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New Delhi, Mar 13 () Federal Bank on Friday said its asset quality is healthy and the capital adequacy is much above the regulatory requirement, amid broader concerns triggered by the Yes Bank crisis. "To reiterate the bank's strengths: Federal Bank is now having a CRAR (capital adequacy ratio) of 14.14 per cent (FY2019) which is higher than the regulatory minimum of 9 per cent. "As on December 31, 2019, the total CRAR of the bank was 13.64 per cent, with tier 1 capital being at 12.62 per cent and this indicates a strong position on capital," it said in a statement. Also, gross NPA (non-performing asset) ratio in Federal Bank is 2.92 per cent against the industrial average of 9.1 per cent. Stress book to average assets of Federal Bank has come down from 1.96 per cent in third quarter of 2018-19 to 1.59 per cent in the same quarter this fiscal. "These figures show that the asset quality of the bank is safe and healthy. Federal Bank's deposits have been growing at a healthy rate of 14 per cent year-on-year (December 2019 vs December 2018)," it added. The lender also said nearly 90 per cent of the bank's deposits are granular. "This means, the percentage of deposits which are of value Rs 2 crore or below in our base, is close to 90 per cent. This reduces the risk of dependency on high-value deposits for the bank," it said. The lender also said its shareholder base is very widely held with no promoter groups holding shares. "The history of Federal Bank dates back to the pre-independence era. Federal Bank is an extremely well-capitalized private bank with a strong financial base and a legacy close to 9 decades and having a customer base of 10 million," it said. Federal Bank has more than 1,000 branches and ATMs across different states in India. The bank is showing consistent growth in profit on year-on-year basis and its dividend paying capacity track record is also good, the statement said. Several private sector lenders have issued statements about their financial condition in the wake of Yes Bank crisis which has triggered panic among customers as to whether their deposits are safe in private banks. Federal Bank stock was trading at Rs 67, up 6.18 per cent, on the BSE. KPM KPM ANUANU

Federal Bank says well capitalised, asset quality healthy

Mumbai, Apr 3 () Moody's Investors Service on Friday placed private sector lender Indusind Bank's ratings under review for downgrade and cut its outlook on ICICI Bank, Axis Bank and IDBI Bank by a notch due to asset quality concerns in the current challenging times.The global ratings agency also affirmed the deposit ratings of ICICI Bank, Axis Bank and IDBI Bank.The ongoing COVID-19 crisis is bound to have a major impact on various sectors, including banks, according to experts. The RBI has already moved by offering a three-month moratorium on loan repayments.The review for downgrade of IndusInd's ratings reflects the downside risks to asset quality amid the deteriorating macro environment and financial market volatility, the agency said in a note.The proportion of microfinance and vehicle finance for IndusInd Bank is higher than the peers and these loans have a high risk of getting impacted due to the current stress as they have limited capacities to repay, it said.The bank's funding is also weak when compared to other rated Indian banks, as reflected by its high deposit concentration and low share of retail deposits, the agency said, adding this makes the bank more susceptible to the dislocations in the financial markets, including on wholesale funding sources.Meanwhile, the outlook on Axis Bank and ICICI Bank's ratings has been revised down to negative from stable, while the same for the LIC-run IDBI Bank has been made "stable" from "positive" earlier.The agency attributed that the changes in outlook are driven by potential deterioration in asset quality."The economic shock, resulting from the nationwide lockdown will exacerbate existing negative pressures on asset quality from the already deteriorating operating environment prior to the outbreak," it explained.ICICI Bank and Axis Bank may stand to suffer because of their exposures to the small and medium enterprises, given the fact that such businesses have limited liquidity buffers to withstand difficulties, it said.The rating agency also said that retail loans, especially the unsecured ones like credit cards can also face reverses if the salaries of borrowers suffer as a result of the lockdown.For IDBI Bank, it acknowledged that very low new business origination provides a cushion, but flagged risks from poor loan underwriting standards.The agency has also lowered its assumption of systemic support for ICICI Bank and Axis Bank to 'moderate' from 'high', resulting in a one-notch downgrade of their counterparty risk assessments and local currency counterparty risk rating, it said. AA MKJ

