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EXCLUSIVE
IBBI INCOME SET TO SHOOT UP SEVERAL FOLD WITH REGULATORY FEES
Regulator imposes a 0.25 per cent fee on CIRP plans where realisation is more
than the liquidity value and one per cent fee on third-party service providers
and professionals appointed by insolvency professionals
* ETBFSI
* September 23, 2022, 07:53 IST
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Insolvency regulator Insolvency and Bankruptcy Board of India (IBBI) has imposed
a regulatory fee of 0.25 per cent on corporate insolvency resolution plans
(CIRP) where the realisation value exceeds the liquidation value as it looks to
raise finances and reduce dependence on the government.
It has also imposed a 1 per cent regulatory fee on third-party service providers
and professionals appointed by insolvency professionals.
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The regulatory fee of 0.25 per cent — which will come into effect from October 1
— will be applied on the realisable value to creditors under the resolution
plan, and only in those cases where the amount of the resolution plan exceeds
the liquidation value, the IBBI said in an order.
Considering the average aggregate corporate insolvency resolution plan approved
every year through the IBC at about Rs 40,000 crore, then IBBI may earn Rs 100
crore from this, as against Rs 5 crore now, according to reports.
The new amendments
Aiming to reduce delays and realise better value, IBBI this month notified the
IBBI (Liquidation Process) (Second Amendment) Regulations 2022 (Amendment
Liquidation Regulations), and IBBI (Voluntary
Liquidation Process) (Second Amendment) Regulations 2022 (Amendment Voluntary
Liquidation Regulations).
The amendments would ensure better participation of stakeholders and streamline
the liquidation process to reduce delays, they added.
Post the modifications, the Committee of Creditors (CoC) constituted during the
Corporate Insolvency Resolution Process (CIRP) would function as Stakeholders
Consultation Committee (SCC) during the first 60 days.
After adjudication of claims and within 60 days of initiation of the process,
the SCC shall be reconstituted based upon the admitted claims.
Also, as per the modifications, the liquidator has been mandated to conduct
meetings of SCC in a structured and time-bound manner with better participation
of stakeholders.
Scope of consultation
The scope of mandatory consultation by the liquidator with SCC has been
enhanced. Now, SCC may even propose the replacement of the liquidator to the
Adjudicating Authority (AA) and fix the fees of the liquidator, in case the CoC
has not fixed it during the CIRP.
If any claim is not filed during the liquidation process, the amount of claim
collated during CIRP shall be verified by the liquidator. Wherever the CoC
decides that the process of compromise or arrangement may be explored during the
liquidation process, the liquidator shall file application only in such cases
before the Adjudicating Authority, for considering the proposal of compromise or
arrangement, if any, within thirty days of the order of liquidation.
Also, specific event-based timelines have been stipulated for the auction
process. In addition to this, before the filing of an application for
dissolution or closure of the process, SCC shall advise the liquidator about the
manner in which proceedings in respect of avoidance transactions or fraudulent
or wrongful trading, shall be pursued after the closure of liquidation
proceedings.
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EXCLUSIVE
IBA SETS UP LARGE WORKING GROUP FOR SUSTAINABLE FINANCE
Representatives of key banks including SBI, HDFC Bank, PNB, Canara and Axis are
part of the group that will help in formulating recommendations on green
finance.
* ETBFSI
Click Here to Read This Story
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The Indian Banks’ Association (IBA) has set up a working group, comprising
representatives of key banks, including State Bank of India, Punjab National
Bank, HDFC Bank and Bank of Baroda to focus on green financing.
This working group will help in recommendations on sustainability finance ahead
of India’s G20 presidency in December, where environmental, social and
governance (ESG) issues will be in focus, according to reports.
The other members of the working group include representatives of Canara Bank,
Union Bank of India, ICICI Bank, Axis Bank, Yes Bank, IndusInd Bank and Kotak
Mahindra Bank and four foreign banks -- Standard Chartered Bank, Bank of America
NA, Qatar National Bank QPSC and Mashreq Bank PSC. The two other members are
Exim Bank and SIDBI.
Banks are also seeking priority sector status to sustainable finance to increase
funding to projects mitigating climate risks.
A PSL status will lead to improved credit flow to sectors that cater to green
environment needs.
Banks, under the aegis of the IBA, may soon approach the Reserve Bank of India
with the demand.
India's needs
While there is significant green finance available globally, there is a paucity
of such capital in India and hence there is a need for a mechanism for Indian
companies to tap into the global capital.
Green investments of $200 billion are needed annually to meet India's net-zero
target. Of that, the country is managing just about $20 billion currently. Even
there, a large part comes from traditional public and domestic sources.
