Federal Bank gains market share as PSBs stay troubled

A rising equity market has helped public sector behemoth Life Insurance Corporation of India (LIC) report a 21 per cent rise in profit from sale of investments to Rs 8,632 crore for the third quarter ended December 31, 2019. However, its provisions on impaired assets have risen too.

While most of the profits have come from sale of equities, LIC also holds older government securities at attractive price and normally holds them to maturity. The margin from equities is higher compared to debt investments.

During the December quarter, the behemoth saw

The Central Board of Direct Taxes (CBDT) will link annual appraisals and postings of field officers with their performance in terms of collection under the 'Vivad se Vishwas' scheme.

A February 21 office memorandum from the CBDT said that collection outcomes would play a bigger role in the future postings of the field officers.

The latest missive assumes significance as there have been concerns over alleged 'tax terrorism' and undue harassment of over Rs 10,000 crore of its investments from traditional and pension funds made into Yes Bank, IFCI Ltd, Dewan Housing Finance Ltd, ECL Finance, GMR Pochanpalli Express-way and IndiaBulls Housing Finance being downgraded by rating agencies while as on date Rs 66,254 crore investments from traditional and pension policies have been downgraded by various rating agencies.

LIC’s provision for doubtful assets on its longterm exposure to bonds more than doubled to Rs 12,197 crore as at December 31, 2019 compared to Rs 5,633 crore as at December 31, 2018. Similarly, on short- term investments its provisions for doubtful investments taxpayers by tax officials. .

Soon after the dispute settlement scheme was announced, the department asked the field officers to work on holidays/ Saturdays so that when the scheme is formally launched they get a headstart on the collection front.

'Vivad se Vishwas' scheme for resolving income tax cases was announced during the 2020-21 Budget presentation by Finance Minister Nirmala Sitharaman.

A target of mopping up Rs 2 lakh crore by March 31 has been set.

The scheme would formally rose to Rs 10,197 crore as at December 31, 2019 compared to Rs 7,880 crore in the corresponding period of the previous year. The bad loans in the Ulip funds amounted to Rs 431.25 crore (book value) while the provisions made were to the tune of Rs 363 crore.

Like banks, LIC too has been facing a problem of bad loans in the last several years as loans given to various municipalities, state governments, corporate houses have turned bad and have been classified as loss, sub-standard and doubtful.

Of its life fund or premium from traditional life insurance business, loans given to several state governments, municipalities and state-owned entities have gone bad. be launched on Monday, when Parliament resumes the second leg of the Budget session.

There are 4.83 lakh direct tax cases worth over Rs 9 lakh crore pending in various appellate forums— Income Tax Appellate Tribunal, high courts and the Supreme Court.

According to the memorandum, the department has told field officers that their annual performance and increments would be linked to the collection outcomes of the disputes they handle.

The memorandum has been sent to all zonal chief IT commissioners.

Kerala-based Federal Bank has gained market share while its public sector counterparts have been busy tackling rising bad loans and merger of associate banks.

Public sector banks have been reeling under pressure to reduce their nonperforming assets. Further, in the Kerala market, State Bank of Travancore was being merged with SBI along with other associate banks.

Federal Bank has utilised this opportunity to gain market share in its core Kerala market as well as outside the state.

“In the Kerala market, our market share in terms of total business has moved up from 12-13 per cent four years back to 15 per cent as of September 2019. Outside Kerala, the bank’s market share has inched up from 0.4 per cent to 0.6 per cent,’ said Shalini Warrier, executive director of Federal Bank.

In Kerala, which is largely a deposit-oriented market, its share in deposits stood at 17 per cent at the end of September. It grabbed 22 per cent of the incremental deposit growth in the market during the past three to four years.

Similarly, in the markets outside Kerala, it has market share of 0.8 per cent in credit and has doubled its share in incremental credit in the past four years.

“The NPA of PSU banks and the SBT merger have helped our growth. Simultaneously, we also undertook measures to increase our distribution through branches as well as other channels,’ said Warrier.

Federal Bank has been undertaking a ‘branchlight, distribution heavy’ strategy for the past five years. It formed a network of relationship managers to focus on areas like corporate banking and priority banking. Partnership with fintech companies, reaching out to customers through its own NBFC and thrust on digital banking have helped the bank increase its distribution network.

The bank has recently launched Retail 2.0 to focus on high margin businesses. These include auto loans, personal loans, credit card, gold loans and business banking for small and micro enterprises.

Mumbai, March 1: Bank credit growth declined to 8.5 per cent in January from 13.5 per cent in the year-ago period, led by a sharp slowdown in loans to the services sector, according to RBI data.

Growth in advances to the services sector decelerated to 8.9 per cent from 23.9 per cent in January 2019.

Bank loan growth to non-banking financial companies (NBFCs) slowed to 32.2 per cent in January from a growth of 48.3 per cent a year ago.

During the month, the personal loans segment grew by 16.9 per cent. Within personal loans, credit to the housing segment grew by 17.5 per cent from 18.4 per cent, while education loan showed a negative growth of 3.1 per cent as against a negative growth of 2.3 per cent in January 2019.

Advances growth to agriculture and allied activities contracted to 6.5 per cent from 7.6 per cent rise last year.

Credit growth to industry decelerated to 2.5 per cent from 5.2 per cent.

By the latest quarterly statistics on deposits and credit of banks, bank loan growth decelerated to 7.4 per cent in the October-December, 2019 from 12.9 per cent the year-ago quarter.