Category: Finance

RBI maintains FPI investment limits in G-Secs at 6%, corporate bonds at 15%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) on Friday (April 26) said the limits for FPIs’ (foreign portfolio investors) investment in government securities, state development loans and corporate bonds will remain unchanged at 6%, 2% and 15%, respectively, of outstanding stocks of securities for 2024-25.

As of now, all investments by eligible investors in the ‘specified securities’ will be reckoned under the fully accessible route (FAR), the RBI said.

“The limits for FPI investment in government securities (g-secs), state government securities (SGSs) and corporate bonds shall remain unchanged at 6 per cent, 2 per cent and 15 per cent, respectively, of the outstanding stocks of securities for 2024-25,” it said. The allocation of incremental changes in the g-sec limit (in absolute terms) over the two sub-categories ‘General’ and ‘Long-term’ will be retained at 50:50 for 2024-25, the central bank stated.

Also Read: RBI bars Kotak Bank from onboarding new online customers, issuing new credit cards

The entire increase in limits, in absolute terms, has been added to the general sub-category of state development loans (SDLs), it said.

The notification said the aggregate limit of the notional amount of credit default swaps (CDS) sold by FPIs will be 5% of the outstanding stock of corporate bonds. Accordingly, an additional limit of ₹2,54,500 crore is set out for 2024-25.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Breather for charitable trusts, NGOs as CBDT again extends deadline for registration and renewal

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Central Board of Direct Taxes (CBDT) has again extended the deadline for filing Form 10A/ Form 10AB under the Income-tax Act, 1961, to June 30, 2024, the government announced on April 25. The extension aims to facilitate smoother compliance procedures.

Form 10A is used during the initial registration or approval of a trust, institution, or NGO, while Form 10AB is necessary for subsequent renewals.

Previously, the CBDT had extended the deadline for filing Form 10A/ Form 10AB multiple times. Earlier, the last date for filing the form was extended to September 30, 2023.

The CBDT’s decision comes after the government received representations from various quarters, urging for more time beyond the last extended deadline. The extension applies to certain provisions of Section 10(23C), Section 12A, Section 80G, and Section 35 of the Act.

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The existing trusts, institutions, or funds, which failed to file Form 10A for assessment year (AY) 2022-23 within the previously extended due date, and later applied for provisional registration as a new entity and received Form 10AC, can now surrender the Form 10AC and apply for registration for AY 2022-23 as an existing entity in Form 10A until 30th June 2024, the government clarified.

Also, trusts, institutions, or funds whose re-registration applications were rejected solely due to late filing or filing under the wrong section code, may submit fresh applications in Form 10AB within the extended deadline of June 30, 2024.

The applications as per Form 10A/ Form 10AB must be filed electronically through the e-filing portal of the Income Tax Department.

Also Read: RBI plans curbs on suspect bank accounts to fight cyber fraud: Report

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Equitas Small Finance Bank expects gross NPA to remain at current levels of 2.5-2.6% in FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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P.N. Vasudevan, Managing Director and CEO of Equitas Small Finance Bank, on Thursday (April 25) indicated that the bank’s asset quality has nearly reverted to pre-pandemic levels. Addressing concerns over non-performing assets (NPAs), Vasudevan affirmed the bank’s expectation that gross NPAs would sustain at current levels in FY25.

“It will hover between 2.5-2.6%,” he told CNBC-TV18.

He highlighted a one-time impact on NPAs in March 2024 due to Reserve Bank of India’s (RBI’s) clarification.

Further, Equitas SFB anticipates loan growth of 25% in FY25.

The bank has strategically managed its credit-deposit ratio and aims to maintain a credit cost of 1.20-1.25% in the upcoming financial year.

Looking ahead, Equitas Small Finance Bank plans to allocate ₹520 crore over the span of three years to reinforce its operational capabilities and drive sustainable growth.

Despite acknowledging a likely uptick in interest costs by 8-10 basis points, the bank maintains a prudent approach to managing its cost-to-income ratio, expecting it to range between 62-65% in FY25.

On Wednesday (April 25), Equitas Small Finance Bank reported a 9.47% increase in net profit, reaching ₹208 crore for the fourth quarter ending March 31, 2024.

The bank’s total income witnessed a growth to ₹1,685 crore for the fourth quarter, signifying a year-on-year increase from ₹1,394 crore.

As of March 31, 2024, Equitas SFB’s net worth stood at ₹5,969 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI plans curbs on suspect bank accounts to fight cyber fraud: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) plans to soon change guidelines to permit banks to temporarily freeze accounts suspected of being used to commit cyber crimes, as it battles a rising wave of online crime, three sources told Reuters.

