RBI has introduced new guidelines for gold financing NBFCs that will negatively impact business growth and margins. Key changes include:
1) Capping the loan-to-value ratio at 60% for loans against gold collateral.
2) Increasing the minimum Tier 1 capital requirement to 12% by April 2014.
3) Requiring disclosure of gold loans as a percentage of total assets.
4) Disallowing lending against bullion or gold coins.
While current portfolios are not affected, the lower LTV ratio will reduce incremental yields and require higher volumes to compensate, posing challenges to growth. The increased capital requirements will also curb leverage abilities.
The issues of proper Financial Management and Corporate Governance have taken a centre stage. The Public Sector Banks as well as Private Sector Banks are witnessing acute rise in nonperforming assets, moving up to 4.6% in March, 2015, whereas stressed advances have increased to 11.1% of the total advance, from 8% about 2 year ago. The major reasons as per a research of a large sample are as follows:
The issues of proper Financial Management and Corporate Governance have taken a centre stage. The Public Sector Banks as well as Private Sector Banks are witnessing acute rise in nonperforming assets, moving up to 4.6% in March, 2015, whereas stressed advances have increased to 11.1% of the total advance, from 8% about 2 year ago. The major reasons as per a research of a large sample are as follows:
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Subordinate debt worth Rs. 20,000 crores introduced for stressed MSMEs. Those companies which are stressed or even an NPA are eligible for this facility. 2 lakh MSMEs are likely to benefit from this.
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Capitalstars, financial research private limited is a SEBI Registered, provide Stock Tips,Share Market Tips , commodity & currency tips.
http://www.capitalstars.com/tracksheet-stock-tips/
Kotak Mahindra_ The Strategic Shift from NBFC to BankMANTHAN CHAUHAN
How Kotak Mahindra shifted his 'tag' from NBFC (Non Banking Financial Company) to Bank is briefly explained in this presentation with help of small case study and question and answers based on it.
what is the major difference between NBFC and bank,their related companies act and Banking acts are also explained
in it.
Monetary Authority of Singapore - Approach Towards Islamic BankingIslamic_Finance
The module aims to reflect upon MAS’ regulatory approach towards Islamic banking that mainly focuses on addressing the risks to the soundness of a financial institution and elaborates on how Islamic banks are generally exposed to the same types of risks as conventional banks. The module also provides details on MAS set of admission criteria when considering an application by banks to operate in Singapore, as well as MAS regulatory framework with regards to Shariah compliance risk and the capital framework to be implemented by banks.
Zawya Islamic Hosts a collection of Regulations gathered from Global providers amongst Securities & Exchange Commission Nigeria, Central Bank of Bahrain, Commission de Surveillance du Secteur Financier and others.
The collection is available on http://www.zawya.com/shariah-legal/listing/regulation/
Key Takeaways:
- Overview of the FSR
- Global Macro Financial Developments
- Economic Growth and Financial Conditions in India
- Performance of Scheduled Commercial Banks
IDENTIFYING THE POSSIBLE LIMITATIONS AND CHALLENGES FACED BY THE NON-BANKING FINANCIAL INSTITUTIONS (NBFI) ON IMPROVING THE DEMAND FOR PERSONAL LOANS
by Nulaim Nuwaiz
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Daily Derivatives Report:08 January 2020Axis Direct
Axis Direct presents daily derivatives report presenting recommendations based on technical analysis. For trading in derivatives visit https://simplehai.axisdirect.in/offerings/products/derivatives
Weekly Derivatives Report :03 February 2020Axis Direct
Axis Direct presents daily derivatives report presenting recommendations based on technical analysis. For trading in derivatives visit https://simplehai.axisdirect.in/offerings/products/derivatives
Subordinate debt worth Rs. 20,000 crores introduced for stressed MSMEs. Those companies which are stressed or even an NPA are eligible for this facility. 2 lakh MSMEs are likely to benefit from this.
Axis Direct presents daily derivatives report presenting recommendations based on technical analysis. For trading in derivatives visit https://simplehai.axisdirect.in/offerings/products/derivatives
Capitalstars, financial research private limited is a SEBI Registered, provide Stock Tips,Share Market Tips , commodity & currency tips.
http://www.capitalstars.com/tracksheet-stock-tips/
Kotak Mahindra_ The Strategic Shift from NBFC to BankMANTHAN CHAUHAN
How Kotak Mahindra shifted his 'tag' from NBFC (Non Banking Financial Company) to Bank is briefly explained in this presentation with help of small case study and question and answers based on it.
what is the major difference between NBFC and bank,their related companies act and Banking acts are also explained
in it.
Monetary Authority of Singapore - Approach Towards Islamic BankingIslamic_Finance
The module aims to reflect upon MAS’ regulatory approach towards Islamic banking that mainly focuses on addressing the risks to the soundness of a financial institution and elaborates on how Islamic banks are generally exposed to the same types of risks as conventional banks. The module also provides details on MAS set of admission criteria when considering an application by banks to operate in Singapore, as well as MAS regulatory framework with regards to Shariah compliance risk and the capital framework to be implemented by banks.
Zawya Islamic Hosts a collection of Regulations gathered from Global providers amongst Securities & Exchange Commission Nigeria, Central Bank of Bahrain, Commission de Surveillance du Secteur Financier and others.
The collection is available on http://www.zawya.com/shariah-legal/listing/regulation/
Key Takeaways:
- Overview of the FSR
- Global Macro Financial Developments
- Economic Growth and Financial Conditions in India
- Performance of Scheduled Commercial Banks
IDENTIFYING THE POSSIBLE LIMITATIONS AND CHALLENGES FACED BY THE NON-BANKING FINANCIAL INSTITUTIONS (NBFI) ON IMPROVING THE DEMAND FOR PERSONAL LOANS
by Nulaim Nuwaiz
Daily Derivatives Report:18 February 2020Axis Direct
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"The Government is keen to have sustainable long term investment driven growth rather than a short term consumption driven growth." Here's our take on the Union Budget 2019 - 20.
