Highlights of Special GOI Package of Rs 20 lakh crores for Atmanirbhar Bharat (COVID-19)

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The package works out to roughly 10 per cent of the GDP, making it among the most substantial in the world.

Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by the Govt. of India, for relief and credit support related to businesses, especially MSMEs to support Indian Economy, Atmanirbhar Bharat and to fight against COVID-19.

GOI Presentation on Rs. 20 Lac Crore Special Package: AtmaNirbhar Bharat (COVID-19)

Hon’ble Prime Minister Shri Narendra Modi yesterday announced a Special economic and comprehensive package of Rs 20 lakh crores, equivalent to 10% of India’s GDP. He gave a clarion call for आत्मनिर्भर भारत अभियान or Self-Reliant India Movement. He also outlined five pillars of Aatmanirbhar Bharat– Economy, Infrastructure, System, Vibrant Demography and Demand.

During the press conference here today, Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman said in her opening remarks that Prime Minister Shri Narendra Modi had laid out a comprehensive vision in his address to the Nation yesterday. She further said that after spending considerable time, the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of economic package in fight against COVID-19.

“Essentially, the goal is to build a self-reliant India that is why the Economic Package is called Aatma Nirbhar Bharat Abhiyaan. Citing the pillars on which we seek to build Aatma Nirbhar Bharat Abhiyaan, Smt. Sitharaman said our focus would be on land, labour, liquidity and law.

The Finance Minister further said that the Government under the leadership of Prime Minister Shri Narendra Modi has been listening and is a responsive Government, hence it is fitting to recall some reforms which have been undertaken since 2014.

“Soon after Budget 2020 came COVID-19 and within hours of the announcement of Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced,” Smt. Sitharaman said. She further said that we are going to build on this package.

“Beginning today, for the next few days, I shall be coming here with the entire team of the Ministry of Finance to detail the Prime Minister’s vision for Aatma Nirbhar Bharat laid out by the Prime Minister yesterday,” Smt Sitharaman said.

Smt. Nirmala  Sitharaman today announced measures focused on Getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment. Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to real estate sector were also covered.

Over the last five years, the Government has actively taken various measures for the industry and MSME. For the Real Estate sector, the Real Estate (Regulation and Development) Act [RERA] was enacted in 2016 to bring in more transparency into the industry. A special fund for affordable and middle income housing was set up last year to help with the stress in this segment. To help MSMEs with the issue of delayed payment by any Government department or PSUs, Samadhaan Portal was launched in 2017. A Fund of Funds for startups was set up under SIDBI to boost entrepreneurship in the country and various other credit guarantee schemes to help flow of credit to the MSMEs.

Key Highlights of the Special economic and comprehensive package of Rs 20 lakh crores Announced by Govt. of India (COVID-19)

a) Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs

To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

b) Rs 20,000 crore Subordinate Debt for Stressed MSMEs

Provision made for Rs. 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

c) Rs 50,000 crores equity infusion through MSME Fund of Funds

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

d) New definition of MSME

Definition of MSME will be revised by raising the Investment limit. An additional criteria of turnover also being introduced. The distinction between manufacturing and service sector will also be eliminated.

e) Other Measures for MSME

e-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.

f) No Global tenders for Government tenders of up to Rs 200 crores

General Financial Rules (GFR) of the Government will be amended to disallow global tender enquiries in procurement of Goods and Services of value of less than Rs 200 crores.

g) Employees Provident Fund Support for business and organised workers

The scheme introduced as part of PMGKP under which Government of India contributes 12% of salary each on behalf of both employer and employee to EPF will be extended by another 3 months for salary months of June, July and August 2020. Total benefits accrued is about Rs 2500 crores to 72.22 lakh employees.

h) EPF Contribution to be reduced for Employers and Employees for 3 months

Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months. This will provide liquidity of about Rs.2250 Crore per month.

i) Rs 30,000 crores Special Liquidity Scheme for NBFC/HFC/MFIs

Government will launch Rs 30,000 crore Special Liquidity Scheme, liquidity being provided by RBI. Investment will be made in primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and MFIs. This will be 100 percent guaranteed by the Government of India.

