BANKS ARE ILL, LONG LIVE NBFCs

Shares of Bharat Financial Inclusion Ltd, earlier known as SKS Microfinance Ltd, on Friday closed at 909.20—inching closer to the price at which retail investors had bought its shares in an initial public offering (IPO) six years ago. The 1,654 crore SKS IPO in July 2010, the first by any microfinance company in India and second in the world, was subscribed 13.7 times. The shares were sold at 985 in the IPO, but retail investors were given a discount of 50. It was listed on 16 August 2010 and soon rose to 1,490. That was before a crisis hit the microfinance industry following the promulgation of a state law in Andhra Pradesh. The law prompted large-scale defaults by borrowers and drying up of bank funds to the microfinance sector, and the SKS stock soon plunged to 54.5 as investors rushed to sell. 

The company posted a net profit of 235.91 crore in the June quarter, an almost four-fold increase from 61.16 crore a year ago on higher total income and a 96.85 crore tax write-back, beating analysts’ estimates. The gross non-performing assets (NPAs) for the quarter were 0.1% and, after setting aside money for bad loans, the net NPAs were 0.03%. Its loan portfolio rose 76% to 8,463 crore from 4,797 crore in the year-ago period.

Another listed microfinance company which is on its way to become a small finance bank, Ujjivan Financial Services Ltd’s stock rose to 540.85 on Friday before closing at 511.40. In May, Ujjivan’s 887 crore IPO was subscribed 41 times. In less than three months since its listing, the stock price has more than doubled. On Friday, Ujjivan announced a 71.37 crore net profit for the June quarter, more than double the profit it had reported in June 2015. Its loan book jumped 66% in the past one year to 5,850 crore. Its gross NPAs in June were 0.18% and net NPAs, 0.04%.

The third listed microfinance entity, Equitas Holdings Ltd, closed at 196.35 on Friday, losing around 2.5%, but it’s still trading at around 80% higher than its IPO price of 110. Its 2,163 crore IPO in the first week of April was subscribed 17 times. Its June-quarter net profit rose 60%.

Clearly, there is a re-rating of non-banking financial companies (NBFCs); investors are pulling out of banks and putting their money in NBFCs as they are growing faster than banks and their quality of assets is far better. The price-to-book ratio of Bharat Financial— which we get by dividing the current price of the stock by the book value per share—is probably the highest among all NBFCs barring mortgage lender Gruh Finance Ltd. Bharat Financial’s one-year forward price-to-book ratio is around 5.5, far higher than the best-performing private banks on the stock market like HDFC Bank Ltd and Kotak Mahindra Bank Ltd (both around 3.75), IndusInd Bank Ltd (3.5) and Yes Bank Ltd (close to 3). Among public sector banks, only State Bank of India’s one-year forward price-to-book value is higher than 1. Many of them are trading at half of their book value.

This is because most public sector banks have bloated bad loans and very few of them are actually growing the loan books. A handful of them announced their June-quarter earnings and they indicate that there is no respite from adding to the pile of bad loans and shrinking balance sheets.

The banks are not lending for fear of accumulating more bad loans and the NBFCs are taking advantage of that. What we are witnessing in the Indian financial sector now is quite unique. The Reserve Bank of India seems to be pushing for a bank-led financial system, but the business of lending is increasingly becoming sector agnostic because of the emergence of new channels such as mobile and Internet.

The banking regulator has given conditional licences to eight microfinance institutions to set up small finance banks; it also wants some of the larger NBFCs to become wholesale banks. However, for an NBFC, particularly a microfinance entity, the incentives to become a bank is far less today than in the past. They don’t need to entirely depend on banks for resources anymore; the Micro Units Development and Refinance Agency Bank as well as the National Bank for Agriculture and Rural Development are giving them funds. Besides, they can also collect deposits from the borrowers and cater to their need for savings by being a business correspondent of banks. Finally, new channels are being used to disburse loans.

