Coronavirus pandemic may adversely affect output and prices: SBI Ecowrap

The nearly 30 per cent fall in global crude oil prices can lower petrol prices by Rs 12 per litre and diesel prices by Rs 10 per litre in India from their present prices, said State Bank of India (SBI) research team's publication Ecowrap published on Tuesday.

However, if both the Centre and states are not willing to cut fuel prices, they must not -- under any circumstances -- raise excise duty.

"Rather the additional revenue accruing to the Centre can be spent on providing relief to people at the lower strata who will lose income because of shutdown of commercial activity in states as novel coronavirus (COVID-19) spreads," said Ecowrap.

At the same time, there is a need to revive consumer demand. "This may be done through an employment-generating package targeting the efforts to contain the spread of virus," said the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI.

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As the number of cases of COVID-19 in India rise, the economic impact is expected to accrue from supply chain risk which may link up with exports as in pharmaceutical sectors.

On the direct exports side, a set of commodities may see some disruption where China is an important export destination, said Ghosh. On the demand side, adverse demand shock is expected to hit sector like air transport, tourism and hotels, which in turn will affect other sectors.

Thus depending upon the degree of forward and backward linkage of a sector (domestic and global) the impact of the COVID-19 will vary across sectors.

Ghosh said the arguments of Reserve Bank of India (RBI) cutting rates has more to do with coordinated policy actions by the central banks.

However, if RBI does cut, and that too by a large amount, then the current favourable interest rate differential can turn adverse and result in capital outflows.

"Coordinated monetary policy actions are good but exits are always not coordinated, and thus causes significant market disruptions. Deposit rate cuts beyond a point is counterproductive and actually creates perverse flows into liability products that are offering higher interest rates," said Ghosh.

This can always be a recipe for future problems if assets and liabilities are not properly matched, as the experience of Yes Bank shows.

Besides, the pandemic shock is not comparable to other types of crisis as India has an embedded adverse supply shock angle with China as the supplier of many critical inputs.

"Hence only a rate cut in the current situation will only lead to an asset bubble and possibly no correction in demand. We thus believe that in the current COVID-19 outbreak, a combination of monetary and fiscal policy will be the best option," said Ghosh.

SBI to invest Rs 7,250 cr in crisis-hit YES Bank as part of RBI rescue plan

State Bank of India (SBI) on Thursday said it would infuse Rs 7,250 crore into ailing YES Bank to pick up to 49 per cent equity as part of the Reserve Bank of India-mandated bailout plan.

SBI will pick 7,250 million shares at Rs 10 each, and its shareholding will remain within 49 per cent of the paid-up capital of the private sector lender.

Under the restructuring scheme, the authorised capital shall stand altered to Rs 5,000 crore.

The number of equity shares will stand altered to 24,000 million of Rs 2 each aggregating to Rs 4,800 crore.

SBI’s stake in altered capital is expected to be 30 per cent, going by the restructuring scheme. “The executive committee of the central board at its meeting on March 11 accorded approval for purchase of 7,250 million shares of YES Bank at a price of Rs 10 a share, subject to regulatory approvals,” SBI said in an exchange filing on Thursday.

Under the reconstruction scheme, SBI is to buy up to 49 per cent of YES Bank and cannot reduce its holding below 26 per cent for the next three years. The SBI investment of Rs 7,250 crore is much higher than the Rs 2,450 crore it had planned initially for 49 per cent stake in the private sector lender.

chartLast week, SBI Chairman Rajnish Kumar had said the bank would invest Rs 2,450 crore to buy 2,450 million shares of YES Bank. SBI was also in talks with other investors, and SBI investment would not exceed Rs 10,000 crore.

On March 5, the RBI had imposed a moratorium on YES Bank, restricting withdrawals to Rs 50,000 per depositor till April 3.

The RBI also superseded the board and placed it under an administrator, Prashant Kumar, who is a former deputy managing director and chief financial officer of SBI.

The administrator will take on board results for third quarter on Saturday. The final restructuring scheme is expected to be finalised on Friday.

YES Bank is banking on investment by SBI, speedy resolution with support from the RBI and SBI, and fundraising plans to instil confidence among customers, according to administrator.

SBI board accepts resolution plan for sale of RCom, subsidiaries

State Bank of India’s (SBI’s) board has accepted the resolution plan for sale of Reliance Communications (RCom) and its subsidiaries Reliance Telecom and Reliance Infratel. According to sources in the bank, the final voting on the resolution will be over on Wednesday.

They expect 66 per cent of the votes to be in favour of the resolution during the meeting of the committee of creditors (CoC).