Moody's cuts outlook on Indian banks over asset quality concerns

New Delhi, Apr 17 () Micro finance institutions and small finance banks will find it difficult to carry on the collection work due to the national lockdown on coronavirus pandemic, resulting in serious asset quality issues going forward, rating agency Ind-Ra said on Friday.It expects microfinance institutions (MFIs) and small finance banks (SFBs) to face severe asset quality issues in the short term, as near-term collections would see unprecedented disruptions on account of the COVID-19 linked nationwide lockdown, it said in a release. Even as the rated non-banking finance company (NBFC)-MFIs in the investment grade category have adequate liquidity for 1.5-6 months (assuming nil collections and no moratorium), there may be refinancing and funding challenges for some entities in the next 3-6 months, India Ratings and Research(Ind-Ra) said. "SFBs would face similar risks on the asset side and managing deposits base may also become challenging. However, they would be better placed on the liability side by virtue of them being banks where the Reserve Bank of India is the lender of the last resort. As a result, Ind-Ra revised its outlook on NBFC-MFIs and SFBs from stable to negative," it noted.On the asset quality concerns on the NBFC-MFIs driven by the Covid-19 lockdown, it said the micro finance lenders are the hardest hit in the initial period of the lockdown as the field staff cannot go for collections."Given that collections mostly happen in cash, they may fall drastically in April 2020 before seeing a modest recovery in May 2020 if the lockdown is lifted. The recovery could be on account of a significant share of the borrowers being involved in providing essential goods and services, so cash flows would not dry up for them. Also, a section of the borrowers would have low debt outstanding as their loans would have run down and they would repay to avail the next cycle of loans," it added. If MFIs are unable to disburse the next cycle of loans to such customers, this could aggravate the collection issues. This could also be contributed by homogeneity in borrower behaviour, loss of business opportunities and lower demand.The ratings firm has also cut the GDP growth estimates to 3.6 per cent from 5.5 per cent for the current fiscal year.On the liquidity front, it said while Ind-Ra rated NBFC-MFIs in the investment grade have sufficient liquidity to cover liability obligations for 1.5-5 months, it could take much longer for the credit support to normalise, considering domestic banks to be the dominant fund supplier to most MFIs and banks may curtail funding/refinancing to MFIs for the short-to-medium term, given the uncertainty towards inflows, if the lockdown is extended. "Cumulatively, NBFC-MFIs will have to forgo two months collections of around Rs 2,600 crore which is almost equivalent to the cumulative liquidity that they currently hold on the balance sheet. This situation has aggravated, as most of the banks still are uncertain in terms of passing the moratorium benefits to NBFCs.While the Reserve Bank of India has announced targeted long-term repo-operation 2.0 of Rs 50,000 crore for NBFCs, half of which is targeted for small and mid-sized NBFCs and MFIs, the banks' appetite to flow the same remains uncertain. KPM KPM ANUANU