There is a need for heavily polluting industries to transition to green
processes, for instance, the steel industry replacing coking coal with green
hydrogen, for which green bank can help.
RBI paper on sustainable finance
The RBI has taken steps for furthering green finance. In 2021, it joined the
Network for Greening Financial System, a voluntary group of 116 central banks
that promotes the exchange of best practices on green finance.
In July this year, the RBI released a discussion paper on climate risk and
sustainable finance to help regulated entities deal with the issues arising from
a warming planet.
The guidelines revolve around appropriate governance, strategy to address
climate change risks and risk-management structure to manage them from a
micro-prudential perspective, the paper said.
Regulated entities may explore aligning their climate-related financial
disclosures on the lines of the Financial Stability Board’s Task Force on
Climate-related Financial Disclosures’ framework.
This framework is increasingly being recognised as a suitable basis for
climate-related financial disclosures, the paper said. Adapting the same would
also help improve the consistency and comparability of the climate-related
financial disclosures of regulated entities with their counterparts globally,
the paper said.
These entities may make such disclosures annually, to begin with and may use
their sustainability reports, annual reports, website, or a combination of them
to facilitate public access, the paper said.
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EXCLUSIVE
RUPEE TRADE WITH BANGLADESH LIKELY AS IT FIGHTS FOREX CRUNCH, SAY BANKERS
Two senior bankers told ET that in the wake of the turbulence faced by
Bangladesh they expect a bilateral loan denominated in Indian rupees can be used
by the country to pay for the imports from India.
* Sugata Ghosh
* ET Bureau
Click Here to Read This Story
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A dollar crunch in Bangladesh, dip in the country's foreign exchange reserves
and a weakening taka may soon pave the way for a rupee loan line to Bangladesh
and settlement of India's trade with the neighbour in local currency, according
to banking circles.
Two senior bankers told ET that in the wake of the turbulence faced by
Bangladesh they expect a bilateral loan denominated in Indian rupees can be used
by the country to pay for the imports from India.
A framework for settling exports and imports invoiced in rupees is in place with
the Reserve Bank of India's June 11 circular allowing special vostro accounts
that banks of the partner country can have with banks in India.
It may further require a central bank notification allowing settlement of trade
transactions in Indian rupees outside the Asian Clearing Union mechanism - an
arrangement, in vogue since the mid-70s, to facilitate payments among member
countries on a multilateral basis to economise on the use of forex reserves and
transfer costs. (In May, RBI permitted settlement of trade with Sri Lanka in
rupees as the country grappled with a severe shortage in hard currency).
Indian banks have turned cautious and selective on their exposure to Bangladesh
amid fears that in the coming days banks there may find it difficult to organise
dollars from the market to pay for the goods the country imports.
Bangladesh is considering currency diversification and measures to cut down
dollar outgo.
"Under the circumstances we understand that a rupee loan facility may be under
consideration. It would reduce the strain on Bangladesh's forex kitty and is
likely to work out cheaper when the loan is repaid later. If the loan is in
rupee, the outgo in taka terms would be less compared to a dollar loan because
the rupee would also depreciate," said a banker.
However, the advantage is retained only if the loan is used only to buy Indian
goods invoiced in rupees. If the rupees lent is converted to US dollars and used
to buy dollar-invoiced goods, the benefit goes away.
But a rupee loan line is a matter that New Delhi and Dhaka, along with the
central banks of the two countries have to finalise. "We have not received any
communication from the RBI or the ministry so far. However, we believe some
initial discussions have happened given the relationship between the two
countries," said the person. An RBI spokesman did not comment on the matter.
According to the RBI circular, the exchange rate between the currencies of the
two trading partner countries (settling trade in rupees) may be
market-determined. "While a rupee-taka exchange rate can be arrived at using the
dollar, the banks representing exporters and importers cannot readily sell
rupees to buy taka or vice-versa as currencies are partly convertible. Unlike
the trade with Russia, exports are more than imports from Bangladesh," said an
industry official.
Bangladesh had a trade deficit of $14 billion with India in the last financial
year. The country's forex reserves have fallen below $37 billion - down by over
$11 billion in one year.
Geopolitics and financial compulsions have combined to push countries to figure
out ways to promote foreign trade in domestic currencies. Whhile the
India-Russia trade in rupee (yet to fully take off) is an outcome of US
sanctions, a local currency trade with Sri Lanka is the fallout of an acute
shortage in hard currency. "While rupee remains a currency of limited
convertibility, the new arrangements could slowly increase its acceptance in
other markets. Probably, countries would look beyond arrangements like ACU,"
said a banker.