The CoC, which is led by SBI, had earlier chosen Mukesh Ambani’s Reliance Jio Infocomm and Delhi-based UV Asset Reconstruction Company (UVARC) as highest bidders for the assets of RCom and its subsidiaries, according to sources in the know.

The combined bid amount at that time was around Rs 21,000 crore.

Sources in SBI said that, according to their estimation, they will be able to recover 35 per cent of the Rs 41,000 crore outstanding exposure of banks. The total claims made by various creditors against the companies were Rs 1.32 trillion.

The Anil Ambani-run company went through the insolvency process, and was referred to the National Company Law Tribunal (NCLT) in May last year.

This came after an offer by Reliance Jio to buy its assets did not find favour with the creditors. The conditions imposed by the department of telecommunications, too, were a hindrance.

The resolution professional (RP) was appointed in June.

Sources said Reliance Jio agreed to marginally up its earlier offer and is willing to pay about Rs 4,700 crore for the tower and fibre assets of Reliance Infratel.

Delhi-based UVARC offered to pay about Rs 16,000 crore for spectrum, real estate, enterprise and data centre businesses of RCom and Reliance Telecom.

The bidders are believed to have committed themselves to paying 30 per cent of the proceeds within 90 days. The banks, however, will be able to salvage much more from the deal compared to the case of another telco, Aircel, which went to the NCLT.

In this case, they took a haircut of over 99 per cent on the outstanding dues of Rs 20,000 crore.

Even here, it was UVARCL that won the bid, agreeing to pay Rs 150 crore upfront. The ARC’s plan was to sell fibre and other telecom assets to recover some bank dues.

How it unfolded

The CoC had earlier chosen Reliance Jio and UVARC as highest bidders for the assets of RCom and its subsidiaries

The combined bid amount at that time was Rs 21,000 crore

The total claims made by various creditors against the companies were Rs 1.32 trillion

The Anil Ambani-run firm went through the insolvency process and was referred to the NCLT in May last year

SBI Cards IPO opens March 2: All you need to know about the $1.4 bn offer

The much-awaited IPO of the year is here. SBI Cards and Payment Services, the credit card unit of the country's largest lender State Bank of India. It is the second-largest credit card issuer in the country. The company, which had filed draft IPO papers in November, obtained "observations" from the Securities and Exchange Board of India on February 11.

The initial public offering of SBI Cards will open on March 2. The company aims to raise around Rs 10,340 crore ($1.4 billion), making it the largest Asian IPO in 2020 and fourth-biggest domestic IPO. The IPO will be a mix of fresh issue and an offer for sale (OFS). The company plans to issue new shares worth Rs 500 crore and will offer up to 130.5 million shares for sale, the prospectus, dated Feb.18, showed. The bidding process will close on March 5. The company has set the price band for the share sale at Rs 750-755. The bid lot for the offer has been finalised to be 19 equity shares and in multiples of 19 equity shares thereafter.

Brief history about the company

SBI Cards was launched in October 1998 by SBI and GE Capital.In December 2017, SBI and The Carlyle Group acquired GE Capital's stake in the company. At present, SBI holds 74 per cent and Carlyle 26 per cent in SBI Cards.

After the issue, SBI’s stake will drop from 74 per cent at present to 70 per cent, while Carlyle will see its holding come down from 26 per cent to 16 per cent and public will hold 14%. SBI Cards will be the first credit card company to list in the domestic markets. The company will command a market capitalisation of nearly Rs 71,000 crore, making it India’s 38th most valuable company.

About the offer

The net proceeds of the fresh issue are proposed to be utilised for increasing the capital base to meet the future capital requirements. Additionally, the company expects to achieve the benefit of listing of the equity Shares on the stock exchanges.

Offer break-up

50 per cent of the issue has been reserved for QIBs (Qualified Institutional Buyers), and 15 per cent for Non- Institutional Bidders (NIBs) and 35% for Retailers.

Normally, IPOs are open for subscription for three days but SBI Cards IPO will run for four days. The first three days, i.e. from March 2 to March 4, the issue will be open for all bidders - QIBs, NIBs, and Retail investors (including SBI shareholders and employees). However, the fourth day - i.e. March 5 - will be exclusively for Retail investors only. For QIBs, the offer will close on March 4.

Ambareesh Baliga, an independent market expert said investors should definitely suscribe to the IPO because of the company’s financial track record, high return ratios, and growth potential.

He said SBI Cards IPO will not be a multi bagger like IRCTC, but expected to give 50% return on listing.

