Page 10 - Banking Finance May 2021

BANK UPDATE

The unebbing growth in deposits and "Banks have no choice but to refund value during transactions, and are tired
sagging credit growth have continued the borrowers. Each bank will have to of surfing for the next best deal. With
at least for the past one year. Industry take a hit of anywhere between Rs. this insight, we developed
experts urged that the inflow in 300-400 crore. We cannot challenge Rewards123, a consistent value-driven
deposits could be because investors are this (Supreme Court) order also. All proposition, which can be used safely
risk averse and want a certain stable other parts of the order are good. We as a separate account for digital
return from their savings. This was don't want to reopen this order. Maybe transactions."
despite the fact that except in a couple a one-time hit is okay," the banker
of state-owned banks, deposit rates stated on condition of anonymity. Bank NPAs to climb to 9.9-
have not been hiked in the recent past.
In fact, according to the reports, after Airtel Payments Bank 10.2% in FY22 as COVID-
two months of positive but near-zero 19 impact surfaces
returns in December and January, the introduces 'Rewards123' Although the banks of India reported
inflation-adjusted return stood at - savings account; offers a decline in bad loans in the December
0.03% in February for such deposits - quarter, the impact of the pandemic-
considered one of the most popular benefits on digital induced disruptions on asset quality
modes of savings for most Indians. transactions will be spread over FY21 and FY22, with
Pointing out credit and deposit growth Airtel Payments Bank has recently bad loans expected to rise to 9.9-
trends in Q3 Care Ratings said, "The announced the launch of its new 10.2% by 31 March, 2022.
increase in overall deposits can be savings account 'Rewards123' that Banks had seen their gross and net
owing to continuous outflows offers benefits and value to customers non-performing assets improve in Q3.
witnessed in equity mutual fund when they transact digitally using the Despite including pro forma bad loans
coupled with lower inflows in debt bank account. of about Rs. 1.3 trillion, gross NPA
mutual fund during the quarter under Customers can get 'Rewards123' at an ratio stood at 8.3% compared with
review, indicative of risk aversion by annual fee of Rs. 299 and avail benefits 8.6% as on March 31, 2020.
investors which could support the rise
in bank deposits." ranging from certain cashback per ICRA Limited believes that the decline
month on payments for prepaid seen till December was also driven by
recharges, post-paid, landline, loan write-offs of Rs. 1.1 trillion during
Indian banks may take a broadband, DTH bill payments, load the first nine months of FY21. Also,
Rs. 7,000 crore hit money benefits and shopping rewards. based on the restructuring guidance

Compound interest refunds for loans Other benefits include free Platinum given by various banks, the overall
above Rs. 2 crore during last year's Online Mastercard Debit Card and zero volume of recast debt is estimated at
moratorium will cost Indian lenders minimum balance. The new savings 1.3-1.5% of the advances, much lower
over Rs. 7,000 crore this quarter, given bank account offers regular benefits than initial estimates.
the government's unwillingness to throughout the year up to Rs. Anil Gupta, Sector Head (Financial
compensate them for it. 960.Customers can easily open or Sector Ratings) at ICRA, remarked that
upgrade to Rewards123 through the
The government has agreed to make while the headline asset quality and
good compound interest refunds of Airtel Thanks app using Video KYC. restructuring numbers are encouraging,
loans up to Rs. 2 crore during the Introducing the 'Rewards123' digital these do not reflect the underlying
March 1 August 31 moratorium and savings account, Airtel said that this is stress on asset quality of banks.
has already credited Rs. 6,500 crore to "designed to offer consistent value, Gupta stated, "The level of loans in
banks in this respect. However, it has with assured rewards on different overdue categories has increased after
made no commitment about the rest, types of digital transactions upliftment of moratorium and the
forcing bankers to take the hit. throughout the year." impact on asset quality will be spread
The head of a public sector bank said, Anubrata Biswas, MD & CEO, Airtel over FY21 and FY22 as various
"The Indian Banks' Association has Payments Bank, stated, "Our research interventions and relief measures have
taken up the matter with the reflected that digitally ready, time prevented a large one-time hit on
government." sensitive consumers, seek consistent profitability and capital of banks." T

10 | 2021 | MAY | BANKING FINANCE