Indeed, they will have to follow stricter norms for recognizing bad loans—from non-payment for 180 days to 90 days, on the line of banks—but this is not happening overnight. Similarly, their capital requirement by the end of the current financial year will not be as high as it was prescribed by an RBI panel in 2014. Finally, the drop in the yield of 10-year government bond, currently trading at its lowest since 2009, indicates that their cost of borrowing can only go down. No wonder then that the NBFCs have aggressively been building their retail books and the banks, though reluctant to lend to the borrowers directly, are happy to increase their exposure to these companies.

The NBFCs have got a fresh lease of life in the Indian financial system but does that explain the investors’ bullishness on a few of them, particularly the two MFIs that will become small finance banks? One thing is for sure that once they become banks, they will not be able to sustain the pace of growth in their loan book as they would need to focus on raising liabilities from the public in the form of deposits and that won’t be a cakewalk. There is also no clarity on whether Ujjivan and Equitas would need to tap the market again after three years of starting the bank. Under the RBI norms, listing is mandatory for a bank within three years. Both the entities have listed their holding companies. Of course, the regulator can always relax the norms either by accepting the listing of a holding company as a proxy for a bank or giving them more time for the bank listing.

There’s a need to develop corporate debt market: H.R. Khan (Former Deputy Governor of RBI)

H.R. Khan, former deputy governor of RBI, speaks of the need to develop India's corporate bond market and verious steps in how to go about it

H. R. Khan

Let me start where the governor ended his previous monetary policy press interaction; he said that repo in corporate bonds will be allowed and Mr. Khan is going to be in-charge of a committee that will present the roadmap to it. Can you tell us how soon we will be having repo in corporate bond markets? 

 Let me give you a bit of a background about corporate debt market, which we have been talking since ages.

There are structural issues and in fact, not many countries also have very robust corporate debt market and many countries like India have a bank-dominated system but corporate debt market is assuming criticality because there is a risk diversification, it compliments and supplements (what) banks are doing and more particularly in Indian context, it has also assumed importance because given the bank’s position in terms of their non-performing loans (NPLs) and other constraints, there is a need to develop corporate debt market and particularly when we are also planning to see that corporates at an aggregate level, they should not get overexposed to the banking sector part of their financial requirement should go to the market and through the bond market.

So if that is the case, then we need to do what all need to be done to develop corporate debt market.

It was in that context that I thought it was very crucial that RBI is contemplating allowing corporate debt in the repo transactions?

The whole idea is that it would be a major change in terms of— we are only taking sovereign papers so far as the repo is concerned. However, if you see world over, there are central banks whether it is unconventional monetary policy or quantitative easing and all, they have gone for corporate debt paper and expanding their balance sheet.

In RBI, we have been conservative and rightly so because given the illiquidity of corporate bond market and credit risk that may come and probably it may have impact on the balance sheet but we have to move on in the sense that we want to develop the corporate market, we have to do something which will be a game changer.

Is that committee report, which you were leading, ready, submitted?

FSDC has been discussing about this corporate debt market for quite some time. Then about few months ago, the sub-committee of the FSDC decided that let us have a group of all regulators and government to give a list of implementable recommendations, not go for a big report because there have been many reports on this corporate bond market to call out what all can be done and what new things we can do for the corporate debt market. So, we had all the regulators and government we sat together and we have worked out—the job is almost done and it is being submitted. Broadly, we had tried to look at what are the factors, which can further enable development of corporate debt market, which I put it in a characteristic manner in terms of issuer, in terms of investor, in terms of infrastructure, in terms of intermediaries, in terms of instruments and incentive and innovation.

Therefore, from what you are saying, it looks like a repo of corporate bond in RBI’s liquidity adjustment facility (LAF) is only one part. You have many other recommendations?

Yes; many other parts, and all the parts have to play together and in fact, most of the regulators and particularly RBI and Sebi are mostly involved and we have good understanding and quite a few things, implementers and timelines are also being suggested. So, we will see a lot of action in the next couple of months in terms of actual implemention.

