The Finance Ministry has approved a 12 per cent salary hike with five years arrears for the public sector general insurance industry. Finance Minister Nirmala Sitharaman, who had earlier refused to give her final approval to the wage hike proposal unless unions of the PSU insurance companies agree for the “performance linked future wage revision” had changed her mind to approve the proposal, sources said.
The FM’s approval has reached the Department of Financial Services (DFS) for its necessary notification and implementation, industry sources said. PSU general insurance firms have also come out with the new salary structure for various categories of employees after the wage revision.
The government had earlier rejected the demand of unions for a pay parity with Life insurance Corporation (LIC) and ECGC.
However, industry observers have now raised questions about the ability of the three loss making companies (Oriental Insurance Company, United Insurance Company, and National Insurance Company) to bear the burden of higher salaries and arrears of their employees unless the government infuses more funds into these companies. With the 12 per cent hike along with five years of arrears, wage bill for NIC will be around Rs 2,177 crore, Rs 2,080 crore for New India Assurance (NIA), Rs 2,135 crore for OIC and Rs 1,752 crore for UII. There will be a total outgo of Rs 8,146 crore from all four companies for meeting wage revision expenses, analysts said. Analysts said the industry will see a large number of employees, particularly above 50, availing VRS (voluntary Retirement Scheme) after receiving their revised salaries.
The government last year had approved a 16 per cent wage revision with arrears for the employees of IPO-bound LIC and had even finalised a hike of 15 per cent with arrears for the PSU banking industry in 2020.
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The government on Friday invited expressions of interest (EoIs) for IDBI Bank and offered to sell a total of 60.72 per cent stake in the bank, including major portions of the shares held by the government and state-run Life Insurance Corporation (LIC).
IDBI Bank’s stock closed 0.71 per cent higher on the BSE on Friday. At the current market price, the stake being offloaded is worth Rs 27,800 crore. With the consent of the regulators — the Reserve Bank of India and the Securities and Exchange Board of India — the government has made the mandatory glide path for stake reduction for the buyer more flexible than what is specified for promoters of private banks. The buyer, therefore, would get 15 years to bring down the equity to 26 per cent. Of course, in the first five years, 40 per cent of the equity capital would be locked in, as per the RBI guidelines.
The last date for submission of EoI is December 16. While the Centre is keen to conclude the transaction during the current financial year, it may spill over to the next year, given the formalities to be completed. Banks, non-banking financial companies and private equity funds have already shown interest in IDBI Bank.
The Centre’s disinvestment receipts so far this fiscal year have been Rs 24,544 crore, as against the annual target of Rs 65,000 crore. “A cumulative 60.72 per cent of the shareholding shall be divested. GoI shall divest such number of shares representing 30.48 per cent and LIC of India shall divest such number of shares representing 30.24 per cent of the equity share capital of IDBI Bank, along with transfer of management control in IDBI Bank,” the department of investment and public asset management (Dipam) said in a statement.
Currently, LIC holds 49.24 per cent in IDBI Bank, while the government holds 45.48 per cent. On May 5, 2021, the Cabinet Committee on Economic Affairs had granted in-principle approval for the strategic disinvestment of IDBI Bank along with transfer of management control.
IDBI Bank posted profit after tax of Rs 2,439 crore in FY22.
Its net interest margin stood
at 3.73 per cent and return on equity at 13.60 per cent. The bank’s capital to risk (weighted) assets ratio stands at a comfortable 19.06 per cent.
As per the EoI conditions, private sector banking companies, foreign banks, NBFCs, and alternative investment funds registered with Sebi are among the entities eligible to bid. However, large industrial/ corporate houses and individuals (natural persons) aren’t eligible. FE
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A MAJORITY of the top 15 listed PSUs by market capitalisation continued to witness a shrinking of their headcount, an analysis of the annual reports, including for the latest financial year 2021-22 (FY 22), showed. This trend was seen across sectors from banking and manufacturing to energy and minerals.
Barring, SBI Life Insurance and IRCTC, which reported an expansion in headcount during FY 22, and LIC, which has not yet reported its numbers for the year-ended March 31, 2022, all companies in the list have been reporting a decline in the number of employees for the past several years.
