HDFC Ltd to raise Rs 1,135 cr via debentures

Issue of the NCDs to be on a private placement basis will open for a day on May 6

HDFC Ltd today said it will raise Rs 1,135 crore by issuing debentures this week to meet funding requirements.

"The object of the issue is to augment the long term resources of the Corporation. The proceeds of the present issue would be utilized for financing/refinancing the housing finance business requirements of the Corporation", it said in a regulatory filing.

The issue of the non-convertible debentures (NCDs) to be on a private placement basis will open for a day on May 6.

The NCDs carry coupon rate of 8.34%. ICICI Bank and SBI Capital Markets are the arrangers to the issue. Shares of the mortgage lender closed 2.86 per cent higher at Rs 1,131 a piece on BSE.

With 10 branches, first small finance bank kicks off operations

The bank’s business is projected to increase four-fold from Rs 3,000 crore as on March 31, 2016 to Rs 12,000 crore and branch network to 216 by March 2021.

Jalandhar-based Capital Small Finance Bank Ltd, India’s first small finance bank, has commenced operations. The bank kicked off operations with ten branches.

In the current fiscal, the bank would consolidate in Punjab by adding 29 branches. The bank’s business is projected to increase four-fold from Rs 3,000 crore as on March 31, 2016 to Rs 12,000 crore and branch network to 216 by March 2021.

Capital Small Finance Bank has been set up by converting the erstwhile Capital Local Area Bank Ltd. “Consequently, the bank ceases to exist with effect from April 24, 2016. It was one of the 10 applicants to be given in-principle approval for setting up SFBs as announced by the Reserve Bank in its press release dated September 16, 2015,” the RBI said.

Ten selected applicants include Au Financiers (Jaipur), Capital Local Area Bank (Jalandhar), Disha Microfin (Ahmedabad), Equitas Holdings (Chennai), ESAF Microfinance and Investments (Chennai), Janalakshmi Financial Services (Bengaluru), RGVN (Northeast) Microfinance (Guwahati), Suryoday Micro Finance (Navi Mumbai), Ujjivan Financial Services (Bengaluru) and Utkarsh Micro Finance (Varanasi).

The small finance bank will primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

There won’t be any restrictions in the area of operations of small finance banks. The minimum paid-up equity capital for small finance banks shall be Rs 100 crore.

The promoter’s minimum initial contribution to the paid-up equity capital of such a small finance bank should at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.

The RBI had granted approval to 11 entities for launching payments banks in August 2015. It had given approval to IDFC and Bandhan to start universal banks last year.

Meanwhile, microfinance player Ujjivan Financial Services, which got the RBI nod for a small finance bank, will hit capital markets on Thursday to raise nearly Rs 885 crore through an initial public offering.

How Gujarat’s co-op bank hopes to recover Rs 240 cr to repay small depositors

How Gujarat’s co-op bank hopes to recover Rs 240 cr to repay small depositors

Gujarat-based Madhavpura Mercantile Co-operative Bank (MMCB) has announced its final settlement scheme 2016 in a bid recover dues from defaulters

Gujarat-based Madhavpura Mercantile Co-operative Bank (MMCB) has announced its final settlement scheme 2016 in a bid recover dues from defaulters. The bank hopes to recover about Rs 240 crore from nearly 600 borrowers through this scheme.

It may be recalled that thousands of small depositors got duped in the Rs 1,200-crore MMCB scam that was unearthed in 2001. A bank official, requesting anonymity, said MMCB, currently under liquidation, owes nearly Rs 100 crore to about 13,000 small depositors, and Rs 650 crore to 268 other co-operative banks.

With this scheme, MMCB is offering its borrowers the final opportunity to settle their dues. In a press note, the bank said the scheme will cover all accounts except those of Ketan Parekh, Mukesh Babu and Sirish Maniar of Maniar Group.

Chief executive officer GK Fakir said the bank had filed several civil as well as criminal complaints against “defaulter borrowers”. He hoped the final settlement would see most borrowers clearing their dues.

At a time when the Reserve Bank of India did not allow banks to lend more than Rs 15 crore to stock brokers, MMCB had fraudulently issued pay orders worth Rs 12 crore to Mumbai-based stock broker Parekh, and huge sums to Babu and Maniar.

In 2012, the RBI had cancelled the bank’s licence after its total recovery pending stood at over R1,100 crore and non-performing assets had touched 99.9% of total deposits.

Sun Capital

Supreme Court asks finmin to reveal mechanism to recover NPAs of PSBs

The Supreme Court on Tuesday asked the finance ministry to inform it about the mechanism in place and steps being taken to recover huge non-performing assets (NPAs) of the nationalised banks.

he Supreme Court on Tuesday asked the finance ministry to inform it about the mechanism in place and steps being taken to recover huge non-performing assets (NPAs) of the nationalised banks. The apex court also asked the government to form an expert panel to look into the issue.
A bench headed by Chief Justice T S Thakur, while seeking response from the RBI and the Indian Banks Association on various issues framed in this regard, said the current system is not working to safeguard the interests of the banks. It said “if your (government) system was perfect, you could not have such huge NPAs”.