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EXCLUSIVE
INDUSIND BANK TO BE A LARGE BANK IN 5 YEARS WITH A RS 5 LAKH CRORE BALANCE SHEET
Private lender IndusInd Bank’s balance sheet will cross `5 lakh crore in the
next five years, its managing director Sumant Kathpalia told Saloni Shukla and
MC Govardhana Rangan in an interview.
* Saloni Shukla
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* MC Govardhana Rangan
* ET Bureau
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Private lender IndusInd Bank’s balance sheet will cross Rs 5 lakh crore in the
next five years, its managing director Sumant Kathpalia told Saloni Shukla and
MC Govardhana Rangan in an interview.
Kathpalia also said he is not looking to grow inorganically as it will be
dilutive for the bank. Edited excerpts:
Credit growth is at multi-year highs, inflation is denting consumer confidence,
financial markets are shaky. What do these mean for the Indian economy?
The Indian economy continues to progress well on recovery notwithstanding the
external disturbances. All the high-frequency vectors…GST, freight movement,
card spends, automobile industry growth…are all moving in a positive direction.
With deleveraging of balance sheets in the corporate sector and high capital
adequacy ratios in the banking sector, we are poised for a very good growth
rally for the next two to three years. There are no NPAs which have not been
provided for by the banking sector. We have to watch out for liquidity concerns,
inflation and be cautiously optimistic, specifically in the unsecured business.
Are you still seeing the pain at the bottom of the pyramid?
Rural growth has happened but not at the pace at which urban growth has
happened. Consumption is happening but not at the pace one would have expected
because they are still coming out of the effects of Covid 2.0. In our book, you
would see some (bad loan) flows this quarter also, but the flows will be far
lesser than what you saw in quarter one, and by quarter three, they will
continue to come down. The restructured book may not come down dramatically
because of the regulations to have continuity of payments for 12 months before
these accounts are moved away from the restructured book. We will end up with
120-150 basis points of credit costs this year.
You have navigated three tough years as an MD. What does the agenda for the next
three years look like?
If you look at the last three years, the agenda was very simple. We have worked
on building a strong liability franchise, ironing out issues in our corporate
book, and fortifying the balance sheet. The agenda for the next few years will
be building on our domain specialisation. This differentiates us from the rest
of the industry. We still need to do a lot of work on the granularisation of
liability.
I continue to believe that liabilities have to lead the growth for assets. Next
would be the launch of a digital 2.0 strategy. In December and January, we will
see the launch of a differently-enabled technology stack. We will also continue
to grow the corporate side of the balance sheet, and it should be 45% of our
portfolio. And the last agenda is to drive new products, like merchant
acquisition, diversify our microfinance business into micro banking in rural
India, scooter loans, and affordable housing loans.
In another 5-7 years what will IndusInd Bank look like?
IndusInd Bank will look like a bank which has domain specialisation. We will
also be in para-banking activities, in three areas of asset management, non-life
insurance and broking. We will be considered as a large bank in five to seven
years, with an asset portfolio of more than Rs 5 lakh crore. We will be a
leading player in rural India because of our inordinate distribution in that
geography.
What is the plan to grow the microfinance book?
I think our growth will be very different as we go forward. We have diversified
this business into merchant acquiring business in semi-urban and rural areas.
This book was at Rs 2,300 crore at the end of quarter one; we expect this book
will become Rs 10,000 crore in the next two years. In terms of scooter loans, we
will be able to do a Rs 5,000 crore book in the next two years. We will grow at
25-30%.
Your share prices have taken a dramatic beating over the last couple of years.
When do you feel it will return the lost glory?
I can’t comment on the share price; my job is to give earnings per share and
stability of earnings. I can say that we will be in the top quartile on all the
financial metrics in the banking sector.
I think investors have to get their confidence back. Over the last two years,
we’ve been trying to do that and the share price will take its own way.
The government is privatising IDBI Bank. There are plans to sell the Central
Bank of India as well. Would this interest you?
We have not evaluated it, but in my opinion, IDBI Bank has a very clean balance
sheet. We have three considerations when we look at a potential buyout. Does it
complement or create anew business line? So, whenever we’ve done an acquisition,
it’s always complementary to our core businesses.
For example, microfinance, or diamond, a new line of business came into play.
Second, are RoA (return on assets) and RoE (return on equity) accretive to us?
Third, does it bring any regulatory issues or any labour issues along with it as
a consequence?
