Page 7 - Banking Finance May 2023

BANK UPDATE

spect of deposits which have not been At present, banks make provisions on Such robust growth was possible as
operated for 10 years or more was Rs incurred loss, that is, once an account bank lending to NBFCs grew 32 per
35,012 crore," Minister of State for is overdue for more than 90 days, they cent and there is a positive correlation
Finance Bhagwat Karad said. set aside capital, known as provision. between interest rate and relative
premium for PSL assets. Both these
PSBs recovered 14% of SBI to launch new variant factors augur well for securitisation
market, the agency said.
written-off loans in 5 years of current, savings ac-
"We expect the market to continue to
Public sector banks could recover only
counts grow but at a moderate pace in FY24,"
14 per cent of the written-off loans
SBI is planning to launch new variants senior directors Sanjay Agarwal and
worth Rs 7.34 lakh crore in the last five
of current account (with balances of Vineet Jain said in a note.
years ending March 2022, Parliament
Rs. 50,000 and Rs. 50 lakh) and
was informed. Of Rs 7.34 lakh crore The two main drivers of growth for the
"Parivar" (family) savings account in
written-off loans, state-owned lenders securitisation market continue to be
FY24 to minimise the gap between
recovered Rs 1.03 lakh crore, Finance the priority sector lending require-
deposit growth and credit growth.
Minister Nirmala Sitharaman said in a ment and the need to expand the re-
written reply to the Rajya Sabha. The new plans come in the wake of tail asset book.
deposit growth lagging credit growth
So, after recovery, net written-off
over the last few quarters.
stood at Rs 6.31 lakh crore in the last Banks, insurers face GST
five years. Domestic deposits of India's largest notices for fake payout
bank grew 8.86 per cent year-on-year
Replying to another question, the Fi- The Goods and Service tax (GST) au-
(y-o-y) by the end of 2022, while do-
nance Minister said non-performing thorities have issued show-cause no-
mestic advances were up 16.91 per
assets (NPAs), including, those in re- tices to 29 insurance companies, a
cent y-o-y.
spect of which full provisioning has leading private bank, around five non-
been made on completion of four SBI expects that its domestic deposits banking financial companies (NBFCs),
years, are removed from the balance- and domestic advances will grow and over 100 vendors. These entities
sheet of the bank concerned by way of about 12 per cent and 16 per cent y- were involved in paying for fictitious
write-off as per RBI guidelines and o-y, respectively, in FY24, according the services to enable the insurers to pay
policy approved by bank boards. Bank's business plan for the new finan- a bank commission that was more than
cial year.
permitted under law.
PSBs may seek pause on
An insurance company, which is part of
paying govt dividends Securitization of retail the same group as a leading private
Public sector banks (PSBs) are consid- loans increases bank, paid a significantly inflated com-
ering asking the government to allow mission to the bank by supplying them
Retail loan securitisations jumped a
them to not pay it a dividend as they with office staff to sell their insurance
robust 56% to Rs 1.76 lakh crore in the
look to conserve capital before the policies to loan borrowers. The insur-
just concluded fiscal 2023, while that
expected loss-based approach for loan ance company outsourced the man-
of wholesale rose to around Rs 6,600
loss provisioning kicks in, likely from agement of payroll and manpower to
crore, coming out of the pandemic
April 1, 2025. a multinational company (MNC) and
blues finally, says a report. The second-
deployed them at various offices of the
In January, the Reserve Bank of India ary market for standard retail assets
bank.
(RBI) released a discussion paper on has seen a robust growth of 56 per cent
the expected loss-based approach for in FY23, reflecting the resilient retail Another 28 private insurers are under
loan loss provisioning. Recently, the asset pools in the secondary market as investigation by the GST authorities for
government asked public sector banks well as the preference of banks to grow availing fraudulent input tax credit
to conduct a detailed study on the im- their retail assets to meet priority sec- (ITC) for excess commission payments
pact of such a norm on their capital po- tor lending requirements, according to to finance companies for fictitious ser-
sition. a Care Ratings analysis. vices by supplying manpower or by

BANKING FINANCE | MAY | 2023 | 7