“Something is missing (in the current system). Something is not working. Don’t take this as adverse remark. But steps are needed to prevent such huge write-offs. We are looking at suggestions to reform the system and prevent the huge write-offs… Please tell us what is the current institutional mechanism to check it…And what reforms you are intending to bring in,” the bench asked Solicitor General Ranjit Kumar, who informed the court that some “amendments are in the offing. And the Bankruptcy Code is likely to come into effect soon”.
Kumar also told the apex court that the government is already working to contain the bad loan situation and has various mechanisms like the proceedings before the Debt Recovery Tribunals/the Sarfaesi Act to recover the bad debts.

The CJI also told the bank to propose a committee which can look into all these issues. “We are not financial experts and cannot look into the safeguard issues, but the government should be in a position to evolve safeguards to prevent NPAs. If you propose a committee which can go into all these issues, we will be okay with it,” he observed.
Counsel Prashant Bhushan, appearing for NGO Centre for Public Interest Litigation (CPIL), told the judges that there is severe discrepancy with respect to the information on loan write-offs provided by individual banks and the RBI.
Bhushan cited the RBI data that showed Punjab National Bank writing off over `8,500 crore in the last two years, while PNB has denied writing off any loan during this period. Similarly, while the Bank of India claimed that the bank wrote off more than `17,700 crore loans in the last two years, the RBI figure stood at `2,567 crore.

The counsel also filed a two-page note and formulated around 11 issues to be looked into by the court. The issues included — whether the RBI can refuse to disclose information about defaulted loans, suits filed for recovery of loans, restructured loans, debts written off, willful defaulters, one-time-settlement, sales of assets of companies to Asset Reconstruction Companies etc, what mechanisms are required to ensure that banks obtain adequate security for the loans that they give to the companies/corporates and whether the personal guarantees of the promoters should be required to be taken in loans given to the corporates.
The SC had earlier critisised the banks for failing to go after big defaulters and instead driving farmers to sell their small tracts of land and committing suicide for failure to return small outstanding loans.

Sun Capital

HDFC Bank is the Glenn McGrath of Indian banking

HDFC Bank’s balance sheet has crossed Rs7 trillion, narrowing the gap with ICICI Bank

Just like former Australian bowler Glenn McGrath used to land ball after ball in the same spot outside the off stump, HDFC Bank Ltd has unerringly posted another quarter of 20% net profit growth. If there was any mild excitement around its March quarter earnings, it was the utilization of around Rs.300 crore of floating provisions towards two accounts.

Half of this provision was on account of a central bank directive to all lenders to set aside 7.5% of their exposure to the Punjab state government, which is battling a foodgrain scam. It has to make a similar provision in the first quarter of this financial year. That said, at the end of the day, as the lender’s management clarified in a conference call, this loan has been made directly to the state government and would be classified as sovereign debt.

There was no untoward effect on HDFC Bank’s credit costs either. Annualized credit costs came in at 47 basis points in the March quarter, a decline from both a year ago and the previous quarter’s number. One basis point is one-hundredth of a percentage point. The bank maintained its asset quality performance with gross non-performing loans remaining under 1% of its advances.

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Other performance yardsticks hit the mark as well. Return on assets was 1.9% and cost-to-income ratio under 45%. The bank’s net interest margin was 4.3%; the management said the move to the new marginal cost of funds-based lending rate was unlikely to affect margins much. It reiterated its usual guidance of 4-4.4% margin for the current quarter as well.

With this set of numbers repeated quarterly, the trigger for stock performance is balance sheet growth. HDFC Bank’s balance sheet has crossed Rs.7 trillion, narrowing the gap with ICICI Bank. In the March quarter, loans grew 27%, about two-and-a-half times industry growth and especially creditable for a loan book of this size. Retail loans—driven by personal loans and home loans—grew by 30%. Deposits also grew faster than the industry at 21%.

While HDFC Bank shares trade at 3.3 times their expected book value for this financial year—among the most expensive in the world—it is its ability to disregard the operating environment that allows the stock to outperform the benchmark Bankex.

Sun Capital

IDBI Federal Life Insurance buys office space worth Rs 111 cr in Marathon Futurex

In one of the major office space transaction, IDBI Federal Life Insurance Company Limited has bought commercial space worth over Rs 111 crore at Marathon Futurex in Lower Parel in Mumbai. The company has acquired around 61,720 sq ft office space spread over two floors at the IGBC’s Gold rated Green Building. The deal was registered last week after completion of all formalities.

The 450 employees of IDBI Federal Life Insurance will occupy the offices on 22nd and 23rd floors of the tower. The deal works out at around Rs 18000 per sq ft and falls within the ongoing property rates for outright transactions. Rates in Lower Parel are in the range of Rs 18,000-20,000 per sq ft based on the profile and facilities offered in commercial complexes here.

Mr.Mayur Shah, Managing Director, Marathon Group said, “This is one of the biggest commercial realty deals in the recent time which instills the hope that commercial real estate is on track.”


