Loans | Business Upturn

Bank of Maharashtra reports 23% increase in its loan book in Q3 FY21-2022

News Desk — Tue, 04 Jan 2022 10:01:02 +0000

Government-owned Bank of Maharashtra reported 23.02 per cent growth year-on-year (YoY) in its loan book that rose to Rs 1.29 trillion as of in third quarter on December 31, 2021 (Q3F22), as against Rs 1.04 million in the same quarter in the previous fiscal.

According to data by the Reserve Bank of India (RBI), the company has posted a 7.3 per cent year-on-year growth in the mid of December 2021. The public sector lender’s deposits have expanded by 15.21 per cent from Rs 1.61 trillion in 2020 against Rs 1.86 trillion on December 31, 2021. The company also saw a sequential increase of 2.78 per cent in its bank deposits in September 2021, the bank said in a regulatory filing with BSE.

The public sector bank’s credit to deposit ratio also increased from 64.77 per cent in December 2020 to 69.15 per cent in December 2021. The bank also saw a sequential increment of 63.47 per cent in its deposits in September 2021.

Its current and savings accounts stand at around 55.05 per cent in December 2021 against 50.91 in the previous fiscal. The bank also saw an increment in its low-cost deposits – current and savings account money that went up by 53.91 per cent in September 2021.

The bank’s growth in investments was flat and sequentially have an increment of 11.9 per cent on a year-on-year basis at Rs 72, 328 in December 2021 against Rs 72,285 crore in September 2021.

HDFC Ltd reports Q3 result, loan allotment increases by 5%

News Desk — Mon, 03 Jan 2022 15:36:58 +0000

Mumbai-based mortgage financier Housing Finance Development Corporation Ltd. (HDFC) on Monday shared its business outlook for the quarter ending December 2021. The company said, “It had allotted loans worth Rs 7,468 crores in Q3 of 2021 as compared to Rs 7076 crores in the same quarter of the year 2020. They saw an increment of 5 per cent in the allotment of loans.”

“All the loans assigned during the December quarter were to HDFC Bank pursuant to the buyback option embedded in the home loan arrangement between the corporation and HDFC Bank,” said in a press release.

In 2021, the mortgage lender sold loans worth Rs 27,591 crores as compared to Rs 16,956 crores in 2020. Its gross income also increased from dividends for the period at Rs 195 crores, HDFC said in a regulatory filing.

The company is carrying approximately Rs 27,000 crores worth of high-quality liquidity assets (HQLA) held entirely in government securities. Furthermore around Rs 13,000 crores of HQLA is held for the requirements of statutory liquidity ratio and Rs 15,000 crores were being held for general liquidity purposes. In compliance with the rules of the Reserve Bank of India (RBI) with effect from December 1, 2021, the parent company is required to maintain the liquidity coverage ratio (LCR) up to a minimum of 50 per cent. The company also has liquidity buffers of approximately Rs 55,000.

In aggregate, HDFC Ltd. posted its revenues from operations of Rs 1,39,034 lakh crore in the year 2021 against Rs 1,01,726 lakh crore in the year 2020. On Monday HDFC Ltd. shares closed 1.93% higher at Rs 2636.40 on NSE.

RBI refines standards for upgrading accounts classified under NPAs

Ayisha Farah — Fri, 12 Nov 2021 17:55:13 +0000

On Friday, the Reserve Bank of India refined that lenders should reclassify a non-performing asset to a “standard” asset only when the borrower pays the complete arrears of interest and principal.

The regulator has remarked that some lending organisations promoted accounts listed as non-performing assets (NPAs) to the ‘standard’ asset classification upon fee of only interest overdue, partial overdue, etc.

“It has been observed that some lending institutions upgrade accounts classified as NPAs to ‘standard’ asset category upon payment of only interest overdue, partial overdue, etc. To avoid any ambiguity in this regard, it is clarified that loan accounts classified as NPAs may be upgraded as ‘standard’ assets only if the borrower pays entire arrears of interest and principal,” the RBI said.