SBI Cards and Payment Services' $1.25 billion-IPO to open on March 2

The $1.25 billion initial public offering (IPO) of SBI Cards and Payment Services, the credit card arm of State Bank of India (SBI), will open on March 2, according to its prospectus.
The company plans to issue new shares worth Rs 500 crore and will offer up to 130.5 million shares for sale, the prospectus, dated Feb. 18, showed.The bidding process will close on March 5.

State Bank of India to ink deal with exporters for credit assessment

SBI will sign a memorandum of understanding later this month with the Gems and Jewellery Export Promotion Council (GJEPC), to use the latter’s data bank for credit assessment of their members.

After the $2-billion PNB-Nirav Modi scam broke out in January 2018, the GJEPC creat­ed a database of jewellery exporters, revised daily. With a registry of around 6,000 entities, MyKYC, as it is termed, has complete details of jewe­llery exporters from India and their clients abroad. Even if exporters ship a consig­nment to own factories abroad, the detail is on MyKYC. “We have tied up with leading trade associations in India, Antwerp, Hong Kong and elsewhere across the world to provide details of jewellers to update MyKYC. SBI and other banks, in addition to the ministries of finance and commerce, were happy with our efforts. We will be signing an MoU with SBI later this month, followed by other PSBs,” said Colin Shah, vice-chairman at GJEPC.

Banks have strengthened compliance rules and cut loan exposure to the entire jewellery sector since the scam. This created working capital problems for exporters. Overall bank exposure to the gems and jewellery sector is now Rs 40,000 crore, from around Rs 80,000 crore in January 2018.

To ease the sector's working capital problems, bankers have set up a committee of creditors, chaired by SBI, with members from other PSBs and the trade.

“Once the MoU with the SBI is signed, more members would get registered with MyKYC,” said Sabyasachi Ray, executive director, GJEPC.

One hope is that successful implementation of MyKYC for exporters could mean its extension for domestic jewellery manufacturers and retailers, too.

Operations may be impacted due to bank unions' two-day strike: SBI

The country's largest lender SBI on Friday said its operations may be impacted to some extent due the proposed two-day nationwide strike beginning January 31.

The bank has however made all arrangements to ensure normal functioning in its branches and offices, the State Bank of India (SBI) said in a filing to the BSE.

"While Bank has made all arrangements to ensure normal functioning in its branches and offices, it is likely that work in our Bank may be impacted to some extent by the strike," the filing said.

Bank unions have called for a two-day nationwide strike on January 31 and February 1 after talks over wage revision failed to make headway with the Indian Banks' Association (IBA).

"We have been advised by IBA that United Forum of Bank Unions (UFBU) which constitutes 9 major unions...has given a call for an all India strike by Bank employees on 31st January and 1st February, 2020," the filing said.

The UFBU constitutes All India Bank Employees' Association, All India Bank Officers' Confederation, National Confederation of Bank Employees, All India Bank Officers' Association, Bank Employees Federation of India, Indian National Bank Employees Federation, Indian National Bank Officers' Congress, National Organisation Of Bank Workers and National Organisation of Bank Officers.

Fewer jobs are being created as economy slows down, says SBI report

The economic slowdown has adversely impacted employment generation in the country as nearly 1.6 million less jobs are projected to be created in FY20 compared to 8.97 million fresh jobs in FY19, a report said.

According to the SBI research report- Ecowrap, there is a decline in remittances in a few states like Assam and Rajasthan, reflecting downsizing of contractual labourers.

"In FY19, India had created 8.97 million new payrolls as per the EPFO data. In FY20, as per current projected this number could be at least 1.58 million lower," the report said.

The EPFO data primarily covers low paid jobs as the salary is capped at Rs 15,000 per month. As per the calculation done by the report, during April-October 2019, the actual net new payroll was 4.31 million which annualised comes out to be 7.39 million for FY20.

The EPFO data does not cover government jobs, state government jobs and private jobs as such data have moved to National Pension Scheme (NPS), beginning 2004.

"Interestingly, even in the NPS category, state and central government are supposed to create close to 39,000 jobs less in FY20 as per current trends," the report said.

It said a sample of data on remittances by migrant labourers to selected states in the last one year showed that there is a decline in remittances in states like Assam, Bihar, Rajasthan, Odisha and UP.

"The delay in resolution of cases under bankruptcy proceedings may have prompted companies to downsize their contractual labourers," it said.

Over the years, migration has been an important livelihood option for both the poor and the non-poor in the country.

As a result of unequal growth, people from agriculturally and industrially less-developed states migrate to more developed states in search of job opportunities - for example from Uttar Pradesh, Bihar, the southern part of Madhya Pradesh, Odisha, and Rajasthan to states like Punjab, Gujarat, and Maharashtra.

