Category: Finance

State Bank of India cuts its headcount by 25,000 in five years

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

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The country’s largest lender, State Bank of India, has cut its total headcount by 10% since FY19, equating to 25,000 fewer staff. The number of employees at the state-owned lender stood at 2,32,296 at the end of March 31, 2024, according to data collated from exchange filings.

In contrast, the bank had a total headcount of 2,57,252 at the end of FY19. That was despite the fact that the bank enjoys one of the lowest attrition rates in the sector, which stood at 1.43% during FY24.

On an average, the bank has witnessed a reduction of 5,000 employees every year since FY19, with the highest cut being in FY23 at 8,392 employees. However, the reduction in the number of employees coupled with a surge in profitability aided the bank report improved profit per employee. The bank reported a profit per employee of 26.2 lakh in FY24, against 5.8 lakh reported in FY20. At ₹61,077 crore, the net profit of SBI grew at an annualised rate of 44% between FY22 and FY24.

The staff expenses of SBI increased by 24% in FY24 to ₹71,237 crore. During the fiscal year, the bank also provided an additional provision of ₹13,387 crore to cover the 12th bipartite wage revision settlement. Excluding the one-time wage revision expenses, staff expenses are set to increase by ₹500 crore per month from FY25. The management expects the overheads to be in the range of ₹65,000 crore to ₹70,000 crore for the financial year 2025. “Our employees are recruited from the best talent in the country and are trained to handle the scale, complexity and compliance requirements of the bank,” said Dinesh Khara, Chairman of SBI, post-Q4 results.

Additionally, improvements in profitability also pushed the bank’s return on assets (RoA) higher. The RoA, which has been on an upward trend over the last six years, hit 1.04% in FY24. In comparison, the ratio stood at 0.02% in FY19.

Shares of SBI have outperformed the benchmark index by a wider margin over the last six months. While the stock of SBI has rallied as much as 41% in six months through May 14, the gauge for bank stocks—Bank Nifty—has yielded a return of 9% during the same period.

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

RBI to hold a conference for NBFCs’ assurance function heads

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

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The Reserve Bank of India (RBI) will hold a meeting with heads of risk and assurance functions of non-bank lenders in Mumbai on Wednesday, May 15, sources told CNBC-TV18. The conference would be presided over by deputy governors- M Rajeshwar Rao, who heads the department of regulation at RBI, and Swaminathan J, who is responsible for the department of supervision.

The meeting assumes significance amid the increased regulatory focus on strict compliance by regulated entities, in the wake of a series of regulatory actions against financial entities for non-adherence with regulatory norms. Recent actions against NBFCs like JM Financial, IIFL Finance, or Bajaj Finance before that have brought to the fore that the regulator is keen to enforce good risk management and assurance practices, compliance with regulatory guidelines, board effectiveness, fairness to customers, and good governance as key priorities.

During the in-person conference that is scheduled to take place on Wednesday, sources said, RBI’s senior officials would set the supervisory and regulatory expectations on the risk and assurance functions of NBFCs. Other sessions that will be part of the day-long conference with NBFCs include those on cyber security, best practices and challenges for robust assurance functions, with specific expectations the regulator has from risk, compliance and audit functions of NBFCs.

As with most such meetings that the regulator has held in the past, the NBFCs would also have an interactive session with senior officials of the Reserve Bank, including executive directors from the departments of regulation and supervision to enable NBFCs to also present their views, suggestions, concerns or seek any guidance or clarifications, a person directly aware of the matter told CNBC-TV18.

“As an upper layer NBFC, we go through at least one annual financial inspection and that process is continuous and ongoing… What is very clear is that for business going forward we have to keep governance and compliance right at the centre of everything we do, versus an earlier attitude where compliance was more about checking some boxes,” Gagan Banga, Vice Chairman and managing director of Indiabulls Housing Finance had told CNBC-TV18 during an interaction earlier.

“The regulator is clearly upping the ante on two things. One is its regulatory oversight itself. And second is we know that when you have repeated observations and you’re not fixing those issues, then they are willing to go all the way to ensure that you fall in line. So it is not just signalling for the NBFCs as what right now you know you are led to believe, it is more a signalling to all the players that you need to fall in line with what is expected,” Aseem Dhru, MD & CEO, SBFC Finance said in an interaction earlier.