It has also directed lenders to specify particular due dates for payment of loans, compensation frequency, break up between principal and interest, and examples of SMA/NPA classification dates in the loan agreements.

The standards currently say that an amount will be treated as ‘overdue’ if not paid on the due date fixed by the bank. The central has witnessed that the due dates for repayments are seldom not explicitly considered in the loan agreements. Instead, a classification of due dates is mentioned, leaving scope for different versions.

“Henceforth, the exact due dates for repayment of a loan, frequency of repayment, break up between principal and interest, examples of SMA/NPA classification dates, etc. shall be clearly specified in the loan agreement, and the borrower shall be apprised of the same at the time of loan sanction and also at the time of subsequent changes, if any, to the sanction terms/loan agreement till full repayment of the loan”, the RBI said.

Also, the regulator said that the accounts that have availed of the interim facility and the specific date of origin of payment should also be defined in the loan agreements. The RBI has said the lenders have to follow these instructions by December 31, 2021, as new loans are affected, but in the case of enduring loans, these directions should be followed as and when such loans become due for renewal/review.

Gross NPAs of banks to reach 9% this fiscal year: CRISIL

Ayisha Farah — Tue, 19 Oct 2021 11:41:09 +0000

On October 19, Bad loans of the Indian banking sector will grow at a slower pace in the current fiscal year than the 2018 peak, rating agency Crisil said. Gross non-performing assets (NPAs) of banks will advance to 8-9 per cent this fiscal, well under the top of 11.2 per cent seen at the end of fiscal 2018, the agency said in a report.

The COVID-19 easing projects such as the restructuring dispensation and the Emergency Credit Line Guarantee Scheme (ECLGS) will help curb the rise. With around two per cent of bank credit required under restructuring by the end of this fiscal, stressed assets, including gross NPAs and loan books under restructuring, should reach 10 per cent to 11 per cent, the agency said.

“The retail and MSME segments, which together form around 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around,” said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings.

“Stressed assets in these segments are seen rising to 4-5% and 17-18%, respectively, by this fiscal end. The numbers would have trended even higher but for write-offs, primarily in the unsecured segment,” Sitaraman said.

Last year, the government and the RBI announced a few measures to support the stressed borrowers, including a six-month loan moratorium. Despite the efforts, stressed assets in the retail segment will grow to 4-5% by the end of this fiscal from ~3% last fiscal, Crisil said.

While home loans, the largest segment, will be the least impacted, unsecured loans are assumed to bear the effects of the pandemic, Crisil said.

The MSME (micro, small and medium enterprise) segment, despite profiting from ECLGS and the current limit improvement and tenure extension, is expected to see asset quality decline and will need restructuring to manage cash-flow challenges, Crisil said.

“In fact, restructuring is expected to be the highest for this segment, at 4-5% of the loan book, leading to a jump in stressed assets to 17-18% by this fiscal end from ~14% last fiscal. The corporate segment, though, is expected to be far more resilient,” Crisil said.

Moreover, a large part of the pressure in the corporate portfolio had already been identified during the asset quality review began five years ago, the agency said. That, joined with the secular deleveraging trend, has established the balance sheets of corporates and allowed them to tide over the pandemic comparatively unharmed compared with retail and MSME borrowers.

This is apparent from the restructuring of only ~1% in the segment. Consequently, stressed corporate assets are expected to remain range-bound at 9-10% this fiscal.

“The rural part, which was hit harder during the second wave of the pandemic, has also seen a substantial improvement. Therefore, stressed assets in the agriculture segment are expected to remain relatively stable,” Crisil said.

CEO of Union Bank of India: restructures loans worth Rs 13,000 crore, follows resolution framework by RBI

Aayushi Singh — Thu, 29 Jul 2021 15:15:15 +0000

On July 29, the Union Bank of India, which is the fourth-largest public sector bank in the country, had said that it had so far restructured the loans worth Rs 15,927 crore under the two resolution frameworks announced by the Reserve Bank of India.