For a large number of migrants, New Delhi is a much-favoured destination due to the abundance of job opportunities, the report said.

"These migrants have been making significant financial contributions to their families in their places of origin," it said.

The report further said in the last five years, the overall productivity growth has remained relatively stagnant between 9.4 per cent to 9.9 per cent.

This slow growth in productivity manifests in low wage growth, it said.

The report also cautioned the policymakers of such slower productivity growth as it could encourage over-borrowing by corporations and households, which can create a big risk to economies and fiscal systems.

SBI, Union Bank to sell NPAs of Rs 2,836 cr this month through e-auctions

The country's largest lender State Bank of India (SBI) and Union Bank of India are looking to sell their non-performing loans totalling Rs 2,836 crore to banks, asset reconstruction companies and other financial institutions.

While SBI has put on sale Rs 1,554.87 crore of three assets, state-run Union Bank of India has invited bids to sell 11 NPAs worth Rs 1,280.87 crore, according to separate public notices by the two lenders.

All these NPAs will be sold through e-auctions during January.

In a notice issued on Thursday, SBI said it will sell two NPAs- Rohit Ferro Tech with an outstanding amount of Rs 1,313.67 crore and Impex Ferro Tech with dues of Rs 200.67 crore, on January 17.

The bank said Rohit Ferro Tech will be sold on cash cum securities receipts with a 50:50 ratio and Impex Ferro Tech only on 100 per cent cash.Both the companies are promoted by Kolkata-based SKP

Group which is into manufacturing, trading, import and export of ferro alloys. The group also has presence in steel, power cement sector.

In a notice on its website on December 12, SBI had sought bids to sell another Kolkata-based engineering firm Avani Projects and Infrastructure, having an outstanding loans of Rs 40.53 crore.

The bad asset will be sold on 100 per cent cash basis through an e-auction to be held on January 10. Public sector lender Union Bank has invited all-cash bids for 11 NPAs.

The bank is selling GVK Power Goindwal Saheb (Rs 443.84 crore), Chennai Elevated Tollway (Rs 192.24 crore), Rajamundry Godavari Bridge (Rs 153.03 crore), Sona Alloys (Rs 135.58 crore), Supreme Manorvada Bhiwandi Tollways (Rs 113.95 crore) and NSSL Ltd (Rs 61.63 crore).

The other five smaller NPAs includes Shri Raghunath Rai Memorial (Rs 51.91 crore), Vikas WSP (Rs 46.45), Kamachi Industries (Rs 28.37 crore), Karur KCP Packaging (Rs 26.55 crore) and Pacific Hospitals (Rs 5.87 crore).

All the 11 assets were declared NPA between December 2012 and November 2017, Union Bank said. The auction will be conducted on January 13.

Home loan EMIs to reduce as SBI cuts external benchmark rate by 25 bps

The country's largest lender State Bank of India (SBI) on Monday announced reduction in its external benchmark-based rate by 25 basis points to 7.80 per cent from 8.05 per cent.

The new rates will be applicable from January 1, 2020, the bank said in a statement.

SBI "has announced the reduction in its external benchmark-based rate (EBR) by 25 basis points to 7.80 per cent p.a from 8.05 per cent per annum with effect from January 1, 2020," it said.

With this reduction, interest rate for existing home loan customers as well as micro, small and medium enterprises (MSME) borrowers who have availed loans linked to external benchmark based rate would come down by 25 basis points, it said.

The new home buyers will get loans at an interest rate starting from 7.90 per cent per annum compared to earlier 8.15 per cent per annum, it said.

To safeguard banking, SBI to introduce OTP-based ATM transactions from Jan

From January, SBI customers will be able to make ATM withdrawal above Rs 10,000 only after an OTP verification during 8 PM to 8 AM.

The OTP-validated ATM transaction has been introduced to minimise the number of unauthorised transactions, State Bank of India (SBI) said in a Facebook post on Thursday.

"With the introduction of its OTP-based cash withdrawal facility, State Bank ATMs have added another layer of security for cash withdrawals. OTP will be received on the customer's mobile number registered with the bank," SBI said.

This additional factor of authentication will protect State Bank card holders from unauthorized ATM cash withdrawals, it said further.

SBI said that the new feature will not require any major change in the present process to withdraw cash from its ATMs (automated teller machines).

However, this facility will not be applicable for transactions, where a State Bank card holder withdraws cash from another bank's ATM, because this functionality has not been developed in National Financial Switch (NFS), it added.

In this process, once the cardholder enters the amount they wish to withdraw, the ATM screen displays the OTP window. The customer has to enter the OTP received on the registered mobile number to complete the transaction.

