VisVoice

AMALGAMATION: WAS IT THE ONLY OPTION FOR LVB?   On 20 th  Nov 2020, I wrote on the amalgamation of LVB with DBIL (https://viswoice.blogspot.com/2020/11/amalgamation-of-lvb-with-dbs-bank-india.html) Since then, the draft scheme of RBI has been notified by the Central Government, which came into effect  from 27th Nov 2020. Much against the hopes of the shareholders of LVB, the draft scheme is implemented without a change. The shareholders' investments in the equity, including the share premium paid by them in the last rights issue in Jan 2018 and the Tier II bonds that carried loss absorption clauses as per Basel III norms, were fully written off. Naturally anguished, the shareholders of LVB filed writ petitions before the High Courts of Bombay and Madras.  While Bombay High Court refused an interim stay and posted the case for further hearing, Madras High Court gave certain directions to the respondents for t...

  Amalgamation of LVB with DBS Bank India Important: While I finished this article, I received some pertinent questions in one of the whatsapp group comprising directors and top officials from reputed companies and banks. I gave my views on them.   I have reproduced them after this article.   One or two responses therein might have figured in this article also.   I did not want to edit either the article or my responses. Request you to please go thro’ both Reserve Bank of India (RBI) superseded the board of Lakshmi Vilas Bank (LVB) and proposed a draft scheme of amalgamation with DBS Bank India (DBIL). The bank is placed under moratorium for a period of 30 days and the depositors can withdraw in cash up to Rs.25000 during the moratorium period.   As per the draft scheme, RBI ensured protection of a.        All the depositors of the bank (Rs.20,000 cr) b.       Investors in lower Tier II Bonds (Rs.348...

  Co-Lending by Banks and NBFCs to Priority Sector ‘Co-Origination of loans’ Scheme for joint lending by banks and NBFCs to the borrowers in priority sector was introduced by RBI in Sep 2018. The arrangement entailed joint contribution of credit at the facility level by both the lenders as also sharing of risks and rewards. The scheme, now named as “Co-Lending Model” (CLM), has been revised significantly, as the original scheme did not take off in a great way. It aims to make available loans at affordable costs to beneficiaries in the un-served and under-served sectors of the economy, by integrating the low cost funds available in the banks with the greater reach of the NBFCs in these areas. The scheme also enables greater operational flexibility to the lending institutions, while requiring them to conform to the regulatory guidelines on outsourcing, KYC, etc. Why New Name:  To clear any misunderstanding as to who should originate, the name has been changed to co-lending. ...

Use of enhanced DICGC cover for deposits In promotion materials Recently, I come across ‘the increase in DICGC Cover on deposits’ being used by Jana Small Finance Bank and Suryoday Small Finance Bank in their promotion/information materials. Per se, nothing factually wrong in their exhibits about the DICGC cover and how it can be maximised (based on FAQs published by DICGC) by individual depositors. But the question is, can the insurance for depositors, which is available only in the event of liquidation by a bank, be used in fixed deposit canvassing? In the light of enhancement in deposit insurance cover from Rs. 1 lac to Rs.5 lacs, many other banks might also be already using a strategy like this or may follow suit. (As per DICGC site, after the enhancement in coverage, 50% of assessable deposits and 91% of total no. of deposits with the banks, are now protected deposits).   It is possible that  banks in desperate need of funds in future, while offering higher rate interest ...

  RBL Bank’s Growth and Financials : Some Thoughts RBL Bank is among the few private sector banks in India that grew their balance sheet substantially in the last five years. Post IPO 2016, the bank’s presentation included a ‘vision 2020’ statement, as per which goals were fixed for each FY up to Mar 2020 for achieving o    CAGR (compound annual growth rate) of 30-35% under loans and o    non-interest income to contribute at least one third of net total income The achievements for the respective quarters/years in relation to the set goals was made part of the bank’s presentation to the investors.   Growth Story: To the credit of the bank, it achieved a CAGR of 29% in the period FY 2016- 2020 under advances (CAGR of 37% for the period FY 2016-FY 2019 and a y-o-y growth of 7% for FY 2020 over FY 2019). It also surpassed the non-interest income by achieving a CAGR of 36% in the above period. As can be seen from the table below, deposit and advances ...