Non-Banking Financial Company (NBFC).
The correction in gold prices in recent months is not expected to materially impact the asset quality of non-banking financial companies (NBFCs) lending against gold. Apart from periodically collecting interest over the past few fiscals, they have ensured that disbursement loan-to-value (LTV) is maintained below 75 per cent, ratings agency Crisil said.
On a 30-day rolling basis, gold price has corrected 10 per cent over the past six months, while on an absolute basis it fell twice that rate.
For NBFCs, the average portfolio LTV as on December 31, 2020, was 63-67 per cent, while average LTV on incremental disbursements in the October-December 2020 quarter was 70 per cent. The LTV discipline is also evident in interest receivables remaining at just 2-4 per cent of the loan book over the past few years.
For banks, however, incremental-disbursement LTV was higher at 78-82 per cent because they were more aggressive than NBFCs in lending against gold during last fiscal. Much of the growth in their book came during the third quarter of the last fiscal, when gold prices were soaring.
Since June 2020, loans against gold surged even as lending to other segments was affected by asset-quality concerns. In the 11 months through February 2021, loans against gold grew 70 per cent for banks to over Rs 56,000 crore. What further contributed to this growth was the LTV relaxation to 90 per cent (only for banks) announced by the Reserve Bank of India (RBI) in August 2020.
Krishnan Sitaraman, Senior Director & Deputy Chief Ratings Officer, Crisil Ratings, said: “The average LTV of the gold-loan books of banks is estimated at 75-80 per cent currently versus 70 per cent before the RBI relaxation. Given that gold prices have dropped 18-20 per cent from their August peaks on an absolute basis, without periodic interest collections, the books of banks may be susceptible to asset-quality issues to some extent. However, with the LTV dispensation period ending in March 2021, incremental lending would have more LTV cushion.”
Disbursement LTV and timely interest collection have a significant bearing on the cushion available with lenders in terms of value of gold given as collateral compared with the loan outstanding. This, in turn, impacts asset quality. Therefore, robust risk management systems and timely auctions are crucial to offset volatility in gold prices and ultimate credit loss.
Ajit Velonie, Director, CRISIL Ratings, said: “While gross non-performing assets (GNPA) could rise, ultimate credit cost – a more appropriate indicator of asset quality for gold loans – is not expected to. Historically, while GNPAs had risen to as much as 7 per cent for NBFCs, credit costs were low at 10-80 basis points. This underscores sound business acumen and strong track record of timely auctions. For banks, given the sharp growth they have seen, monitoring LTV and staying agile are imperatives to avert potential asset-quality challenges.”
Blue Dart Med-Exp to test UAS for vax deliveries
Logistics company Blue Dart, part of the Deutsche Post DHL Group (DPDHL), has formed Blue Dart Med-Express Consortium with the mission of revolutionizing the delivery of vaccines and emergency medical supplies to the remotest parts of India with Drones amid the surging second wave.
Blue Dart Med-Express Consortium is part of the ‘Medicine from the Sky’ project in collaboration with the Government of Telangana, World Economic Forum, Niti Aayog and Healthnet Global.
The Ministry of Civil Aviation (MoCA) has granted the project with necessary exemptions and rights to fly drone flights on an experimental basis in Telangana.
The aim is to assess an alternate logistics route in providing safe, accurate and reliable pickup and delivery of health care items from distribution centre to specific location and back.
Blue Dart Med-Express Drone flights will deploy an immersive delivery model to optimize the current healthcare logistics within Telangana. The model will enable deliveries from district medical stores and blood banks to Primary Health Centers (PHCs), Community Health Centres (CHCs), Blood Storage Units & further from PHCs/CHCs to Central Diagnostic laboratories.
Balfour Manuel, Managing Director, Blue Dart said, “It’s been over a year and our battle against COVID-19 continues to unfold new challenges that need solutions in real-time. The pandemic has taught each one of us the importance of logistics and the need for a tech-led supply chain infrastructure. As an organization Blue Dart has always been surrounded with the technology of the future. It is this ability that has helped us to not only withstand the pandemic but thrive with growth. While we reach out to over 35,000 locations across the country, the current situation calls for a much deeper penetration of vaccines.”
