer : Private sector lender Yes Bank has appointed Niranjan Banodkar as the Group Chief Financial Officer of the bank. Banodkar is currently responsible for the Strategy and Planning function as well as driving the Sustainability agenda at Yes Bank. He will replace Anurag Adlakha, who has been appointed Chief Human Resources Officer. Adlakha is replacing Deodutta Kurane, who would be retiring from the service of the bank. “Both these appointments will be effective January 1 2021,” the lender said in a statement. The decisions were taken at a meeting of the board of directors of Yes Bank on Wednesday. - Business Line

🍒 Rs 8 lakh crore worth loans were written off by Indian banks in the last decade : Indian banks wrote off loans worth around Rs 8,83,168 crore in the last ten years, a significant chunk of which came from government-owned banks, the latest data from the Reserve Bank of India shows. Of this, public sector banks (PSBs) alone wrote off Rs 6,67,345 crore worth loans since 2010. This is about 76 percent of the total written-off loans in the decade, while private banks wrote off loans worth Rs 1,93,033 crore constituting about 21 percent of the total chunk. Foreign banks wrote off Rs 22,790 crore loans or 3 percent of the total write-off, the RBI data showed. In the financial year 2019-2020 alone, banks wrote off a total of Rs 2,37,206 crore or about a quarter of the total loan write-offs in the last one decade. Of this, Rs 1,78 lakh crore was by PSBs and Rs53, 949 crore by private banks. These figures do not take into account the loans written off by small finance banks, which is a relatively smaller portion. - moneycontrol.

🍒 Private banks’ operating profit share rises to 43.4% at PSBs’ cost : Net profits of scheduled commercial banks (SCBs) turned around in FY20 after losses in the previous two years. Although PSBs incurred losses for the fifth year in a row, the quantum of losses shrank. Payment banks (PBs) could not break-even as they incurred high initial capital expenditure and wage bills. The improvement in financial performance also reflected an increase in trading income on profit booking in the light of favourable yield movements. In line with the increasing share of private banks (PVBs) in banking assets, their share in operating profits also increased to 43.4% in FY20 at the cost of PSBs. The consolidated balance sheet of SCBs has grown in H1FY21 after a deceleration in FY20 on account of subdued economic activity, deleveraging of corporate balance sheets and muted business sentiment impacting credit supply. - financial express

🍒 Budget 2021 expectations | Govt support may be required again to recapitalise public banks : The recent attempt by a few public banks to raise equity capital from the markets saw a relatively tepid response with participation largely limited to a few state-run institutions, raising questions on the ability of these banks to raise external capital. This is the situation despite the massive recapitalisation of public banks entailing a capital infusion of Rs. 3.16 lakh crore during FY2016-2020. Given the weak profitability outlook for these banks even in FY2022, the investors’ interest towards these banks is likely to remain muted. Increasing credit growth from the banking system would require active participation from public banks as they still account for 2/3rd of the banking sector credit. Accordingly, the Government of India (GoI) may need to continue supporting these banks in FY2022 as well. - moneycontrol.

🍒 Deposits of public sector banks surge amid pandemic stress : Deposits for public sector banks (PSBs) grew at a higher pace than usual despite their lower deposit rates and amid stress on a few private banks. Term deposit mobilisation of public sector banks quadrupled but it decelerated sharply for private banks, the Reserve Bank of India said. For the banking sector as a whole, term deposits – contributing almost 60% of total deposits – moderated, reflecting the easing of interest rates and the lure of returns on competing asset classes. Foreign banks aggressively raised low-cost current and saving account (CASA) deposits, although their share in total deposits is low. “During 2020-21 so far, deposits with PSBs grew at a higher pace than usual, partly reflecting perception of their safe-haven status,” RBI said in its report on Trend & Progress of Banking in India. - economic times

🍒 Banks need Rs one lakh crore for NPAs, growth, says Reserve Bank of India : The Reserve Bank of India (RBI) has said that banks will need additional capital of up to one and a half percentage points of risk-weighted assets in its assessment of the impact of Covid-19 on lenders. Given that total bank loans are around Rs 104 lakh crore, the capital requirement would be more than Rs 1 lakh crore. “Preliminary estimates suggested that potential recapitalisation requirements for meeting regulatory purposes as well as for growth capital may be to the extent of 150 basis points (100bps = 1 percentage point) of the common equity tier I (CET I) ratio for the banking system,” the RBI said in its report on ‘Trend and progress of banking in India’ released on Tuesday. According to the RBI, gross non-performing assets (NPAs) declined from 9.1% as of March 2019 to 8.2% at end-March 2020 and further down to 7.5% in end-September 2020. - economic times

