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The share price of <keyword id="6363556" type="DOMAIN" weightage="20" keywordseo="indiabulls">Indiabulls</keyword> Housing Finance Ltd depreciated by 14% to 204.40 in the early trade on Thursday, after Reserve Bank of India rejected Indiabulls' proposal to merge with the capital starved private sector lender Lakhsmi Vilas Bank (LVB). The shares of <keyword id="818048" type="DOMAIN" weightage="20" keywordseo="Lakshmi-Vilas-Bank-Ltd">Lakshmi Vilas Bank Ltd</keyword>. were trading 4.82% low at 25.65. Both LVB as well as IBHF informed the bourses late Wednesday evening about the RBI decision, but did not specify the reasons for the same, which however, for many was in the offing given the regulator's stated opposition to corporates and realty-focused entities entering the banking arena. The merger proposal had already received all other approvals, including those from the fair trade watchdog. Since the central bank has been opposed to the idea of bank promoters hailing from real estate and corporate sector for long, the regulatory call on the merger had assumed greater interest. The application for merger was made in May after both the parties agreed to the merger in April. Entering the banking space would have given IBHF access to cheap deposits and saved it from crisis like being faced by the shadow banks now, while the promise of capital infusion would have helped revive the fortunes of the Tamil Nadu based lender which was last month put under the prompt corrective action framework which puts a lot of curbs on its operations. "The Reserve Bank has informed us that the application for voluntary amalgamation of IBHF and Indiabulls Commercial Credit with LVB cannot be approved," LVB informed the exchanges. In a similar exchange filing, IBHF said it has also been informed by the RBI about the same and added that the decision ends the uncertainty of the past five months. To push the prospects of getting the Reserve Bank nod, the IBHF promoters led by Samir Gehlaut and Gagan Banga, had also offered to pare their <keyword id="525588" type="DOMAIN" weightage="20" keywordseo="holdings">holdings</keyword> to the levels of regulatory comfort from day zero of the merger and get it down further eventually and even also eschew Indiabulls branding from the new banking entity. In the run-up to the merger, Indiabulls had sold 15 percent stake in <keyword id="51993" type="DOMAIN" weightage="20" keywordseo="Indiabulls-Real-Estate">Indiabulls Real Estate</keyword> to the Bengaluru-based Embassy Group. IBREL also sold various properties to US-based private equity firm Blackstone as part of its exit plan. They had also promised additional capital infusion along with the merger, to take care of LVB's fragile buffer situation due to the higher bad loans. The low capital buffers had last month prompted the monetary authority to put LVB under restrictions called the prompt corrective action framework, which puts curbs on large size lending and branch expansion. For FY19, LVB's net NPAs stood at 7.49 percent, <keyword id="120758" type="ORGANIZATION" weightage="20" keywordseo="capital-adequacy-ratio">capital adequacy ratio</keyword> was at 7.72 percent and its return on assets was a negative 2.32 percent. It had reported a net loss of Rs 894.10 crore in FY19. The decision to put it under PCA had led to speculation that the RBI has decided to deny the permission, but governor Shaktikanta Das had last week clarified nothing should be read into the move. During the past five months, a complaint was also filed against LVB with the Economic Offences Wing of the Delhi Police for cheating and misappropriation of funds. Separately, IBHF is facing a public interest litigation in the Delhi High Court which had alleged that monies loaned by Indiabulls to various companies were routed back to its promoters through other entities. The group had called such allegations baseless which were leveled with the intent of stopping the merger process. Recently, the South-based lender's managing director and chief executive Parthasarthy Mukherjee had also quit midway through the merger process, leading to question marks over the merger. However, despite these setbacks, both the parties had sounded confident of pulling through. In its statement, IBHF said its board will be meeting next Monday to consider a share buyback. "The company will focus on its growth of the core business of housing finance," IBHF said, adding it will resume with its policy of paying quarterly dividends from here on. It has a networth of approx Rs 19,000 crore, healthy liquidity and cash balances of over Rs 18,000 crore as on date, Indiabulls added. The IBHF counter had closed the session with gains of 2.34 percent at Rs 240.30 on the BSE, while the LVB scrip shed 4.93 percent to close at Rs 27 while the benchmark rallied close to 650 points. (With PTI)