Rajkiran Rai G, MD, and CEO of the Union Bank said that a large piece of the restructured accounts was from the retail segment. He added on saying that under the resolution framework 1.0, the lender had restructured accounts worth Rs 11,965 crores, out of which Rs 3,702 crore were from the personal loans segment, Rs 2,427 crore were from the micro, small and medium enterprises segment and Rs 5,836 crore were from the large corporates.

Till June 30, 2021, the total recast amount was Rs 3,962 crore under the resolution framework. The scheme would be open for three more months. In the second round of the recast, the personal loans accounted for Rs 2,855 crore, and from the MSME’s over Rs 954 crore came, the rest came from agriculture. Under the resolution framework, 2.0 announced on May 5, 2021, large corporates were not eligible for the recast.

Rajkiran Rai said that they have expected that retail and MSME would be put together, and restructuring worth Rs 2,000 crore might occur in the second quarter.

On August 6, 2020, the first resolution framework was issued and was applied to all the categories of borrowers affected by the COVID-related stress.

Slippages worth Rs 7,049 crore were reported by Union Bank in Q1FY22, out of which 45 per cent was from the MSME segment. 15 per cent of the total slippages were from Retail which was worth Rs 1,078 crores. Mr. Rai said that the stress was mainly due to COVID-19 as the EMI payments had been affected, and the stress in retail was already covered in the June quarter and there was not much in the September quarter.

The CEO had mentioned that the bank was confident that stress would get lower with the aid of restructuring and the facilities extended under the emergency credit line guarantee scheme (ECLGS). In FY22, the Union Bank has expected recoveries and upgrades worth Rs 13,000 crore. The recoveries and upgrades in Q1 were over Rs 4,300 crore.

Banks mark RComm account as fraud, ‘unjustified and unwarranted’, says Reliance Group

Devanshu Singla — Wed, 30 Dec 2020 14:30:06 +0000

On 29 December, three state-run lenders, State Bank of India (SBI), Union Bank of India (UBI) and Indian Overseas Bank (IOB) classified accounts of the Anil Ambani owned Reliance Communication Ltd (RCom) and its two units Reliance Telecom Ltd (RTel) and Reliance Infratel Ltd (RInfra) as fraudulent.

Additionally, the SBI and the UBI have also marked Reliance Telecom Ltd account as fraud.

The Delhi High Court has also suggested that the union government is free to investigate or file any complaint proceedings against RCom and RTel. The resolution professional for RCom has accepted claims worth Rs 49,224 crore from 53 creditors, including banks, non-banking finance companies (NBFCs) and mutual funds (MFs), the Economic Times reported.

Today, Reliance Group in a statement has said that certain banks labelling accounts of the now defunct telecom firm – Reliance Communications (Rcom) – and its units as fraud was “unjustified” and “unwarranted”.

It also denied the reports on social media that RCom and its units owe lenders Rs 86,188 crore, saying they owe around Rs 26,000 crore to Indian banks and financial institutions as on the date of filing before the dedicated bankruptcy court.

On Wednesday, Reliance Group in a statement said, “The alleged ‘fraud’ classification by certain banks is entirely unjustified and unwarranted, and the Delhi High Court by an interim order has directed the same to be kept in abeyance for the time being, and the matter is now sub judice.”

DHFL reports net loss of ₹2,122.65 crore

Shalmali Bhagwat — Thu, 26 Nov 2020 14:14:08 +0000

Dewan Housing Finance Corporation Ltd (DHFL) has made public that it suffered from a consolidated net loss of ₹2,122.65 crore in the second quarter of the fiscal against a net loss of ₹6,640.62 crore in the same period a year ago. For the quarter concluded on September 30, 2020, DHFL reported a total income of ₹2,205.90 crore compared to ₹2,581.16 crore in the same period last fiscal. Its revenue from operations jumped up by 4.65 per cent to ₹2,204.81 crore from ₹2,106.71 crore.

Dewan Housing Finance Corporation Ltd is a deposit-taking housing finance company, based in Mumbai with branches in major cities across India. DHFL was established to offer access to economical housing finance to the lower and middle-income groups in semi-urban and rural parts of India.