Several key NBFCs across the upper and middle layers classification as per RBI’s scale-based regulation, are expected to be part of the day long conference in Mumbai.

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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

RBI’s draft norms on project financing to hit credit cost by 7-8 bps: Bank of Baroda

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

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Debadatta Chand, MD & CEO of Bank of Baroda, on Tuesday (May 14) shed light on the impact of the Reserve Bank of India’s (RBI) proposed draft guidelines on financing.

Chand stated that while the draft regulations are in the consultation phase, the bank is anticipating a maximum impact of 7-8 basis points on credit costs.

The RBI’s proposal aims to enforce stricter rules governing lending to projects under implementation. This will necessitate lenders to allocate 5% of the total loan amount as general provisions.

Chand also discussed the status of IndiaFirst IPO, highlighting that its execution hinges on market conditions and valuation attractiveness. He noted that the current market conditions in the insurance sector haven’t aligned with favourable valuations.

Regarding asset quality, Chand expressed optimism, noting a downward trend in both gross non-performing assets (NPAs) and net NPAs over several quarters. Despite a slight increase in provisions due to a particular account, Chand highlighted improvements in slippage ratios compared to the previous year.

Chand also shared insights on the bank’s loan growth trajectory, indicating a robust performance in both retail and corporate segments. With a projected loan growth of 12-14% for the full year, Bank of Baroda aims to sustain its strong momentum in lending activities.

Last week, Bank of Baroda reported a 2.3% rise in net profit for the fourth quarter of FY24.

The bank’s performance surpassed the estimates of analysts, with net profit standing at ₹4,886.5 crore versus the CNBC-TV18 poll projection of ₹4,576.2 crore.

Key highlights of Bank of Baroda’s Q4 FY24 earnings include a loan growth of 13% year-on-year and 4% quarter-on-quarter.

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

General insurance premium grows 16% in April, ICICI Lombard and Star Health shine

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

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General insurance companies displayed strong growth in premium collection for the month of April. The general insurance industry (comprising general insurers and standalone health insurers) saw its premium collection grow by 16%, while standalone health insurers experienced 27% growth.

ICICI Lombard: Strong performance on a high base

In April 2024, ICICI Lombard’s premium collection grew by 23% year-on-year.

Despite achieving a 17% growth in premium collection in April 2023, ICICI Lombard managed to sustain its growth momentum, indicating a healthy pace of growth despite having a strong base.

Additionally, ICICI Lombard’s market share increased by 63 basis points in April 2024 compared to the previous year.

New India Assurance: Premium growth lags despite a favourable base

New India Assurance recorded a 10% growth in premium collection for April 2024.

Despite a favorable base, the company only managed to achieve a 4% growth in premium for April 2024.

The larger disappointment for New India Assurance was on the market share front, as the company lost market share by 200 basis points or 2% in April 2024 compared to the previous year.

Go Digit General Insurance

Ahead of its public issue launch, Go Digit General Insurance experienced an 8% growth in premium collection for April 2024, a decline from the 40% growth seen in April 2023.

Additionally, the company’s market share dipped by 22 basis points in April 2024 compared to April 2023.

Star Health Insurance: Focus resumes on premium growth

Despite a strong base of 25% growth in premium for April 2023, Star Health managed to grow its premium by 23% in April 2024.

In recent months, the gap between the growth in premium for the Standalone Health Insurance Industry’s average premium growth and Star Health has been around 8-10%, which narrowed to 4% in April.

Unlisted large players also demonstrated notable growth:

• Bajaj Allianz General Insurance recorded a 45% increase in premium collection.
• HDFC Ergo witnessed a 20% growth in premium.
• SBI General Insurance experienced a growth of 45% in premium for April 2024.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

Shriram Finance to focus more on profits than revenue growth this year

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

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Shriram Finance will focus on improving profits more than the revenue growth following the sale of the housing finance subsidiary.

“We are trying to get more digital play and improving our operational efficiency. You can definitely expect better bottom line growth than the top line growth,” said Umesh Revankar, Executive Vice Chairman of the company.

The lender has guided for a 15% growth in asset under management for the current financial year with focus on gold loans and small-ticket lending.

Shriram Finance was among the top Nifty gainers today after the company approved the sale of its housing finance subsidiary for a valuation of ₹4,630 crore to Warburg Pincus.