He added, “Among the biggest commercial real estate deals that have taken place in last couple of months, maximum deals have taken place in Marathon Futurex in Lower Parel. The reason is the distance of railway stations from the iconic building and the gold rated green building with amenities and facilities that are at par with international standards. With increasing standards Indian corporate houses and entry of multinationals, Marathon Futurex is the apt office space solutions for these companies.”

Sun Capital

RBI proposes cutting of merchant discount rate

Mumbai The Reserve Bank of India (RBI) has proposed to rationalise the merchant discount rate (MDR), or the fee a merchant has to pay a bank to access its payment infrastructure.

While the central bank did not provide any solution, it has asked public opinion in a concept paper on card acceptance infrastructure.

In the concept paper, RBI noted that MDR "often acts as a disincentive," as the cap prescribed by the regulators were treated as a floor and the benefit of lower MDR "not really accruing to smaller merchants."

Larger merchants, with economies of scale, can absorb MDR relatively easily.

In September 2012, RBI capped MDR for debit card transaction at 0.75 per cent for transaction values up to Rs 2,000 and at 1 per cent for transaction values above Rs 2,000.

The concept paper also raised questions whether MDR for credit cards should also be rationalised as the cap prescribed was only for debit cards but can be extended to credit cards as well. However, if MDR was lowered, the merchant acquisition would be unattractive for banks, thereby defeating the purpose of promoting card payment.

The concept paper proposed a few options that can be explored to make MDR viable and at the same time cheap.

The proposals included ad-valorem MDR across all merchant categories and locations, differentiated MDR across various tiers of cities and merchant sizes, and also fixing the MDR at a flat fee rate beyond certain value.

Banks are also going slow on acquiring merchants, the paper noted.

Between October 2013 and October 2015, ATMs increased by around 43 per cent while POS machines increased by around 28 per cent. As of end-December 2015, the number of ATMs has increased to 193,580 while POS machines had increased to 1,245,447 in the country.

"The issuance gap in POS terminals is glaringly high. For more than 25 million retail outlets currently, we have about 1.2 million POS terminals in India. Going forward, the POS gap will only increase leading to major acceptance problems," said Kumar Karpe, CEO of TechProcess Payment Services Ltd.


"India needs to leapfrog the gap by leveraging the existing infrastructure of more than 200 million smart phones and work towards a virtual mPOS solution that converts a merchant's smartphone into a virtual point-of-sale device."

Sun Capital

Deutsche Bank chief scotches India unit sale speculation

MUMBAI: Deutsche Bank quelled speculation about its future in India as well as Asia and said it aims to build on one of the most profitable franchises amid global reorganisation that is leading to some businesses shrinking for it to remain profitable.

"Deutsche Bank India sale was never ever on the table,''Gunit Chadha, chief executive officer of Deutsche Bank in Asia Pacific, told ET in an interview. "We have significant businesses in Japan, China, India, Australia, Hong Kong,ASEAN & Singapore.

Deutsche Bank

The global banking industry must reinvent its business models. We ourselves have some challenges which we are proactively addressing, but our commitment to Asia Pacific is strong and stays fully intact."

The German bank which was cleared by the regulators in a rate rigging probe is reorganising itself by cutting staff and exiting markets which are unviable.In this context, some speculated that Deutsche may sell its India unit as the region itself could become a non-core area. In fact, the bank had to face some toughmarket conditions recently after analysts questioned its ability to pay interest on some bonds. But the bank has since reassured investors with a bond buyback plan. Its CEO John Cryan said that bank is 'absolutely rock solid.'

"Asia Pacific is our strong growth region," said Chadha. "This is no surprise as Deutsche Bank Asia Pacific PBT has doubled between 2012 to 2015 with very attractive financial metrics and the region now has five of the top 10 countries for Deutsche Bank globally." About 12% of its revenues (4 billion) came from the Asia-Pacific region. It mostly does corporate and investment banking in the region with India alone having a retail business. Deutsche Bank has 17 branches in India currently with around.`5,000 crore mortgage book and.`15,000 crore in wealth management.

Last year it sold its mutual fund business to Pramerica Mutual Fund.

In October 2015, the bank announced that it will shut operations in 10 countries globally, cutting 15,000 full and part time jobs as part of the bank's 'Strategy 2020' which aims to reduce costs, lower risks and improve Deutsche Bank's capital position after being weighed down by fines linked to the LIBOR fixing scandal.

Chadha said the bank recently sold its mutual fund business in India because it was "sub scale and largely domestic". It was less than 2-3% of the DB India profits. While being consistently profitable and well managed, it needed to scale up.

But the same need not be true of its retail business in India even though it does not contribute significantly to overall profits.

"I don't believe that our Indian retail business will be shrunk to glory," said Chadha. "Either you are in the retail business or not. If one is in the business it needs to scale up. Deutsche Bank's retail business is not about becoming leaner. It's a well-managed profitable business for us. Yet as India is the only market in Asia where we have a retail business , the strategic forward naturally comes up."

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