🍒 Banking sector sees improvement in health during FY20, says Reserve Bank of India : The performance of the Indian banking sector improved in fiscal 2020, when lenders reported a profit on an aggregate basis after two years of losses, the central bank said in its yearly assessment report. The banking system's bad loans fell and capital buffer improved, but banks need to be vigilant about competition from nimbler tech rivals, the Reserve Bank of India said. The RBI also expressed concern over rolling back the policy support given to banks to deal with the Covid-19 pandemic in the last eight months. "In 2020-21, as policy support is rolled back, the impact of the Covid-19 pandemic may dent the health of the banks and non-banks," the regulator said, as part of its report on Trends and Progress of Banking in India. The RBI said the turnaround of the banking system depended on the pace of the economy returning to a growth path. "Improvement in the health of the banking sector henceforth hinges around the pace and shape of economic recovery," it said. "The challenge is to rewind various relaxations in a timely manner, reining in loan impairment and adequate capital infusion for a healthy banking sector." - economic times

🍒 IFSCA permits banking units to transfer assets through participation pacts : The International Financial Services Centres Authority (IFSCA) on Wednesday allowed Banking Units (BUs) to transfer assets to/from other financial institutions, persons resident in India and persons resident outside India through any internationally recognised standard risk participation agreement. The above dispensation is expected to encourage risk participation of foreign currency assets through BUs in IFSC instead of banks in foreign jurisdictions, IFSCA said in a statement. The first IFSC in the country has been set up at the Gujarat International Finance Tec-City (GIFT) in Gandhinagar. Transfer of assets through the risk participation agreement route is a common practice in many jurisdictions especially in the field of trade finance, it said. "Such risk participation is undertaken as a bilateral contract under a standard document called a risk participation agreement between the two institutions (buying and selling entity). One of the common standard risk participation agreement is the Master Risk Participation Agreement (MRPA) developed by the Bankers Association for Finance and Trade (BAFT)," it said. The IFSCA was established on April 27 this year with its head office in Gandhinagar. - economic times

🍒 ITR filing deadline extended from Dec 31 to January 10, 2021 for these taxpayers : The government has extended the deadline to file income tax return (ITR) for FY 2019-20 for individuals from the current deadline of December 31, 2020, to January 10, 2021. The extension of the deadline is for those individuals whose accounts are not required to be audited and who usually file their income tax return using ITR-1 or ITR-4 forms, as applicable, as per the press release dated December 30, 2020. This is the third time that the government has extended the deadline to file ITR - first from the normal deadline of July 31 to November 30, 2020, and then to December 31, 2020. As per the press release, the deadline for other taxpayers whose accounts are required to be audited (including partners of a firm) and/or those who have to submit report in respect to international financial transactions has been extended to February 15, 2021.. - economic times

🍒 Krazybee Services appoints Gopalakrishna as Independent Director : Krazybee Services Private Limited, a non-deposit taking non-banking financial company (NBFC-ND-SI), has appointed G Gopalakrishna, former Executive Director (ED) of Reserve Bank of India (RBI) as an Independent Director on its Board. Gopalakrishna has been a career Central Banker with RBI for over 33 years in various capacities and retired as Executive Director (ED) in 2014. During his stint as ED RBI, he was overseeing the Department of Banking Supervision, Dept of Non-Banking Supervision and Foreign Exchange Department, among others. - Business Line

🍒 ICICI Lombard launches online platform for SMEs ; Private insurer ICICI Lombard General Insurance has launched an online platform for small and medium enterprises to buy or renew insurance. “The new interface will serve as a convenient platform for SME owners to buy or renew insurance products, endorse their insurance policies, and register claims. Through this platform, business owners can opt for different insurance options such as marine insurance, workmen compensation,” it said in a statement. “The SME segment is relatively more vulnerable to multiple risks and has been significantly impacted by the pandemic. With this one of its kind online platform for business insurance, we are empowering SMEs to avail our business insurance solutions conveniently at any time and from anywhere in a contactless manner,” said Sanjeev Mantri, Executive Director at ICICI Lombard. - Business Line