Revankar said the company will receive ₹1,360 crore from the sale after accounting for taxes, fees, and other expenses. 

These are the edited excerpts of the interview.

Q: According to your earlier comments, basis the valuation assumptions that you gave, the deal for the housing finance subsidiary would come anywhere around ₹6,000-6,500 crore. The offers were closer to ₹5,000-5,500 crore. What gave for you to go ahead and sell it at a valuation multiple lower than peers and lower than what the Street was anticipating?

A: We never gave out any number. We did not have any ballpark target numbers. We felt whatever is the best offer we got, we should be able to conclude the deal. And also we are looking at a good partner who can take it forward. That is also very important when we make the deal because the management has to be comfortable continuing the business.

We have built a very efficient leadership and management in the SHFL and we are proud of it. And we feel that this deal and Warburg Pincus is a good name to reckon with and also they have done, in the past, certain transaction of total investment and making it bigger and better and we are quite comfortable and happy with the deal.

Q: How does this change things and what does it take your capital adequacy ratio to?

A: The capital adequacy of SFL will improve by nearly 200 basis point. And that will help us to grow our business faster for the next year or so. Also, now we can focus on our core business of lending to businesses and lending for buying of commercial vehicle and SME. We will focus on that. Housing needs more specialisation, more attention and a lot of capital, because it is a fastest growing segment and company. We felt it is better to focus on our core business and improve the capital adequacy of the SFL.

Also Read | Here is how Shriram Finance benefits from exiting its housing finance business

Q: What is the net amount that will come to the company net of the taxes, etc. fees, whatever needs to be paid? What’s the deal done at and what’s the net amount that comes to you after taxes, fees etc.?

A: We have 84%, so we get ₹3,908 crore. The P&L impact is ₹1,360 crores after tax. So we get ₹1,360 crore after taxes, etc.

Q: What is the growth you are looking at? Also, give some part of the markets believe there is pain in the rural market. Have you experienced anything on that front?

A: This year, we do expect a little slow in the first quarter because of election, but it is a temporary and we feel that moment the new government comes in all the government projects and infra projects will start functioning or start getting implemented.

As far as rural is concerned, we are really witnessing good credit growth in the rural and the demand is good. Even the asset quality has improved significantly in the rural area. We are quiet happy and comfortable in the rural growth. The demand for tractors, two-wheelers have grown significantly and most of the two-wheeler demand is coming more in the rural, especially the agrarian economy UP, Bihar, MP and the interior Maharashtra. So, we feel that rural is doing well and with good monsoon predicted this year also it should do well.

Q: Of the ₹1,360 crore that comes into your books, could you give us a sense of how much would be allocated towards commercial vehicle business, consumer finance business, and at what rate will you leverage your book with the kind of capital that you are adding?

A: If you look at our segmental growth, commercial vehicle is growing at around 15%. The passenger vehicle is growing fastest because the demand for passenger vehicle in the tier two and tier three towns are the highest and it’s growing more than 25%. So passenger vehicle will definitely grow faster this year because more disposable income is in that segment, the tier two, three towns.

Then SME business itself has good traction and demand is quite good. We are quite bullish on SME business getting expanded into smaller towns. Now post-merger, we have 3,000 plus branches we have reach and we should be able to do well. Additionally, we also would like to focus on gold business, where we feel our reach will help us increase our market expansion.

Money is fungible. We disburse more than 10,000 crore every month. so we cannot really allocate pie to pie in each of the segments.

Q: Any other measures that you want to undertake to focus on the core business, or any other non-core assets that you would like to sell?

A: Right now we don’t have any plans because this is one subsidiary we had, all other businesses are in single company. So we wanting to be focusing on the high yielding business to have better margins in our business. We would prefer to do small ticket lending to small entrepreneurs, not the large ticket to mid and large-sized enterprise businesses. That’s our core strength to reach, be of help and be friend to the businesses.

Read Here | Shriram Finance to sell its housing finance arm to Warburg Pincus for ₹4,630 crore

Q: What would be those high yielding businesses, and in the gold business, would you at unlocking value there, because the Street is suddenly seeing a lot of potential in gold lending.

A: With gold prices going up, people coming for gold loan has increased because they would like to unlock the value of the investment they have made in gold. It is also available at a cheaper rate compared to any other source of borrowing. For us, it is high yielding.