j) Rs 45,000 crores Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs

Existing Partial Credit Guarantee scheme is being revamped and now will be extended to cover the borrowings of lower rated NBFCs, HFCs and other Micro Finance Institutions (MFIs). Government of India will provide 20 percent first loss sovereign guarantee to Public Sector Banks.

k) Rs 90,000 crore Liquidity Injection for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal instalments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

l) Relief to Contractors

All central agencies like Railways, Ministry of Road Transport and Highways and CPWD will give extension of up to 6 months for completion of contractual obligations, including in respect of EPC and concession agreements.

m) Relief to Real Estate Projects

State Governments are being advised to invoke the Force Majeure clause under RERA. The registration and completion date for all registered projects will be extended up to 6 months and may be further extended by another 3 months based on the State’s situation. Various statutory compliances under RERA will also be extended concurrently.

n) Tax Relief to Business

The pending income tax refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership and LLPs and cooperatives shall be issued immediately.

o) Tax related measures

Reduction in Rates of ‘Tax Deduction at Source’ and ‘Tax Collected at Source” – The TDS rates for all non-salaried payment to residents, and tax collected at source rate will be reduced by 25 percent of the specified rates for the remaining period of FY 20-21.This will provided liquidity to the tune of Rs 50,000 Crore.

The due date of all Income Tax Returns for Assessment Year 2020-21 will be extended to 30 November, 2020.  Similarly, tax audit due date will be extended to 31 October 2020.

The date for making payment without additional amount under the “Vivad Se Vishwas” scheme will be extended to 31 December, 2020.

Notification for reduction in rate of TDS & TCS

Micro-finance rebound shows rural India recovering from demonetisation

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The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities and an Indian unit of HSBC Holdings in analysis that contrasts to the distress that’s swept the farming sector

India’s vast rural hinterland, which makes up 70% of the country’s population, is showing signs of recovery from last year’s cash crunch, boosting optimism that increased spending will help the broader economy regain its vigour.

The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities Ltd and an Indian unit of HSBC Holdings Plc in analysis that contrasts to the distress that’s swept the farming sector.

“We believe repayments and improved collection trends have increased the confidence of companies to start disbursing loans at a healthy pace again,” Mumbai-based Alpesh Mehta and colleagues wrote in a report from Motilal Oswal.

India’s micro-finance industry, which provides small loans to entrepreneurs and business owners who have little collateral, was slammed when the government withdrew high-denomination bank notes from circulation late last year in a bid to stamp out corruption. And while farmers have taken to the streets across India to protest plunging food prices, labourers who get paid a wage to work the land have actually seen their incomes rise after last year’s good monsoon, the HSBC economists wrote.

Loan collection rates in Uttar Pradesh, India’s largest and most populous state, are largely back at about 98% levels, up from less than 50% after demonetisation, Mehta, Piran Engineer, and Subham Banka said in their 3 July note. Other major states such as Karnataka are displaying “much improved collection trends,” they said.

Micro-finance disbursements, which grew 13% last year compared with 80% the prior year, are expected to return to pre-ban levels in three to six months, according to Motilal Oswal.

Gold loan company Manappuram Finance Ltd has risen 68% from its low after demonetisation in November and Bharat Financial Inclusion Ltd, India’s largest listed micro-finance firm, has rebounded 64% over the same time frame.

However, the state of Maharashtra, home to India’s financial capital, Mumbai, is lagging other states and continues to face delinquency pressures, with about 20% of loans unpaid 90 days past due, according to Motilal Oswal.

Interactions with micro-finance companies reveal no expectation of disruption from the rise of farm loan waivers in Indian states but instead a focus on the effects of demonetisation, the report said. Microfinance Institutions Network—India’s largest group of microfinance firms—reported that “demonetization severely impacted the micro-finance business in multiple ways including slowing down of growth due to non-availability of cash for a few months.”

Motilal intends to observe delinquency trends for a few more quarters before reaching conclusions over the impact of waivers on micro-finance. Maharashtra, Punjab, Uttar Pradesh have all announced, waiver programs.