MFIs, SFBs to face asset quality issues  due to lockdown: India Ratings

<ul><li>The governor of the Reserve Bank of India, <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword>, has categorically ruled out an official <keyword id="1879107" type="PERSON" weightage="20" keywordseo="asset-quality-review">asset quality review</keyword> of India’s shadow banks. </li><li>The reason? A risk review might endanger the recovery in liquidity in the sector as an adverse set of findings will result in investors steering clear. </li><li>However, the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> will continue to monitor the sector intensely to ensure compliance with risk norms and a repeat of the IL&amp;FS default.</li></ul>The governor of the Reserve Bank of India, Shaktikanta Das, has categorically ruled out an official asset quality review of India’s shadow banks, according <a href="https://www.business-standard.com/article/finance/rbi-governor-shaktikanta-das-rules-out-asset-quality-review-of-nbfcs-119021401382_1.html">to media reports</a>. The reason? It doesn’t want to scare investors with its findings. Speaking at a conference for foreign institutional investors in Hong Kong, Das suggested that an asset quality review of non-banking financial companies (NBFCs) might endanger the recovery in liquidity in the sector as an adverse set of findings will result in investors steering clear. NBFCs make up a large part of the country’s shadow banking sector. More importantly, with the liquidity crisis slowly dissipating, it still might be too early for an exhaustive review of India’s shadow banks. In December last year, Arvind Subramanian, India’s former chief economic advisor, said it was high time for <a href="https://www.business-standard.com/article/finance/time-ripe-for-asset-quality-review-for-nbfcs-says-arvind-subramanian-118120701080_1.html">a risk review of NBFCs</a> to ascertain the extent of balance sheet weakness and non-performing loans at these institutions. An asset quality review of India’s commercial banks in 2015-16 helped reveal the true extent of the bad loan crisis. Towards the end of 2018, a default by IL&amp;FS, India’s largest infrastructure lender, triggered a collapse in the <keyword id="6355260" type="UNKNOWN" weightage="20" keywordseo="NBFC">NBFC</keyword> sector, as banks and mutual funds curbed their investments and pulled out capital. The sector is large, with over 2,000 such shadow banks handling a cumulative total of <a href="https://economictimes.indiatimes.com/markets/stocks/news/rbi-for-intense-scrutiny-on-nbfcs-but-no-aqr-likely/articleshow/67886716.cms">₹3.4 trillion </a>worth of loans. Das did maintain, however, that the RBI was ready to step in and support the sector, in addition to providing ample liquidity through its purchase of government securities. The RBI will also continue to monitor the sector intensely to ensure compliance with risk norms and a repeat of the IL&amp;FS default. In the last few months, it has tried to alleviate the liquidity crunch by making it easier for shadow banks to lend <a href="https://www.businessinsider.in/the-reserve-bank-of-india-just-made-it-a-lot-easier-for-the-countrys-shadow-banks-to-sell-off-their-loans/articleshow/66879016.cms">to sell off their loans</a>.This year, it also plans to regulate the sector more effectively by establishing <a href="https://indianexpress.com/article/business/banking-and-finance/centre-reserve-bank-working-on-new-system-to-gather-data-on-nbfcs-5524971/">a data collection system</a> to compile monthly lending and borrowing data of NBFCs. SEE ALSO: <a href="https://www.businessinsider.in/as-indias-shadow-banks-brace-for-a-tough-2019-the-central-bank-and-government-will-try-and-prevent-a-repeat-of-the-ilfs-crisis-by-solving-the-data-problem/articleshow/67419846.cms">As India’s shadow banks brace for a tough 2019, the central bank and government will try and prevent a repeat of the IL&amp;FS crisis by solving the data problem</a> <a href="https://www.businessinsider.in/the-reserve-bank-of-india-just-made-it-a-lot-easier-for-the-countrys-shadow-banks-to-sell-off-their-loans/articleshow/66879016.cms">The Reserve Bank of India just made it a lot easier for the country’s shadow banks to sell off their loans</a>

India’s central bank doesn’t want investors to know how deep the rot is in the country’s shadow banks

<keyword id="2240511" type="General" weightage="80" keywordseo="bandhan-bank" source="Orion">Bandhan Bank</keyword> on Wednesday reported over three- fold jump in net profit at Rs 721 crore for the second quarter ended September 30, 2023. The Kolkata-headquartered private sector lender had posted a profit of Rs 209.30 crore for the same quarter a year ago. Total income during July-September this fiscal rose to Rs 5,032 crore as against Rs 4,250 crore in the same period of 2022-23, Bandhan Bank said in a regulatory filing. Net interest income grew to Rs 2,443 crore in Q2 FY24 from Rs 2,193 crore in Q2 FY23. On the <keyword id="6382596" type="General" weightage="20" keywordseo="asset-quality" source="Orion">asset quality</keyword> front, the lender reported deterioration as gross non-performing assets (NPAs or <keyword id="142154" type="General" weightage="20" keywordseo="bad-loans" source="Orion">bad loans</keyword>) rose to 7.32% of gross advances at end-September 2023 from 7.19% by the end of second quarter of 2022-23. Likewise, net NPAs or bad loans also increased to 2.32%, from 1.86%. However, provision (other than tax) &amp; contingencies declined to Rs 636 crore from Rs 1,280 crore in the same quarter a year ago. Net interest margin of the bank improved to 7.2% in Q2 FY24 from 7% in Q2 FY23.

Bandhan Bank Q2 profit jumps over 3-fold to Rs 721 crore

New Delhi, Feb 10 () The RBI extending the MSME loan restructuring scheme and allowing relaxation in asset classification for certain real-estate projects signify a gradual shift away from the regulator's earlier effort to enhance quality and transparency of asset classification by banks, Fitch Ratings said on Monday. There is a risk that such regulatory forbearance will perpetuate moral hazard, as it follows aggressive lending growth and risk-taking in certain sectors in five years to the financial year ended March 2019, the ratings agency said. "The Reserve Bank of India's (RBI) announcement of forbearance towards stressed sectors signifies a gradual shift away from the regulator's earlier effort to enhance the quality and transparency of asset classification in Indian banking system," Fitch Ratings said. Last week the RBI allowed restructuring of the borrower account of MSME by one more year till March 31, 2021. Finance Minister Nirmala Sitharaman in her budget speech had urged the RBI to extend the recast for small businesses and had also taken measures like a Rs 25,000 crore fund for stuck realty projects in her budget. Micro, small and medium enterprises contribute more than 28 per cent to the total GDP, more than 40 per cent to exports and employ about 11 crore people. Considering the importance of MSMEs in the Indian economy and for creating an enabling environment for the sector, a one-time restructuring of loans to MSMEs that were in default but 'standard' as on January 1, 2019, was permitted without an asset classification downgrade. Fitch said the RBI's move mark a further dilution of the regulator's drive to enhance loan recognition. "It is not clear at the moment whether this forbearance will be extended to non-bank financial institutions (NBFIs) as well, but we believe that the probability of this is high, considering the impact that the NBFI liquidity squeeze and a slowing economy have had on the MSME and real-estate sectors," it said. Fitch said in recent years, banks have preferred to lend to NBFIs, which lend heavily to the real estate and MSME sectors, as a way to deploy their excess liquidity, while limiting their own direct exposure to these areas. "Fitch believes that these extensions are only likely to defer asset-quality pressures unless there is a sustained improvement in macroeconomic conditions. Although we expect India's economic growth to pick up in the coming months, to 5.6 per cent in FY21 from 4.6 per cent in FY20, there are still risks to the country's economic outlook," Fitch said. It said Indian banks have a poor track record with restructuring and the RBI's asset-quality reviews in FY2016 and FY2018 found that a dominant share of loans restructured post-FY2012 had degraded into non-performing loans (NPLs). On the RBI's move to exempt cash reserve ratio cut against lending to specific sectors like auto, small businesses and housing, the agency said the move is aimed at improving monetary transmission as interest rates on the three products go down, but flagged concers on the same. "Most of these sectors have had above-average lending growth in the last few years, either directly or indirectly via non-banks, and could be at risk were the economy to slow," it said. The measure is unlikely to support sustainable credit growth until capitalisation improves meaningfully across banks, in particular among state-owned banks, which account for nearly two-thirds of the sector's assets, it added. JD AA MRMR

MSME restructuring extension signify RBI's shift in stance on asset quality, transparency: Fitch

New Delhi, Jul 1 () Indian banks may continue to face heightened asset quality and earning pressure for at least two years, as disruption to business activity and supply chains and shrinking personal incomes damage banks' balance sheets, according to a report by Fitch Ratings. The reported performance of Indian banks for the financial year ended March 2020 does not adequately reflect the incipient stress caused by the pandemic, the rating agency said in the report titled 'Indian banks vulnerable to pandemic related stress'. "Bank balance sheets are yet to feel the impact of India's strict lockdown measures that were implemented by the government from March 25. Moreover, a meaningful short-term recovery looks unlikely, as the acceleration of new COVID-19 cases threatens the gradual reopening of the economy," it said. The impaired loan ratios of Indian banks fell during 2019-20 in line with our expectations to 8.5 per cent in 2019-20 from 9.3 per cent in 2018-19, driven by fewer fresh impaired loans and continued write-offs. Several state-owned banks also returned to profitability due to easing credit costs, but the banking sector's return on assets was low. "Fitch expects heightened asset quality and earning pressure for at least the next two years, as disruption to business activity and supply chains, as well as shrinking personal incomes, damage banks' balance sheets," it said. Public sector banks (PSBs) were more vulnerable than private sector banks coming into the crisis, with weaker loss-absorption buffers, and appear to be shouldering a disproportionate share of the burden in bailing out affected sectors, it added. Indian banks are likely to require at least USD 15 billion in fresh capital to meet a 10 per cent weighted-average common equity tier-1 ratio under a moderate stress scenario, Fitch said. The amount would rise to about USD 58 billion in a high-stress situation where the domestic economy fails to recover from the coronavirus pandemic-related disruption. PSBs will require the bulk of the recapitalisation, as the risk of capital erosion at the state-owned banks is significantly higher than their privately-owned peers. "We expect the majority of the injection to come through in FY22, as bad loan recognition has been pushed back by a 180-day regulatory moratorium. However, a clearer picture should start to emerge from December 2020, unless the central bank agrees to a one-time loan restructuring, which would affect the timely recognition and resolution of bad loans," Fitch said. A well-functioning banking sector is supportive of achieving sustained economic growth of 6-7 per cent, but without timely and adequate recapitalisation, banks will continue to display heightened risk aversion, adding to India's economic uncertainty, it added. Fitch expect the economy to contract by 5 per cent in the current financial year, followed by a recovery in 2021-22, but with considerable downside risk to its forecast. JD HRS

Indian banks to face asset quality, earning pressure for at least 2 years: Report

New Delhi, Jul 13 () Moody's Investors Service on Monday said the challenging economic and credit conditions stemming from COVID-19 will weigh on the asset quality and profitability of banks in India and ASEAN countries. Moody's expects that asset quality and profitability will deteriorate from "good" levels in 2019 across most banking systems, and while government support measures will offset some of the pressure, they will not fully eliminate the negative impact. "In ASEAN and India, bank downgrades in 2020 have been driven by Indian banks, following the downgrade of the sovereign in June," Moody's Vice President and Senior Credit Officer Eugene Tarzimanov said. Despite the challenging outlook, the majority of banks are adequately capitalized, it added. "The challenging economic and credit conditions stemming from COVID-19 will weigh on ASEAN and Indian banks' asset quality and profitability," Moody's said. In a report titled 'Banks - ASEAN and India: Asset quality, profitability will weaken as economic challenges grow', Moody's said the largest banks will continue to benefit from deposit inflows as they are seen as safe havens in times of stress. Moody's expects the GDP of most ASEAN economies and India to contract in 2020 and gradually recover in 2021. The relaxation in lockdowns and resumption of economic activity will be key factors supporting the recovery, it added. JD ANU ANU

Asset quality of banks in India, ASEAN economies to weaken due to COVID-19 crisis:Moody's

Mumbai, Mar 16 () Reserve Bank on Monday asked all banks and financial institutions to assess the impact on their balance sheet, asset quality, liquidity, among others, in the wake of the potential threat arising out of the spread of coronavirus disease in India. Several confirmed cases have also been detected in India, which highlight the need of a co-ordinated strategy for handling the emerging situations for protecting the resilience of the Indian financial system, RBI said in a notification addressed to banks, urban cooperative banks, NBFCs, payment and small finance banks. RBI has asked financial entities to encourage their customers to use digital banking facilities as far as possible. "Besides taking steps...for ensuring business process resilience, supervised entities should also assess the impact on their balance sheet, asset quality, liquidity, etc. arising out of potential scenarios such as further spread of COVID-19 in India and its effect on the economy, contagion from wider disruption in the global economy and the global financial system, etc," RBI said. Based on these, they should take immediate contingency measures to manage the risks under intimation to us, it added. As the situation requires to be monitored closely, both from business and social perspective, a Quick Response Team (QRT) may be constituted for the purpose, RBI said. The QRT shall provide regular updates to the top management on significant developments and act as a single point of contact with regulators/outside institutions/agencies, it said. While the Government of India, in co-ordination with the state machineries, is already taking steps for preventing and controlling the local transmission of disease, further steps are required to be taken by the respective banks/financial institutions as a part of their existing operational and business continuity plans, the central bank said. The regulator, among others, asked them to devise strategy and monitoring mechanism concerning the spread of the disease within the organisation, making timely interventions for preventing further spread in case of detection of infected employees including travel plans and quarantine requirements as well as avoiding spread of panic among staff and members of the public. The banks and financial institutions should also take stock of critical processes and revisit business continuity plan "in the emerging situations/scenarios with the aim of continuity in critical interfaces and preventing any disruption of services, due to absenteeism either driven by the individual cases of infections or preventive measures," RBI said. It also advised on taking steps for sharing important instructions/strategy with staff members at all levels, for soliciting better response and participation and sensitizing the staff members about preventive measures to be taken in suspected cases. The World Health Organization (WHO) has declared the outbreak of the novel coronavirus disease (COVID-19) a pandemic. RBI said the WHO declaration indicates significant and ongoing person-to-person spread in multiple countries, with the uncertainty about the extent of spread and the likely impact on the global economy. KPM RVK

