Page 6 - Banking Finance June 2020

BANK UPDATE

Jaipur, Mangaluru and Visakhapatnam, As per the rating agency ICRA, 52% of Govinda Rajulu Chintala as chairman of
with a strategic view to increase pen- assets under management of non- National Bank for Agriculture and Ru-
etration across geographies. banking finance companies (NBFCs) ral Development, an official communi-
were under a moratorium as of May cation said. Chintala is currently Chief
The opening of two new zonal offices
2020. Even if 10% of these loans are General Manager at Nabard.
in South India will enable the bank to
defaulted on, the gross NPAs of NBFCs
further strengthen its market share in The appointments committee of the
will more than double and reach 9.6%
this vital region, it added. Additionally, union cabinet cleared Chintala’s ap-
32 new regional offices are being of loans as of March 2021. They were pointment for two years till his super-
at 4.6% as of March 2020. Gross NPAs,
opened across locations, including annuation in July 2022. It also cleared
also referred to as bad loans, are basi-
Shimla, Amritsar, Bareilly, Mau. the appointment of Shaji KV, currently
cally loans which haven’t been repaid general manager at Canara Bank, as
for a period of 90 days or more.
Indian banks to face un- deputy managing director at Nabard
Any trouble at the level of NBFCs is for five years.
precedented NPA’s likely to spill over to banks. Post de-
The fresh appointments at Nabard
According to, Shaktikanta Das, Gover- monetization, banks had a surfeit of come at a time the institution is set to
nor RBI, “The economic impact of the money coming in as deposits, which play a key role in financing the needs
pandemic may result in higher non- found its way into the shadow banking of the rural economy as part of the
performing assets (NPAs) and capital sector. As of December 2016, bank government’s economic package deal-
erosion of banks. A recapitalization lending to NBFCs had stood at ?3.22 ing with the coronavirus pandemic’s
plan for public sector banks (PSBs) and trillion. By May 2020, the lending had impact.
private banks has, therefore, become jumped to Rs. 8.04 trillion. Hence, if The cabinet committee also cleared
necessary." NBFC borrowers’ default, NBFCs will
find it difficult to repay bank loans. the appointment of Nabard chief gen-
Das said was that the negative eco- eral manager P.V.S. Suryakumar as
A Bloomberg news report published in
nomic impact of covid-19 will lead to deputy managing director till his super-
increased defaults by borrowers. Lets early July points out that the rating annuation in July 2023.
firms have submitted a document to
understand it. If one-twentieth of the
RBI where they have suggested that
loans which are likely to be under a Yes Bank closes its FPO
moratorium as of 31 August are de- they will have to stop publishing credit
scores of many companies which with 95% subscription
faulted on, the overall quantum of bad
haven’t been providing adequate infor-
loans in the Indian banking system Yes Bank Ltd managed to close its fol-
mation or have stopped paying the
would be close to Rs. 12 trillion. If one- fees to rating firms. This could poten- low-on public offer (FPO) with 95% sub-
fifth of them default once the morato- scription, driven by institutional inves-
tially impact nearly half of the compa-
rium is lifted, the quantum of bad loans tors, even as HNIs and retail investors
nies which currently go through a regu-
would touch a dizzying Rs. 20 trillion, lar rating exercise. Hence, many com- showed tepid interest in the bank's
more than double the current level. offering.
panies are in trouble and want to hide
Former RBI governor Raghuram Rajan that by not sharing information. The bank received subscriptions for
said recently: “The levels of NPA will be Clearly, in the months to come, many shares worth Rs. 14,267 crore in the
FPO, at the lower end of the price band
unprecedented six months from now." of these firms will not be in a position
to continue repaying their loans. of Rs. 12-13 per share.
With increased defaults, banks will need
to be recapitalized, that is, more Institutional investors drove the sub-
money will have to be invested in them Govt appoints Govinda scription, with shares reserved for
these investors getting subscribed 1.9
to keep them going. In fact, there is Rajulu Chintala as Nabard
already enough evidence of increased times, excluding the anchor allocation.
pressure in the banking system in the chairman "Domestic financial institutions played
days ahead and of the impending storm. The government has appointed a big role in the FPO, and subscribed

6 | 2020 | JUNE | BANKING FINANCE