With rising NPAs, banks take foot off pedal on Mudra loans
G Naga Sridhar Hyderabad | March 11, 2019 BUSINESSLINE
Disbursal target of Rs 3 lakh cr unlikely to be met this fiscal
Banks are going slow on Mudra loans this fiscal so far and are unlikely to meet the disbursement target.
As on March 1, 2019, the disbursement under the Mudra scheme was Rs 2.12 lakh crore. The target for financial year 2018-19 is Rs 3 lakh crore. In other words, in less than one month, banks have to disburse almost one-third of the target.
“In the initial two years, the performance of this category of loans was good. But now, there are some concerns, especially in the ‘Sishu’ category of small business loans, which calls for caution though there is pressure to ramp up lending under Mudra,’’ a senior official of a public sector bank told BusinessLine.
The policy of increasing the disbursal target every year ‘unrealistically’ is hurting the banks, he added. The target last year was Rs 2.40 lakh crore.
Based on the ground realities, bankers feel that the ‘Tarun’ category of loans have a better repaying capacity but a lion’s share of the loans are being made under the ‘Sishu’ category.
Three types of loans
Launched in April 2015, Mudra offers three categories of loans: Shishu (up to Rs 50,000), Kishor (Rs 50,000-5 lakh) and Tarun (Rs 5 lakh-10 lakh).
According to data available with the Micro Units Development and Refinance Agency, the apex body of Mudra loans, there has been a 41 per cent growth in Mudra lending during the last fiscal compared with the previous year at Rs 2.46 lakh crore against the target of Rs 2.40 lakh crore.
While the growth in respect of public sector banks is 29 per cent, the same increased significantly for private sector banks at 27 per cent.
As per figures for the third quarter, some banks like SBI might reach individual targets. In terms of regions, northern, southern and western regions account for top three slots in growth in lending.
But non-performing assets too more than doubled during the year for public sector banks to 3.43 per cent, while bad loans across the total portfolio touched 5.8 per cent.
There have been reports about a warning from the RBI on the rising NPAs under the Mudra segment.
Mudra now has 193 partner institutions comprising 27 public sector banks, 18 private sector banks, 31 regional rural banks, 13 State cooperative urban banks, 73 micro-finance institutions and 31 non-banking financial companies.
PNB scam: Fresh charge-sheet against Nirav Modi
PTI New Delhi | March 11, 2019 BUSINESSLINE
The Enforcement Directorate has filed a fresh charge-sheet against PNB scam accused Nirav Modi under the anti-money laundering law, officials said on Monday. They said the charge sheet or the prosecution complaint has been filed before a special Prevention of Money Laundering Act (PMLA) court in Mumbai. This is a supplementary charge sheet against the diamantaire and few others and the agency has recorded additional evidences gathered in the case and attachments made, they said. The development comes two days after a British daily reported that Nirav Modi, accused in the $2-billion Punjab National Bank (PNB) scam, is living in a swanky £8-millionapartment in London’s West End and is now involved in a new diamond business.
Bombay HC to hear Kotak Mahindra plea on promoter-shareholding norms today
Surabhi Mumbai | March 12, 2019 BUSINESSLINE
The Bombay High Court will take up for hearing the writ petition by private sector lender Kotak Mahindra Bank on the issue of promoter-shareholding norms by the Reserve Bank of India on Tuesday.
The court had, on January 17, adjourned the hearing after the RBI senior counsel Venkatesh Dhond sought more time to file the affidavit in response to the writ petition.
The case is being closely followed as it is perhaps for the first time that a bank is approaching the courts on an RBI directive. Many bankers and experts, who did not wish to be named, see it as a direct challenge to the regulator.
At the core is the contentious issue of diluting the promoter shareholding in the bank to 20 per cent by December 31, 2018, from close to 30 per cent at present. The RBI had said the issuance of Perpetual Non-Convertible Preference Shares (PNCPS) by the lender in August last year did not meet its requirements for diluting the shareholding.
Kotak Mahindra Bank had filed the writ petition on December 10 last year on the Banking Regulation Act, and had sought validation on whether its issuance of PNCPS met the regulatory requirements. It is being heard by a two-judge bench of the Bombay High Court comprising justices BP Dharmadhikari and Sarang V Kotwal. It has not given any interim relief to Kotak Mahindra Bank, and had refused to grant a stay on the December 31, 2018, deadline set by the RBI.