The plans come as internal government data shows individuals have lost funds of nearly $1.26 billion in financial institutions to cyber fraud since 2021, with one of the sources saying about 4,000 fraudulent accounts are opened every day.

Tens of thousands of Indians receive daily telephone calls seeking to defraud them by accessing their bank accounts and wallets to siphon off money that then accumulates in the scammers’ accounts.

To fight back, the regulator, the Reserve Bank of India (RBI), is likely to let banks suspend such accounts, freeing victims from first having to file police complaints, said two government sources and a third aware of the central bank’s thinking.

India’s finance ministry, home ministry and central bank did not immediately respond to Reuters’ emails seeking comment.

While perpetrators can empty accounts within minutes, banks now freeze accounts only after police register a crime report, a procedure that sometimes takes days, given the number of crimes law enforcers must tackle, the sources said.

The suspensions would target accounts frequently misused to transfer funds gained from cyber crime, both government sources said.

The banking regulator will amend its guidelines for banks based on information from the home ministry’s cyber fraud fighting agency, the Indian Cybercrime Coordination Centre, one of the government sources said.

Agency data shows that in the last three months the government has suspended 250,000 accounts used to siphon off funds, one of the government sources added.

The agency compiles data on misused bank accounts, electronic devices, mobile connections and criminals on a portal accessible to banks, police, and telecom operators.

Yet thousands of such fraud accounts operate with impunity since the hands of regulators and banks are tied in the absence of police complaints having been registered, one of the government sources said.

Names and details of miscreant account holders will be used to uncover more accounts held in other banks, and suspend those too, one of the government sources said.

However, a new centralised body is needed to investigate cyber frauds, said the source aware of the central bank’s thinking, without elaborating.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI action against Kotak and other banks should not be a surprise

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The series of actions against financial entities by Reserve Bank of India (RBI) has led to a debate on the larger message the regulator wants to send out to the ecosystem, and whether imposing business restrictions is the best way to deal with non-compliance.

“If you see the recent actions against regulated entities, it will become clear what the RBI wants banks and other regulated entities to prioritise and focus on. (RBI) is keen to enforce good risk management and assurance practices, compliance with regulatory guidelines, board effectiveness, fairness to customers, and good governance,” said a person directly familiar with the RBI’s actions, on the condition of anonymity.

Secondly, regulatory or supervisory action taken on entities is “not a moment of surprise for anyone,” said another person familiar with the regulatory functioning.

“When issues are found, RBI engages in bi-lateral discussions for at least a year.. Once inspection findings reveal deficiencies, RBI seeks a response, gives time to rectify, checks to see if compliance is done or not- there is a lot of back and forth and this process takes a year or more so there is adequate time. Many discussions are held and more than adequate time is given to banks or other entities before such action is taken,” said this person.

As to whether placing restrictions was the best re-course to dealing with non-compliance issues, the person quoted earlier explained, that the RBI has various tools at its disposal, from warnings, to fines, to business restrictions, change in management and in the worst case scenario license cancellation in extreme cases, and it choses the appropriate tool after much deliberation.

It is only when warnings, bi-lateral engagements do not work does the RBI act to impose business restrictions, explained one of the people quoted before.

“Business restrictions don’t impact customer service – every single action if you see places embargo on new customer acquisition or new products until they fix their system. Servicing existing clientele is not impacted by supervisory actions, that’s always on RBI’s mind. New business impact will finally impact shareholders similar to a penalty, so no change in impact target. Also this will hurry up the entity to expedite remediation,” said a person closely involved with RBI’s functioning.

On the question of why action is taken against select entities, when in certain cases, other banks or NBFCs may also be at fault or non-compliant at some level as well, one of the persons explained, “while many entites may be doing it, RBI looks at (1) persistent non-compliance as well as (2) the proportionality of the effect of non-compliance on the ecosystem, and acts accordingly. This is to ensure there is demonstrative affect.”

In the past, such regulatory actions would be accompanied by just a line or two on the reason behind the action. However, this has now changed after Reserve Bank took feedback from stakeholders to demanded a more detailed reasoning for their understanding of the regulator’s point of view, explained the people quoted earlier.

In the case of IIFL Finance or JM Finance, and more recently in the case of Kotak Mahindra Bank, the regulator has detailed the background to the action, explaining why the regulatory action was necessitated.