Today, if you look at our stock price, and the way it’s trending, the buyout
will not be accretive to our shareholders. Also, I believe we have headroom to
grow organically right now. We should evaluate this when it comes and see what
parameters make sense for us.
Has the promoter shareholder communicated any plans of increasing stake in the
bank?
We have no plans to raise capital. As per our plans, the internal accruals
should be enough for the bank to take care of the growth. You do capital raise
if you have an acquisition in mind, and a target in mind, or you are growing at
a faster pace of 30-35%.
Today, I think we’ve taken care of our losses, our growth rates are at 20-22%,
and internal accruals can take care of this growth. If there is any need for
capital, the promoters have always put in the capital without considering the
share price. For 12-18 months, we don’t need fresh capital.
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EXCLUSIVE
ECO ACTIVITY STILL BELOW PRE-PANDEMIC LEVEL; RBI TO SLOW DOWN ON RATE CUTS TILL
NEXT YEAR: ADB
With economic activity still to reach pre-pandemic levels, the RBI may slow down
the pace of rate hikes until next year to quell soaring inflation while
supporting growth, the Asian Development Bank (ADB) says in its latest report.
The Manila-based multilateral funding agency has raised the inflation forecast
for the current fiscal year ending in March 2023 to 6.7 per cent from its
earlier projection of 5.8 per cent.
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With economic activity still to reach pre-pandemic levels, the RBI may slow down
the pace of rate hikes until next year to quell soaring inflation while
supporting growth, the Asian Development Bank (ADB) says in its latest report.
The Manila-based multilateral funding agency has raised the inflation forecast
for the current fiscal year ending in March 2023 to 6.7 per cent from its
earlier projection of 5.8 per cent.
For the next fiscal year too, the forecast has been revised upwards to 5.8 per
cent from 5 per cent earlier.
Inflation will remain elevated this year and the next, ADB said in an update to
its flagship Asian Development Outlook (ADO) 2022 report.
"This Update forecasts the inflation rate averaging 6.7 per cent in FY2022
(fiscal ending in March 2023) before moderating to 5.8 per cent in FY2023
(ending in March 2024), just below the central bank target range of 2 - 6 per
cent," it said.
Both forecasts are higher than ADO 2022's projections.
Even though supply pressures are expected to ease in the current fiscal year,
upward pressure on inflation could continue because of demand-side pressures
caused by increasing economic activity, according to the ADB report.
The report says the Reserve Bank of India (RBI) is expected to increase policy
rates even though economic activity is still below the pre-pandemic trend and
inflation continues to be driven more by domestic supply conditions than
international factors.
"The RBI may, however, consider slowing the pace of policy rate hikes until next
year because economic activity, although increasing, remains below the
pre-pandemic trend. At the same time, allowing the exchange rate to serve as an
automatic stabilizer will help improve the balance of payments position," as per
the ADO Update.
The RBI has increased the policy rate by 140 basis points (1.4 per cent) over 4
months to contain inflationary expectations.
High inflation due to elevated oil and commodity prices will likely require
continued tightening monetary policy to ensure that inflation expectations do
not get entrenched, which would likely hinder economic growth in the short run,
it said.
As per the report, India's exports and growth are expected to be adversely
affected due to weaker than expected global demand over the next two years.
ADB has cut India's GDP growth forecast for the current fiscal to 7 per cent
from 7.2 per cent, on the assumption that global demand will remain sluggish and
oil prices will remain elevated.
For next fiscal, ADB expects the Indian economy to grow by 7.2 per cent as
against 8 per cent it had projected earlier.
"Nevertheless, the economy is expected to grow strongly over the forecast
horizon, with investment playing a catalytic role. Private consumption will be
affected by higher inflation eroding consumer purchasing power even though
consumer confidence continues to improve.
"Sticky core inflation will adversely impact spending over the next 2 years if
wages fail to adjust," cautions the ADB report.
Even as government subsidy support on fertiliser and gas, free food distribution
as well as excise duty cuts will help offset some of the effects of high
inflation on consumers, ADB said taxes on packaged food products will likely be
a burden on consumers already dealing with rising inflation.
The Manila-based agency also expects investment growth to be lower than
projected due to the increase in RBI policy rates, increasing the cost of
borrowing for investors amid rising global uncertainty.
On the rupee, ADB said the RBI has been active in preventing it from
depreciating further, resulting in the biggest drawdown of foreign exchange
reserves since the 2008-09 global financial crisis.
The rupee depreciated from Rs 74.3 to the US dollar in January 2022 to Rs 80 in
July. It fell further below Rs 81 this week.
