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Business Standard
6 days ago
- Business
- Business Standard
Select PSU banks gain in weak market; Canara, Union, BOB surge up to 3%
Public sector banks' price movement today Shares of select public sector banks (PSBs) were trading higher by up to 3 per cent on the National Stock Exchange (NSE) in Monday's intra-day trade in an otherwise weak market. Canara Bank, Union Bank of India, Bank of Baroda, Indian Bank, Punjab National Bank, Bank of India and State Bank of India (SBI) were up in the range of 1 per cent to 3 per cent in intra-day trade. Around 12 PM, these stocks are trading higher by up to 1 per cent. At the same time, the Nifty PSU Bank index was up 0.45 per cent, as compared to a 0.43 per cent decline in the Nifty 50. The PSU Bank index has gained nearly 2 per cent in intraday trade on Monday. The Nifty PSU Bank Index is designed to reflect the performance of the public sector banks. What's driving PSU bank stocks? According to a media report, Finance Ministry officials are discussing increasing the cap on foreign direct investment (FDI) in public sector banks. Officials from the Finance Ministry and central bank are discussing a variety of possible options, including authorising large companies to apply for banking licenses as long as they limit their shareholdings, incentivising non-bank finance companies to acquire full banking permits, and make it easier for foreign investors to raise stakes in state-run banks, Bloomberg reported. MSME credit growth picks up As per media reports, public sector banks have stepped up lending to new and lower-rated Micro, Small & Medium Enterprises (MSMEs), leveraging government guarantee schemes like Credit Guarantee Fund for Micro Units (CGFMU) and Emergency Credit Line Guarantee Scheme (ECLGS), which together cover ₹6.28 trillion. While industry-wide MSME credit has shifted towards higher-rated borrowers, PSU banks still have 30.3 per cent exposure to subprime accounts versus 18 per cent for private banks. Overall, MSME asset quality has improved, with the gross NPA ratio falling to 3.6 per cent as of March 2025 from 4.5 per cent a year ago. Revival in MSME lending is underway, with public sector banks driving credit flow to new and lower-rated borrowers under government-backed schemes like CGFMU and ECLGS. While private lenders continue to focus on high-quality, collateralised MSME borrowers, PSBs are supporting broader inclusion through policy-driven lending, ICICI Securities said in a note. Meanwhile, bank credit growth remained muted in Q1FY26, reflecting subdued demand across corporate, retail, and NBFC segments. However, with the festive season ahead, expected revival in capex, and a lower interest rate environment, a pickup in credit momentum is likely from H2FY26 onwards, the brokerage firm said. June 2025 (Q1FY26) quarter results preview According to Motilal Oswal Financial Services, PSU banks profit after tax (PAT) growth to moderate sharply to 4.8 per cent Y-o-Y amid a decline in net interest margins (NIMs), normalised opex, and higher provisions sequentially due to the benefits of the one-time reversal in provisions on Security Receipts (SRs) reported in March 2025 quarter. Net interest income (NII) is likely to remain flat Y-o-Y (down 1.8 per cent Q-o-Q) owing to a decline in NIMs. The brokerage firm estimates PSU banks to report a 6 per cent compounded annual growth rate (CAGR) in PAT over FY25-27. Opex is likely to be under control and should follow a normalised trajectory for PSU banks. Treasury performance is likely to be better Q-o-Q amid a sharp decline in G-sec yields. The brokerage firm expects stable asset quality trends for PSU banks, aided by controlled slippages and robust PCR.
