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Rates on fresh loans and deposit moderate sequentially in May
In May 2024, the Reserve Bank of India reported a marginal decline in weighted average lending rates on fresh loans and deposits by 16 and one basis points, respectively. The WALR on fresh rupee loans fell to 9.39%, while the WADTDR on fresh term deposits dropped to 6.47%.
Retail loans moderate for the 10th straight month
The Reserve Bank of India reported that bank lending to the retail sector moderated for the tenth consecutive month in May, reaching 17.8% from 19.1% a year ago. Corporate loans grew faster at 8.9% compared to 6% in May 2023. Non-food bank credit saw a 16.2% growth in May 2024 compared to 15.5% a year ago.
How financing is turning out to be a bigger roadblock for EVs
Electric vehicle financing presents varying rates across different vehicle types, with banks and NBFCs playing a crucial role in offering competitive options. Understanding the evolving landscape of interest rates and the influence of factors like EV batteries is essential for customers looking to finance their electric vehicles effectively.
Big US banks withstand Fed's commercial real estate shock scenario
Amid economic uncertainties, the Federal Reserve's stress tests revealed big U.S. banks' resilience to a 40% drop in commercial real estate values. The tests underscored the challenges faced by regional banks and the need for robust risk assessment in the banking sector.
Kotak Bank bets big on MSME loan uptick
Kotak Mahindra Bank is optimistic about the MSME segment's demand for working capital and term loans in the second half of the fiscal year, driven by rural development initiatives under PM Modi.
Banks warned, again: Rebalance high credit-deposit growth gap
RBI warns banks about high credit-deposit ratio, urges balance in assets and liabilities without specifying an ideal ratio. CD ratio at 80%, near decade high, reflects slower deposit growth compared to credit growth.
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Banks's CD ratio dips 50 bps since March
The Credit to Deposit (CD) ratio of commercial banks fell by 50 basis points since March, signaling a potential slowdown in credit growth due to slower deposit growth. As the RBI maintains current rates, deposit rates are unlikely to rise, possibly pressuring loan growth despite expected capex spending boosts. The CD ratio, considering the HDFC merger, dropped from 80.27% in late March to 79.79% by May 17.
Credit-to-deposit ratio of banks falls 50 bps since March as deposit growth slows
The credit-to-deposit ratio (CD ratio) of commercial banks has decreased by 50 bps since March, indicating a slowdown in credit growth due to slower deposit growth. Despite expectations of stable rates and stagnant deposit rates, there may be further pressure on loan growth. The latest data from the Reserve Bank of India shows a decline in the CD ratio, suggesting that banks are lending less in proportion to the deposits they collect.
Shriram Finance raises USD 468-mn multi-currency social loan
Shriram Finance Limited raised USD 468 million in multi-currency for business growth through a social loan structured by leading banks, marking the largest syndicated transaction by a private NBFC.
Heatwave shaves 2% off loan collections in May
Soaring temperatures and elections impacted loan collections in May, with lenders experiencing a drop in efficiency. They expect a rebound with the onset of the monsoon season.
Credit growth slows in April across major sectors
Bank credit growth is expected to moderate 200 basis points (one bps is 0.01 percent) to 14% this fiscal after an estimated robust growth of 16% in fiscal 2024, according to ratings firm Crisil. Strong economic activity and retail credit demand drove loan growth last fiscal. This fiscal growth will be tempered by a high base effect, a revision in risk weights and a somewhat lower gross domestic product growth, it said.
Financial frauds declined by 46.7 per cent during 2023-24: RBI annual report
The Reserve Bank of India (RBI) reported a 46.7% drop in fraud value for 2023-24 compared to the previous year. Private-sector banks reported the most frauds, mainly small digital payment frauds, while public-sector banks had the highest fraud value, primarily in loans. The report highlights a focus on regulation, supervision, and financial stability for 2024-25, including enhancing cyber response and using AI to prevent fraud. It also notes India's robust economic growth, with strong macroeconomic fundamentals and significant capital expenditure planned. The Pradhan Mantri Garib Kalyan Anna Yojana extension will bolster food security.
Large Indian banks are expected to improve their asset quality in the current fiscal: S&P
India's top banks are set for asset quality improvement in the fiscal year, driven by record profits, which will enhance their balance sheets and underwriting standards. Despite a rise in HDFC Bank's nonperforming loans post-merger, all major banks reported record profits. Retail loans drive growth amid moderating credit expansion expectations.
Banking tech startup Gravity raises $1 million from Kettleborough VC
Business-to-business (B2B) banking tech startup Gravity will use the fresh capital to strengthen “our engineering strength to build the product and take it to the next version, offering the best in product engineering we can,” cofounder and chief executive Satish Krishnaswamy told ET.
Greater transparency: No indemnity clause in NPA sale pact between banks and ARCs
High-street banks and stressed asset firms in Mumbai adopted a 'model agreement' for selling loans but couldn't agree on 'indemnity'. Lenders can declare an account 'fraud' post-sale to ARCs. The industry body approved the Model Assignment Agreement and Model Trust Deed for adoption by banks, financial institutions, finance companies, and ARCs.