Though there has been speculation that there could be an out-of-court settlement, both Kotak Mahindra Bank and RBI have remained silent on the issue and said the matter is sub-judice.
Meanwhile, pressure is mounting on the RBI to review the promoter shareholding norms, although it is unlikely to look into the issue at present.
Another private sector lender, Bandhan Bank, recently merged with Gruh Finance, which has been seen as a means to meet the RBI’s promoter shareholding norms.
On Monday, shares of Kotak Mahindra Bank gained 0.88 per cent to close at Rs 1,248.85 apiece on the BSE.
IDBI Bank, LIC constitute joint task force to chalk out future roadmap
Our Bureau Mumbai | March 10, 2019 BUSINESSLINE
The bank, in a statement issued on Sunday, said the joint task force has been constituted to realise the full potentials arising out of business synergies
IDBI Bank and Life Insurance Corporation of India (LIC) have constituted a joint task force to chart out the future roadmap, both for the bank as also its associate companies, even as the bank is considering extending the appointment of Rakesh Sharma, the current Managing Director (MD) and Chief Executive Officer (CEO) of the Bank, for a further period of three years.
This move follows LIC completing acquisition of 51 per cent controlling stake in IDBI Bank on January 21, 2019. The bank received total capital of Rs. 21,624 crore from LIC. Sharma was appointed by the Government to head the bank for a period of six months on October 5, 2018.
The bank, in a statement issued on Sunday, said the joint task force has been constituted to realise the full potentials arising out of business synergies. The major areas of synergy identified for the immediate short term are pertaining to selling of LIC policies through IDBI Bank branches, management of cash and other premium receipts of LIC through the bank’s branches, enabling the technical wherewithal available in both the bank and LIC for offering digital solutions to both, the policy holders of LIC and customers of IDBI Bank.
The statement elaborated that the long term strategy includes common investment strategy, use of other resources like real estate, commercial and residential space, IDBI Bank branches, premises and ATMs, digital marketing, rationalization of the common subsidiaries in Mutual Funds, Life Insurance etc.
IDBI Bank has initiated the process of divesting its 48 per cent stake in IDBI Federal Life Insurance Company as under current IRDAI regulations, a single entity cannot have two competing insurance businesses. Similarly, the bank and its wholly-owned subsidiary, IDBI Capital Market Services Ltd may also divest their stakes — 66.67 per cent and 33.33 per cent, respectively — in IDBI Asset Management Ltd as LIC too has its own mutual fund.
“Additionally, a Working Group, has been created to carry forward the initiatives identified for synergy and to effectively implement the decisions taken at the management level,” the statement added.
The new Board will be entrusted with the responsibility of charting out a fresh growth strategy for the bank as also revamp the corporate governance structure to ensure best-in-class business practices, the bank said. The bank has already started the process of appointing two new Deputy Managing Directors for the bank, which will be through open competition from the market.
“The bank has also started reviewing all its policies including credit, investment and its internal processes, risk management practises etc with the help of consultants. Greater opportunities will emerge for employees of the bank as it strengthens its financials through business growth. Furthermore, the bank has also started revamping its Performance Measurement System (PMS) – IDBI Performance Assessment and Continuous Evaluation (i-PACE) – to make it more objective and system-driven,” the statement added.
IDBI Bank’s net loss widened to Rs. 4,185 crore in the third quarter ended December 31, 2018, against Rs. 1,524 crore in the year-ago period, due to a jump in provisions towards bad loans.
With this strategic alliance, the bank said it stands to gain immensely as it will be able to augment its retail business, thereby de-risking its business portfolio and ensuring increasing of other income/operating profit, NIM (net interest margin) and substantial increase in CASA (current account, savings account). The bank has already recorded noticeable improvements in CASA ratio to 38 per cent (of total deposits) as on December 31, 2018, it added.
Rafale deal: No force on earth can make me reveal the source, says N Ram
Special Correspondent Chennai | March 06, 2019 BUSINESSLINE
N Ram, Chairman , The Hindu Group – THE HINDU
N Ram, Chairman of The Hindu publishing group, responded strongly to Attorney-General KK Venugopal’s argument in the Supreme Court that the documents on the Rafale deal were “stolen” and those publishing them were guilty under the Official Secrets Act.
“We did not steal the documents from the Ministry of Defence, we got them from confidential sources and no force on earth can make me or us reveal the source of the documents, because we have given our word,” said Ram. “Secondly, we have published this information obtained through investigative journalism in the public interest, information which was withheld or suppressed despite repeated demands in Parliament and outside.”