Ashok Leyland Q3FY15 Preview: Buy at a CMP of Rs51IndiaNotes.com
Expect volumes to grow by 33% YoY (-3.6% QoQ) led by a revival in demand seen in HCV.
- MHCVs volumes are expected to grow by 60% YoY (-6.1% QoQ) as business sentiments and economic activity improve.
- Expect realizations to improve by 17.8% YoY (-1.4% QoQ) on better product mix (higher MHCV share)
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Ease of doing business challenges persistingNeha Sharma
The new government has been brought to power by electorate of our nation along with large expectations by industry, businesses and professions and other stakeholders of the Indian economy.
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MUTUAL FUNDS (ICICI Prudential Mutual Fund) BY JAMES RODRIGUESWilliamRodrigues148
Mutual funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. They are managed by professional portfolio managers or investment companies who make investment decisions on behalf of the fund's investors.
MUTUAL FUNDS (ICICI Prudential Mutual Fund) BY JAMES RODRIGUES
634953131803473592
1. 22 March 2012
Update
India Financials
RBI releases guidelines for gold financers; LTV cap of
60% to impact business growth and margins
RBI released the guidelines for gold lending NBFCs. Key changes announced:
1) capped the LTV at 60% for loan against collateral of gold
2) increased the minimum Tier I capital requirement from 10% to 12%
(however effective from April-2014)
3) made it compulsory to disclose gold loan as a percentage to total assets,
and
4) disallowed NBFCs to lend against bullion/gold coins.
With the guideline for LTV Cap being effective on a prospective basis, it will
not have implications on existing portfolio. However, it would have a
negative implications on business growth and margins, going forward. With
lower LTV, yield on portfolio is expected to come down impacting margins.
Further, NBFCs would have to generate higher volumes to compensate for
the loss in value which would be a challenge from perspective of business
growth.
LTV Cap of 60% to impact margins and business growth
Concerned over the hyper growth in gold financing segment RBI has
introduced LTV Cap of 60% on loan against collateral of gold from
prospective basis.
Implications
The LTV for Manappuram is around 68% and for Muthoot its is already
around 60%.
While current guidelines does not have any implication on existing portfolio,
there would be some negative implication on incremental disbursement for
gold financing companies and margin.
Lower LTV would require NBFCs to generate higher volumes to compensate
for the loss in value, so as to keep the growth momentum going, which
would be a challenge.
With loan being secured and LTV being lowered to 60% or less, incremental
yield on portfolio is expected to come down, which would impact margins
(though the exact impact is not quantifiable currently). For instance 20% of
the portfolio of Manappuram is above 80% LTV wherein the interest rate
charged is 25%+ and in case of loans with LTV of 50% interest rate is ~18%.
While the yield on current mix will not be impacted with lower LTV
incremental yields would fall.
Increasing Tier I cap requirement to cap leverage
Effective from April-2014, gold financing companies are required to maintain
minimum tier I capital requirement from 10% currently to 12%.
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2. India Financials
Implication:
The guideline in terms of increasing Tier I capital to 12% (to be achieved by
April-2014) is in line with recommendations of the Usha Thorat Committee
and is not a negative surprise.
Currently, NBFCs are mandated to maintain a total capital adequacy ratio of
15% with minimum Tier I Capital of 10%. An increase in the tier I capital ratio
would call for setting aside higher capital, which would also curb their ability
to leverage.
Although both Muthoot and Manappuram currently have their tier-I ratio
well in excess of 12% viz. 13.4% and 18.4% respectively and may not have to
raise fresh capital in a hurry, reduction in leverage could affect growth and
return ratios.
Key takeaways from Manappuram concall
The rationale for the change in LTV Cap could be to create buffer against
volatile gold prices and to increase buffer for the same.
The change in guideline would have some negative implication in medium
term. However, over a long term perspective it would bring about
consolidation in the sector and create entry barriers which would be
beneficial for established players like Manappuram and Muthoot.
The guidelines are ambiguous in terms of calculating the price of gold
collateral i.e. it is unknown as to whether making charges are applicable and
if spot price or average price need to be considered thereby clarity needed to
be sought by RBI, before it get effected.
There would be near term impact on margins although in medium-term, with
risk perception expected to recede, borrowing cost would be lower and thus
negative impact on margins would be contained.
Manappuram does not lend against bullion and have a very insignificant
exposure to loan against gold coin. As a result, the impact of RBI disallowing
NBFCs to lend against bullion and gold coin would be very limited.
Highlights from Muthoot press release
22 March 2012
With the industry attracting various new entrant due to robust growth in the
industry, steps taken by RBI with respect to capital adequacy and LTV is
driven by the fact that they want to strengthen the sector with robust
operating practices and increase risk control measures.
Muthoot currently complies with LTV of 60% as its AUM is ~INR240b with
approximate value of jewelry that it posses is ~INR400b. Further as a
cautious measure the company has been progressively reducing lending rate
per gram as a risk management measure for past couple of month.
As on Dec-11, Muthoot had a Tier I Capital of 13.4%, thereby increasing of
the minimum Tier l capital requirement to 12% by RBI will not have any
impact. Further RBI has provided time till April-14 to comply with the
minimum Tier I capital requirement which provides comfort.
The company lends only against gold jewelry, thereby change in guideline by
RBI of prohibiting lenders to give loans against bullion/ primary gold and
coins will have no implication on Muthoot.
2
4. India Financials
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22 March 2012
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