RBI directs banks/FIs to assess impact on balance sheet, asset quality due to coronavirus outbreak

Mumbai, Apr 17 () The Covid-19 pandemic will lead to a deterioration in asset quality for Indian lenders, global ratings agency Standard &amp; Poor's (S&amp;P) said on Friday, cutting its outlook on private sector lenders Axis Bank and ICICI Bank to "negative". The agency said the economic recovery will be U-shaped, the risks for the banking sector remain on the downside and also warned of some rating downgrades because of the pandemic. It can be noted that since late 2014, with the asset quality review, the going has been difficult for the Indian banks which are now saddled with toxic debt of nearly Rs 10 lakh crore. Slower economic growth in the days leading to the outbreak was making a recovery difficult. "We expect Indian banks' asset quality to deteriorate, credit costs to rise, and profitability to decline," the agency said in a note. The agency added that it has revised the economic risk trend for the banking system to negative from stable earlier. The outlooks on both Axis Bank and ICICI Bank have also been revised down to "negative" largely due to the impact of the economic headwinds that they will be facing, but spared their peers like largest private sector lender HDFC Bank and Kotak Mahindra Bank. Ratings on both Axis Bank and ICICI Bank have been affirmed at the existing ones. "The negative outlook on ICICI Bank reflects our view that the bank is exposed to economic headwinds faced by India's banking system," it said, adding that the bank will maintain its strong market position and despite a deterioration, asset quality will also be better. On the outlook change for Axis Bank, it said, "The negative outlook on Axis reflects our expectation that heightened economic risks facing India's banking system will likely affect the bank's asset quality and financial performance." Axis Bank cannot get support from the government like the one which state-run lenders can enjoy, it said. The agency warned that it would downgrade both Axis Bank and ICICI Bank if stressed assets rise significantly beyond the system average over the next few quarters, and up the outlook to stable if the economic risks in India abate. In the case of HDFC Bank, it appreciated strong business franchise, better liquidity profile, comfortable capitalisation supported by strong earnings and the system-best asset quality, and added that the rating is capped by the sovereign rating. Kotak Mahindra Bank's robust capitalisation, strong management, and better than peers asset quality was also appreciated while affirming the ratings. AA ANSANS

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Federal Bank says well capitalised, asset quality healthy

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Moody's cuts outlook on Indian banks over asset quality concerns

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MFIs, SFBs to face asset quality issues due to lockdown: India Ratings

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India’s central bank doesn’t want investors to know how deep the rot is in the country’s shadow banks

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Bandhan Bank Q2 profit jumps over 3-fold to Rs 721 crore

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MSME restructuring extension signify RBI's shift in stance on asset quality, transparency: Fitch

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Indian banks to face asset quality, earning pressure for at least 2 years: Report

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Asset quality of banks in India, ASEAN economies to weaken due to COVID-19 crisis:Moody's

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RBI directs banks/FIs to assess impact on balance sheet, asset quality due to coronavirus outbreak

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S&P says Covid-19 to hit asset quality of lenders; cuts Axis Bank, ICICI Bank outlook

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