LIC Housing Finance likely to recover Rs 3,000 crore worth NPAs

The target is to get back about 50 per cent of gross non-performing assets (GNPAs), Managing Director and Chief Executive Siddhartha Mohanty said.

LIC Housing Finance is likely to recover about Rs 3,000 crore from borrowers in the current financial year to improve asset quality, an uphill task in a year when the Indian economy is expected to contract.

The target is to get back about 50 per cent of gross non-performing assets (GNPAs), Managing Director and Chief Executive Siddhartha Mohanty said.

LIC HFC’s asset quality profile came under pressure with GNPAs rising to 2.86 per cent in March, from 1.54 per cent a year ago. Net NPAs also went up to 1.99 per cent, from 1.08 per cent. Its total outstanding portfolio stood at Rs 2.1 trillion in March, up from Rs 1.9 trillion last year.

LIC HFC’s provisions for expected credit loss stood at Rs 2,612.39 crore as of March 31, as against Rs 1,659.48 crore a year ago.

ALSO READ: LIC Housing Finance posts 16% fall in pre-tax profit at Rs 826.72 crore

Mohanty said the asset quality might face further pressure due to risk slippages from part of the loan portfolio, which is under moratorium. At present, about 25 per cent of loan book is under moratorium. The RBI has permitted HFCs, finance companies, and banks to grant moratorium on term loans for EMIs till August to soften adverse effect on borrowers due to the lockdown.

While calculating expected credit loss, the company has taken into account its historical experience of losses, updated to reflect current conditions and moratorium.

Covid-19 crisis: Banks seek relaxed NPA norms, moratorium extension

Senior bank executives said the Indian Banks' Association (IBA) has already approached the Reserve Bank of India with a plea for easing regulatory norms.

Banks and financial institutions expect much heavy lifting through credit support, pegged at over Rs 11 trillion in FY21, in the days ahead. As a result, lenders have sought the easing of NPA norms, one-time restructuring, and extension of the moratorium till August-end for borrowers affected by the Covid situation.

Senior bank executives said the Indian Banks’ Association (IBA) has already approached the Reserve Bank of India with a plea for easing regulatory norms, so as to support borrowers hit by the outbreak.

The rule stating that loans unpaid for 90 days in a row will be categorised as non-performing assets (NPAs) needs to be relaxed. The IBA, a banking industry lobby group, has recommended that this period be extended from to 180 days for the current financial year.

In FY22, it could be restored to its original status in two stages. For first six months, loans due for 120 or more days and remaining unpaid for 90 days, will be treated as a bad loan. The RBI may announce its decision in the next few days.

This should also accompany the one-time restructuring of loans, given the concerns of borrowers go beyond liquidity. They now include viability and the capacity to change as well as survive in different business environments, in the post-Covid world, said bankers.

The three-month-moratorium is nearing its end (on May 31). This breathing space has been deemed inadequate and a further 90 days sought by the sector.

In addition, majority of government support under the Rs 20.97-trillion package, announced to deal with the adverse impact of the pandemic, is in the form of guarantees and interest subventions.

YES Bank auditor red-flags multiple breaches of RBI's norms in FY20

Bank sets aside Rs 334 cr for expected penalty for SLR breach.

The auditor of YES Bank has pointed out multiple breaches of the Reserve Bank of India’s (RBI’s) norms and loan covenants by the private bank in the financial year ended March 2020, warning that these may impact the bank’s ability to continue as a going concern.

The auditor, BSR & Co, also said that as the fate of the bank’s additional tier-1 (AT-1) bonds remained uncertain — as the matter is pending in court — any adverse judgment would affect it adversely.

The bank has breached the regulatory requirements of the RBI regarding maintaining the minimum common equity tier-1 (CET-1) and tier-1 capital ratios, which indicates the position of capital adequacy of a bank. “The breach is primarily on account of the increase in the provision for advances during the year ended March 31, 2020, as the bank has decided, on a prudent basis, to enhance its provision coverage ratio on its non-performing asset (NPA) loans over and above minimum RBI loan level provisioning,” the auditor’s report said.

It said the bank had incurred a loss of Rs 16,418 crores for the year ended March 31, 2020. During the last six months of fiscal 2020, there has also been a significant decline in the bank's deposit base, an increase in its non-performing assets or bad loan ratios, resulting in breach of loan covenants on its foreign currency debt and credit rating downgrades, it said. This resulted in partial prepayment of foreign currency debt linked to external credit rating.

“The bank has breached minimum statutory liquidity ratio (SLR) and liquidity coverage ratio requirements of the RBI during the year and has provided an amount of Rs 334 crores for the expected penalty on the SLR breach,” said the report.

YES Bank looks to contain slippages to around Rs 8,500 crore in FY21

Its standard advances after subtracting net NPAs were about Rs 1.75 trillion at end-December.

After adding Rs 23,000 crore to its gross non-performing assets (NPAs) in the December quarter, ailing YES Bank now says it hopes to contain this slippage to around Rs 8,500 crore in the coming financial year (which begins April 1).