The rise in credit growth at the micro-finance level is complemented by a rise in rural incomes and purchasing power, according to HSBC Securities and Capital Markets (India) Pvt. Ltd.

“Macro indicators have improved” in rural India, HSBC economists Pranjul Bhandari, Aayushi Chaudhury, and Dhiraj Nim said in their 10 July note. The plunge in inflation has helped boost annual real income growth to just under 4% from contracting levels a year ago while rural unemployment has sunk from about 9% last September to around 4%, according to HSBC.

Normal rains so far in 2017 and a bumper crop in 2016 after a two-year drought have generated more jobs for rural Indians who work the land—some 70% of rural households who are “landless, according to HSBC.

That’s help pushed up two-wheeler sales and the production of consumer non-durables in this segment, according to the HSBC report. Shares of companies with substantial rural customer bases are experiencing steady growth.

While falling farm prices have hit many rural Indians hard, they have also boosted purchasing power and consumption among the population which could help a broader recovery in the Indian economy that’s suffering from a slowdown in growth, soured loans and weaker manufacturing sector.

Source: http://www.livemint.com/Industry/CANuZ2YGAYheLS4lgPR4dO/Microfinance-rebound-shows-rural-India-recovering-from-demo.html

Bandhan Bank reports FY17 profit at Rs1,111.95 crore

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Bandhan Bank’s net interest income stood at Rs 2,403.50 crore in the financial year 2017

Bandhan Bank on Thursday reported a net profit of Rs1,111.95 crore for the financial year that ended on 31 March. A comparable year-ago figure wasn’t available because the lender started operations only in August 2015.

Net interest income, or the core income a bank earns by giving loans, was Rs2,403.50 crore. Gross advances were Rs23,543.29 crore and deposits stood at Rs23,229 crore.

Current and savings accounts at the end of the March quarter made up 29.43% of deposits. Bandhan Bank’s capital adequacy ratio, an indicator of financial strength expressed as a ratio of capital to risk-weighted assets, was 26.36%. The bank has 840 branches and 10.5 million customers.

Bandhan Bank, which converted from a microfinance institution to a full-fledged lender, kept its focus on borrowers who make up more than 90% of its loan book. Going forward, the bank intends to diversify into affordable housing and loans to micro enterprises.

According to Chandra Shekhar Ghosh, founding managing director and chief executive officer of Bandhan Bank, deposit and credit growth for the bank will continue to grow at 30%.

In the financial year 2016-17, the bank sold inter-bank participatory certificates worth Rs6,704.21 crore, which helped the bank boost its net interest margin.

The net interest margin, the difference between the rate a bank charges for loans and pays for deposits, for the year was close to 10%.

Under the inter-bank participatory certificates arrangement, banks can sell a part of their portfolio to other banks that are short of their targets for lending to the priority sector that includes agriculture and small businesses.

Source: http://www.livemint.com/Companies/SQyBR1lyNbg2sKNrL42ELM/Bandhan-Bank-reports-FY17-profit-at-Rs111195-crore.html

India Inc’s March M&A deal tally jumps 4-fold to $28 billion

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India Inc’s M&A deal tally in March rose four-fold to $27.82 billion, led by the Vodafone-Idea merger, taking the overall figure to $31.54 billion in the first quarter of 2017, says a report.

Overall deal activity in the January-March quarter witnessed an unprecedented three-fold year-on-year rise in value terms, driven solely by the Vodafone-Idea mega merger, which accounted for 80 per cent of the total values.

“The Indian deal activity was dominated by big-ticket mergers and acquisitions (M&As) this quarter. The quarter witnessed one of the largest deals in the country with Vodafone and Idea’s merger, which is estimated at around $27 billion,” Grant Thornton India LLP Partner Prashant Mehra said.

The January-March quarter recorded $33.7 billion across 300 deals marking a sharp increase in value as compared to $10.9 billion in the same period last year while volumes declined by 27 per cent.Without the Vodafone-Idea mega merger, estimated to be a $27 billion transaction, the deal activity would have recorded 39 per cent decline in values, assurance, tax and advisory firm Grant Thornton said.