Lakshmi Vilas Bank shares plummet as RBI stalls Indiabulls Housing merger

<keyword id="20341279" type="General" weightage="20" keywordseo="sbi-cards-and-payment-services-ltd" source="keywords">SBI Cards and Payment Services Ltd</keyword> has reported an 8 per cent rise in net profit to Rs 549 crore for the third quarter ended December 2023. The pure-play credit card company, promoted by <keyword id="19898108" type="General" weightage="20" keywordseo="sbi" source="keywords">SBI</keyword>, had posted a net profit of Rs 509 crore during the corresponding period of the previous financial year. Total income grew to Rs 4,742 crore during the October-December period from Rs 3,656 crore in the year-ago period, <keyword id="20190417" type="General" weightage="20" keywordseo="sbi-card" source="keywords">SBI Card</keyword> said in a regulatory filing. Total operating cost increased by 23 per cent at Rs 2,426 crore for the third quarter of FY24 from Rs 1,974 crore in the previous fiscal, it said. Gross non-performing assets (NPA) rose to 2.64 per cent during the quarter under review as against 2.22 per cent a year ago. Net NPA too increased to 0.96 per cent from 0.80 per cent at the end of the December quarter of the previous financial year. As a result, impairment losses and bad debt expenses grew to Rs 883 crore from Rs 533 crore in FY23. As of December 31, 2023, the card company's capital adequacy ratio was 18.4 per cent compared to 23.1 per cent as of March 31, 2023. As per the capital adequacy norms issued by the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>, the company's capital-to-risk ratio consisting of Tier I and Tier II capital should not be less than 15 per cent of its aggregate risk-weighted assets on the balance sheet and of the risk-adjusted value of off-balance sheet items. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/webstories/oneplus-12-vs-oneplus-12r-heres-whats-different-between-the-two-devices/slidelist/107138750.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/webstories/oneplus-12-vs-oneplus-12r-heres-whats-different-between-the-two-devices/slidelist/107138750.cms" target="_blank">OnePlus 12 vs OnePlus 12R – What distinguishes the two new smartphones</a> <a href="https://www.businessinsider.in/business/auto/news/rolls-royce-spectre-rolls-out-as-indias-most-expensive-electric-car/articleshow/107051636.cms">Rolls Royce Spectre rolls out as India’s most expensive electric car</a> <a href="https://www.businessinsider.in/tech/news/global-pc-shipments-decline-for-the-eighth-straight-quarter-hopes-pinned-on-ai-to-drive-sales/articleshow/106981182.cms">Global PC shipments decline for the eighth straight quarter; hopes pinned on AI to drive sales</a>

SBI Card Q3 profit rises 8 pc to ₹549 crore

The country's largest lender <keyword id="13222" type="General" weightage="20" keywordseo="sbi" source="Orion">SBI</keyword> on Saturday reported a 9.13 per cent growth in consolidated net profit for the September quarter to Rs 16,099.58 crore. The state-run lender had reported a consolidated net profit of Rs 14,752 crore in the year-ago period and Rs 18,356 crore in the June quarter. On a standalone basis, it posted a net profit of Rs 14,330.02 crore as against Rs 13,264.52 crore in the year-ago period. The bank, which controls over a fifth of the overall market and has the widest network in the country, reported a total income of over Rs 1.12 lakh crore for the quarter under review, up from Rs 88,733 crore in the year-ago period. From an asset quality perspective, its gross non-performing assets ratio was at 2.55 per cent as of September 30, an improvement from the 3.52 per cent in the year-ago period and the 2.76 per cent in the first quarter of the current fiscal. Its overall capital adequacy stood at 14.28 per cent as of September 30. SEE ALSO: <a href="https://www.businessinsider.in/tech/gadgets/news/hp-omen-16-gaming-laptop-review/articleshow/104945732.cms">HP Omen 16 laptop review – A powerful laptop with a fine display</a> <a href="https://www.businessinsider.in/business/auto/news/indias-electric-two-wheelers-up-and-running-after-reduced-fame-subsidy-bump/articleshow/104912419.cms">India’s electric two-wheelers up and running after reduced FAME subsidy bump</a> <a href="https://www.businessinsider.in/tech/mobile/news/india-q3-smartphone-shipments-apple-gains-34-pc-market-share-in-india/articleshow/104907807.cms">Smartphone shipments: Apple gains 34% market share in India as Samsung, Xiaomi decline</a>