Time of India
6 days ago
- Business
- Time of India
Sub-prime lending by PSBs rises on the back of govt guarantees
Mumbai: Public sector banks have increased lending to new as well as lower-rated micro, medium and small enterprises taking advantage of government guarantee schemes , even as industry trends suggest a broader shift towards high-quality borrowers. The share of subprime borrowers in the outstanding MSME portfolio of banks decreased to 23.3% in March 2025 from 33.5% in June 2022, according to data from the Reserve Bank of India's latest financial stability report. The share of such accounts in the outstanding MSME book of public sector banks stood at 30.3% at the end of March, compared with 18% for private banks and 26.1% for non-banking finance companies. On the other hand, super-prime borrowers make up 53.7% of private banks' MSME book, compared with 39.3% for state-owned banks and 35.4% for NBFCs, the data showed. Typically, super-prime borrowers are charged starting 9% annually. These loans are backed by strong collateral such as property. Subprime borrowers pay 16-24%, with public sector banks at the lower end of this band and NBFCs are the other end, industry executives said. Unlike private lenders, public sector banks' MSME lending is mainly under various credit guarantee schemes, said industry executives. "PSU banks' lending to MSME is more policy driven with an aim to bring more borrowers under the purview of lending. Since the loan is partially guaranteed by the government, we have a broad-based underwriting policy to lend to lower-rated borrowers and even to new-to-credit customers," said a senior official at a state-owned bank. "Given the past asset quality issues in the industry, there has been a shift towards a high-quality portfolio which is predominantly high-ticket MSME lending backed by collateral or in the form of loan-against-property," said Amit Sharma, MSME business head at IIFL Finance . Around ₹6.28 lakh crore are guaranteed under the government's two flagship schemes for MSMEs: the Credit Guarantee Fund for Micro Units (CGFMU) and the Emergency Credit Line Guarantee Scheme (ECLGS). Non-performing assets covered under CGFMU across banks and NBFCs stood at 9.9%. Under ECLGS, NPAs were 6.4%. "The NPA ratio in both schemes remains contained despite the riskiness of borrowers," the RBI said. Comparatively, the overall asset quality of MSME portfolio of banks has improved with the gross NPA ratio falling to 3.6 as on March 31 from 4.5 a year earlier.
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Business Standard
09-07-2025
- Business
- Business Standard
Vaidyanathan regrets not insuring IDFC First Bank's MFI loans early
V Vaidyanathan, managing director and chief executive officer of IDFC First Bank, in his message to shareholders, said he regrets not insuring the bank's microfinance (MFI) portfolio from the beginning, as the business has been prone to crises every five to eight years in some state or the other. 'In hindsight, the reasons for doing this business are still intact. What I regret most was not insuring the MFI portfolio from the start; this business has been prone to some crisis or the other every five to eight years in some state or the other — Andhra Pradesh, Assam or Tamil Nadu (floods) are examples. Insurance would have significantly cushioned the blow by ~72 per cent,' Vaidyanathan said in the bank's annual report for FY25. 'Going forward, we will fully insure the portfolio, monitor it closely, keep track of industry practices, and keep it within certain limits of the bank's overall portfolio,' he said. From January 2024 onwards, the bank started insuring disbursals of microfinance loans under the Credit Guarantee Fund for Micro Units (CGFMU). Currently, 66 per cent of the bank's overall microfinance portfolio is insured under CGFMU coverage. As a result, in the event of default, the bank will be paid ~72 per cent of the defaulted amount. The MFI sector has been grappling with stress due to over-leveraging of borrowers, resulting in lenders curtailing disbursals, which led to borrower defaults and a rise in non-performing assets (NPAs) for lenders engaged in the segment. As of March 2025, the gross NPA of the bank in the MFI portfolio was 1.63 per cent, compared to 1.81 per cent in December 2024. Following stress in its MFI portfolio, the bank has shrunk its MFI book by 28 per cent from Rs 13,344 crore as on March 31, 2024 to Rs 9,571 crore as on March 31, 2025. Explaining the impact of stress in the MFI portfolio, Vaidyanathan said there were two effects — NPA provisioning increased in MFI loans during the crisis, and the reduction in book size led to a decline in income compared to earlier years. 'We expect improvement in MFI to start reflecting from Q2FY26 onwards,' he said, adding that the bank has built a well-oiled machinery of 6,500 staff dedicated to lending and collections, supported by robust systems and protocols. 'Over eight years, we have financed 4 million customers through multiple repayment cycles, bringing them into the formal credit system and transforming lives. This has helped us meet weaker section PSL norms, avoid penalties, and also run a profitable business. Given these capabilities, it makes little sense to exit due to this one-off crisis. Instead, we must reflect on what could have been done better to reduce the profit and loss (P&L) impact,' he said, referring to whether the bank will continue in the MFI business. 'I take full responsibility for the MFI issue. We see the MFI book in its entirety, with the positives and negatives it gave us, and will insure the portfolio going forward,' Vaidyanathan said.