"To minimise the loss of reserves, future interventions should be aimed at
reducing wide short-term exchange rate swings rather than stabilising the rate,
thereby allowing it to reflect underlying market conditions and remain an
automatic stabiliser," the ADO Update said.
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EXCLUSIVE
HUGE MULTI-DECADE RUNWAY IN BANKS, CONSUMPTION GOING STRONG: AJAY BAGGA
“FIIs are invested in the top end quality players and can take out Rs
2,000-3,000 crore on a daily basis and with the retail flows coming in, we have
seen that gate has become even wider. So we will continue to see the suffering
coming into the Indian market, not because of any intrinsic reason for our
markets but because we are linked to the global play.”
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"Living it in the real world takes a lot of emotional balance and that is why we
say do not try to time it. Just stay invested and keep investing regularly. That
is the best mantra," says market expert Ajay Bagga
The major event that the market was waiting for – the Fed meeting as well as the
dot plot – is over and global markets are nowhere in a mood to recover. What is
your view on market recovery? What kind of a movement are you expecting for the
Indian market?
I have been cautious for quite some time. Basically there is a big shift in the
global macro in terms of very enhanced volatility. Second, the kind of
tightening that is happening, the rate hikes, are unprecedented. We have not
seen this kind of rate hike for the last 40 years. We will have to bear this
period.
There will be these bouts of markets moving up and down sharply, but overall I
would say the markets will struggle to go up from here. Indian markets on the
back of a good economy should outperform their global peers but the risk is when
everything is on sale and we have an open door policy in India where one can
take out a lot of stuff.
FIIs are invested in the top end quality players and can take out Rs 2,000-3,000
crore on a daily basis and with the retail flows coming in, we have seen that
gate has become even wider. So we will continue to see the suffering coming into
the Indian market, not because of any intrinsic reason for our markets but
because we are linked to the global play.
I would say still cautious as RBI will probably raise by 50 bps. They might want
to do a 35 bps hike just to act differently, but from South Africa 75, to a
Sweden 100, to a Vietnam 100, to Switzerland 75 – the last negative rate bond
has gone last week with the Swiss National Bank raising rates by 75 bps and
going to zero. About 90 central banks have raised rates this year. Out of that,
on more than 47 occasions, over 75 bps hikes have been done. To protect the
rupee, RBI’s hands will be tied for a 50 bps hike but let us see, maybe they
will do 35 bps rate hike.
What does an investor do in this kind of a volatile situation? What is the best
way to navigate it because there are a lot of things available on sale. But even
in the stock market, for the last couple of days, we have seen opportunity to
buy more stuff?
Yes, definitely. In any market, there will be a lot of things on sale and even
though Bank Nifty is getting hit a lot, my first go-to place would be banks. You
have a huge multi decade kind of a runway here. This is still a very under
banked country, very under penetrated and we will get those benefits.
So financials stay top pick. IT is still going to take three to six months
before there is some amount of plateau-ing of the margins and the issues that
are there. Consumption is going strong and with the harvest now coming in, we
are hoping that rural consumption will also take off.
The first harvests have started reaching the mandis and next week onwards, you
will start seeing an upsurge in the rural consumption coming in. The consumption
stocks look well positioned. The market has moved ahead in terms of anticipating
this but overall short and sweet to investors. If you do not need the money for
the next one year, stay invested because the markets might go down from here.
I think it could break those also if the US breaks even lower. But the good
thing is when the market turns in a few days, it will give the year’s returns.
So staying invested is what works for most retail investors. One cannot time it
well.
Second, is the incremental money put into SIPs. So buying the stocks that you
like in small amounts every week or every month might be a better strategy
because we do not know how long this will last. If there is a recession in the
US, the US yield curve is telling you that a recession might be coming. Now the
point to note is 100% of recessions are preceded by a yield curve inversion but
yield curve inversion does not mean that a recession will come.
Now more and more, it is looking unlikely that the Fed will be able to control
inflation without a hard landing. Three things could happen really; one, they
give up their 2% target and move to 3 or 4% and life goes on. Second, there is
some political interference which is unlikely in an American kind of scenario.
We are seeing that in Turkey but I doubt it will happen. Three, to get it to 2%,
US unemployment has to be taken to 6.7%.
I am an old economist. I mark it on my Phillips Curve and that is what the
Phillips Curve is telling me, 6.7%. 5.3 million unemployment is the rate at
which inflation comes to 2%. It is mathematical, it is not my opinion. It is
what the curve tells you. That would be a grim recession and markets will
anticipate it, markets will make a bottom about six months before we hit that.
They will start going up also even before we have hit the trough of the economic
cycle and that is the beauty of markets. We know it in theory; living it in the
real world takes a lot of emotional balance and that is why we say do not try to
time it. Just stay invested and keep investing regularly. That is the best
mantra.
