Banks surge on report govt may raise bond investment limit for FPIs to 10%

Banking counters such as IDBI Bank, State Bank of India (SBI), YES Bank, and ICICI Bank, were trading higher on Friday after reports suggested that the government is considering increasing the government bond investment limit of foreign portfolio investors (FPIs) to at least 10 per cent of the outstanding, from 6 per cent now, with an aim to incorporate local bonds into global bond indices.

According to a Business Standard report, the central bank, however, wants the government to go slow and first check how the currency risk is covered from the issuer perspective, before increasing the limits further. Hence, any further increase could take another year or two after the 10 per cent limit is declared, possibly in the Union Budget in February.

"India’s plan might include a possible sovereign bond, but the Reserve Bank of India is opposed to it as the central bank doesn’t want to face a currency risk. However, inclusion in the index itself becomes quasi-sovereign bonds as any investor can invest and transact in those bonds," it said. READ REPORT HERE

Among private banks, YES Bank surged 5 per cent on the National Stock Exchange (NSE), followed by Axis Bank and RBL Bank (1.7 per cent each), Federal Bank (1.6 per cent), and IndusInd Bank (1.3 per cent). Besides, ICICI Bank, which gained only 0.6 per cent, hit a fresh 52-week high of Rs 538.9 apiece.

Among the public sector banks (PSBs) pack, UCO Bank surged 18.8 per cent on the NSE, Oriental Bank of Commerce gained 8 per cent, and Central Bank of India (5.6 per cent). Shares of Bank of India, Punjab National Bank (PNB), SBI, Canara Bank, and Allahabad Bank advanced up to 4 per cent.

Additionally, sentiment at D-Street was bolstered by the latest amendments approved by the Cabinet Committee of Economic Affairs (CCEA) with respect to the Insolvency and Bankruptcy Code (IBC). These amendments protect successful resolution applicants from criminal proceedings against offences committed by previous managements or promoters. Consequently, banking industry now expects the resolution proceeds from Essar Steel and Ruchi Soya to be received as early as next week.

Morevoer, the Cabinet also lowered the rating threshold for public sector banks to purchase high-rated pooled assets to BBB+ from “financially sound” nonbanking finance companies (NBFCs) and housing finance companies (HFCs) under the partial credit guarantee (PCG) scheme. Lowering the limit from AA will make more NBFCs and HFCs eligible for funds from banks.

Fincare SFB bets on micro finance, gold loans, eyes 700 branches by March

Among India’s youngest commercial banks, Fincare Small Finance Bank is targetting total branch network of more than 700 by the end of current 2019-20 financial year.

Besides, the Bank, which commenced banking operations in July 2017 after receiving the final license from the RBI in May 2017, is bullish on the gold loans and micro finance segments to drive its future growth.

Currently, the Bank has a branch network of 569, which it expects to breach the 700 mark by March 2020. “We will soon launch new products in the segments of gold loans, micro finance, mortgage and two-wheeler finance to reach out to a larger customer base,” Bank managing director and CEO Rajeev Yadav said here today.

At present, Fincare transacts gold loans across 200 branches pan India with total portfolio of nearly Rs 100 crore, which it expects to keep pace with the general growth rate of the Bank going forward, he later told Business Standard.

Replying to a query, he said the current spike in domestic gold prices was expected to boost the gold loans segment due to higher valuation. However, he added the caveat of the corresponding higher risk factor owing to price volatility and possible softening of gold prices in the near future.

“The current spate of rising gold prices provides an additional opportunity and momentum for unlocking the value of gold. However, it also has consummate risk attached to it,” Yadav added.

Meanwhile, the lender today launched its second branch in Uttar Pradesh at Lucknow after Noida, which was launched in February 2019. Fincare plans to open six more branches in all majore cities in UP during the current fiscal to up its total branch network to eight by March 2020, he informed.

The new branches are proposed to be launched at Meerut, Agra, Kanpur, Varanasi, Allahabad and another in Lucknow as well. “UP is the biggest state and we are targetting the retail customers, including government employees,” he said.

Over the last 2 years, the Bengaluru-based Bank has expanded in the Northern states of Delhi, Rajasthan, Haryana, Chhattisgarh and UP. Yadav said the Bank was focussing on the financial inclusion matrix for growth and was bullish on the deposit segment in the North.

In 2018-19, the Bank had clocked gross loan portfolio of Rs 3,530 crore, posting 65% year-on-year growth, including 56% growth in microloans and 116% in other assets.

It logged Rs 2,043 crore in deposits, returning 181% year-on-year growth with 58% share in retail deposits. It posted about Rs 102 crore in profit after tax (PAT) in 2018-19, which the Bank is confident to better in the current fiscal. Fincare has gross and net non-performing assets (NPA) of 1.3 per cent and 0.3 per cent respectively, which Yadav said was among the best in industry.