“The company also reported transaction details to Stock Exchanges and NHB through communications dated September 2, 2020, September 28, 2020, and October 6, 2020, for an outstanding sum of ₹14,04,550 lakh, ₹12,70,553 lakh and ₹1,86,484 lakh, respectively. The company has made provisions as per NHB guidelines on ‘Provisioning Pertaining to Fraud Accounts’,” DHFL Administrator R Subramaniakumar said in the results.

The auditors said DHFL’s continuance as a growing concern depends upon the result of the ongoing corporate insolvency resolution process. “The group has accumulated losses exceeding the share capital and reserves and its net worth is fully eroded,” it noted. DHFL shares soared by over five per cent in intra-day trade and closed at a gain of 4.88 per cent at ₹25.8 apiece on BSE on Thursday.

Paytm Money to launch new service, providing loans against stocks, mutual funds

Shalmali Bhagwat — Wed, 25 Nov 2020 06:09:01 +0000

Paytm Money is currently considering further expansion in the financial sector and planning to secure a larger consumer base by introducing loans against stocks and mutual funds. In September 2017, the fintech major launched a direct mutual fund platform. In February, it registered investments worth Rs 5,000 crore through its platform, making it a raging success. The company came up with direct stock trading for its customers in September.

In June, Paytm Money’s rival Kuvera introduce the service of providing a loan against mutual funds. An interest rate of 10.5 percent is charged, besides a fee of Rs 1,999 for these types of loans. The loan amount is a percentage of the mutual fund investment and varies according to the type of mutual fund held, according to information available on Kuvera’s website.

Paytm is an Indian e-commerce payment system and financial technology company, based in Noida, Uttar Pradesh, India and founded in 2010. It stepped in the market as a prepaid mobile and DTH recharge platform and later included data card, post-paid mobile and landline bill payments in 2013. By 2014, the company launched Paytm Wallet, which was quickly accepted by Indian Railways and Uber and further proceeded towards e-commerce platforms. In 2016, Paytm offered online ticket booking options.

Paytm has further scaled the finance mountain higher with new, novel concepts like Paytm Gold to offer users the facility of purchasing gold for as little amount as 1 rupee, Paytm Gold Savings Plan and Gold Gifting to simplify long-term savings, Paytm Payments Bank and ‘Inbox’, a messaging platform with in-chat payments among other products, ‘Paytm for Business’ App providing merchants with one interface to track their payments and day-to-day settlements instantly and in 2019 also partnered with Citi Bank to launch their Paytm First credit card.

Varun Sridhar, CEO, Paytm Money, said in an interview “The platform has seen investors shift some of their mutual fund allocations to stock trading. It has also seen an increase in the average SIP amounts this year, particularly from more experienced investors”, Mint reported.

He added, “As a leading direct mutual fund distributor and wealth platform, managing customers’ short-term liquidity needs or unforeseen expenses is our priority. We are thus considering and studying the launch of a simple loan against securities products involving both mutual funds and invested stocks. The key is a few click experiences, lower than unsecured loans pricing and a flexible product”.

Paytm aims to double loan disbursements to Rs 1,000 crores for MSMEs

Shalmali Bhagwat — Mon, 09 Nov 2020 06:14:48 +0000

Financial service platform Paytm on Monday announced its decision to double loan disbursements from Rs 550 crore in last fiscal year to Rs 1,000 crore by March 2021. The company plans to provide collateral-free loans of up to Rs 500,000 at a low-interest rate and unique daily EMI product customized for micro-merchants.

The merchants can avail these collateral-free loans through the ‘Merchant Lending Program’ in Paytm for Business App. The creditworthiness of a merchant is assessed by the algorithm of daily transactions and this evaluation gives a pre-qualified loan offering.