You have already told us your first port of call is the banking stocks. If we
had to step away from that, what are the other themes that you are watching out
for? Is it consumption, is it Europe plus one, is it the festive season or even
industrials and defence?
All the themes that you mentioned have done well and they have a lot of scope
behind them. I would like to share Europe plus one. I spoke to three friends who
are industrialists in Europe over the last two days and each of them was saying
there is so much pain, it is very difficult to really run the business and they
were looking at introductions to manufacturers in India to move that.
The second very interesting analysis I was reading is that the cost of wood has
gone up nearly 87% because for the winters. Whole neighbourhoods are stockpiling
wood in case gas runs away because even at 100% gas storage, there is only
enough gas for 80 days in Europe. So if they have a four-five month winter, you
do not have enough gas because new supplies from Russia has stopped. So the
Norwegians are stepping in, Spain is sending some but it will take a lot of
management.
So, Europe plus one is very strong, it could help our auto industry, chemicals,
specialty chemicals and consumption as well. Now the big thing is given where
the consumer confidence numbers are in Europe, will we see a blockbuster
Christmas or will it be indifferent consumption? On consumer exports, I would be
a little wary but India will substitute things like machinery, auto, chemicals
and in the short term, we have great opportunities. Europe plus one is a big
theme we should look at very closely.
(Disclaimer: Recommendations, suggestions, views and opinions given by the
experts are their own. These do not represent the views of Economic Times)
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EXCLUSIVE
HIGH NPAS IN EDUCATION LOAN SEGMENT TURN BANKS CAUTIOUS
High defaults of about 8% in the education loan portfolio have made banks
cautious and go slow on the sanction of such credit. Non-performing assets
(NPAs) in the education loan category including public sector banks' (PSBs) were
7.82% at the end of June quarter of the current financial year.
* PTI
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High defaults of about 8 per cent in the education loan portfolio have made
banks cautious and go slow on the sanction of such credit. Non-performing assets
(NPAs) in the education loan category including public sector banks' (PSBs) were
7.82 per cent at the end of June quarter of the current financial year.
Outstanding education loans were about Rs 80,000 crore at June-end.
Cautious approach is adopted at the end of branches while sanctioning education
loans due to high NPAs, a senior public sector bank official said.
As a result some genuine cases are overlooked and there are delays, the official
said.
Recently, the finance ministry had called a meeting of PSBs to take stock of the
education loan portfolio and cut down on delay. The ministry exhorted banks to
spread awareness about the Central Sector Interest Subsidy Scheme among field
formations.
The sharp increase in non-performing assets (NPA) in education loans extended by
commercial banks in India in recent years is a matter of concern, as it could
hamper the growth of bank credit for higher education in the country, according
to an occasional paper published by RBI.
In India, around 90 per cent of education loans are disbursed by the PSBs.
Private sector banks and regional rural banks (RRBs) accounted for around 7 per
cent and 3 per cent of total education loan outstanding, respectively, as at
end- March 2020, the paper published in June 2022 said.
The outstanding education loans of all banks were Rs 79,056 crore at the end of
March 2020 and at Rs 78,823 crore as of March 2021, as per the Report on Trend
and Progress of Banking in India 2020-21 by the RBI. However, the outstanding
loans increased to Rs 82,723 crore as of March 25, 2022.
According to Resurgent India managing director, Jyoti Prakash Gadia, fresh job
creation has not kept pace with the number of graduates coming out of the
colleges, thereby adversely impacting the timely repayment of education loans.
As a result, NPAs have gone up and banks are hesitant to grant fresh education
advances, particularly loans up to Rs 7.50 lakh which are without any collateral
and third party guarantee, he said.
The effective implementation of the New Education Policy, which lays due
emphasis on basic skills development and employability, shall create a win win
situation for all the stakeholders, he added.
Most banks offer a scheme for education loan as per the Indian Banks'
Association (IBA) model education loan scheme to students pursuing higher
studies in India and abroad.
As per this model loan scheme, education loans of up to Rs 4 lakh do not require
any collateral to be provided by the borrower, education loans up to Rs 7.5 lakh
can be obtained with collateral in the form of suitable third-party guarantee,
while education loans above Rs 7.5 lakh require tangible collateral. In all the
above cases, co-obligation of parents is necessary.
The second category of education loans are sanctioned to those students who
obtain admissions to colleges/universities through management quota, provided
they satisfy the minimum marks criteria in the preceding examination.