India’s largest bank SBI last witnessed an increase in the number of its employees in 2017-18, when it added 71,000 employees following the merger of its five associate banks and Bharatiya Mahila Bank during the year. Even prior to that, the bank was witnessing a steady decline in staff strength. SBI’s subsidiary SBI Cards and Payments too saw a decline over the last three years to 3,774 people on its rolls as of March 31, 2022, compared to 3,967 as of March 31, 2020.
Bank of Baroda has been witnessing a reduction in its employee headcount for the last two years, after witnessing a bump on account of amalgamation of Dena Bank and Vijaya Bank with effect from April 1, 2019. The bank had 79,806 people on its rolls as of March 31, 2022, down from 84,283 employees as of March 31, 2020.
Coal India Ltd employee strength dropped from 2.48 lakh as on March 31, 2022, compared with 3.83 lakh eleven years ago in 2010-11. Power generation major NTPC had also last reported an increase in its number of employees a decade ago. At the end of 2011-12, NTPC had 25,511 employees and since then, its numbers have fallen consistently to 17,474 as of March 31 this year.
Upstream oil company ONGC, which had 27,165 employees as of March-end this year, last recruited in 2015-16. It had 33,927 people on its rolls at the end of March 2016. Privatisation-bound Bharat Petroleum Corporation Ltd (BPCL) has also reported a steady decline in the number of employees since 2013-14. At the end of 2013-14, BPCL reported 13,214 employees — one person more than it had as of March 31, 2012 — and has witnessed a fall to 8,594 as of March 31, 2022.
GAIL India saw a net addition to its headcount five years back in 2016-17, when it reported 22,604 employees. It has since witnessed a fall to 17,828 people as of March 31, 2022. India’s biggest state-owned oil marketing company Indian Oil has been witnessing a decline in employee numbers since 2018-19. It had 31,254 employees at the end of 2021-22, compared with 33,498 at the end of 2018-19.
Ticketing platform IRCTC, which had 1,971 people on its rolls as of March 31 this year, saw a decline in 2020-21 to 1,417 from 1,446 employees in 2019-20. SBI Life Insurance has also been seeing a consistent rise in headcount over the past several years to 18,515 people as of March 31, 2022 from 13,207 as of March 31, 2018.
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Life Insurance Corporation (LIC) on Friday reported a multi-fold increase in net profits to Rs 682.88 crore for the quarter ending June compared to a profit of Rs 2.94 crore in Q1FY22. It may be recalled that business activity in the country had come to a virtual standstill in the June 2021 quarter during the second wave of the Covid pandemic. Seen sequentially, LIC’s performance was less impressive as the insurer had posted profits of Rs 2,371.55 crore in the three months to March.
The total income stood at Rs 1.68 trillion as against Rs 1.54 trillion in the year-ago period, LIC said. Total income stood at Rs 2.11 trillion in March quarter. The net premium income during Q1FY23 of Rs 98,351.76 crore, was about 20 per cent higher y-o-y. On a sequential basis, net premium was lower by about 32 per cent.
The first-year premium for the reporting quarter came in at Rs 7,429 crore as against Rs 5,088 crore in the year-ago period. FE
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With the easing of global commodity prices and India witnessing normal monsoon, concerns about any sharp spike in inflation or the current account deficit (CAD) are easing, a government source said on Thursday. The government, however, is not letting its guard down and is watchful of the evolving situation, the source added.
Despite having to bear additional fiscal burden, the Centre isn’t planning to slash the fertiliser subsidy rates at the moment, the source said. It doesn’t wish to add to farmers’ costs of production at this juncture. The government’s fertiliser subsidy bill is expected to exceed its FY23 Budget Estimate of Rs 1.05 trillion by about Rs 1.4 trillion, as global prices shot up in the wake of the Ukraine-Russia war.
The Centre is also unlikely to commit to extending the GST compensation for states beyond five years through FY22, acceding to some states’ demand, as any such decision will mean prolonging cess burden on consumers, said the source. “Will all the states be ready to say let’s keep the cess on the items in the 28% or 18% brackets for a much longer period to fund the GST compensation? These are things we all have to bear in mind,” said the source, indicating that the Centre isn’t going to take on extra burden on this front.
“(However) global crude oil prices are now moderating, so are fertiliser prices. So, the magnitude of worry that was there in March (just after the Ukraine war) has eased now. But we are closely watching the situation,” the source said.
The official data for retail inflation in July will be released on Friday and it is expected to ease 20-25 basis points sequentially from the June level of 7.01 per cent, according to some analysts. Retail inflation has remained above the upper band of the Reserve Bank of India’s (RBI’s) medium-term target of 2-6 per cent for the sixth straight month till June. The aim is to first bring inflation down to 6 per cent, the source said.
India is in a much better position than peers on the economic front, and the steps initiated by the government and the central bank have started to yield results, the source said. The Centre has taken measures to check inflation by reducing fuel taxes, raising the export duty on select steel products and iron ore and cut import duty on pulses, among others.
On cryptocurrency, the source said that the recent volatility in the cryptocurrency market has started a debate among its followers about the merits and demerits of these virtual assets, which augurs well for policymakers across the globe, as they weigh how to regulate such assets.
As India is set to take over the G20 presidency in December, the forum can be used to firm up a global strategy on the regulation of crypto-currencies. However, the government is yet to take a final call on whether or not to push for such an agenda at the G20, said the source.
The government is serious about pursuing disinvestment of all the companies that it has announced, said the source. In certain cases, the process is taking longer, as it involves comprehensive deliberations involving multiple stakeholders. The government has budgeted to garner
Rs 65,000 crore in disinvestment receipts in FY23, against a realisation of just Rs 13,531 crore in FY22, after the initial public offer of LIC was deferred to this fiscal.
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Several banks have raised their repo rate-linked lending rates (RLLR) after the Reserve Bank of India (RBI) on Friday increased the repo rate by 50 basis points (bps) to 5.40 per cent.
Public sector lenders including Bank of Baroda (BoB), Punjab National Bank (PNB), Union Bank of India, as well as private sector ICICI Bank on Saturday raised their RLLRs.
Following the hike, BoB’s RLLR stands at 7.95 per cent, with 5.40 per cent as RBI repo rate and a mark-up of 2.55 per cent. The new RLLR will be effective from Saturday. PNB has increased its RLLR from 7.40 per cent to 7.90 per cent, while Bank of India’s RLLR stands at 8.25 per cent, with effect from Friday.
Bank of Maharashtra’s RLLR will stand at 7.70 per cent from August 10 and Union Bank of India’s external benchmarked lending rates (EBLR) stands at 7.70 per cent, effective August 11.
ICICI Bank’s EBLR, which is pegged to the RBI repo rate, stands at 9.10 per cent.
RLLR is linked to or is based on the repo rate and is revised every time the RBI changes policy rates. With the RBI moving into a rising rate cycle, banks too have started raising their lending rates, both externally benchmarked and marginal cost of funds-based (MCLR). Since April, the RBI has increased the repo rate by 140 bps in three tranches.
As the transmission of monetary policy takes place more effectively under the EBLR regime, banks are opting to switch to the system. As per RBI data, the share of loans under the EBLR-based system, for all banks, has increased to 39.2 per cent in December 2021 from 28.6 per cent in March.
The immediate increase in RLLR or EBLR by banks and a comparatively delayed increase in deposit rates augurs well for their margins. In addition to the RLLR, banks are also increasing their MCLR. ICICI Bank, PNB, Yes Bank and Bank of India also raised their MCLR by 10-15 bps before the RBI policy decision.
While banks revise RLLR whenever there is a change in repo rate, MCLR is revised by lenders every month. Other lenders like Housing Development Finance Corporation (HDFC) and LIC Housing Finance have also increased their retail prime lending rate (RPLR) on home loans. WITH FE
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As FPIs continued to pull out funds from Indian equities in the quarter ended June 2022 amid rising inflation, interest rates and concerns over global growth, their share in NSE-listed companies fell to a 10-year low of 19.2 per cent.