“These detailed press releases are also intended to send a message to others to take notice, and fix their house if it is not in order,” added one of the person quoted earlier.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Axis Bank re-appoints Amitabh Chaudhry as MD and CEO till December 2027

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Axis Bank has announced the re-appointment of Amitabh Chaudhry as its Managing Director & Chief Executive Officer (MD & CEO) until December 31, 2027.

The re-appointment, effective from January 1, 2025, is subject to regulatory approval from the Reserve Bank of India (RBI) and the bank’s shareholders, the lender said in a regulatory filing.

Amitabh Chaudhry, 59, has been at the helm of Axis Bank since January 1, 2019, bringing with him a wealth of experience garnered from his tenure at HDFC Standard Life Insurance Company Limited (HDFC Life), where he served as the CEO for over nine years, the bank said.

Prior to his stint at HDFC Life, Chaudhry served as the MD & CEO of Infosys BPO.

Amitabh Chaudhry’s educational background includes a degree in Engineering from Birla Institute of Technology and Science, Pilani, and a Post Graduate degree in Business Management from IIM Ahmedabad.

Meanwhile, Axis Bank reported a net profit of ₹7,130 crore for fourth quarter of FY24, surpassing CNBC-TV18’s poll expectation of ₹6,207.4 crore.

In the same quarter of the previous financial year, the lender had reported a loss of ₹5,728.4 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Axis Bank shares surge over 4% following Q4 results, brokerages ‘bullish’ on outlook

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Axis Bank rose over 4% on Thursday, April 25, buoyed by robust fourth-quarter financial performance. The lender reported a net profit of ₹7,130 crore for the fourth quarter of FY24. This marked a shift from the same period in the previous financial year when the bank posted a loss of ₹5,728.4 crore.

In response to the results, brokerage firms expressed bullishness about the bank’s future trajectory.

Morgan Stanley issued an ‘Overweight’ call on Axis Bank, setting a target price of ₹1,450 per share.

The brokerage highlighted several key factors contributing to its positive stance.

“The bank’s Profit Before Tax (PBT) exceeded expectations by 4%, driven by a decent performance in Net Interest Income (NII) and fee income. Additionally, despite prevailing liquidity challenges, Axis Bank demonstrated 5% quarter-on-quarter growth in average deposits,” it said.

Notably, the Net Interest Income (NII) of the bank stood at ₹13,089 crore for the fourth quarter of FY24.

The bank saw total deposits grow by 13% year-on-year (YOY) and 6% quarter-on-quarter (QoQ) on the period-end basis, of which savings account deposits grew 2% YoY and 4% QoQ.

Morgan Stanley emphasised that the acceleration in deposit growth could serve as a significant catalyst for re-rating in the near future.

Brokerage firm Jefferies also expressed confidence in Axis Bank’s prospects, issuing a ‘buy’ call with a target price of ₹1,380 per share.

The brokerage noted a 13% beat on profit estimates, primarily driven by improved Net Interest Margins (NIMs).

Despite softer loan growth projections for FY25, Jefferies predicted that efforts to enhance the Loan to Deposit Ratio (LDR) and margin expansion initiatives could offset some of the impact.

Additionally, Axis Bank’s recent board approval for a ₹20,000 crore fundraise, equivalent to 13% of its net worth and representing a 6% dilution, was viewed as a strategic move.

While Jefferies slightly adjusted its estimates, it deemed Axis Bank’s valuations, at 1.7 times FY25 adjusted price-to-book (PB) and 10 times price-to-earnings (PE), as attractive.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How big is Kotak Mahindra Bank’s credit card business

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India (RBI) has prohibited Kotak Mahindra Bank from onboarding new customers through online and mobile banking channels. It has also halted the issuance of fresh credit cards with immediate effect.

This action comes as a result of deficiencies identified in the bank’s IT risk management, the RBI said.

What exactly went wrong with Kotak Mahindra Bank?

Kotak Mahindra Bank has been directed by the RBI to cease and desist from acquiring new customers digitally and issuing fresh credit cards due to concerns regarding its IT infrastructure and risk management practices.

Despite repeated advisories from the RBI, the bank reportedly failed to address these concerns comprehensively and in a timely manner, prompting the regulatory action.

Impact on customers

For existing customers of Kotak Mahindra Bank, it’s essential to note that the business restrictions imposed by the RBI do not affect the services provided to them.

Existing customers, including credit card users, will continue to receive uninterrupted services as usual.

However, potential new customers will face temporary limitations on opening accounts or obtaining credit cards through the bank’s online and mobile platforms.