SBI posts 9.13% rise in consolidated net profit to Rs 16,099 crore in Q2

<ul><li>Three banks would be most impacted by the move as their capital ratios would be affected by 30-85 basis points.</li><li>Capital buffers will have to be further strengthened by banks if they want to lend to consumers for unsecured loans.</li><li>Borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023, as per a report.</li></ul> Shares of <keyword id="116253" type="General" weightage="50" keywordseo="sbi-cards" source="Orion">SBI Cards</keyword>, RBL Bank, <keyword id="6357149" type="General" weightage="50" keywordseo="hdfc-bank" source="Orion">HDFC Bank</keyword> and <keyword id="6653" type="General" weightage="50" keywordseo="icici-bank" source="Orion">ICICI Bank</keyword> are expected to come under pressure after the Reserve Bank of India asked lenders on Thursday to set aside more capital for consumer loans. This move is expected to impact the capital buffers of these banks. According to analysts, these banks would be most impacted by the move as their capital ratios would be affected by 30-85 basis points. For banks the first line of defense against bad loans is CET Tier 1 capital or Common Equity Tier 1 capital (CET1), which is the highest quality of regulatory capital, as it absorbs losses immediately when they occur. According to Motilal Oswal Financial Services, the CET 1 impact would be maximum for RBL/HDFC Bank/ICICI Bank at 84 basis points/72 basis points/64 basis points. Among non banks, SBI Cards would be the most vulnerable with a 416bp impact on capital ratios. Capital buffers will have to be further strengthened by banks if they want to lend to consumers for unsecured loans. If a bank had to set aside say ₹20 for loans, it will now have to set aside 25% more for every unsecured loan it issues. Not just this the banks will have to set aside more capital if they want to lend to shadow banks or non banking financial institutions as well. When cost of capital increases, so will lending rates. In the years after the pandemic broke, unsecured personal loans to retail borrowers have been on a steady rise. Not just banks but even non banks have been merrily issuing such loans to borrowers, and in many cases these borrowers have multiple such loans used for consumption. From 12-14% these loans are now growing at 30% rate. The central bank has cracked down on some non banks for not adhering to norms while underwriting such small ticket loans. The red flags have been flying high for a while now. According to proprietary research done by UBS, borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023. New disbursement of personal loans to borrowers with weaker credit profiles accounted for 22% of disbursements. Of all banks, UBS was of the view that state-owned banks and non banking financial companies had a much higher share of weak borrowers compared to private banks. Analysts believe that pressure on net interest margins and higher credit costs to impact earnings of banks and shadow banks over FY24 and FY25. Paytm, a fintech company, has recently built a large loan portfolio which is mostly comprised of personal loans. With the <keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword> cracking down on these loans, the loan growth will be impacted for Paytm too. Deepak Shenoy, CEO of Capital Mind, took to social media to explain the impact, “See how it affects SBI cards: SBI Cards had credit card receivables of ₹ 45,000 crore with 23% capital adequacy ratio (CAR). So ₹10,500 cr in capital (23% of ₹45Kcr). Increase risk weight to 125% means ₹45K cr=₹56K cr risk weighted assets.” Shenoy explains that if “SBI Cards wants to grow, and keep high CARs (min is 15% I think?) they’ll need to raise capital and dilute. Which means for the same profit = higher capital. Means lower ROEs.” ALSO READ: <a href="https://www.businessinsider.in/stock-market/markets/news/foreign-investors-continue-to-bet-big-on-banks-and-nibbling-on-small-and-mid-cap-stocks/articleshow/104462273.cms" data-type="tilCustomLink" target="_blank">Borrowers with multiple personal loans a big risk to profitability of banks and NBFCs</a>