Its standard advances after subtracting net NPAs were about Rs 1.75 trillion at end-December. Advances were Rs 1.86 trillion and net NPAs at Rs 11,114 crore.

The slippage ratio (standard advances becoming NPAs) will be brought to 5 per cent in 2020-21, from 11.98 per cent in the December quarter, according to a presentation for analysts. The vulnerable portfolio, loans that have high chance to slip into NPAs, is Rs 13,911 crore at end of December 2019. These are special mention accounts (SMA) categorised in terms of duration. In the case of SMA -1, the overdue period is between 31 and 60 days. An overdue between 61 to 90 days will make an asset SMA -2.

Gross NPAs at end-December were Rs 40,709 crore, up from Rs 5,159 crore a year before (and Rs 17,134 crore at end-September 2019). With the huge provisioning for bad loans, the bank posted a loss of Rs 18,564 crore in the December quarter.

Provisioning for NPAs and write-offs rose about 10-fold to Rs 22,238 crore in that quarter, from Rs 2,214 crore in the earlier one. It had provided Rs 507 crore on this account in the December quarter of 2018-19.

The Provision Coverage Ratio (PCR) increased to 72.7 per cent for the December quarter, from 43.1 per cent in the September quarter. The higher PCR would enhance the ability to offload these assets from the balance sheet, to further release capital, YES Bank stated in the presentation.

While determining NPAs and related provisioning requirements for October-December, it considered slippage in NPAs after this date till that of the publication of financial results (March 2020), it said. This change resulted in recognition of additional loans of Rs 5,150 crore as NPAs and related provisioning requirement of Rs 772 crore for the quarter.

Additionally, considering the economic environment and significant increase in NPAs, the Bank decided to enhance its PCR on bad loans over and above the Reserve Bank-mandated requirement. As a result, additional provisioning of Rs 15,422 crore for the quarter, it said.

63% banks report decline in NPA in infra sector in six months: Ficci-IBA

57 per cent of banks surveyed said engineering goods has seen a reduction in NPA levels.

More banks are seeing a reduction in bad assets, especially in the sectors they had earlier quoted as high non-performing asset (NPA) sector, a recent survey by Ficci and IBA revealed.

The ninth Ficci-IBA survey in their report said the proportion of respondent banks citing a reduction in NPAs stood at 52 per cent as against 43 per cent in the previous round. About 55 per cent of reporting public sector banks (PSBs) have cited a reduction in NPA levels.

According to the survey, sectors such as engineering, infrastructure and iron ore and steel, which were more prone to become dud assets, banks are now seeing NPA levels reduce in the last six months in these sectors.

About 63 per cent of banks have reported a decline in NPA in the infrastructure sector during the last six months. Likewise, 57 per cent of banks surveyed said engineering goods has seen a reduction in NPA levels.

Moreover, banks have also seen about 92 per cent reduction in the level of NPAs in metals, iron and steel over the last six months.

Till June, the Reserve Bank of India (RBI) had cut its policy rate by 75 basis points (bps), however, the banks had passed on only 29 bps to the customers. The survey revealed that from February to June 2019, while the RBI had cut rates thrice by 25 bps each, 48 per cent of the responding banks reduced their MCLR by up to 20 bps.

In case of term deposits above one year, 39 per cent of responding banks have decreased interest rates by up to 50 bps while 30 per cent have not changed the rates. For term deposits below one year, 57 per cent respondents did not change their interest rates, while 22 per cent have reduced it by up to 50 bps.

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RBI tells banks, financial institutions to disclose exposure to IL&FS

It said banks and financial institutions must mention the total amount of exposure that are non-performing assets (NPAs) to the IL&FS.

The Reserve Bank of India (RBI) has asked banks and financial institutions to declare details of their exposure and provisions related to the troubled Infrastructure Leasing & Financial Services (IL&FS). It said banks and financial institutions must mention the total amount of exposure that are non-performing assets (NPAs) to the IL&FS.

In the matter between the IL&FS and the Ministry of Corporate Affairs, the National Company Law Appellate Tribunal (NCLAT) had earlier stated that no financial institution can declare the accounts of the IL&FS or its group entities as NPAs without prior permission of the tribunal.

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However, the RBI had appealed in the NCLAT, seeking modification against the order, saying banks must reflect defaults of the IL&FS group and its entities as NPAs in their accounts.

Group entities of the beleaguered IL&FS began to default due to asset liability mismatch in the second quarter of 2018-19.

Its payment obligations on maturing loans were far more than its cash flows. The defaults by the IL&FS entities caused liquidity squeeze in the markets, affecting the non-banking financial companies and the housing finance companies adversely. The group companies have a total debt of more than Rs 94,000 crore.

Of the Rs 94,000-crore debt, state-owned lenders with exposure of Rs 35,382 crore (secured and unsecured) are the worst-hit, followed by investors holding non-convertible debentures of the IL&FS having an exposure of Rs 25,767 crore.

Business Standard