NFS is the largest interoperable ATM network in the country and it manages more than 95 per cent of the domestic interbank ATM transactions.

"This will safeguard the customers against the risk of unauthorized transactions on account of skimmed/cloned cards, while withdrawing cash at State Bank ATMs," the bank said.

SBI likely to pay Essar lenders on Dec 16 as ArcelorMittal pays up

The State Bank of India (SBI), the lead banker of the bankrupt Essar Steel, is likely to settle dues of other lenders as it received Rs 40,000 crore on Friday from ArcelorMittal, which is going to takeover the company bringing to an end to the much-prolonged resolution process.

The SBI may settle the dues of all the other lenders on Monday.

The development followed the tabling of the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, in the Lok Sabha on Thursday, which also provides for protection of buyers from criminal proceedings against previous promoters of the bankrupt firm.

ArcelorMittal had kept the promised Rs 42,000 crore in an escrow account, but didn't release it immediately after the Supreme Court's order in the case last month, as the company wanted immunity for Essar Steel's assets from probe against its previous promoters.

The SBI had the largest exposure to Essar Steel of over Rs 13,000 crore, while the amount approved by the committee of creditors (CoC) stood at Rs 12,161 crore. The other lenders of Essar Steel included IDBI Bank, Canara Bank and Punjab National Bank.

Both ArcelorMittal and SBI, however, are yet to respond to questions sent by IANS.

As per the resolution proposal, banks would recover over 90 per cent of their claims against Essar Steel, amounting to over 40,000 crore. The operational creditors would initially get Rs 196 crore, and another Rs 1,000 crore later, allowed by the CoC, taking the total repayment to Rs 1,196 crore.

The resolution of Essar Steel can be marked as a landmark in the 3-year-old Insolvency and Bankruptcy Code (IBC). A major roadblock in the resolution was removed by the Supreme Court on November 15 as it set aside the National Company Law Appellate Tribunal's (NCLAT) ruling that provided for equal distribution of proceeds between financial and operational creditors.

The Essar case, which was among the first 12 cases to be referred by the Reserve Bank of India (RBI) for resolution, faced several hurdles as its promoter Prashant Ruia also tried to bid for the company and moved the appellate tribunal for rejection of the ArcelorMittal's Rs 42,000 crore bid.

 

SBI cuts MCLR rate by 10 bps for one-year loan, deposit rates unchanged

The country’s largest lender, State Bank of India, has cut its marginal cost of fund-based lending rate (MCLR) by 10 basis points for loans with a one-year tenure to 7.9 per cent, effective December 10.

This is the eighth consecutive cut in MCLR in the current financial year (2019-2020), SBI said in a statement. Last month it had reduced MCLR by five basis points.

The lending rate has been pared to pass on the benefit of its reduced cost of funds to customers, the bank added.

The Reserve Bank of India in its monetary policy review last week said monetary transmission (of 135 basis points) has been full and reasonably swift across various money market segments and the private corporate bond market.

Credit market transmission for loans disbursed by banks remains delayed but is picking up. The one-year median MCLR has declined by 49 basis points, RBI added.

The transmission is expected to improve going forward, as the share of base rate loans, interest rates on which have remained sticky, declines; and MCLR-based floating rate loans, which typically have annual resets, become due for renewal, RBI said.

After the introduction of the external benchmark system, most banks have linked their lending rates to the policy repo rate of the Reserve Bank.

SBI has not changed the interest rate on term deposits for now. In November 2019 it had reduced deposit rates by 15 and 75 basis points on account of adequate liquidity in the system.

Overall liquidity in the system remained in surplus in October and November 2019. This was despite an expansion of currency in circulation due to festival demand. Average daily net absorption under the Liquidity Adjustment Facility (LAF) amounted to Rs1,98,566 crore in October, RBI said in policy.

SBI General Insurance aims at Rs 6,000-crore premium income in FY20

SBI General Insurance is aiming at a total premium income of more than Rs 6,000 crore in the 2019-20 financial year. A joint venture between State Bank of India (SBI) and Insurance Australia Group (IAG), the company reported Rs 4,717 crore in premium revenue in FY19, SBI General Insurance MD and CEO Pushan Mahapatra said.

“Last year, SBI General Insurance posted more than 33 per cent growth in comparison to the industry growth of about 13 per cent. In the first quarter (Q1) of the current financial year, ended June 2019, we have reported 26 per cent growth compared to the industry uptick of less than 10 per cent,” he said.

Mahapatra said the market share of SBI General Insurance had also gone up from 2.77 per cent during FY19 to 3.11 per cent in Q1 of FY20. “We have witnessed robust growth in the segments of property, health, small and medium enterprises (SME), crop etc, although the automobile segment has hit the slow lane,” he underlined.