We have increased our reach. Earlier gold was offered in around 1,000 branches. Today around 1,600 branches are able to give gold loan. We can add more as we progress. We should be able to take advantages of our reach and the brands network and the people. We have 75,000 people employed in our company. So small ticket we can do well.

Q: What is the disbursement target for this year?

A: This year, we have guided the market with the 15% AUM (asset under management) growth on the top line. But our focus will be to improve the bottom line this year. We are trying to get more digital play and we are also trying to improve our operational efficiency. You can definitely expect better bottom line growth than the top line growth. So that’s what we are targeting this year.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

Certification must for AIF Manager’s investment team: SEBI

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

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Securities Exchange Board of India (SEBI) has amended rules making it mandatory for at least one key personnel within an investment team of an Alternative Investment Fund (AIF) manager to obtain requisite certification.

The new requirement is aimed at boosting competency and professionalism in the AIF space.

In a notification dated May 10, SEBI said, ”At least one key personnel, amongst the associated persons functioning in the key investment team of the Manager of an Alternative Investment Fund, shall obtain certification from the National Institute of Securities Market (NISM) by passing the NISM Series-XIX-C.”

To give this effect, the Securities and Exchange Board of India (SEBI) has amended AIF rules.

The new rules have been made applicable from the same date.

Through this requirement of certification for key personnel, the capital markets regulator is looking to ensure a higher proficiency in managing AIFs.

Last month, SEBI announced that certain changes in the private placement memorandum of AIFs can be submitted directly to the regulator rather than through a merchant banker in a bid to facilitate ease of doing business.

Also, the move is aimed at rationalising the cost of compliance for alternative investment funds.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

Indian banks’ underwriting standards at risk amid rapid consumer loan growth: Fitch

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

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Asset quality of Indian banks’ consumer loans has held up well so far, but an accumulation of ”untested risks” due to rapid growth may challenge lenders’ underwriting standards and risk controls, Fitch Ratings said on Monday.

”Fitch’s assessment of Indian banks’ risk profiles also factors in lower transparency in terms of data disclosures on retail underwriting, such as loan-to-value ratio, borrower debt serviceability, credit bureau scores, and recovery rates, than most Asian banking systems,” the rating agency said in a statement.

Indian banks have reported strong loan growth over the last few quarters, boosted by consumer spending amid firm economic growth.

Banks’ loans rose 19% in the two weeks to April 19 from a year earlier, latest data from the central bank showed.

Retail loans, or loans given to consumers, which constitute about 10% of all bank loans, have grown at an annual rate of 20% since 2020-21, Fitch estimates.

Most lenders have reported an improvement in their asset quality, but have banked on unsecured credit to expand margins.

The Reserve Bank of India (RBI), in November, increased risk-weights on certain loan categories to improve buffers against the potential for build-up of risks. It has also applied business restrictions on certain entities in case of supervisory concerns, and is proposing to increase provisioning on project finance.

While the RBI’s measures can foster greater caution towards risk-taking, their effectiveness ”through the cycle” is not yet proven, Fitch said.

Asset quality pressures from the previous credit cycle are subsiding, creating a favorable business environment. Still, loss absorption buffers, particularly at state-run banks, remain ”moderate” against high concentration risks and renewed interest towards sectors such as infrastructure and construction, Fitch said.

Banks’ risk appetite through higher loan growth will remain a key consideration for their intrinsic creditworthiness despite improved financial performance, it said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

RBI appoints R Lakshmi Kanth Rao as executive director

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

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The Reserve Bank of India (RBI) on Friday (May 10) said it has appointed R. Lakshmi Kanth Rao as executive director (ED) with effect from May 10, 2024. Prior to being promoted to ED, Rao was serving as chief general manager-in-charge in the Department of Regulation.

Rao has experience of over three decades in the Reserve Bank of India (RBI), having worked in the areas of regulation of banks and NBFCs, and supervision of banks and consumer protection.

He had served as banking ombudsman at RBI Chennai and as regional director of Uttar Pradesh at the Lucknow office. He has also served as a member of several committees and working groups and has been contributing to policy formulation.

Also Read: RBI tells NBFCs to ‘strictly adhere’ to cash disbursal limits as per IT rules

As executive director, Rao will look after Deposit lnsurance and Credit Guarantee Corporation, the Right to lnformation Act (FAA) and the Department of Communication.