🍒 Jana SFB expands its branch network to 601 : Jana Small Finance Bank digitally inaugurated 18 bank branches in Maharashtra. With the conversion of its asset centres to bank branches, Jana Bank’s presence in Maharashtra will reach 70 and 601 all India. Maharashtra is the second highest of the 22 States where the bank has a presence. Staying true to their promise of paise ki kadar, Jana Bank is all set to increase its footprint across rural India. Jana Small Finance Bank started its journey in Maharashtra in 2010 and have served over 15 lakh customers in the State who are mainly women. The bank offers unsecured loans to women under the group loan model as well as individual loans for small businesses. - Business Line

🍒 Flat growth for life insurance industry in FY21: Murlidhar : The life insurance industry’’s growth in the current fiscal is likely to stay flat amid sharp traction seen in the protection business and ₹5 lakh income tax exemption will have a short term negative impact, a top life insurance official said on Wednesday. In the private sector players, the additional premium income saw a de-growth of four per cent in the first half of the fiscal while some companies attained healthy growth. Companies that could offer complete digital onboarding and servicing platforms immediately grew, he said. “This has been an unprecedented year. The industry is likely to remain flattish. However, we will stay ahead of the industry. In the first half our additional premium had grown by 16 per cent,” Kotak Mahindra Life Insurance MD & CEO G Murlidhar said. - Business Line

🍒 SFBs should focus on bottomlines to withstand adverse shocks: RBI : Small Finance Banks (SFBs) may need to focus on their bottomlines as and when financial conditions tighten, according to a Reserve Bank of India (RBI) report. The “Report on Trend and Progress of Banking in India 2019-20” observed that the prevailing easy liquidity conditions facilitate borrowings and refinance on which SFBs rely. Currently, there are 10 SFBs in the country. The central bank said the risk absorption cushions in the form of provision coverage ratio (PCR) is low in some SFBs, impacting their ability to withstand adverse shocks. - Business Line

🍒 Kapil Wadhawan submits alternative proposal for DHFL : Kapil Wadhawan, the erstwhile promoter of Dewan Housing Finance Corporation Ltd (DHFL), has submitted an alternative proposal that he contends is better than the bids submitted as part of the resolution process until now. Noting that there is a possibility of a potential litigation amongst the bidders, he urged that his proposal be considered by the RBI, the advisors to the DHFL Administrator and the committee of creditors (CoC). “You will appreciate that the alternative proposal that I have now made is significantly better than the bids made by any of the bidders by a wide margin. It is apparent that the bidders are offering no real value for the wholesale book and are seeking to retain for themselves the profits that they will earn through further retail lending,” Wadhawan said in a fresh letter to RBI Governor Shaktikanta Das, DHFL’s Administrator R Subramaniakumar and the CoC. - Business Line

🍒 Just 2.1% of TLTRO funds went to NBFCs that needed them most: RBI report : Banks deployed more than 70 per cent money raised through targeted long-term repo (TLTRO) in papers issued by AAA-rated non-banking finance companies (NBFC), defeating the very purpose of the special liquidity operations. The top-rated NBFCs did not need special assistance from the RBI or banks. They had enough access to the debt markets and had a comfortable liquidity position. The whole idea of launching the TLTRO funds, in various batches, was to provide system level liquidity as well as “targeted liquidity to sectors and entities experiencing liquidity constraints and restricted market access.” Clearly, banks did not do it, data released by RBI’s Trend and Progress Report showed. - Business Standard

🍒 Fintechs may pose a challenge to banking sector over the next few years : At an inter-block cricket match in Purnea district early this year, all sorts of loans were on offer around the ground, with banners bearing cell numbers. None of these banners bore the names of banks but apps that could process instant loans with few questions asked. This is just the kind of activity that Reserve Bank of India Governor Shaktikanta Das warned in a December 23 press release would result in individuals and small businesses “falling prey to growing number of unauthorised digital lending platforms (or) mobile apps on promises of getting loans in quick and hassle-free manner”. But this explosion of app-based lending, a digitised extension of the informal, below-the-radar channels that flourish in India, underlines the growing importance of fintech companies of all hues. Even before banks can reach credit to the “unbanked” through such measures like Jan Dhan, these companies have moved in and are creating what Nobel laureate George Akerlof would describe as a lemons market — where it is difficult to distinguish between a good and a bad product. There are no industry-wide estimates of how large India’s digital lending segment has grown. In 2018, Boston Consulting Group estimated that it could be a $100-billion market for India by 2023 across all segments. - Business Standard

🍒 A year after PMC Bank scam, RBI says NPAs rise in urban co-operative banks : The proportion of gross non-performing assets (NPAs) of urban co-operative banks saw a rise in FY20 to 10.8% as against 7.3% in the previous year, the Reserve Bank said on Tuesday. From a soundness perspective, the number of such lenders bracketed in the lowest "D Category" increased during the last fiscal, the central bank said in the "Trends and Progress of Banking in India" report. It can be noted that dud assets at the poorly governed urban co-operative banks (UCBs) are a major source of stress, and the crisis at lenders like PMC Bank, which continues to be under directions even after one year, can be attributable to high quantum of NPAs. - Live Mint

🍒 Bitcoin jumps to record $28,600 as 2020 rally reaches new heights : Bitcoin on Wednesday jumped to a record $28,599.99, after the digital currency almost quadrupled in value this year amid heightened interest from bigger investors. The world's most popular cryptocurrency was last up 2.3 percent at $28,012.It has surged by nearly half since breaking $20,000 for the first time on December 16. Bitcoin has increasingly seen demand from larger US investors in particular, attracted by its perceived inflation-hedging qualities and potential for quick gains, as well as expectations it would become a mainstream payments method. - moneycontrol.

🍒 India's forex reserves rise by $51.4 billion during April-September 2020 : India's foreign exchange reserves increased by $51.4 billion during April-September 2020 as compared with $19.1 billion during April-September 2019, Reserve Bank of India's balance of payments (BoP) data shows. Apart from this, the foreign exchange reserves in nominal terms rose by $66.9 billion during April-September 2020 as compared with $20.8 billion recorded during the same period in 2019. The central bank on December 30 released the BoP for July-September 2020, based on which the sources of variation in foreign exchange reserves during April-September 2020 are measured. - moneycontrol.

🍒 Gold prices today drop but silver rates jump : Gold prices in India continued to trade in a narrow range as investors assess the impact of the pandemic and the pace of vaccine distribution. They are also keeping a watch on progress of an enhanced stimulus package in the US Senate. On MCX, February futures were down ₹31 to ₹50,008 per 10 gram while silver futures jumped 1% to ₹68,847. In the previous session, gold had ended flat, settling ₹22 higher per 10 gram while silver had declined ₹800 per kg. Gold futures on MCX have remained in the ₹50,500 to ₹50,000 for the past two weeks.

🍒 Sensex, Nifty extend record run on vaccine booster : After a volatile session, the 30-share BSE Sensex closed up by 133.14 points or 0.28 per cent at a record high of 47,746.22. The barometer scaled its all-time intra-day high of 47,807.85. The broad-based NSE Nifty rose by 49.35 points or 0.35 per cent to finish at its lifetime high of 13,981.95. It touched an all-time peak of 13,997 in intra-day trade. Among major Sensex movers, Ultratech Cement rose over 4 per cent, Bajaj Finance by 2.63 per cent and Maruti by 2 per cent. Mahindra and Mahindra, Tech Mahindra, HUL, Kotak Bank, HDFC Bank, Reliance Industries and Asian Paints also finished in the green.

🍒 Rupee rises by 11 paise to end at over 2-month high : Rising for the fifth straight session, the rupee on Wednesday appreciated by 11 paise to close at more than two-month high of 73.31 against the US dollar on the back of foreign fund inflows and a weak greenback in the global markets. At the interbank forex market, the domestic unit opened at 73.35 against the US dollar and witnessed an intra-day high of 73.26 and a low of 73.36. The local unit finally settled at 73.31, registering a rise of 11 paise over its previous close. The rupee had last closed at this level on October 13. On Tuesday, the rupee had settled at 73.42 against the American currency. In the last five trading sessions, the Indian rupee has gained 53 paise. Meanwhile, the dollar index, which gauges the greenback''s strength against a basket of six currencies, fell 0.21 per cent to 89.80.

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