So, which other areas? The LAF is one. What are the other things possible?

If I can take you through very quickly for example, on the issuance side, we have not seen much reissuances. And volumes are not there so liquidity is not there. And on corporate side, there is a problem because bunching will be there. So, what we are trying to say that whether you can have same International Securities Identification Number (ISIN) number but different redemption date so you can do it so, National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL) will probably work on that. And the other thing is that if you do reissuances, the stamp duty can be removed so that there is an incentive for reissuances.

Similarly, in the case of, for example, investor. We have not allowed foreign portfolio investors to invest. So, now as announced in the budget, now unlisted bonds and PTC they will be allowed to invest. And if you talk of intermediaries, the very critical point is market making. So, what we are looking at is whether some of the brokers can be market makers and if they become market makers, what sort of support they can get. So, they probably will get an access to repo and corporate bond market which is not allowed to them. So, if they get an access through repo to the market repo, probably they can make market. But then exchanges are working out a scheme and I think it is in advanced stage of being implemented.

And the other is in terms of banks, and primary dealers are already trading members. So, they could be also encouraged to become market makers. And if you see the infrastructure side, there are quite a few things. For example, one is electronic book for this private placement. And there is integrated trade repository where both primary and secondary market issuances one place, prices, volume, everything is available.

And one critical element of infrastructure is credit rating agencies who play very important role. So, they will be encouraged to become members of credit information bureaus. So, they can access information. They are eligible users, but many of them are not members. And also possibly, going forward, whether they can be given access to Central Repository of Information on Large Credits (CRILC) data, but that has to be used very carefully, because SMA-2, SMA-2 does not mean that it is full default. So, probably that is one area.

And other critical part is some of the instruments we have introduced, they have not really taken off. Take the example of credit default swap (CDS), repo in corporate bond. For example, in CDS we allowed few things, it does not work. In the corporate debt repo, we have reduced the haircut.

So you will allow more partial re-enhancement?

So, what we are trying to do is in terms of CDS, the main issue which has been a stumbling block as per the market is this netting issue involving public sector because of that capital charge increases. So, we were in dialogue with the government whether we have that amendment to the RBI act, netting and if that is not possible, pending that whether based on legal opinion we got second tracked whether the netting can be allowed. So, that will be a big boost.

And so far as repo is concerned, we would like to have a screen based platform. Some cases where the liquidity can be a central counter-parties (CCP) facility and some where it is not liquid it can be without CCP facility. So, that is one area where we can work for this instrument. And other is of course, tripartite repo but better collateral management. The other issue is very important

So, it can be increased, maybe 30-50%. And also, NBFCs were providing credit enhancement, for them there may not be any limit.

But what is the timetable for all this?

Another very critical point in terms of incentive as I have stated is that corporates’ exposure to the banking system as a whole should come down and part of that, they should go to market. So, that is a work in process and RBI will come out with their own recommendation. And of course, finally, as you mentioned is this LAF eligibility.

The whole idea is that once the market repo, tripartite repo gets some traction, there is some liquidity, probably we can open up this for LAF, but we have to see the legal aspect because RBI act is not very clear in terms of whether we can accept or not accept. That will be examined. My hunch is that pending RBI act amendment, possibly we can do. And very important thing which has happened is this bankruptcy code which is one of the main stumbling blocks. We have now the bankruptcy code in place, but the challenge lies in creating the infrastructure of ports and insolvency professionals.

The most attractive proposal or rather one of the more attractive proposals is allowing corporate bonds to be used in the LAF window. The legal opinion at that time was that the RBI would only take sovereign paper. Is this settled?

I would say it is not settled, but we will be in a position to interpret that it can be taken. Of course there has to be very sound risk management practices in terms of ratings, in terms of haircuts and all that. But if there are ambiguities, better to get the act amended. So that view has to be taken.