Pushan said the company was counting on the retail sector, apart from the health and SME segments to make up for the impact of the auto sector slowdown on the general insurance space. While the automobile segment comprises nearly 45 per cent of the domestic general insurance business, SBI General Insurance has a much smaller auto portfolio of roughly 22 per cent, he added.

The company is further looking at doubling its business from the SME portfolio from 5 per cent to 10 per cent by the end of current financial year.

Last year, SBI General Insurance had launched a unique cyber insurance product to provide insurance cover against the growing instances of cyber frauds and hacking.

He said although the domestic cyber insurance market is still small, yet there is a need to create awareness in the sector, especially among corporate clients to seek insurance cover against potential threats emanating from the virtual world. India, USA and China have been clubbed as the world’s most cyber attacks prone nations.

Meanwhile, the company plans to appoint about 3,000 new insurance advisors to add to its current tally of 10,000 across India for deeper penetration in the market, he informed.

In Uttar Pradesh, the company collected Rs 295 crore in premium income last fiscal with the auto segment contributing 36 per cent of the business. It operates 10 branches in the state with a new branch scheduled to be opened shortly. He said UP was one of the key markets for the company with immense future growth potential.

SBI cuts deposit rates sharply, other lenders may follow suit

The State Bank of India (SBI) on Monday cut its deposits rates for fresh funds across segments, citing “falling interest rate scenario and surplus liquidity.”

The term deposit rates will be 20 basis points lower for retail customers, and 50-75 basis points lower for deposits up to 179 days. For bulk deposits, which is Rs 2 crore and above, the rate cut would be as much as 35 basis points. The new rates by India's biggest lender are effective August 1.

SBI's decision follows the RBI cutting lending rates by cumulative 75 basis points this year.

“SBI is the leader anyway. Once SBI does something on rates, others will have to follow,” said Ananth Narayan, Associate Professor, Finance at S.P. Jain Institute of Management and Research.

In a post-results conference, ICICI Bank executive director designate Sandeep Garg said the bank’s marginal cost based lending rate was lowered a fortnight back and the bank will move as per the composition formula of the MCLR. As and when the linked cost of funds, or market rates come down, the MCLR will have to be lowered.

However, the banks can lower their deposit rates at their discretion, based on competition, and that automatically brings down the MCLR for banks. As SBI has now lowered the deposit rates, banks such as ICICI Bank will also have to lower their deposit rates and this then brings down the MCLR for fresh loans.

In a recent meeting with the public sector bank chiefs, RBI governor Shaktikanta Das had prodded banks for cutting rates. The governor is meeting the private sector bank chiefs this week and will also press forward for more rate cuts.

In an interview with Business Standard, Das said banks should start cutting rates.

“Consequent to the rate cuts by the RBI, the accommodative stance, the hugely surplus liquidity in the system right from June 1 onwards, and yields on government securities coming down by over 100 basis points since the first policy rate cut in February, banks should pass on the rate benefit to customers,” governor Das said in the interview.

“The conditions are absolutely conducive for faster transmission of interest rate cuts, I repeat, at least for new loans,” Das said, adding for old loans the transmission may take some more time.

SBI has enough reasons to cut its deposit rates. The banking system had a liquidity surplus of Rs 1.26 trillion as on July 26, compared with nearly Rs 1 trillion deficit a few months back. Particularly for SBI, the certificates of deposits (CD) have come down quite sharply.

“What is the best market indicator for funding rates? SBI’s CD rates have come down by more than 100 basis points since May. The treasury bills have come down by 200 basis points since December. By comparison, the deposit rates have not really come down. Whether this will hit the savings we don’t know but everyone was expecting the banking system to lower lending rates which will follow the deposit rate cuts,” said Narayan.

Following the rate cuts, deposits between 7 days to 45 days will give a return of 5 per cent, from 5.75 per cent earlier. One year to less than two years will give rates of 6.8 per cent, from 7 per cent earlier. The most poplar basket, that of two years to three years will offer interest rate of 6.7 per cent, from 6.75 per cent earlier. For senior citizens, this basket will offer 7.3 per cent, from 7.5 per cent earlier.

For five years and up to 10 years, the deposit rates offered would be 6.5 per cent, from 6.6 per cent earlier. For senior citizens, the rates have been revised down to 7 per cent, from 7.1 per cent earlier.