In the same period, however, domestic institutional investors (DIIs), who continued to invest in Indian markets, raised their holding of Indian equities to an all-time high of 14.06 per cent.
According to data collated by primeinfobase.com the domestic retail holding (individuals holding up to Rs 2 lakh) also stood strong in April-June despite the Sensex witnessing a fall of nearly 15 per cent in the quarter from its closing on March 31, 2022. The retail share in National Stock Exchange (NSE)-listed entities stood at 7.4 per cent at the end of June, marginally lower over its highest share of 7.42 per cent seen in the quarter ended March.
“This further showcases the rise of domestic investors and the huge counterbalancing role they have played to foreign investors. To also put this in perspective, as on March 31, 2015, FPI share was 23.30 per cent while the combined share of DII, retail and HNI was just 18.47 per cent. The combined share of DII, retail and HNI now stands at an all-time high of 23.53 per cent,” said Pranav Haldea, managing director, PRIME Database Group.
During the quarter, while net outflows from FPIs stood at Rs 1,07,340 crore, net inflows from DIIs amounted to Rs 1,28,277 crore. The data shows that the gap between FPI and DII holding decreased to its lowest level in this quarter as DII holding is now just 26.77 per cent lower than FPI holding. (On March 31, 2022, DII holding was 31.99 per cent lower than FPI holding).
The FPI to DII ownership ratio too fell to a new low of 1.37 as on June 30, from 1.47 as on March 31. Over a 13-year period (starting June 2009), while FPI share has increased from 16.02 per cent to 19.2 per cent, DII share has risen from 11.38 per cent to 14.06 per cent.
The share of domestic mutual funds in companies listed on the NSE rose for the fourth quarter running and reached a 2-year high of 7.95 per cent as on June 30, 2022, up from 7.75 per cent as on March 31, 2022. This was after five quarters of consecutive decline from March 31, 2020 (7.96 per cent) to June 30, 2021 (7.25 per cent). The share has grown on the back of net inflows by domestic mutual funds of Rs 73,857 crore in the June quarter.
LIC’s share (across 286 companies where its holding is more than 1 per cent) rose to 3.92 per cent as on June 30, 2022 from 3.83 per cent as on March 31, 2022. Share of high net worth individuals (HNIs) (individuals with more than Rs 2 lakh shareholding in a company) in NSE-listed companies also declined to 2.08 per cent as on June 30 from 2.21 per cent on March 31.
While disclosure of holdings of FPIs by name is available only for holdings in a company greater than 1 per cent, Haldea said it is time for complete details of all their holdings to be made mandatory to be disclosed in India.
The share of the government (as promoter) in companies listed on the NSE saw a huge spike and reached 7.15 per cent as on June 30, from 5.48 per cent as on March 31. According to Haldea, this was primarily on account of the mega IPO of LIC.
The share of private promoters in NSE-listed companies declined to 44.33 per cent as on June 30, from 45.12 per cent on March 31.
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Rising inflation has emerged as a key concern all across as it eats into disposable incomes of individuals. Vibha Padalkar, MD and CEO, HDFC Life, told Sandeep Singh that if the inflation is prolonged then it will start hurting demand for savings products too. Stating that the premiums should stabilise now, she also called for the regulator to permit life insurance companies to sell health indemnity as that will allow them to offer innovative solutions to customers. Edited excerpts:
How is inflation hurting the industry and what is the impact of interest rates?
Inflation remains a big concern as it has a bigger impact since it eats into the savings and reduces the disposable income. As disposable incomes reduce, customers react by going for slightly smaller cover or by not covering everyone in the family, etc. If you see the industry numbers, the impact is not much as of now. While there has been some impact on term, it is not so much on savings. However, if inflation is prolonged then it will start impacting savings products too.
As for interest rates’ rise, it is reasonably positive for us. Our transmission is faster and we can pass higher annuity rates. However, the volatility in equity markets is a downside. I think that of the other options to save, insurance continues to do well. The saving quantum itself is, however, reducing.
The industry has witnessed a rise in premium. Do you see it stabilising now?