The third category of education loans includes schemes for needy students for
pursuing vocation education courses run by industrial training institutes
(ITIs), polytechnics, training partners affiliated to National Skill Development
Corporation (NSDC)/sector skill councils, state skill mission/corporation,
preferably leading to a certificate/diploma/degree issued by such organisation
as per National Skill Qualification Framework (NSQF) and any other institutions
recognized by either the central or state education boards or university.
The fourth category of scheme specifically caters to the requirement of students
studying in premier institutions like IITs/IIMs/NITs/IISc or courses abroad,
with demand for a higher quantum of loan amount. All education loans of up to Rs
10 lakh (enhanced to Rs 20 lakh in September 2020) have been included within the
priority sector definition by the Reserve Bank of India.
Under most of these schemes, moratorium period consists of the course period
plus six months to one year, and there are nil/negligible processing fees for
schemes with high value education loans.
The interest rate under the various schemes consists of a markup of 2-3 per cent
above the marginal cost of funds based lending rate (MCLR)/external benchmark,
based on the reputation of the course/institutions. The repayment period is in
the range of 10-15 years.
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EXCLUSIVE
TANZANIA CENTRAL BANK TO REDUCE LIQUIDITY TO TACKLE INFLATION
TANZANIA-INFLATION/Tanzania central bank to reduce liquidity to tackle inflation
* Reuters
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DAR ES SALAAM, Sept 24 - Tanzania's central bank will reduce liquidity in the
economy in September and October to slow rising inflation in the east African
country, a statement from the bank's monetary policy committee (MPC) published
on Saturday said.
"In the context of ... high inflation and commodity prices, which has
contributed to rising inflationary pressures in the country, the MPC approved
for the bank to continue with gradual reduction of liquidity in September and
October 2022," the statement said.
"The policy decision aims at reducing inflationary pressures, while safeguarding
economic activities."
Inflation in Tanzania rose to 4.6% in August from 4.5% the previous month, while
the country's economy was facing a range of challenges, including weak global
growth, high commodity prices, tight financial conditions and the recurrence of
COVID-19 in some countries, the statement said. (Reporting by Nuzulack Dausen;
Writing by Elias Biryabarema. Editing by Jane Merriman)
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EXCLUSIVE
SOVEREIGN GOLD BOND: PREMATURE REDEMPTION OF SGB FIXED AT THIS PRICE
The India Bullion and Jewellers Association Ltd. shall determine the basis for
the redemption price of SGB using the simple average of the closing gold price
for 999 purity for the week (Monday through Friday) before to the date of
redemption (IBJA).
* Sneha Kulkarni
* ET Online
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The Reserve Bank of India has fixed the price for early/premature redemption of
the Sovereign Gold Bond Scheme SGB 2016 Series II and SGB 2016-17 Series II at
Rs 4,952 per unit.
According to the RBI press release, “Accordingly, the due date of the fourth and
third premature redemption of the above tranches shall be on September 29, 2022
and September 30, 2022 respectively’.
Sovereign Gold Bonds make it simple for you to invest in gold without having to
worry about having physical gold. Users hold the investments in demat form, and
they have the option of redeeming them at maturity or earlier.
How is redemption calculated
The simple average of the closing gold price for 999 purity for the week (Monday
through Friday) before the date of redemption, as announced by the India Bullion
and Jewellers Association Ltd., shall serve as the basis for the redemption
price of SGB (IBJA).
As a result, based on the simple average of the closing gold price for the week
of September 19–23, 2022, the redemption price for the early redemptions due on
September 29 and 30, 2022, shall be Rs. 4,952 per unit of SGB.
Minimum and maximum amount to invest in the Sovereign Gold Bond
The minimum amount to invest in the Sovereign Gold Bond is one gram, with a
maximum of 4,000 grams per fiscal year for Individual/Hindu Divided Families and
20,000 grams for Trusts and Similar Entities as specified by the government from
time to time.
What is the redemption process?
According to the RBI, this is the procedure involved in redemption
The investor will be advised one month before maturity regarding the ensuing
maturity of the bond.
On the date of maturity, the maturity proceeds will be credited to the bank
account as per the details on record.
In case there are changes in any details, such as, account number, email ids,
then the investor must intimate the bank/SHCIL/PO promptly.
Trading of bonds
According to HDFC Bank website, “The bonds are tradable on stock exchanges from
the date to be notified by RBI. The bonds can also be sold and transferred as
per provisions of Government Securities Act. However, the client would have to
approach his / her broker for trading related requirements.”
