Page 7 - Banking Finance September 2021

BANK UPDATE

Venkatachalam pointed out that Sec- MasterCard from onboarding new us- MasterCard came as a surprise to the
tion 45 empowered the government ers, Federal Bank and YES Bank are in bank.
and the RBI to amalgamate any bank discussions with Visa and RuPay to re-
with another bank to avert closure and start issuances of credit cards. Bank of Maharashtra net
loss of customers' deposits.
Both the private sector lenders had profit rises
"That is why, while hundreds of banks exclusive tie ups with MasterCard.
Bank of Maharashtra (BoM) reported a
were getting closed prior to 1960, with They have stopped onboarding of new
this amendment to Banking Regulation credit card customers following the 106% year-on-year (y-o-y) rise in net
Act, not a single commercial bank has embargo by the RBI on MasterCard profit at Rs 208 crore in the June quar-
been liquidated or closed," he pointed from acquiring new customers. ter. The bank's net interest margin im-
out, adding there was thus no question ShaliniWarrier, Executive Director, proved to 3.05% from 2.43% in the cor-
of any commercial bank getting closed Federal Bank, said the lender is likely responding quarter last year. Its net
down. The AIBEA strongly felt that the interest income increased by 29% to Rs
restart issuance of credit cards within 1,406 crore in the quarter compared to
deposits of commercial banks and, im- two months. "There are two other
portantly, public sector banks, need not Rs 1,088 during Q1FY21. Net non-per-
franchises - Visa and RuPay. We have forming assets (NPAs) fell by 188 basis
be covered by the deposit insurance
started the process with both of them points to 2.2% from 4.10% last year.
scheme, he said. and we will be back in action within
He highlighted that, year after year, the next two months. We will continue The bank's gross NPA declined to
public sector banks and all commercial with existing to bank customers and at 6.35% as on June 2021, against 10.93
banks were required to pay a huge some point move to new to bank cus- % last year. The bank's provision cov-
premium to DICGC, yet the claim ra- tomers," she said. The bank had erage ratio improved to 90.70% as
tio was nil since there was no likelihood launched credit cards for existing to against 85.62% last year. During the
quarter, the bank made Covid-19 pro-
of liquidation. The AIBEA letter high- bank customers in a digital format in
vision of Rs 285 crore, taking the total
lighted that the claim settled so far, June and had onboarded 20,000 cards
Covid provisions to Rs 1,000 crore.
since 1962, was only Rs. 5,200 crore, to date.
and that too for cooperative banks. YES Bank Managing Director and CEO The bank's operating profit grew by
The AIBEA's missive comes at a time Prashant Kumar also said the process 56% to Rs 1,110 crore. The bank's cost
when the government is looking to in- to onboardRuPay and Visa for initiat- of funds reduced by 58 basis points.
Gross advances increased by 14.46% to
crease the deposit insurance coverage ing issuance has started. "The bank has
Rs 1,10,592 crore in Q1FY22 y-o-y, with
to Rs. 5 lakh from Rs. 1 lakh at present. already signed an agreement with
the retail loans growing by 19.35% to
RuPay and will sign an agreement with
The AIBEA letter also highlighted the Rs 28,871 crore driven by rise in hous-
fact that of the 2,067 banks covered Visa within next week," he said, add- ing and vehicle loans.
by the DICGC, the 1,923 cooperative ing that they expect issuance to re-
banks were the only ones facing threats start in 90 to 120 days. Net revenues for Q1FY22 improved by
of closure and their deposits need pro- YES Bank in recent months has been 44% to Rs 2,097 crore. The bank's fee
tection. Even in their case, the pre- fairly ambitious in its credit card busi- based income increased by 68% on y-
mium should be charged only to the ness. Kumar said over the next three o-y basis to Rs 245 crore.
extent of deposits covered by insur- months, the bank would not be in a Non-interest income rose by 87% to Rs
ance, rather than the total assessable position to issue 75,000 to 1 lakh cards. 691 crore in Q1FY22. There was an
deposits, which is much higher, the "There will be no impact due to the bar improvement in the cost to income
association said. on MasterCard on existing 9,87,000 ratio to 47.05 % for Q1FY22 as against
credit cards in force. It will not impact 51.25 % for Q1FY21.
Federal Bank, YES Bank profitability of the bank in the short
discuss issuance of credit term and we will make up on the lost PSBs vacating branches
acquisition momentum in the current
cards fiscal year," he further said, adding that godsend for lenders

With the Reserve Bank of India barring the news of the embargo on The move by five public sector banks

BANKING FINANCE | SEPTEMBER | 2021 | 7