SBI Payment plans to double PoS units to 1.2 million by March 2022

SBI Payment Services Pvt Ltd (SBIPSPL) is planning to double the number of point-of-sale (PoS) units deployed by it to 1.2 million by 2021-22 (FY22). This is part of the company’s strategy to be a key player in the Centre’s ambitious plan to increase the number of PoS terminals across the country and, thereby, garner a significant share of digital payments at merchant outlets.

As of May 19 this year, SBIPSPL had 600,000 PoS terminals. The number is expected to rise to 780,000 by the end of FY20, and double (from its current level) to 1.2 million by FY22-end. The ramp-up plan comes three months after the company became a 74:26 joint venture between State Bank of India (SBI) and Hitachi Payment Services, a wholly-owned subsidiary of Hitachi.

The Reserve Bank of India’s (RBI's) data shows that the number of PoS terminals deployed rose to 3.72 million at FY19-end, or a rise of 18.6 per cent over the preceding financial year. For FY20, the government has set its sight higher -- a growth rate of 33 per cent; and over time, banks are to deploy around 8.5 million PoS terminals across rural areas and North-Eastern states. SBIPSPL wants to ride on the renewed thrust on PoS, and take on private sector banks in a big way.

Private sector banks led PoS terminal deployment -- both in terms of absolute numbers and year-on-year growth. The total PoS terminal deployment stood at 2.4 million at the close of FY19 for private banks, up 31 per cent over the previous financial year. The comparable figure for state-run banks was 1.1 million, down 0.8 per cent, and 0.07 million for foreign banks, up 6.7 per cent.

This will promote digital payment acceptance by a wider merchant community as it presents customers a wider choice of payment modes where they can pay through the QR code, debit cards or BHIM UPI. Reliance Jio Infocomm is set to enter this business with its plans to win over mom-and-pop stores to opt for PoS, and weave a payments ecosystem around them. Paytm, PhonePe, and GooglePay also plan to integrate payments, supply chain, and working capital.

A recent report by Worldline India — part of Atos, the Paris-based Euro 11-billion (in revenues) payments solutions major — said 29 per cent of transactions at PoS terminals were done using credit cards and these accounted for 52 per cent of the amount spent; it was 71 per cent and 48 per cent for debit cards. In Q1FY19, the average ticket size via PoS was Rs 3,476 for credit card transactions, while the same for debit cards was much lower at Rs 1,323. The reason for this, notes Worldline, “is the conservative nature of consumers who use credit cards for purchasing high-value items and debit cards for their daily purchases”.

SBIPSPL wants to leverage debit cards at about 925 million compared to 47 million credit cards in circulation which presents a great opportunity to increase the usage of the former at PoS units. The Nandan Nilekani report has also called for measures such as the removal of import duties on PoS devices and reduced GST on digital transactions; and wanted issuers to look at boosting the usage of plastic money.

SBI cuts MCLR by five bps to 8.4% across all tenors from July 10

Responding to RBI’s nudge for quicker transmission of policy rate cuts, State Bank of India reduced its MCLR by five basis points across all tenors from July 10. The Marginal Cost of funds based Lending Rate (MCLR) for one year stands reduced to 8.4 per cent per annum from 8.45 per cent per annum.

This is the third rate cut in the current financial year (2019-20). With today’s MCLR cut, the reduction in the home loan rates since April 10 is 20 bps, SBI said in a statement on Tuesday.

This is out of turn decision as now SBI revises MCLR at beginning of every month.

Reserve Bank of India governor Shaktikanta Das on Monday said that the central bank expected a quicker transmission of the interest rate cuts by banks to consumers by way of cheaper home, auto and personal loans.

During this year, the RBI reduced the key policy rate thrice with an aggregate reduction of 0.75 percentage point in the repo rate, the rate at which RBI lends to banks.

For 50 basis point policy rate cut prior to June 6, banks had reduced interest rate by 21 basis points. Earlier it used to take six months for transmission, now the transmission is taking a much shorter period of 2-3 months, Das had said.

"RBI was collecting the data (on rate decision by banks). And banks should keep in mind that right from the month of June, in fact, June 1, the system is more than adequately surplus in liquidity," Das said.

Overall the system liquidity was hugely in surplus and if individual banks have liquidity issue, the RBI will provide liquidity support to them, Das added.

Jet Airways case: SBI's no to Etihad's demands for open offer waiver, slots

State-run SBI Friday said Etihad Airways had sought waiver of open offer and assurance of flying slots for take over of Jet Airways, but the lenders to the debt-ridden carrier had no authority to accommodate the relaxations sought.

State Bank of India (SBI) chairman Rajnish Kumar had Thursday defended the lenders' decision to take Jet Airways for bankruptcy saying "it was their last effort to find a resolution" for the grounded airline and also did not rule out the possibility of liquidation.