Business Standard
04-07-2025
- Business
- Business Standard
Suryoday SFB gains as gross advances jump 20% YoY in Q1 FY26
Suryoday Small Finance Bank (SFB) added 2.68% to Rs 141.56 after the bank's gross advances increased 20% to to Rs 10,846 crore in Q1 FY26, as compared to Rs 9,037 crore posted in Q1 FY25. Sequentially, gross advances rose 6% to Rs 10,251 crore posted in Q4 FY25. Disbursements for Q1 FY26 stood at Rs 2,261 crore, up 30% YoY and 8% QoQ. The banks total deposits grew by 39% YoY and 7% QoQ to Rs 11,312 crore reported in Q1 FY26. Retail deposits increased 39% YoY and 8% QoQ to Rs 9,230 crore and bulk deposits stood at Rs 2,083 crore during the quarter, up 21% YoY and 4% QoQ. The bank's CASA (Current Account Savings Account) deposits stood at Rs 2,003 crore in Q1 FY26, registering a growth of 39% in YoY and down 9% YoY. The CASA ratio remained unchanged at 17.7% in Q1 FY26, compared to the same figure of 17.7% in Q1 FY25. However, it showed a decline from 20.9% posted in Q4 FY25. The CE - 1 EMI% stood at 94.1% in Q1 FY26, compared to 93.4% in Q1 FY25, and 98.8% in Q4 FY25. Meanwhile, the CE - Overall% was recorded at 97.1% in Q1 FY26, showing a decline from 99.7% in Q4 FY25, but still higher than 101.0% in Q1 FY25. The gross non-performing assets (GNPA) ratio stood at 8.5% in Q1 FY26, compared to 7.1% in Q4 FY25, reflecting a Q-o-Q increase. This was also higher than 2.7% recorded in Q1 FY25, indicating a Y-o-Y rise. As of June 2025, approximately 98% of the Inclusive Finance portfolio, which makes up around 48% of the Bank's Gross Advances, is covered under the CGFMU Scheme. The breakdown for Gross Non-Performing Assets (GNPA) as of June 30, 2025, shows a GNPA of Rs 927 crore, with Rs 804 crore covered under CGFMU. Of this, Rs 585 crore is claimable as per the CGFMU policy under various cohorts. In Q1 FY26, the bank received around Rs 56 crore, representing 100% of the claim made for the quarter. Additionally, the Bank's retail deposits grew by 44% Y-o-Y, while disbursements for the quarter rose by 30% Y-o-Y, reaching over Rs 2,200 crore. Suryoday Small Finance Bank is a leading Small Finance Bank(SFB) in India. The company started offering SFB services in 2017. They serve customers in the unbanked and underbanked segments. Before SBF, the company operated as an NBFC. The bank reported standalone net loss of Rs 33.78 crore in Q4 FY25 as against net profit of Rs 60.84 crore in Q4 FY24. Net sales rose 4.2% year on year to Rs 530.68 crore in Q4 FY25.
Time of India
01-07-2025
- Business
- Time of India
Loans flow at a faster clip into MSMEs; asset quality up, too
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Mumbai: MSMEs, often cited by economic policymakers as crucial to last-mile job creation, raced ahead of retail last fiscal in drawing formal banking credit, which has remained rather circumspect lately in aggregate despite a cumulative one percentage-point lowering in policy rates so far this calendar year."Despite a broad deceleration in bank credit growth, the share of credit to the micro, small and medium enterprises (MSME) sector in total non-food bank credit has been growing steadily and its growth has outpaced that of other sectors during FY25," the Reserve Bank of India RBI ) noted in the latest edition of the financial stability report (FSR). In FY25, MSME loans surged 14.1%, compared to 11.7% growth in retail and 11.2% in services, central bank data showed. The share of MSME credit in total bank credit stood at 17.7%, an all-time high. Loans to this segment stood at more than ₹14.3 lakh crore at the end of May the MSME sector, credit to the micro enterprises, which formed 49% of total credit to the MSME sector, witnessed slower incremental growth in FY25 compared to small and medium enterprises. The upswing in lending came with stronger asset proportion of subprime borrowers in banks' MSME portfolios declined significantly, from 33.5% in June 2022 to just 23.3% by March 2025. Asset quality also showed improvement with the gross NPA ratio of MSME portfolio of banks falling from 4.5% in March 2024 to 3.6% at the end-March is also reflected in the significant moderation in SMA-2 (special mention accounts due beyond 60-90 days) ratio, an indicator of incipient stress which fell to 0.8% of total MSME government's credit guarantee schemes improved flow of credit to the MSME sector, especially vulnerable enterprises, with approximately ₹6.28 lakh crore guaranteed under two flagship schemes, the Credit Guarantee Fund Scheme for Micro Units (CGFMU) and the Emergency Credit Line Guarantee Scheme (ECLGS).The NPA ratio in both the schemes was relatively higher versus the sector-wide ratios, as these loans are directed towards more risky CGFMU, the NPA ratio for the banking system stood at 10.8% while it was 5.6% under the ECLGS.