Impact on bank’s business

Kotak Mahindra Bank has been lately embracing digital innovations in its business operations.

Around 95% of new personal loans by volume and 99% of new credit cards have been facilitated through digital channels as of the third quarter of FY24.

In Q3FY24, Kotak Mahindra Bank witnessed growth in its credit card book, with a year-on-year increase of 52% and a quarter-on-quarter rise of 10%.

This growth trajectory reflects the bank’s strong reliance on digital platforms for business expansion, with the credit card book amounting to ₹13,882 crore, approximately 3.9% of its total loans.

However, the recent regulatory restrictions are likely to impact its business operations.

Deepali Pant, Former Executive Director at the RBI, expressed that the bank’s retail portfolio is expected to suffer setbacks.

However, she emphasised that these challenges are temporary in nature.

According to Digant Haria, Co-Founder of Greenedge Wealth Services, the retail segment was anticipated to be the most rapidly growing sector for Kotak Bank. However, the recent developments have shaken confidence in this projection.

It is anticipated that both the stock value and the business itself will require a significant amount of time to recover.

But how long?

Ashutosh Mishra, an analyst at Ashika Stock Broking, highlighted that based on previous instances where the RBI has taken similar actions against banks or major payment networks like Visa and MasterCard, the recovery process could extend up to a year or longer.

Regulatory response and future outlook

The RBI’s decision to impose business restrictions on Kotak Mahindra Bank is aimed at safeguarding the interests of customers and ensuring the stability of the financial ecosystem.

The restrictions will remain in place until the completion of a comprehensive external audit commissioned by the bank with the RBI’s approval.

The review process will also consider observations from RBI inspections and the satisfactory remediation of identified deficiencies.

Historical context

This is not the first instance of the RBI taking regulatory action against a leading Indian bank for IT-related issues.

In 2020, HDFC Bank faced similar restrictions after repeated outages in its online platforms, leading to a halt in new digital launches and credit card issuances.

The RBI partially lifted the ban in subsequent months.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Axis Bank Fundraise | Lender to get ₹35,000 crore via debt and ₹20,000 crore through equity

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Private sector lender Axis Bank Ltd on Wednesday (April 24) unveiled plans to raise ₹55,000 crore through a combination of debt and equity instruments.

The decision was approved by the bank’s board of directors, marking a move to significantly bolster its capital base and support future growth initiatives.

In a regulatory filing, Axis Bank outlined its intention to raise funds through various avenues, including the issuance of debt instruments in Indian and foreign currencies.

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These instruments may encompass a wide range of options such as long-term bonds, masala bonds, sustainable/ESG bonds (including green bonds), convertible debentures, non-convertible debentures, perpetual debt instruments, AT 1 bonds, infrastructure bonds, and Tier II capital bonds, among others.

The bank seeks to raise up to ₹35,000 crore through debt instruments, subject to the approval of its members, in accordance with the provisions of the Companies Act, 2013, and the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.

Additionally, Axis Bank plans to raise up to ₹20,000 crore through equity shares, depository receipts, or any other instruments representing equity shares or convertible securities linked to equity shares.

The fundraising may be conducted through various channels such as qualified institutions placement (QIP), American depository receipts (ADRs), global depository receipts (GDRs), preferential allotment, or any other permissible mode or combinations, subject to the approval of members of the bank and relevant statutory/regulatory bodies.

Also Read: IIFL Finance starts special audit after RBI suspends its gold loan disbursements

Shares of Axis Bank Ltd ended at ₹1,064.05, up by ₹7.60, or 0.72%, on the BSE.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI Deputy Governor T Rabi Sankar gets a year’s extension till May 2025: Report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India has reportedly extended its Deputy Governor, T Rabi Sankar’s term by a year to May 2025.

The one-year extension would be applicable from May 3, 2024, according to the order, which was accessed by Reuters.

Rabi Sankar, who was appointed to the post in May 2021, is in charge of the foreign exchange, currency, and fintech departments at the central bank.

Apart from him, Swaminathan J, M Rajeshwar Rao and Dr MD Patra are currently serving as other RBI deputy governors.

Deputy Governor Swaminathan J is said to look after consumer education and protection, supervision, financial inclusion and development, inspection, premises, and Rajbhasha departments; Rajeshwar Rao looks after affairs related to regulation, communication, enforcement, legal, and risk monitoring; and Dr Patra oversees the divisions of monetary policy, financial markets regulation, financial markets operations, deposit and credit guarantee corporation, and economic and policy research, among others.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow