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Showing posts with label SME. Show all posts
Showing posts with label SME. Show all posts

Saturday, 29 October 2016

18:21

SME and retail sectors next bubble says Shikha Sharma

SME and retail sectors next bubble says Shikha Sharma

“The retail and medium-sized enterprises sectors have been showing credit demand but the banking industry is worried that they could be the next bubble”, said Axis Bank’s Managing Director & CEO, Shikha Shikha Sharma. Shikha Sharma also pointed out that credit growth to the corporate sector has been relatively weak and that working capital demand from the sector has also decreased considerably. Explaining the point, Shikha Sharma said that corporate India has not seen any new projects coming up in the past eighteen months. Hence, working capital demand had also declined.

Shikha Sharma further explained that the reason for the slow growth was that there was a base effect issue as large project funding had taken place three years back. On the brighter side, Shikha Sharma said that there was a lot of headroom for growth in the retail sector and that Axis Bank continued to be optimistic in that regard. Shikha Sharma also added that the corporate credit sector would bounce back, along with investments.

Axis Bank is the third largest private – sector bank in India offering a comprehensive suite of financial products. Headquartered in Mumbai, the bank has 2,959 branches, 12,743 ATMs and nine international offices! The bank employs over 50,000 people and has a market capitalization of ₹1.0583 trillion (US$16 billion) as on September 31st, 2016. It offers the entire spectrum of financial services to customer segments, spanning large and mid-corporates, SME, and retail businesses. Axis Bank has its registered office in Ahmedabad.

The corporate IT sector is the main engine driving the Indian economy’s growth. The lack of new projects for the past eighteen months is a worrying factor. Without new projects, working capital demand from the corporate sector (like IT) will decline thereby affecting the banking sector as well. Loss of jobs is also a possibility in both the sectors, as a result. The government of India should aid the private and public sector banks in giving capital to the corporate sector even after a large project funding has taken place thereby preventing a base effect issue. It should also negotiate with foreign countries and keep new projects coming to the IT industry to enable it to grow, generate jobs and employ more and more people. It should also encourage existing giants and startups in the IT industry to develop new technology and innovative projects so that, India need not completely rely on outsourced foreign projects. If the government of India takes the above mentioned steps, the Indian economy will bounce back from the brink. 

Source:Indianceo 
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Thursday, 11 August 2016

07:59

Cooperation between European promotional banks

Cooperation between European promotional banks

Already after the fall of the Berlin Wall, the approach of the German promotional bank KfW became a role model for similar institutions in Southern and Eastern Europe. In Hungary, Croatia and the Baltic States for example KfW advised the respective governments on setting up a promotional bank or developing SME programmes. KfW still today is cooperating with European funding institutions to promote growth in Europe.

New initiative supports European Securitisation Market

In July 2016 the European Investment Fund (EIF) and several National Promotional Institutions (NPIs) have launched the "EIF-NPI Securitisation Initiative" (ENSI) aiming at providing more funding to small and medium-sized enterprises (SMEs) via the capital markets.

The objective of this cooperation is joint participation in SME securitisation transactions in order to stimulate the availability of finance to SMEs in Europe by revitalizing the SME securitisation market and to catalyse resources from the private sector in the spirit of the European Fund for Strategic Investments in order to achieve a much wider outreach in support of SMEs. The working group defines standard procedures and minimum criteria under which the respective promotional institutions are generally willing to participate in securitisation transactions and beyond that, it also discusses with the European Commission the option to deploy funds out of the European Fund for Strategic Investments for this purpose.

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Wednesday, 27 April 2016

08:03

DBS aims to woo retail customers by launching mobile-only bank

DBS aims to woo retail customers by launching mobile-only bank

Singapore-based DBS Bank, hitherto focusing on the affluent segment, has decided to shed that tag and instead go for mass-market retail (individual) customers.
To woo this segment, it has launched a mobile-only bank. It says this will be completely paperless and branchless, allowing customers to open accounts by using their Aadhaar card, the biometric authentication, at various companies it makes arrangements with. At present, it has tied up with 500 Café Coffee Day outlets.
To expand the customer base, the bank will be offering seven per cent annual interest (no minimum balance required) on a savings account, higher than the five per cent it was offering till now, and free cash withdrawal across all ATMs.
Piyush Gupta, chief executive officer, says the reduced cost in investments with this mobile-only bank will allow them to offer a high savings interest rate and other benefits. At present, the bank’s cost to income is 55 per cent in India. It aims at bringing this down to its global average of 45 per cent.
“We want to build a liability book of Rs 50,000 crore and an asset book of Rs 10,000 crore in the next two to three years on this platform. We are also aiming to have about five million savings accounts in the next five years,” said Gupta.
Over the past three-odd years, he said, the bank had invested about $500 million globally for a digital transformation. Investments made specifically into India weren't disclosed. India is the first country where they've launched the mobile-only bank and the lender will be taking it to other markets, too.
This comes as the bank awaits clearance from the Reserve Bank of India to convert into a wholly-owned subsidiary (WOS) in the country. The application was in April last year.
“We want to become a subsidiary in India so that we can grow and focus on the small and medium enterprise (SME) business, a very small portion (for it) in India till now. Globally, 17-18 per cent is SME banking, 20 per cent is corporate and the rest is retail,” said Surojit Shome, chief executive, DBS India.
Once the bank gets approval for WoS, they are looking at scaling up the branch network to 60-70 in the next four years. At present, the bank has 12 branches. Gupta said the Indian operations account for about five per cent of the total book. So far, the lender has invested Rs 6,500 crore into India. It infused Rs 1,700 crore of tier-2 capital in the past two years and Rs 670 crore of tier-1 capital in FY16.
The need for tier-i capital infusion, said Shome, was was at an elevated level to compensate for the erosion due to a rise in bad loans in the past couple of years.
“We had some portfolio challenges, which have been cleared, and are looking at returning to marginal profitability in FY16,” said Gupta. In FY15, the bank's loss was Rs 275 crore, on the back of higher provisioning.

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Thursday, 11 February 2016

11:25

Top 10 groups that figure in the ‘House of Debt’ are Essar, Reliance ADAG, Adani, GMR, GVK, Lanco, Jaypee, JSW, Videocon and Vedanta.

Top 10 groups that figure in the ‘House of Debt’ are Essar, Reliance ADAG, Adani, GMR, GVK, Lanco, Jaypee, JSW, Videocon and Vedanta.

Start repaying bank loans, Govt tells corporate majors

TAKING a tough stance to address the bad loan crisis, the government has asked about a dozen big corporate groups — some of the biggest borrowers from public sector banks — to start repaying loans at the earliest by selling off their non-core businesses.

“If we declare them as defaulters or classify their borrowings as bad loans, the market will smell ‘distress’ on any asset they want to sell. We have spoken to some of them and asked them to start paying back over the next couple of months,” a senior government official told The Indian Express.

The official said, “We all know who these industrialists are, and how much they have borrowed.” According to the official, loans taken by companies in the small and medium enterprise (SME) segment make up a bulk of the public sector banks’ non-performing assets.

A Credit Suisse report in October 2015 that analysed the debt of top 10 corporate houses said their combined borrowings had touched Rs 7,33,545 crore, 16 per cent more than in 2013. The 2013 report, called ‘House of Debt’, had estimated their cumulative debt at Rs 6,31,024 crore. The rising stress, it said, was visible in multiple instances of default over the past year.

The top 10 groups that figure in the ‘House of Debt’ are Essar, Reliance ADAG, Adani, GMR, GVK, Lanco, Jaypee, JSW, Videocon and Vedanta.

“The promoters of some of these companies have conveyed to the government that they are in the process of selling their assets to pay back. Jaypee and Reliance ADAG, for instance, have met senior government functionaries stating their intent to show meaningful progress in repaying the debt,” another official, who did not wish to be named, said.

The government, at its highest level, is tracking the loan recovery progress in banks. “We are keen that stalled projects are revived. We understand that some corporates had over-expanded and some suffered due to policy logjam during the last years of the previous government,” the official said.

Source:BankingNews
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Sunday, 27 December 2015

09:52

Peer to peer lending is where China has to get smart

Peer to peer lending is where China has to get smart

An overly regulated structure will not help get funding to those who need it most

In October, China’s leaders revealed details of the 13th Five-Year Plan, which will guide the economy’s trajectory until 2020.

Gone are the directives to expand industrial production at a breakneck pace that characterised previous five-year plans. Now, the focus is on achieving sustainable long-term growth, underpinned by domestic consumption, a stronger services sector, entrepreneurship, and innovation.

The internet — which already has more than 680 million active users in China — will play a key role in facilitating this shift. In particular, online peer-to-peer (P2P) lending, a streamlined approach to credit allocation, may hold the key to expanding and deepening China’s financial sector, enabling firms to grow and innovate, and bolstering domestic consumption.

In online P2P lending, individual (and, lately, institutional) investors provide funds that can be lent out to individual borrowers, without involving a traditional financial intermediary. Loans can range from 100 yuan (Dh56.83, $16) to 1 million yuan, and target small and medium-size enterprises (SMEs), as well as individual borrowers, that currently struggle to access credit through traditional institutions.

Over the last three years, China’s P2P lending sector has been growing annually at an astounding average rate of 245 per cent, with its total value reaching 253 billion yuan last year. China now has more than 2,000 registered active P2P loan platforms, up from just 50 four years ago.

Even so, P2P lending still accounts for just a small fraction of overall lending in China. Last year, total loans issued through peer-to-peer networks were equivalent to just 1.5 per cent of the 15.1 trillion yuan in consumer loans issued by Chinese banks.
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Friday, 25 September 2015

09:20

IDFC Bank targets 15 million customers in five years

IDFC Bank targets 15 million customers in five years

New private sector lender IDFC Bank will flag off its operations on October 1, with 23 branches for corporate and rural customers. Starting with a predominant share of corporate banking business, IDFC's banking subsidiary expects to grow the business of Bharat banking, a rural banking unit, to Rs 15,000 crore in five years.

Its personal and business banking unit focusing on retail, small and medium enterprises (SMEs) and self-employed professionals, will start operations, in January 2016. Rajiv Lall, the bank's executive vice-chairman and managing director, said the aim is to grow the client base from the current 400 corporate customers to 15 million in the next five years, a bulk of whom will come from business and personal banking and Bharat banking. Bandhan Bank, which got a banking licence around the same time as IDFC, started operations in August.

IDFC Bank is aiming at 10-15 per cent net profit growth and will rely on technology for customer acquisition rather than open branches across India. IDFC Ltd posted a net profit of Rs 240.88 crore for the June quarter this year.

Lall said the economy was coming out of a very difficult period after the global financial crisis and amid stress on bank balance sheets. Over the last year, the economic environment in India has seen steady improvement and the bank would like to gain from this momentum.

The bank will have a balance sheet of Rs 75,000-80,000 crore initially. Out of this the loan book, mostly infrastructure advances, will be in the region of Rs 55,000 crore and the balance will comprise bonds, corporate bonds and investments. It will be compliant with the statutory liquidity ratio and cash reserve ratio norms from day one, he added.

Commercial and wholesale banking, headed by Ajay Mahajan, will have an overbearing share in the loan book as well as bottom-line contribution. "We were offering term loans till date as infra lender. Now as a bank, we will be in position to give working capital, guarantees and letters of credit. Five years down the line, the bank expects the corporate segment to have two-thirds share in the loan book," Lall said.

The business will have three clusters - corporate, treasury services and government business. It expects the government business to ensure a steady flow of fee income and float money.

Bharat banking, backed by strong technology as well as brick and mortar banking, will start with 15 branches in Madhya Pradesh. Though this is a thrust area, its share in loan book is expected to be small. The emphasis would be on reaching the maximum number of customers with less investment on physical infrastructure.

Personal and business banking will be the last to start operations as the bank will first like to fine-tune its technical and service backbone. This business will start from January 2016 and would aggressively reach out to self-employed middle class professionals like architects, wedding planners and caterers. They generally create the maximum job opportunities, Lall said.

Lall said feedback surveys done by the bank in the run-up to the launch showed "no one likes bankers as there is a widespread perception that bankers are product pushers and less of solution providers". This is where IDFC Bank will like to stand out in services and offering, Lall said.

 Source :Business Standard.
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