PSBs seek changes to rules for Infra loans, may approach govt
State-owned lenders plan to approach the government seeking changes to terms governing performance bank guarantees (PBGs), timely compensation from concessioning authorities, and greater immunity for board members sanctioning funds for infrastructure projects as they firm up their response to Reserve Bank of India (RBI) draft rules on project financing that call for higher provisioning.
Policy on project loans after RBI final rules, says SBI
“The idea to insert a clause with explicit mention of passing it on to the borrower is in line with RBI’s strict stance of making loan documents transparent,” said one of the persons cited above. Secondly, when the regulator increases provisioning norms so sharply, it expects banks to pass them to the borrower, otherwise the purpose of raising the provision is defeated, he added.
India Inc raises record debt capital in FY24
India Inc raised more debt capital in FY24 compared to the previous fiscal, with increased interest from both local and overseas investors in Indian companies. According to the Reserve Bank of India's state of the economy report, bond issuances during 2023-24 grew by about 15% to Rs 8.6 lakh crore. Additionally, corporations received higher funds through external commercial borrowings in FY24, with registrations, disbursements, and net inflows substantially higher than FY23 levels.
Project loan provisions to impact earnings due to limited pass-through: Banks to RBI
Banks face challenges passing on higher provisions due to competition and pressure to maintain relationships. RBI proposed a 5% provision increase for project, commercial, and real estate loans. Lenders may find it difficult to raise rates, impacting project viability and borrower bidding process.
China allocates billions of dollars to bailout its crisis-hit property sector
China has taken decisive measures to tackle the crisis in its property sector, which has been a crucial driver of its economic growth. The People's Bank of China has announced a 300-billion-yuan relending facility to support government-subsidized housing projects. Local state-owned enterprises are encouraged to purchase completed commercial homes to provide affordable housing. Commercial banks have issued significant loans for real estate development and individual housing.
Indian economy projected to expand at 6.6% in FY25, says Moody's
The agency highlighted that strong credit demand, fueled by robust economic growth, will bolster the profitability of the Non-Banking Financial Company (NBFC) sector.
Tighter regulations on personal loans and project finance may hurt banks in FY25
Indian banks had a strong fiscal 2024 but face challenges in the current year due to regulatory changes impacting credit growth and net interest margins. Return ratios and riskier lending are also areas of concern as the market adapts.
SC holds bank employees' interest-free loans taxable as fringe benefits
The Supreme Court has ruled that interest-free or concessional loans given by banks to their employees will be considered "fringe benefits" or "amenities" and therefore taxable. The court argued that these benefits are unique to bank employees and are in the nature of a "perquisite," thus liable to taxation. The court upheld the income tax rule, but deemed the fixation of SBI's interest rate as the benchmark to be neither arbitrary nor unequal exercise of power.
Banks may challenge CBI's retro touch to fraud accounts
Last year, the highest court had ruled that a borrower must be given a hearing before labelling the account as 'fraud'. Now, CBI, which is probing many of these cases, insist that the SC verdict stands for all fraud accounts - new as well as old cases - but banks assert that the SC ruling cannot be given 'retrospective' effect to cover borrowers listed as frauds before the ruling.
RBI issues draft guidelines on infrastructure finance
RBI introduces rules to enhance infrastructure funding and risk management through project lending guidelines, covering aspects like consortium lending, moratorium limits, and NPV requirements for lenders. The RBI also proposed that the original or revised repayment tenor, including the moratorium period, if any, should not exceed 85% of the economic life of the project.
Banks homing in on a bigger share of expanding realty pie; loans almost triple the pace in FY23
Bank loans to commercial real estate, including residential construction, nearly tripled last fiscal year at 23 percent, amounting to Rs 3.97 lakh crore. If the impact of the merger of HDFC with HDFC Bank is included, the loan growth increases to 38.9 percent, with outstanding loans reaching Rs 4.48 lakh crore as of March 31. Property analysts note growth across segments, with the top seven property markets witnessing total sales of 74,486 apartments in the quarter, following a record-breaking quarter in December.
Bank deposit rates rise, but yet to fully reflect repo hike
Regulator-market discord on rate transmission persists. Fresh term deposits show full 2.5% repo rate hike. Interest margins squeezed, WADTDR at 6.62% in March. WALR for commercial banks at 9.37%.
Oil India to take external commercial loan route to raise $550 million loans to fund expansion
"The loan will be priced 110 basis points above the six-month SOFR rate with a reset clause after every six months linked to the then prevailing SOFR rate," said a person familiar with the deal. One basis point is 0.01 percentage point. The six-month SOFR is around 5.39%. The final pricing of deal is likely to be around 6.49%. Bank of Baroda has agreed to underwrite the whole amount initially with a possibility of a loan syndication after a few months.
After changes at the helm, NARCL goes on a bad-loan lapping spree
Led by Diwakar Gupta, NARCL has emerged as the most active player in the bad loan market, acquiring over ₹30,000 crore of stressed loans in four months. It operates under the 15:85 structure, offering 15% cash and 85% security receipts.
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