Page 6 - Banking Finance October 2019

BANK UPDATE

IDBI bank declares to sell SBI lowers lending rate for 5th time in a row in FY20
SBI has lowered its lending and deposit over all tenures for the 5th time in a
stake in IDBI Federal Life row in FY20. In the past one month, it was the second such
Insurance Co. reduction. SBI had also said that it has lowered lending
rates by 10 basis points across all tenors. The one-year
After the infusion of Rs 9300 crore,
IDBI marginal cost of lending rate (MCLR) will stand reduced to
8.15% from 8.25% with effect from 10 September.
Bank has
declared This was the fifth consecutive cut in MCLR in 2019-20. During the same period,
its plans RBI has the cut repo rate by 85 basis points. SBI also reduced its deposit rates by
of selling 20-25 basis points and bulk deposit rates by 10-20 basis points across tenures.
stake in SBI said in a press release, “In view of the falling interest rate scenario and sur-
its insur- plus liquidity, SBI also realigns its interest rate on term deposits w.e.f. Septem-
ance joint venture IDBI Federal Life ber 10." For FDs maturing in one year to less than two years, SBI has cut the
Insurance Co. In a newspaper adver- rate by 20 basis points to 6.50% from 6.70%.
tisement the bank has said that it has Punjab National Bank, Axis Bank, Canara Bank, HDFC Bank, Bank of Baroda,
mandated J P Morgan India to man-
and Kotak Mahindra Bank have also revised their FD interest rates in select
age the process.
buckets.
“JP Morgan India Pvt. Ltd has been The linking of retail floating loans to an external benchmark kicks in from 1 Oc-
mandated for advising and managing
tober, which will be applicable to new loans. SBI’s reduction of its MCLR rate is
a strategic review process for IDBI to keep retail interest sticky during the intervening period. Praveen Kumar
Federal Life Insurance Co. Ltd which
Gupta, managing director, retail and digital banking, SBI, said, “Liquidity posi-
may result in, inter alia, potential di-
tion has been comfortable for the bank. Depending on the banks’ requirement
vestment of all or part of the stake
of funds, we have been reducing MCLR and also repo-linked rates. We are hop-
held by IDBI Bank in IDBI Federal Life ing that this will spur some demand during the festive season."
Insurance Company," IDBI Bank said.
The bank further said that JP Mor- Bank of Baroda looks for additional exposure of Rs.
gan will invite expressions of interest
by way of submission of comprehen- 10,675 in NBFCs
sive, non-binding proposal from po- In the second quarter of FY20, Bank of Baroda (BoB) plans additional exposure
tential investors for evaluating the of Rs. 10,675 crore to non-banking financial com-
potential transaction. panies (NBFCs). BoB is planning to purchase NBFC
assets worth Rs. 5,600 crore, co-originate loans of
IDBI Bank owns 48% of the insurance Rs. 1,000 crore, provide loans of Rs. 3,575 crore
company, whereas, Federal Bank and for on-lending to the agri sector and has set aside
Ageas Insurance International NV
Rs. 500 crore for “high-ticket balance sheet take-
own 26% each. over", according to a BoB proposal. Among the total sanctions, the bank ex-
“We hereby advise that the board of pects to disburse Rs. 5,337.5 crore in the September quarter.
directors of IDBI Bank at its meeting
BoB is also planning to buy loans worth Rs. 5,600 crore from seven NBFCs dur-
held, 21 January, 2019 has approved ing the quarter, the document showed. In certain cases, it said, the bank will
in-principle, the proposal to re-ini- obtain partial guarantee cover from the government.
tiate divestment process of IDBI
In the month of July, finance minister Nirmala Sitharaman announced that the
stake in IDBI Federal Life Insurance
Co. Ltd subject to statutory/regula- government will provide a one-time six-month partial credit guarantee to pub-
lic sector banks for the first loss of up to 10% for purchasing high-rated assets
tory approvals, if any, required to be
from NBFCs. The guidelines, released earlier this month, said the pool of assets
obtained in this regard," the bank
should have a minimum rating of AA, or equivalent, at a fair value prior to the
had said in a regulatory filing.
partial credit guarantee.
6 | 2019 | OCTOBER | BANKING FINANCE