Now, I wanted to know the timetable. When can we expect some of these?

Many of the things should happen over the next two months.

So in the current governor’s tenure itself some of it may be implemented?

I suppose so. Some of the things will happen. For example, allowing FPIs to invest in unlisted debt and PTCs can happen anytime. And few things market making and all that SEBI is in advanced stage of doing it. And we are also in dialogue with Pension Fund Regulatory and Development Au t h o r i t y (PFRDA) and insurance companies, they will also slightly relax their norms for investment. And for example, even bonds of banks, so insurance companies and PF bonds, they will probably be investing. So, we are in dialogue with them. So, some of the major recommendations are likely to be implemented sooner than what was expected because the whole idea of this group is to give the recommendation and lay down some time frame.

Hit by NPAs, PNB to focus on lending to better-rated firms

MD and CEO of the Punjab National Bank,
 Usha Ananthasubramanian

Impacted by asset quality woes, state-run Punjab National Bank today said it will focus on lending to better-rated corporates for credit growth.

"We are looking for highly rated accounts like AAAs and AAs, but it does not mean we will shy away from the B-rated accounts.

"However, the preference is always for the higher rated corporates," the bank's Managing Director and CEO Usha Ananthasubramanian told reporters here. 

She said even if income is going to be less from such accounts, there is stability in this segment as the capital charge is reduced. 

"We also encourage the B-rated companies because that rating does not mean they are bad. The only thing is that where the capital charge is more, we re-look and want them to be supported by collateral," Ananthasubramanian said. 

Although the bank gets proposals from sectors which are not performing well, it takes a conscious decision not to get into them, she said. 

"We do not want iron and steel but where we are already in, it is difficult to come out. Thermal power, gas-based power plants are some of the sticky areas. The old projects we have to continue and should support but we are not keen on incremental fresh exposure," she said when asked which sectors the bank is more cautious about. 

The bank had yesterday reported a 58 per cent decline in net profit to Rs 306 crore for April-June period on account of rising bad loans. 

Provision for NPAs jumped almost three-fold to Rs 3,620 crore from Rs 1,291 crore in the same period a year ago. GNPA ratio shot up to 13.75 per cent.
Speaking about recoveries, Ananthasubramanian said the 

bank is trying to recover non-performing loans which have turned bad. 

"How it improves our asset quality is a thing we have to see and one quarter will not decide it. So going forward, if you are able to control the slippages and improve the recoveries to outnumber the slippages, then it will reflect in the asset quality of the bank," she said. 

The bank has identified some bad loans to be sold to asset reconstruction companies (ARCs). 

"We have already lined up about 72 accounts which have been identified but it is not known how many of them will actually be put on sale," she said. 

The bank has enough security receipts (SRs) and is fine with the SR route as well, she added. 

"It is a misconception that the bank is always after full upfront cash purchases by ARCs," she said.

Asked whether bank has identified accounts under the scheme for sustainable structuring of stressed assets (S4A), Ananthasubramanian said the accounts are run by a consortium of lenders and not by one bank. So, most of the accounts where the bank would like to invoke S4A, there are other consortium lenders. 

She, however, said only completed projects which have commenced operations are eligible for S4A. 

"Unless they generate a positive earnings before interest, taxes, depreciation and amortisation (EBITDA), it will not be possible because the servicing of the loan starts the day you identify the sustainable debt and the unsustainable debt," she added.

Royal Enfield to invest Rs 600 cr in new plant

Company wants to build manufacturing plant, in product development and R&D centres

Managing Director and CEO of Eicher Motors Siddhartha Lal during his visit to the Royal Enfield's manufacturing factory at Oragadam near Chennai on Friday

Royal Enfield (RE), motorcycle division of Eicher Motors, is to invest Rs 600 crore this financial year in a new manufacturing plant, in product development and research & development (R&D) centres.