Earlier this week, SBI-led consortium of 26 lenders had decided to seek resolution under IBC as they had received only a conditional bid.

In a filing to stock exchanges Friday, SBI said financial position of Jet Airways (lndia) Limited (JAL) being weak, lenders were continuously trying for viable resolution for last one year on account of operational losses.

ln this regard, it added reputed consultants -- SBICAPS, McKinsey -- were roped in as process advisors/advisors. lt was also decided to initiate a bidding process to bring in new investors, SBI said.

As part of the bid process, Expression of lnterest (Eol) for investment in Jet Airways was sought from interested participants. Etihad, NIIF, TPG Capital and Indigo Partners had expressed their interest on April 10,2019. The bidding process closed on May 10, 2019.

Subsequent to the closure of the bidding, as no binding bids were received, discussions were held with Etihad (EY) and other prospective investors to find a way for infusion of funds, it said.

"EY had sought certain relaxations viz. waiver of open offer, assurance of flying slots etc. As the lenders did not have any authority to accommodate some of the relaxations sought by EY, it was not considered feasible to negotiate on the conditions laid by EY," the SBI told exchanges.

It further said that since a sustainable resolution plan could not be devised and two operational creditors have already approached NCLT, "the member banks agreed in-principle, to approach NCLT, pursuant to the statutory right available to them" under the Insolvency and Bankruptcy Code, 2016.

Accordingly, an application for Corporate Insolvency Resolution Process (CIRP) was filed with NCLT, Mumbai on June 17, it said.

"That bank is only a lender to Jet Airways (India) Ltd and is not involved in or responsible for the management of the affairs of the said company.

"It is the responsibility of Jet Airways (lndia) Ltd being the listed entity to disclose required information under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015," SBI said.

The state-own bank also said that initiation of instant lnsolvency proceedings is just a step for Resolution/Recovery under the statutory right available to the Lenders.

Jet Airways, which was grounded on April 17, owes more than Rs 8,500 crore to a consortium of banks led by State Bank o, which now run the airline, while it has a much larger debt pile by way of accumulated losses to the tune of Rs 13,000 crore and vendor dues of over Rs 10,000 crore and salary dues of over Rs 3,000 crore.

SBI plans to mop up Rs 5,000-crore debt capital via tier-II bonds

State Bank of India (SBI), the country’s largest lender, plans to raise up to Rs 5,000 crore in debt to shore up capital adequacy and support business growth.

The bank will issue Basel III compliant tier-II bonds to raise debt capital.

India Ratings has assigned ‘AAA’ rating with stable outlook to the proposed bond offering.

SBI remains a better capitalised public sector bank compared to its peers, with a common equity tier-1 (CET1) ratio of 9.62 per cent in FY19 (against 9.68 per cent in FY18). The tier-II capital was 2.07 per cent at end of March 2019 against 2.23 per cent in March 2018.

Its capital adequacy ratio (CAR) stood at 12.72 per cent in March 2019 (against 12.60 per cent in March 2018). SBI is one of the few public sector banks with the ability to raise equity directly from the markets. In December 2018, its shareholders gave nod to raise up to Rs 20,000 crore in equity capital through various instruments, including public offering, private placement and tapping international capital markets.

The rating reflects SBI’s systemically important position, the size of its franchise and strong standalone profile.

The bank would continue to be one of the most important constituents of the Indian banking system, the rating agency said in a statement. The central government owns a majority stake in SBI (57.13 per cent at the end of FY19). During FY14-FY18, the bank received Rs 24,840 crore from the Centre in equity. In FY19, however, it did not receive any equity.

The rating agency said SBI also has non-core assets that are large profitable enterprises in their own segments and the bank has established a track record of monetising them to raise equity. SBI is planning to list its general insurance and credit card subsidiaries which will provide it resources for enhancing capital adequacy.

SBI’s capital and operating buffers are likely to be adequate to cover credit costs (amounts set aside as provisions for bad loans) through FY19-FY20 and support its medium-term growth plans.

A meaningful capital requirement for SBI will only show up if it decides to maintain its CET1 ratio above 9 per cent in the medium term, India Ratings added.

SBI says it has received two unsolicited bids for crisis-hit Jet Airways

State Bank of India (SBI) said on Friday it has received two unsolicited bids for ailing Jet Airways, nearly a month after the airline was forced to ground all operations due to funding troubles.

Jet, once India's largest private airline, stopped all flights on April 17 after its lenders, led by SBI, declined to extend more funds to keep the carrier going.

"(We have) made disproportionate efforts to keep Jet flying," the bank's chairman Rajnish Kumar told reporters in Mumbai