Loan repayment is primarily collected from the merchant’s daily settlement with Paytm and there are no prepayment charges on these loans. In the last financial year, over 1 lakh merchants benefited from this service, with Paytm processing loans worth over Rs 550 crore. The entire process is digitised starting from the loan application, approval to disbursal with no additional documents required. Paytm had recently launched Paytm All-in-One Android POS device that has created the facility for over 2 lakh MSMEs to accept all payment modes, including Paytm Wallet, all UPI based apps, Debit & Credit Cards and ‘Cash’.

Paytm bank is not yet allowed to lend according to RBI, and the lending operations were conducted in partnership with various NBFCs and banks.

Earlier in 2018, Paytm partnered with Clix Capitals to disburse loans. Bhavesh Gupta, CEO – Paytm Lending said, “With our collateral-free instant loans, we are trying to help Kirana stores & other small business owners who have been left behind by the traditional banking sector and do not have easy access to loans and credit. Going forward, we will especially focus on EDC merchants and provide higher loan amount based on their EDC transactions.”

Paytm claims to have 50 percent of market share in merchant payments and also gives a tough competition to likes of Khatabook with its Paytm for Business app where merchants can track payments instantly, track settlements and access past collections record, all through one interface.

Loan Moratorium Case: SC schedules next hearing on November 18

Shravan Kanade — Thu, 05 Nov 2020 08:57:56 +0000

A bench headed by Justice Ashok Bhushan has adjourned the hearing of the Loan Moratorium Case to November 18. The bench heard the batch of pleas related to charging of interest on interest by banks on EMIs not paid by the borrowers under the RBI loan moratorium scheme from March 1 to August 31.

However, the Finance Ministry of India and the Reserve Bank of India have already stated that the banks and other financial institutions will take “necessary actions” to credit into the accounts of eligible borrowers by November 5. The Loan Moratorium Scheme is applicable on loans of up to ₹2 crores. The government said that the lending institutions will credit this amount in the accounts of borrowers for the 6-month loan moratorium period.

The pleas sought that no interest should be charged during the moratorium as citizens were facing “extreme hardship, whereby business and work have come to a halt and the entire market has crashed.” It also sought the RBI to “appropriately consider extending the moratorium period for a certain period so as to enable millions of persons, who may get unemployed due to COVID-19 health emergency for some time even after lockdown”.

The apex court told the centre to implement the scheme as soon as possible due to the upcoming festival Diwali and the implementation will benefit the common man.

In the wake of COVID-19 and the consequences of lockdown, the Reserve Bank of India issued a circular on March 27 that allowed financial institutions to grant a moratorium on payment of instalments of term loans falling due between March 1, 2020, and May 31, 2020, for three months, but as the lockdown extended so the RBI had extended the moratorium till August 2020.

Penal Interest and Moratorium cannot go together: Justice Reddy

Aditi Swarup — Thu, 03 Sep 2020 12:07:52 +0000

The Reserve Bank of India gave a 3-month moratorium for loans so that the common man gets some financial relief during the pandemic. The moratorium was extended till the 31st of August but some accounts that have not made payments on interests are being declared NPAs (Non-Performing Assets).
Petitions regarding the same were sent to the Supreme Court and today the Supreme Court passed an order saying that accounts cannot be declared NPAs until a final decision is made regarding the interest and penalty.
While arguing the case on whether there should be a penalty on the moratorium, Solicitor General Tushar Mehta said, “The idea of the moratorium was to defer repayment to ease the burden caused by COVID and lockdown so that business can manage working capital. The idea was not to waive off interest. The effort is that those who are affected by COVID and facing distress get the benefit and those who are defaulters are not able to take benefit.”
According to Bar & Bench, Justice Reddy said, “Question is about the demands of compound interest in the meantime. Moratorium and penal interest cannot go together. RBI will have to clarify.”

Grant 3-year moratorium to pay interest, penalty & interest on penalty, writes @ConnectCOAI to @DoT_India on the #AGR dues. Here's @tyagi_parisha with all the details pic.twitter.com/uILCzRaps8

— ET NOW (@ETNOWlive) February 27, 2020

Navi provides Paperless Loans with Sachin Bansal as CEO

Aayush Agarwal — Wed, 24 Jun 2020 16:36:29 +0000

Navi provides Paperless Loans. Sachin Bansal, is the co-founder of successful e-commerce platform Flipkart. However he also owns financial services startup Navi. Which, has just launched a mobile app. Furthermore, it provides instant personal loans targeted at consumers. These are in the middle-income class segment.