Commenting on Blue Dart’s experiment with Drone flights for Beyond Visual Line of Sight delivery of vaccines Ketan Kulkarni, CMO & Head – Business Development, Blue Dart says, “The consortium aims at enabling safer, efficient and cost-effective Drone delivery flights. With efficient systems in place, it can help reduce the current logistics cost, making the healthcare logistics faster and efficient. We are delighted to be granted the rights to commence operations and this is definitely the need of the hour. Mankind is witnessing the worst time and Blue Dart is committed to giving back to the society in which it operates and will always be ready to take one step forward.”
Fuel prices unchanged on Thursday
Fuel retailers spared consumers of any further increase in fuel prices by keeping retail prices of petrol and diesel unchanged on Thursday.
Accordingly, petrol continues to cost Rs 92.05 per litre and diesel Rs 82.61 up in Delhi.
Across the country as well the petrol and diesel price prices remained static on Thursday but its actual retail prices varied depending on the level of local levies in respective states.
In Mumbai, regular petrol now comes for Rs 98.36 a litre just few days away from crossing the historic level of Rs 100 per litre.
Petrol prices in some states including Rajasthan, Madhya Pradesh and in some places in Maharastra have breached the Rs 100 per litre mark while premium petrol has been hovering above that level for some time now.
Before Thursday’s price hold, fuel prices increased for three consecutive days this week up to Wednesday. Petrol and diesel prices also increased on four consecutive days last week
Petrol prices have increased by Rs 1.50 a litre Delhi in May in the seven increases so far. Similarly, diesel prices have risen by Rs 1.88 per litre in capital this month.
IANS had written earlier that OMCs may begin increasing the retail price of petrol and diesel post state elections as they were incurring losses to the tune of Rs 2-3 per litre by holding the price line despite higher global crude and product prices.
OMCs benchmark retail fuel prices to a 15-day rolling average of global refined products’ prices and dollar exchange rate. In the last fortnight global oil prices have hovered in $66-67 a barrel range higher than the levels when petrol and diesel prices were last revised. Crude prices have jumped around $ 69 a barrel now.
With global crude prices at around $ 69 a barrel mark, OMCs may have revise fuel prices upwards again if there is any further firming up.
RAI seeks capital support for retail industry amid pandemic
Retailers Association of India (RAI) has urged the government to take steps for capital infusion into the retail industry with ECLGS benefits and loan moratorium.
Speaking about the state of the Indian Retail Industry, Kumar Rajagopalan, CEO, RAI, said: “The retail industry in India has been in a perpetual paradox ever since the first set of restrictions began last year in March 2020. The businesses and the workforce in retail need to be cushioned by the government or the local authorities to ease off their hardships.”
He further said that two most important and immediate steps that can prevent this industry from collapsing are to prioritise vaccination of the last mile workers and to urgently provide financial support.
RAI noted that as the days of the lockdown drag on, it is getting increasingly difficult for retailers to retain employees and to keep their businesses afloat. Retailers need to pay salaries, minimum electricity, rentals, property taxes etc, even if the businesses are shut due to the lockdown.
The cash inflow of the industry has come to a standstill, while the fixed operating cost remains intact.
The immense financial stress faced by the retail sector will adversely impact both livelihood and the financial institutions exposure to the sector as retailers start to become insolvent. Millions of MSME suppliers too get no payment from the industry participants.
RAI has recommended that the Ministry of Finance and the Reserve Bank of India step in to bring some relief to the mounting stress on the retail business in the wake of second wave of Covid -19.
It noted that corporate retail outlets is one of the 26 sectors, selected by the Kamath panel under the ‘Resolution Framework for Covid-related Stress’. While this was mentioned in the announcement of ECLGS 2.0 it has not been clarified in the notification which announced ECLGS 3.0, it said.
“This needs to be clarified and ECLGS funds made available to the retail sector immediately. Availability of additional funding to eligible retail businesses will go a long way in contributing to retail revival and protecting jobs,” it said.
It further sought a moratorium on principal and interest for six months for the 26 stressed sectors.
RAI also asked the government and the RBI to mandate banks to give ad-hoc working capital loans of 30 per cent more than current limits so that critical payments like salaries and wages can be made, among other recommendations.
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