RBI tightens norms on personal loans for banks and NBFCs; stocks to be under pressure

New Delhi, <keyword id="47209" type="General" weightage="20" keywordseo="finance-ministry" source="Orion">Finance Ministry</keyword> would consider capital infusion in three loss-making public sector general insurance companies based on their financial performance of nine months. The infusion if required would be made in the fourth quarter of the current financial year, sources said. According to sources, the finance ministry last year asked three insurers -- National Insurance Company Limited, <keyword id="94451" type="General" weightage="80" keywordseo="oriental-insurance-company-limited" source="Orion">Oriental Insurance Company Limited</keyword> and <keyword id="356117" type="General" weightage="80" keywordseo="united-india-insurance-company" source="Orion">United India Insurance Company</keyword> -- to chase bottomlines rather than topline and underwrite only good proposals. The financial review would give some idea about the impact of restructuring initiated on the profitability numbers and the solvency margin, sources said. The solvency margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur. It acts as a financial backup in extreme situations, enabling the company to settle all claims. The government last year provided Rs 5,000 crore capital to three insurers -- National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company. Kolkata-based National Insurance Company Limited was given the highest, Rs 3,700 crore, followed by Delhi-based Oriental Insurance Company Limited (Rs 1,200 crore) and Chennai-based United India Insurance Company (Rs 100 crore). According to sources these companies have been asked to improve their solvency ratio and meet the regulatory requirement of 150 per cent. The solvency ratio is a measure of capital adequacy. A higher ratio reflects better financial health and the ability of the company to pay claims and meet future contingencies and business growth plans. Barring the solvency ratio of <keyword id="6369780" type="General" weightage="80" keywordseo="new-india-assurance" source="Orion">New India Assurance</keyword>, this key indicator of the three public sector general insurance companies stood below the regulatory requirement of 150 per cent. During 2019-20, the government infused Rs 2,500 crore in these three companies. It increased substantially to Rs 9,950 crore in the following year and Rs 5,000 crore in 2021-22. In all, the government infused Rs 17,450 crore into these insurance firms so far to improve their financial health. Public sector general insurance companies are undergoing various reforms, including organisational restructuring, product rationalisation, cost rationalisation and digitalisation. For efficient use of capital and to push profitable growth, the sources said, a set of key performance indicators linked reforms have been initiated by all public sector general insurance companies effective 2020-21, when the maximum capital infusion was made. Of the four state-run general insurance companies only New India Assurance Company is listed on the stock exchanges, the remaining three are wholly owned by the government. The government has already announced its intention to privatise one general insurance company. To facilitate privatisation, Parliament has already approved amendments to the General Insurance Business (Nationalisation) Act (GIBNA). Finance Minister <keyword id="129243" type="General" weightage="80" keywordseo="nirmala-sitharaman" source="Orion">Nirmala Sitharaman</keyword> in the Budget 2021-22 announced a big-ticket privatisation agenda, which included two public sector banks and one general insurance company. "We propose to take up the privatisation of two public sector Banks and one general insurance company in the year 2021-22. This would require legislative amendments," she had said.

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Lakshmi Vilas Bank shares plummet as RBI stalls Indiabulls Housing merger

BI India Bureau

SBI Card Q3 profit rises 8 pc to ₹549 crore

PTI

SBI posts 9.13% rise in consolidated net profit to Rs 16,099 crore in Q2

PTI

RBI tightens norms on personal loans for banks and NBFCs; stocks to be under pressure

Malini Bhupta

Govt may infuse capital in PSU general insurers in Q4 based on performance

PTI

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