Also, the Navi borrowing app will provide direct loans of up to ₹5 Lakh. Which come with repayment tenures of up to 36 months. Moreover, the loan process is passed completely using digital and contact less process for the customers.

Firstly, the app is currently available for download on the Android platform. Secondly, through which clients can check their eligibility. Lastly, they can then select the loan and EMI amount. And enter their PAN and Aadhaar card number. In order to receive the loan amount in their bank account within minutes.

Paperless Loans: The New Age Overdrafts

Since, Navi provides Paperless Loans. It does not require customers to upload any documents like payslips or bank statements. Because, of recent advancements in know your customer (KYC) norms. As well as and due to the availability of rich consumer data.

In order to assess loan applicants and prevent fraudulent transactions. App-based lenders source customer data from trading and brokerage accounts. And credit and debit card transactions directly from banks. Besides, a customer’s employment information and credit history are also accessed. From credit bureaus approved by the Reserve Bank of India.

“With more and more people opting for online channels. And apps for all their needs. Including financial services in the past few months. The Navi lending app received strong response from Tier 1, 2 and 3 towns during the Beta phase. This gave us the insights and confidence to launch it officially in such a short time. We are now scaling the app across 150 cities in India.” Said Samit Shetty, chief executive of Navi Finserv, the NBFC owned by Navi.

Bengaluru-based Navi was founded by Bansal in May, 2018. Soon after he moved out of Flipkart. Bansal has also backed several technology entrepreneurs across different sectors in his personal capacity. While Navi has also been making strategic investments in several financial sector firms in the last few months.

In April, Navi had raised ₹204 crore in equity capital. From Mumbai-based private equity firm Gaja Capital and other ultra-rich individual investors. This was a second fund-raise following a ₹3,226-crore funding led by Bansal and other individual investors in March.

RBI composes new draft norms for Home Loans lenders

Aayush Agarwal — Sun, 21 Jun 2020 14:45:52 +0000

RBI composes new draft norms for Home Loan lenders. The RBI composes a draft that has given a long and easy road for agreement. Since, it wishes to ease rules governing housing finance companies (HFC’s). Also, non-banking finance companies (NBFC’s). The draft norms were released on Wednesday. Moreover, it largely talks about existing rules for HFC’s on capital adequacy. But it has been able to define the business more accurately. Which, is a progressive path for increasing capital adequacy, has also been proposed.

Draft Norms for HFC’s and NBFC’s

The new definition leaves out loan against property from being labeled as a housing loan. However, only if the proceeds are used for anything other than. Buying another residential property. Also, this could prompt reclassification by some lenders. Which states HFC’s should have 75% of their loans to individuals and those lenders. Which do not meet this criteria time until Financial Year 24. In order to do so. Also, most HFC’s are already complying with this criteria. Multiple analysts have said. However, some players such as Piramal Enterprises Ltd may not meet the criteria. According to analysts at Motilal Oswal Financial Services. Since, the share of individual loans in Piramal’s book is just 11%, the brokerage firm pointed out.

Lest, to avoid double exposure to a project. There are ways of lending to the developer. As well as the buyer of the house. Furthermore, the central bank has proposed some tightening. Which, pertains to real estate projects belonging to the same group as the HFC’s comes under. “The HFC’s can either undertake an exposure on the group company. Or in real estate business OR lend to retail individual home buyers in the projects of group entities. But not do both.” the draft norms clearly stated. Here too, analysts believe that most lenders are prudent enough on exposures.

Even so, HFC’s belonging to large groups may have to re-look at their exposures. Besides, HFC’s would need to maintain liquidity coverage ratio and beef up their capital adequacy ratio to 14%. In the next one year and 15% by Financial Year 22.