Indian Bank sees new opportunities with larger footprint after merger

After the merger of Allahabad Bank with it, Indian Bank sees growth in lending and deposits and new opportunities emerging despite the lockdown, according to Padmaja Chunduru, Managing Director & CEO of Indian Bank. Both the banks have come together amid the coronavirus (Covid-19) lockdown and started working as a single bank with a larger footprint.
Even during the lockdown period, both lending and deposits are growing. "We must be careful in assessing and giving the loans. We have been one of the earliest banks to announce emergency loans across the table. I think this opens up new opportunities. First of all we have to assess the risks because there are so many more sectors now and the whole paradigm is shifting," Chunduru said.
The merger was a big task in front of the bank, but when confronted with the Covid-19 issue, the whole bank came together and the safety of the employees became paramount. Safety measures have been implemented across the bank. On April 24, it was Allahabad Bank's Foundation Day, but the amalgamated entity could not celebrate due to the lock-down.
The bank has also launched an online learning management solution for the staff. The best the welfare measures that were offered by the two banks have been made applicable to all the employees and all of them have been well received. In terms of alignment of products of both the banks, especially those related to housing loans, Indian Bank had certain products which were more attractive to the customers and they were launched across the country.

Allahabad Bank had one or two products for agriculture investments like tractors, which have been extended to Indian Bank customers.

Lockdown 2.0: Coronavirus-hit units get Rs 10,000 crore from banks

Ahead of finalising the package for industries hit by Covid-19, the Union finance ministry reviewed support extended by large public sector banks (PSBs), including via the emergency credit line, to affected firms.

 State Bank of India (SBI) and Bank of Baroda (BoB) have together sanctioned close to Rs 10,000 crore as immediate credit assistance to the affected units.

PSB executives said this was a regular review with top officials of large banks, including SBI. There was also discussion on working capital re-assessment.

Banks have built internal capacities for assisting companies, including micro, small & medium enterprises (MSMEs). Feedback from interactions is expected to act as an input for policies that are in works.

However, it is not clear when the package would be finalised, officials said. A SBI executive said the bank is giving these emergency loans to those in need. It does not involve elaborate scrutiny. Only thing is that borrowers have to establish the Covid impact.

Bank merger will slow down loan growth, rivals likely to benefit: Analysts

Current Affairs

Equity analysts predict that India’s move to merge several of its state banks will slow their loan growth, and many brokers advise buying shares of the lenders’ rivals who stand to benefit from the uncertainty.
While the mergers will reduce the number of state-owned banks to 12 from 27 and are aimed at creating bigger and healthier lenders, the time needed for integration and challenges related to staff, branch and process overlaps are expected to be the main immediate risks.
Prime Minister Narendra Modi’s government late Friday surprised analysts by announcing a series of mergers that will create four new lenders that will hold business worth Rs 55.8 trillion ($781 billion), or about 56 per cent of the Indian banking industry. The announcement came minutes before data showed economic growth in Asia’s third-biggest economy slumped to a six-year low of 5 per cent, below the weakest estimate of 39 economists polled by Bloomberg.
Futures contracts on India’s Nifty 50 Index dropped 1 per cent in Singapore on Monday, when local markets were shut, indicating the broader stock market may decline when they open for trade on Tuesday.
Here is what some of the analysts are saying:
Caution on Merger Candidates

 Mergers will keep state-run banks “busy in the integration process for a prolonged period and thus help private banks further consolidate their business market share,” Emkay Global analysts Anand Dama and Rahul Malani wrote in a note dated Sept. 3. Emkay downgrades Indian Bank to hold from buy, and maintains sell on Punjab National Bank, Canara Bank and Union Bank, citing merger overhang...Read More

Rs 70K-cr capital infusion in PSBs credit positive, to boost economy: S&P

International News

The proposed Rs 70,000-crore capital infusion into public sector banks (PSBs) will provide a timely booster to these lenders, S&P Global Ratings has said.
The move, announced in the Budget, is likely to be credit positive for the banking sector and the economy, S&P said in a note titled 'India's Budget attempts to address trust deficit in the financial sector.
"We believe the capital infusion will help PSBs make necessary haircuts on their weak corporate loans and shore up their capital adequacy," said S&P Global rating credit analyst Geeta Chugh.
The capital infusion will help some banks to come out of the central bank's prompt corrective action and resume lending and clean up their balance sheets, she added.
S&P said it believe PSBs still require substantial reforms to improve risk management, service quality, efficiency, and diversity of product offerings.
While the government has infused large amounts of capital into PSBs in the past few years, the progress on reforms has been rather lackluster, S&P said.
The US-based rating agency said the government has also signalled liquidity support for the financially sound non-bank finance companies (NBFCs).
PSBs' purchase of high-rated pooled assets of Rs 1 lakh crore will now be eligible for a one-time six months' partial credit guarantee by the government for a first loss of up to 10 per cent.

 We believe this will shore up demand for these assets. The Reserve Bank of India (RBI) will also facilitate these transactions by providing banks a liquidity backstop against their excess holdings of government securities, S&P said...Read More