Rao is a graduate of commerce. He holds a master’s degree in business administration (finance) from Sri Venkateswara University, Tirupati and a diploma in TIRM (IIBF). He is also a certified associate of IIBF.

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

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

AMFI to soon unveil guidelines to curb front-running and insider trading in mutual fund houses

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

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The Association of Mutual Funds in India (AMFI) will introduce a standardised operating procedure (SOP) for asset management companies (AMCs) within a month. This will be in order to curb potential market abuse, including front-running and insider trading, AMFI Chief Executive Venkat Chalasani said while making the monthly mutual fund data announcement.

This decision follows a directive from the Securities and Exchange Board of India (SEBI) on April 30, urging AMCs to establish a structured institutional mechanism for identifying and deterring market abuse.

SEBI will outline broad guidelines, with AMFI tasked to develop specific standards.

The regulator aims to enhance surveillance and internal control procedures within AMCs to detect misconduct and prevent misuse of sensitive information.

Additionally, SEBI plans to increase accountability among AMC management for any instances of misconduct.

To ensure transparency and accountability, AMCs will be required to implement a whistle-blower mechanism. This mechanism is intended to encourage employees to report any suspicious activities without fear of reprisal.

The need for such measures became apparent following instances where mutual fund employees were implicated in front-running trades for personal gain.

In response, SEBI imposed stricter norms on MF staff and fund managers. At present, AMC employees must document all face-to-face communications during market hours, including those that occur outside the office.

However, SEBI may grant exemptions to these requirements once the institutional mechanism is in place.

Previously, SEBI had brought mutual fund units under its prohibition of insider trading regulations to prevent employees and key staff from engaging in dealings based on unpublished price-sensitive information (UPSI).

Certain cases revealed key personnel redeeming their holdings in schemes before information was shared with other unit holders, prompting regulatory action.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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

India to delay payments market cap, helping Walmart-backed PhonePe, Google Pay

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

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India will again delay caps on market share for a popular digital payments method, two sources told Reuters, benefiting Google Pay and Walmart-backed PhonePe as the authorities prioritise growth over concerns about market concentration.

The National Payments Corporation of India (NPCI), the quasi-regulator, will extend by as much as two years a year-end deadline to cap at 30% the market share of any company processing payments via the Unified Payment Interface (UPI), the sources with direct knowledge of the matter told Reuters.

PhonePe’s share of UPI payments has risen to 48.3% from 37% in April 2020, while Google Pay’s share has declined to 37.4% from 44%, according to NPCI data.

The two processed a combined 11.5 billion transactions in April, the data showed.

NPCI and Google Pay declined to comment.

PhonePe did not respond to an email seeking comment.

India launched UPI in 2016 but barred companies from charging for the instant digital payments service in an effort to promote online transactions and reduce the use of cash in Asia’s third-largest economy.

Because they cannot charge for it, India’s banks and others like Meta-owned WhatsApp and Amazon Pay have not pushed UPI-based payments aggressively, leaving authorities worried about a concentration risk.

While their apps do not earn money from the payments, PhonePe and Google Pay have been able to use their UPI customer base to sell services such as loans and insurance.

NPCI, which has a regulatory mandate from the central bank, announced the 30% cap in 2020 but later extended the deadline by two years to the end of 2024.

The deadline will have to be extended again, said one of the sources, as it is not possible for PhonePe and Google Pay to reduce their market shares without hurting UPI payments growth.

A final decision on the extension will be communicated closer to the deadline, said the sources, who asked not to be identified because they are not allowed to speak to the media.

NPCI had hoped for more competition when WhatsApp was permitted to offer UPI-based payments in February 2020, but the company had just 0.2% market share as of April.

India’s Paytm, with the third-highest share, has experienced a decline in payments processed through its platforms after regulators placed curbs on a group entity.

Payment firms want the market-share cap removed, asking NPCI to let them charge for UPI payments to encourage competition, said an official at a payment company.

The government will decide whether to allow firms to charge for UPI payments, the two sources said, but one said NPCI does not favour removing the share cap.

The volume of UPI transactions rose 49.5% in April from a year earlier, less than the 54% rise logged March.

The central bank met on Tuesday with industry executives to brainstorm on ways to expand the UPI user base, which was about 300 million users and 50 million merchants late last year, according to the most recent data.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

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