Here are important Sovereign Gold Bond (SGB)FAQs as per the IDBI Bank website
1. What is the rate of interest and how will the interest be paid?
The Bonds bear interest at the rate of 2.50 per cent (fixed rate) per annum on
the amount of initial investment. Interest will be credited semiannually to the
bank account of the investor and the last interest will be payable on maturity
along with the principal.
2. Who are the authorized agencies selling the SGBs?
Bonds are sold through scheduled commercial banks and designated Post Offices
either directly or through their agents like NBFCs, NSC agents, etc.
3. Is it necessary for me to apply through my bank?
It is not necessary for the customer to apply through the bank where he/she has
his/ her account. A customer can apply through another bank or Post Office.
4. If I apply, am I assured of allotment?
If the customer meets the eligibility criteria, produces a valid identification
document and remits the application money on time, he/she will receive the
allotment.
5. When will the customers be issued Holding Certificate?
The customers will be issued Certificate of Holding on the date of issuance of
the SGB. Certificate of Holding can be collected from the issuing banks/Post
Offices/agents or obtained directly from RBI on email, if email address is
provided in the application form.
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EXCLUSIVE
SHIVALIK SMALL FINANCE BANK REVISES FD, SAVINGS ACCOUNT INTEREST RATES
The interest rates for fixed deposits and savings accounts have changed at
Shivalik Small Finance Bank (SFB). On September 19, 2022, the new rates will go
into effect, according to the bank's website.
* Sneha Kulkarni
* ET Online
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Shivalik Small Finance Bank (SFB) has revised its fixed deposit and savings
account (FD) interest rates. According to the bank's website, the new rates are
effective from September 19, 2022.
Savings account
Savings account interest is based on day-end balances kept in the account and is
paid on a quarterly basis. The calculation of interest is based on incremental
balance slabs. Interest rate is offered between 3.50% and 7%.
Fixed Deposits
Senior citizens receive an additional spread of 0.5% on top of the card rates
shown above as their incentive. In Shivalik Small Finance Bank, interest rates
are calculated using simple interest for up to six months. All rates longer than
six months will be compounded quarterly. The bank offers different rates for
amounts below Rs 25 lakhs, Rs 25 Lacs to below Rs 2 Crores, and 2 Crores and
above.
Recurring and flexi recurring deposit
According to the website, “Flexi Recurring Deposit Accounts are opened for term
expressed in multiple of quarters. Interest for terms of 6 months and above is
compounded quarterly and payable at maturity.”
Source: Bank website
Premature withdrawal
Note that early withdrawal will result in a penalty equal to 1% of the interest
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EXCLUSIVE
BANK CREDIT GROWTH AT 16.2 %, MORE THAN DOUBLE LAST YEAR'S PACE
ank credit rose 16.2 percent to Rs 125.5 lakh crore as of September 9'22 over
last year's levels. This is reckoned to be the highest growth in more than eight
years and more than double the pace of 6. per cent growth in September'21.
Analysts attribute this to a surge in corporate demand besides a steady growth
in retail and MSME loans.
* Gayatri Nayak
* ET Bureau
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Bank credit rose 16.2 percent during the fortnight ended September 9, more than
double the pace of 6.7 per cent in the same period last year as corporate demand
is picking up and are going back to banks to meet their funding requirements due
to tight market rates.
Bank credit rose 16.2 percent to Rs 125.5 lakh crore as of September 9'22 over
last year's levels. This is reckoned to be the highest growth in more than eight
years and more than double the pace of 6. per cent growth in September'21.
Analysts attribute this to a surge in corporate demand besides a steady growth
in retail and MSME loans. "Notably, with aggregate capacity utilization levels
at 75% (as of June 2022) and a tightening global monetary landscape, banks are
facing renewed demand from corporates—largely for increased working capital
requirements, which until recently were met by overseas borrowing or the
corporate bond market" said Tanvee Gupta Jain, UBS India Economist. "This was
also supported by banks’ improved willingness to lend".
India Ratings has revised its banking credit growth estimate for FY'23 to 13.0%
yoy from 10.0%. The factors driving this upward revisions include the following
the rise in working capital demand even as capex is likely to see some
moderation, given the build-up of macro uncertainties. Moreover with the adverse
interest rate cycle, there is a visible shift from capital markets to the
banking system for longer term funding. Also, the revival in credit demand from
the corporate segment is better than expected, especially in sectors such as
infrastructure and chemicals, the ratings firm said.
From the lenders' perspective, assets quality concerns are waning. Asset quality
metrics continue to improve, with the gross non-performing assets (GNPA) ratio
for the banking system declining to 6.1% in FY'22 from the peak of 11.2% in
FY'18, according to India Ratings.
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