Page 8 - Banking Finance June 2020

BANK UPDATE

IBA working on ease of economy like hospitality, travel and However, treasury income will con-
tourism would need hand-holding. tinue to support profitability in the first
banking on lending side: quarter, as it offsets weakness in net
Echoing similar views, Mehta said the
CEO Sunil Mehta government has also requested RBI to interest margins and fee income

The Indian Banks' Association (IBA) is consider a one-time restructuring growth. The 10-year government secu-
working on bringing ease of banking on scheme for some sectors hit hard by rity has fallen 25 basis points quarter-
the lending side and is also focusing on the pandemic. on-quarter.
swift decision making amid the COVID- "Sectors which really require separate Stake sales in subsidiaries of State Bank
19 crisis, its CEO Sunil Mehta said. attention are aviation , hospitality, of India and ICICI Bank will also add to
Member banks are working on travel and tourism etc. These are the higher treasury gains. During the quar-
digitisation of loan products so that the sectors which are greatly impacted ter, SBI sold a 2.1% stake in SBI Life
human intervention is minimised in the during the pandemic because of occu- Insurance Co., while ICICI Bank sold
process of loan, he said. pancy level and travel restrictions. 1.5% in ICICI Prudential Life Insurance
May be the government comes out Co. and 3.96% in ICICI Lombard Gen-
"Ease of banking is one of the key
with special packages for these sectors eral Insurance Co.
agenda of IBA and bankers are think-
and even the Reserve Bank can come
ing through this. Bankers have to think Earnings of public sector banks are
out with special restructuring
about swifter delivery. Banks are con- likely to be hit because of sluggish loan
schemes," Mehta said.
verting this pandemic in opportunity growth as a result of integration,
for digitisation of their loan prod- higher proportion of moratorium, and
ucts...6 months from now you will find Banking sector may wit- delay in the resolution of National
more digital lending products and help Company Law Tribunal accounts, ac-
in ease of banking," he said. ness muted first quarter cording to brokerage firm Motlial
results Oswal. “Management commentary on
Citing 'psbloansin59minutes' portal, he
said, this kind of algorithm based deci- Banking sector is likely to see subdued moratorium trends under moratorium
sion making platform can be extended first quarter results, as lenders con- 2.0 would be the key theme of discus-
towards the entire loan life cycle with tinue to strengthen their balance- sion. Also, the trends in collection effi-
the objective of reducing physical in- sheets through higher provisions ciency (banks have highlighted improv-
terface. against the covid-19 impact. The pre- ing collection trends over May-Jun’20)
vious quarter had seen banks, espe- as the economy starts to recover would
He further said ease of transaction has be an important metric to assess the
cially private sector entities, increasing
already taken place as one can do it banking system’s health in the near
provisions to cushion against future
with a click of button. term," it said.
asset slippages.
"Banking has transformed during the
Banks are expected to report 7% year- Asset quality will continue to be stable,
last 10 years and it is going to trans-
on-year growth in pre-provision profit, considering that the second morato-
form further and these improvements
while private banks are to report 11% rium will end by August-end, according
are really needed. Bankers are work-
growth, according to brokerage firm to Phillip Capital. Gross non-performing
ing on it," he said at a webinar
Phillip Capital Pte. Ltd. Moderation in assets (NPAs) are expected to reduce
organised by Assocham.
credit growth and stable net interest by 15 basis points to 5.37% in Q1.
Assuring all support to MSMEs, State margin are likely to keep performance Credit cost, or the amount set aside for
Bank of India (SBI) Managing Director muted. Credit growth is expected to bad loans, however, is expected to be
Dinesh Kumar Khara said the bank is moderate to 6.2% in the first quarter higher, as banks may increase provision
quite open to the request of rehabili- compared to 12% in the year ago. This coverage ratio and create contingent
tation and restructuring of loans also. trend is expected to continue because provisions in anticipation of NPAs after

Khara also said some sectors of the of the impact of the pandemic. the moratorium ends. T

8 | 2020 | JUNE | BANKING FINANCE