Speaking to reporters at its Oragadam facility, 40 km from here, Siddhartha Lal, managing director of Eicher Motors, said by the end of this year, total capacity would be around 675,000 units, about 200,000 more from last year.

The first phase of the Vallam Vadagal facility, seven km from the one at Oragadam, will be ready by September 2017. This will take the company's total annual manufacturing capacity to 900,000 units.  

Asked if capacity expansion would bring down the waiting period, Lal said this had come down to three months, from a peak of 10-11 months. The company wishes to bring it down further, he said, while giving no numbers. A part of the proposed Rs 600 crore investment will go into the new facility. The balance will be for new engineering centres at Chennai and Britain, and for product development.

Lal said the company would be operating on two or three platforms at any given point. RE plans to bring the entire engineering team under one roof by stationing them at the new facility at Old Mahabalipuram Road, this metropolis' information technology 'corridor'.

Initially, this centre will have about 300 people and can accommodate up to 1,000. The UK centre will have 70 people.  

The company's Himalayan brand, the recent addition, is selling around 1,000 units a month. Lal said RE's focus would be the 250-750cc range of engines. Besides India, it will focus on Southeast Asia and Latin America.

RE, he added, had maintained strong volume growth in the first quarter of 2016-17, continuing to take more orders than monthly supply. It is also adding at least two dealerships every month, the current total being 566.

“Our immediate business outlook remains strong and Royal Enfield continues to grow consistently, competitively and profitably, towards leading and expanding the mid-sized motorcycle segment globally,” he said.

In June, RE opened a store in Manila, Philippines, with its global retail identity. That country is among the largest two-wheeler markets in the world. With a large chunk of the population using commuter motorcycles, there is an enormous potential for upgrading to mid-sized ones, the segment Enfield is in.  

In Europe, it participated in Wheels & Waves, one of the most popular motorcycle customisation and surfing festivals, organised in Biarritz, France.

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THE ROAD AHEAD

• Royal Enfield to invest Rs 600 crore in 2016-17 last year it invested around Rs 500 crore
• Company to increase its production capacity to 6,75,000 by end of March 2017; up by 200,000 units against last year
• Investment includes enhancing capacity, to set up engineering centres & for product development
• By end of 2018, after Vallam Vadagal project’s phase-I completes, total capacity will increase to 900,000 units. New centres in Chennai and the UK will initially have 300 and 70 engineers respectively
• Company’s focus will continue to be in 250-7500cc segment
• To replicate India model, it would first strengthen presence in main cities and then expand in and around Latin America and Southeast Asian countries

We are AA+ rated, we want to be rated AAA: Rana Kapoor (MD & CEO of Yes Bank Ltd)

Rana Kapoor, MD & CEO of Yes Bank Ltd.

Rana Kapoor, managing director and chief executive officer of Yes Bank Ltd, comments on the bank's first quarter earning in an interview.

Let me come first of all to the growth, asset quality is not a problem with Yes Bank but 33% loan growth is a very impressive number at time when growth is scarce. Is this repeatable? 

    If you see last year, which was a very tough year, FY15-16, we grew the loan book at 30%. The fact is that our overall denominator is still like a medium-sized bank which is now leaning towards a small large bank.

So, our growth last year was 30% and we have reason to believe that with the sectoral and fairly well fine-tuned segmented, geographic as well as sectoral strategies we can address the credit demand in some sectors which is resurfacing. 

 So, this 33% is manageable?

   Thirty-three percent is not sustainable beyond a point but we have reason to believe that next four years, which is the third phase of Yes Bank’s lifecycle of growth from a small large bank into a medium large bank till 2020, we have reason to believe that we can sustain between 27-30% credit growth and because of these sectoral strategies we have, there is reason to believe that with good credit filters, relationship management, intensified product penetration that this can be done. 

   Where did this 33% growth come from? 