M&A market activity has so far been driven solely by the big-ticket deals, while on the other hand number of transactions continued to slip for the third straight quarter.

“Primary driver for M&A growth was consolidation in the domestic market with deal values growing by 10 times on the back of healthy capital markets and easing credit conditions. This enabled companies strike big ticket deals either to slash debt or consolidate market share,” Mehra said.

Meanwhile, the cross-border deal activity is yet to pick up pace in 2017 as compared to previous quarters due to looming uncertainties in the global economy.

Going forward M&A activity this year is expected to stay positive owing to the sustained interest in Indian economy.

Mehra believes consolidation and expansion is set to be the major theme that will drive the deal activity, especially in healthcare, telecom, e-commerce and infrastructure sectors.”In financial services sector, the possibility of new business models emerging post demonetisation, continued fund raising by NBFCs and a consolidation push by micro finance firms will play a big role,” he added.

Source:   http://economictimes.indiatimes.com/articleshow/58160464.cms

Small loans, big impact: Microfinance now big business at banks

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High margins and volumes are two reasons why banks are exploring the market in thrift credit

From being passive lenders to microfinance institutions (MFIs) till about five years earlier, banks have turned out to be active players in the business of small loans.

 

As on end-December 2016, banks accounted for 37 per cent (Rs 36,683 crore) of microfinance portfolio of Rs 98,625 crore; five years earlier, a handful of MFIs accounted for more than half.

 

High margins and volumes are two reasons why banks are exploring the market in thrift credit.
Most of them in MFI lending are private sector ones. A majority of this portfolio is with 11 banks — Axis, Bandhan, DCB, Equitas, HDFC, ICICI, IDFC, Kotak Mahindra, RBL and YES.

 

This apart, several public sector banks have increased their MFI exposure, through business correspondents (BCs).

 

“We see a lot of synergies with the microfinance sector. More, it is quite well-regulated and growing at a fast rate, providing a lot of business opportunities,” said an official in charge of a bank’s microfinance operations.

 

Also, over the past 18 months, banks have also been aggressive in taking equity stakes in MFIs. Last year, Kotak Mahindra Bank acquired Bengaluru-based BSS Microfinance.

 

chart

RBL acquired 10 per cent in Utkarsh Micro Finance, which recently graduated into a small finance bank (SFB).

 

In July last year, IDFC Bank acquired Trichy-based Grama Vidiyal Microfinance, its second deal in the MFI space. Earlier, IDFC had taken 10 per cent in east-based ASA International India Microfinance.

 

In March last year, DCB Bank had acquired a 5.81 per cent stake in Odisha-based Annapurna Microfinance. Earlier, RBL had acquired 30 per cent in Swadhaar FinServe, a company acting as a BC.

 

Non-banking financial companies (NBFCs) have also shown interest. In 2015, Manappuram Finance had acquired Asirvad Micro Finance, a Chennai-based NBFC-MFI.

 

With a number of MFIs graduating to SFBs, the number in the MFI space is likely to further increase. And, even after graduating into a bank, they are likely to keep much of their lending to microfinance. Bandhan Bank, earlier an MFI, has even after close to two years into operation as a bank still got over 80 per cent of its lending portfolio concentrated in microfinance.

 

“Over the past three years, banks have shown a high level of interest in microfinance, part of a diversification strategy. Also, at least for two to three years, the new SFBs are likely to focus on microfinance as they build their deposit base,” says Ratna Vishwanathan, chief executive officer, Microfinance Institutions Network.

 

Seven of the proposed SFBs, some of which have transformed to a bank, together account for 46 per cent of the MFI portfolio, amounting to Rs 26,228 crore.

 

Source: http://www.business-standard.com/article/finance/small-loans-big-impact-microfinance-now-big-business-at-banks-117031300020_1.html

India’s microfinance industry clocked 60% growth in fiscal 2016: Report

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After years of subdued growth, the Indian microfinance (MFI) industry expanded more than 60% to Rs54,329 crore in 2015-16 compared to the previous year, according to a report prepared by Sa-Dhan, the self regulatory organisation of MFIs.