He asserted that “we are fully protected by the Article 19(1) A of the Indian Constitution, the fundamental right of freedom of speech and expression and also by the Right to Information Act, specifically 8(1)(i) and 8(2), which overrides the Official Secrecy Act” and that “there is no question of any national security being compromised by it”.
Ram also called for democratic India to do away with the Official Secrets Act, 1923, saying: “The OSA is an obnoxious piece of colonial legislation which is anti-democratic and has rarely been used against publications in independent India. If there was espionage or something like that, it’s a different matter. Here, it is material that should have gone into the public realm and should have been freely available to readers.”
Asked if the Attorney General’s argument would have a chilling effect on investigative journalism, Ram said if it represented government policy, it would clearly have a chilling effect on journalism, and investigative journalism in particular. He added, however, that any such attempt was unlikely to succeed.
“Today it’s not just The Hindu, but also some other independent news publications which have put out material on Rafale. There has been an overarching fear in the media ecosystem under this government but the Indian press is now willing to do more. And the very fact that issue has been covered in a big way shows that the blanket of silence that some would like to be imposed on this matter has been breached,” he said.
Ram also explained that The Hindu had exercised due diligence in its investigation and it was not as though everything that came to hand was unloaded in the public realm in the name of investigative journalism. “For example, during the course of our independent Rafale investigation, we had access to information on the 13 India-specific enhancements but in the newspaper’s judgment there was no need to publish this, because it was not strictly relevant to the investigative articles being published and also because the government was saying this technical information was highly sensitive, it may help the interests of adversaries and may cause harm. I don’t accept that argument fully but still we felt that there was no need to publish this technical information,” he said.
The Hindu had exercised due diligence in its investigation, and not everything that came to hand was unloaded in the public realm, said Ram
Jet Airways secures a Rs 2,050 crore loan from PNB: Report
Jet Airways raised foreign currency term loans worth Rs 1,100 crore and a non-fund based credit facility of Rs 950 crore from PNB
Cash-strapped Jet Airways has secured funds worth Rs 2,050 crore from state-run Punjab National Bank (PNB) in a bid to provide temporary support to the carrier. The airlines raised foreign currency term loans worth Rs 1,100 crore and a non-fund based credit facility of Rs 950 crore from PNB, Mint reported.
This credit has been raised in two trenches through separate agreements with PNB. Under one agreement, the airline received credit of Rs 1,050 crore, including a term loan worth Rs 350 crore and a non-fund based facility of Rs 700 crore, the report said. With the second agreement came credit worth Rs 1,000 crore, including a term loan of Rs 750 crore and a non-fund based facility of Rs 250 crore.
Moneycontrol couldn’t independently verify the report.
It is unclear how the carrier will use this credit. While speculation is that the funds will be used for its working capital needs, sources told the newspaper that the airline wants to use the money to clear dues to aircraft lessors and pay staff salaries.
This fund infusion may prop up Jet Airways’ credit rating and help resume flights that have been cancelled ever since at least 49 of its planes were grounded in February.
“The loan has been raised in dollars at a stronger rupee as compared to the value of the rupee now. So, there is a cost arbitrage, which could help the company repay larger rupee loans,” a source cited earlier said.
The term loans have a five-year repayment tenure, but their interest rates are varied. The Rs 750 crore loan has been extended at a rate of 12-month Libor plus five percent and a yearly reset. For the Rs 300 crore term loan, it is six-month Libor plus 3.5 percent and a half-yearly reset.
The airline can sell down Rs 250 crore of the term loans to investors according to the agreement. “The non-fund based facility can be later converted to current account credit facility and be used to fund operations or meet other dues,” the source added.
To avail of the loan, Jet Airways had to create a trust and retention account (TRA) through a tripartite agreement with PNB and ICICI Merchant Services. This mechanism is used to protect banks and lenders against defaults by insulating the project’s cash flows.
Under this pact, the TRA agent has to make all payments to lenders directly, without the borrower’s intervention. This includes managing the project’s operation and maintenance expenses, maintaining a debt servicing reserve and a separate cash reserve for operational spending.
Jet Airways had a debt of Rs 9,600 crore as of December 31. It has incurred a total loss of Rs 3,200 crore in the nine months through December, with a negative net worth of Rs 10,370 crore.