Fundamentally the growth is coming in from the sectors we focused on literally from inception. Some of them continue to be sunrise sectors like agri-business. We have reason to believe that in renewable energy we have a fairly significant market share apart from substantial market and mind share in that particular business. 

Broadly is it corporate, retail, small and medium enterprises, midcap? 

The engines are all moving, the interesting thing is that the corporate businesses, because of our proven track record and relative resilience in asset quality, give us an opportunity with that proven track record to build market share and mind share. At the same time all the growth engines and what we like to believe in our SME businesses which is not small anymore -- it is 23% of our total advances -and if you look at even the consumer and commercial retail, which is clubbed as retail banking, is almost inching up to double digits, it is about 11%.

So, with the overall branch banking driven growth and strong growth in retail liabilities and with credit cards, which is the last mile product launch, we are going to be a very comprehensive retail bank this year. 

Other income has contributed substantially to your profit, it straightaway goes to the bottomline. The notes to accounts gave us very broad ideas that it comes from guarantees, letters of credit, financial advisory, selling of products, can you give me a breakup, did a substantial amount come from sale of securities, investments? 

Overall if you look at the composition of our earnings in this quarter, we were approximately 60% driven by net interest income and just around 40% by non-interest income. This was a very good quarter because what we are seeing is increased market share on corporate banking and in corporate finance, the reason is that our branch that we set up in Gandhinagar—the international banking unit—that is giving us new breakthroughs in clients like pharmaceutical sector which was difficult to compete with when we did not have an offshore loan book. 

How much of equity dilution will come because of the qualified institutional placement? What are you prepared for as an upper limit? 

When we discussed this three months ago, I had shared with you that we expect overall dilution of around 12-13.5%. So, I will pretty much stick to that number, may be 12-13%. The fact of the matter is that the continued resilience of the asset quality of the bank, the sustained profitability of the bank, increased market share of the bank, the outreach of retail and branch banking is in a way helping to rerate the bank. We have had a soft landing on asset quality. 

If it is 12-13% equity dilution, your return on equity (RoE) at the moment is about 21%, how many months will it take or how many quarters will it take to come back to 21%?

 When we meet investors this question comes up invariably in every meeting. Equity capital raising for a bank like ours is value and earnings accretive from day one. So, we have reawatch son to believe that give or take 6-8 quarters we can restore RoE back to 20% and at the same time because our RoE is a 20% and our dividend payout policy is about 80% retention and 20% dividend payout, that in itself gets us about 20% of organic growth through retention of profits.

So, the incremental capital that comes in is going to help us to grow at 30% and with that we can become RoE competitive in less than 6-8 quarters.

We have done it in the past, if you see our 2010 capital raise, $225 million, within 4-5 quarters we were back to 20%. If you look at our $0.5 billion capital raise in May 2014, which was a very big success, it has doubled in value since then; that also enabled us to get back to 20%t RoE in less than 8 quarters. So, it is value and earning accretive. 

Will you be wanting to take over a microfinance or a small bank?. We just saw IDFC do that. Small bank business is fairly lucrative, look at the way Equitas and Ujjivan are doing. Will inorganic be a thought? 

I must confess that the DNA of Yes Bank, which has been in a way personifying in itself over the last almost 12 years, is driven by hardcore entrepreneurship, what we call professional entrepreneurship. So, the ability to create building blocks within the bank, to make them profitable within reasonable timeframes is the real entrepreneurial joy of our top management.

So, we will look at acquisitions as and when they come through but there is a fair amount of organic capacity, bandwidth, bench strength, the bank has to be able to build businesses organically.

We are building a securities business as a subsidiary which is going to be more in retail, broking and asset management in course of time; we have got a licence. So, our ability as a bank with a professional DNA, as the professionals bank of India, is really organic. What happens is HR in India needs to be very homogenous and sometimes when you address it and put a shock in the system it can take a couple of years to recuperate. The systems have to synergise, IT has to be very friendly on the interfaces involved. So, a bank like ours which is still like a brand new bank even though we are 12 years old has the ability to engineer new businesses organically. 