The MFI client base expanded by 2.8 million in the year, taking the total number of clients to 39.9 million, said the report. This growth was despite the fact that Bandhan, which was the largest MFI, moved out of the space to become a full fledged bank.

The top 10 MFIs classified as non-banking financial companies (NBFCs) accounted for about 80% of the total gross loan value, the report said. They include Janalakshmi Financial Services Ltd, Ujjivan Financial Services Ltd and SKS Microfinance Ltd.

“Attaining over 28 lakh clients is no mean feat. This goes on to show that the microfinance industry, having reached its inflection point, is growing steadfastly,” P. Sathish, executive director of Sa-Dhan, said.

The MFI sector experienced a crisis after Andhra Pradesh, the biggest market for small loans made to the unbanked poor and self-employed, in 2010 clamped down on micro lenders.

The state government tightened regulations governing MFIs after reports surfaced that coercive loan recovery practices by the lenders had driven some overextended borrowers to commit suicide. That led to a shrinking of the asset base of the microfinance industry and a surge in bad loans.

Of the total client base of 39.9 million, the southern region alone contributed to 39% of the total client base. Kerala and Karnataka now have the maximum number of MFI branches.

The growth in this sector is also due to Reserve Bank of India allowing many NBFC-MFIs to act as banking correspondents (BCS) connecting commercial banks with customers in small towns and rural areas.

“The MFIs are finding the BC model rather attractive on the credit side,” Sathish added.

The report also claims that 94% of the total loans taken from MFIs are for income generating activities, dominated by agriculture and animal husbandry.

Source: http://www.livemint.com/Industry/4Zb0zp5yOh0toqEdBFz4jL/Indias-microfinance-industry-clocked-60-growth-in-fiscal-2.html

Microfinance lending hits $10 billion

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India’s microfinance industry is close to touching the $10-billion mark with the total loan portfolio of microfinance institutions (MFIs) at an all-time high of Rs. 63,853 crore as of March 31, 2016.

This represents a 31 per cent increase over the Rs. 48,882 crore loan portfolio as of end-March 2015, the Bharat Microfinance Report 2016 showed. The share of NBFC-MFIs stood over 88 per cent, followed by Societies and Trusts at 9 per cent. Nearly 88 per cent of the portfolio is held by MFIs with a portfolio size above Rs. 500 crore. The Bharat Microfinance Report 2016 — published by self-regulatory organisation Sa-Dhan — was released by Reserve Bank of India Executive Director US Paliwal and SIDBI Chairman and Managing Director Kshatrapati Shivaji in the Capital on Wednesday. The sector witnessed a healthy growth in client base with over 28 lakh new members taking the total number of clients to over 399 lakh. But the average loan per borrower of Rs. 11,425 is less than previous year’s Rs. 13,162.

MFI loan portfolio continued to grow at a good clip despite Bandhan, which was then the largest MFI, becoming a bank. If Bandhan’s loan portfolio of Rs. 9,524 crore of 2014-15 is excluded, then the growth rate of the MFI sector between 2014-15 and 2015-16 is over 60 per cent, said P Satish, Executive Director, Sa-Dhan.

“Despite Bandhan going out of the microfinance space, the sector witnessed strong growth. Attaining over 28 lakh clients is no mean feat. This goes to show that the microfinance industry, having reached its inflection point, is growing steadily,” Satish added.

Satish, however, expressed some concern over 13 MFIs recording over 100 per cent growth rates. He also said that MFIs are finding the business correspondent model rather attractive on the credit side.

If Bandhan’s loan portfolio of Rs. 9,524 crore of 2014-15 is excluded, then the growth rate of the MFI sector between 2014-15 and 2015-16 is over 60 per cent: Sa-Dhan ED

 

Source: http://www.thehindubusinessline.com/todays-paper/tp-money-banking/microfinance-lending-hits-10-b/article9108686.ece