So, your preference is organic? 

Prefer that, more weightage on that but if there is a very sweetheart deal, why not? 

There will always be one or two sceptics out there who would feel that if you are growing 33% at a time when the economy is still difficult, have you become a little more, shall I say, courageous in lending? What are yourself given targets on non-performing loans (NPLs)? Do you think you will go maximum to 0.8-0.9%, how might the subsequent quarters look like?

 The guidance on gross (NPLs) is that we should not exceed 1%. We have a minimum provisioning policy literally of 60% and right now our overall provisioning coverage is 64.2%. Which means net-net we should not fall or increase net NPAs beyond 40%.

At the same time there is a lot of focus and visibility on recovery of losses, recovery of NPAs, reducing restructurings; as you will see in our numbers, we have made significant progress in reducing restructurings overall. In sale of assets to asset reconstruction companies (ARCs), security receipts, when you look at the totality of the asset quality, I can promise you today, we are outperforming the perceived retail banks in the country.

We are AA+ rated but we want to be AAA but I am sure you are talking in equity context.

Suggestions on takeover of loan accounts: A.K. Roychoudhary (Director of Sun Capital Advisory Services & Ex Banker PNB)

The present guidelines issued by banks for takeover of account by another bank is causing lot of hardships to SME segment

SME client wants to shift his account from his present banker for various reasons as given below;

·         With the change in manager of the branch he suffers on account of rigidity in the approach of new manager on genuine issues. Now that the new manger is going to be here for next 3 years he wants to avoid wasting his time in visiting branch for every small or big issue.

·         For customers with large facility, with the change in set up at RO/CO/ZO he is again at the mercy of new Senior officers who are not very supportive- say his genuine request for enhancement in facilities is not agreed to by RO/CO/HO. his request for some ad hoc/concessions in charges/ reduction in interest etc are not considered.

There can be many other reasons also for shifting of the bank by the customer.

A number of present guidelines come in the way for shifting of these clients to a new bank. Due to lack of support, the customer suffers and in our opinion due to rigidity on the part of local branch manager or a new Regional Manager the account ultimately slips into NPA category.

I would therefore suggest as under to take care of genuine difficulty in takeover cases:

1.    That banks should be free to take accounts from other banks especially in respect of SME segment.

2.    Presently shifting of accounts from ex-banks where from either CMD or ED’s have come to new bank is not allowed. The above rule at best may be applied where the account is over Rs.100 Cr. 

3.    The power to take over account for SME segment be permitted by the Manager of the new bank, in whose power it falls. Presently next higher authority is required to give permission. 

4.    When a manager can sanction a fresh loan to any new customer who is yet to start business and whose track record is not known, it is not understood why higher officer has to permit the takeover case when party’s track record is already available by going through the conduct of account from his ex bank. 

5.    Presently the permission of higher ups is not required if the customer pays off his limits with ex-bank and waits for three months to take limit from new bank. Knowing the fact that banks take generally longer time to sanction limits, this stipulation (3 months period) should be reduced to ONE month.

Treat HFCs on par with private banks: Assocham to SEBI

Assocham has asked SEBI to treat housing finance companies (HFCs) on par with the private banks and public financial institutions (PFIs).

Assocham said in a statement on Tuesday that the move will strengthen the role of HFCs in the government's mission of "Housing for All by 2022".

 "Debt investments in HFCs should be exempted from sectoral limits and securities issued under AAA rating for long-term instruments and A1+ for short-term instruments by HFCs should be treated on par with AAA rated securities and certificate of deposits issued by private banks," Assocham said in a communication to the Securities Exchange Board of India (Sebi) Chairman U.K. Sinha.

 Assocham said that mutual fund investments in AAA rated pass through certificates (PTCs) backed by mortgages should not be considered as exposure to the HFCs as these are serviced and secured by underlying pools of granular secured housing loans.