The premiums have risen mainly for term policies and the rise has been because of pandemic. Even as there is a lot of talk around rise in premiums, I would like to state that the increase in premium over the last 10 years is less than inflation. Reinsurers have suffered huge losses because of pandemic and if they raise the charge, it is difficult not to raise it. I think, it should stabilise now.
How have Covid death claims been for you?
We have settled claims amounting to over Rs 6,000 crore in FY22 but it has now eased off. We settled close to about 4 lakh claims with gross claims of around Rs 6,000 crore and net claims of Rs 4,300 crore. As a sector I would say that even as it was significantly higher, we paid so many claims without looking too much into the clause I believe that money is important if it is timely. For almost all our non-early claims (if the policy has completed 3 years) we paid within 24 hours or max 48 hours.
While this was for saving schemes, it took around 3 months for term policies as we need to check pre-existing etc and physical checks are required to be done by local field investigator.
Are life insurers getting permission to sell health indemnity?
We have been demanding the regulator to allow us to sell health indemnity but it hasn’t been permitted yet. Our point is that worldwide health sits closer with life than with motor. However, for some reason, general insurers in India are selling health whereas life insurers are not allowed to sell it. That is not logical. We used to be allowed to sell health, but it has been taken away.
My limited point is that life insurers have the largest touch points with their branches and network, but you are not alllowing us to sell. I think the focus should be on penetration of insurance and expansion.
As of now, nothing has moved. We even asked the regulator to allow us to distribute, if you don’t allow us to manufacture. Today, banks can distribute insurance but life insurers can’t distribute health. It doesn’t make sense.
We submitted it almost 18 months ago and the regulator has said that they will look at it. I stay hopeful.
When you say innovations are possible, if you are allowed, what could they be?
Innovation can’t happen if one key piece is missing. For example: When someone is young, he needs more life insurance. Suppose a person is paying Rs 60,000 as premium, I would say that until the age of 55 (nearer to retirement) we would give him maximum of life cover. After that, since he would have built savings too, we will reduce the life cover and increase the health cover. However, for the individual, Rs 60,000 premium will stay constant.
As of now we are not allowed to club various products and sell to the customer, unless we tie up with one insurer. But even that is not seamless.
What are the growth areas for the life insurance?
Growth will come with product innovation. Retirement products are another big growth area. As a nation, pension funds as a per cent of GDP is less than 5 per cent while it is more than 100 per cent in the developed world. While it is increasing, it is not at the desired pace. People need to understand that the risk of an individual running out of money is very real because of increasing longevity.
How will the merger of HDFC Bank and HDFC limited benefit you?
It can only get significantly better. The way I see it is that today HDFC Bank is my largest distributor, but it is not my parent, so once that happens, there will be full alignment. HDFC Bank will become a financial conglomerate and will not just be a bank. It will have everything to do with any financial service products and will be the parent company of all. They will be able to tell the customer that they know them— if they have a home loan but not insurance etc so the advisory will be better.
If customers give their consent that they would like to be serviced as a single customer, they will be treated as a single customer across all HDFC Group products.
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Bharti AXA Life Insurance has posted a 14 per cent growth in total collected premium at Rs 2,602 crore in FY22 from Rs 2,281 crore in FY21. Renewal premium grew by 11 per cent and stood at Rs 1,666 crore in FY22. It posted a 25 per cent growth in weighted new business premium (WNBP) to Rs 730 crore from Rs 582 crore last year, outperforming the overall and private industry growth which stood at 16 per cent and 22 per cent respectively. In Q4 FY22, the company witnessed a 14 per cent growth in WNBP compared to the 13 per cent overall and 9 per cent private industry growth observed in the same period.
Despite the challenging macroeconomic environment, the company recorded a surge of 18 per cent in its assets under management at Rs 11,025 crore in FY22 against Rs 9,374 crore in the last fiscal, said Parag Raja, MD & CEO.
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The meltdown in the US markets on Wednesday on fears of aggressive interest rate hikes rattled domestic markets investors, with key indices plunging 2.61 per cent on Thursday. With the sell-off led by foreign investors sending the pivotals crashing, the benchmark Sensex plummeted 1,416.3 points to 52,792.23 and the NSE Nifty fell 430.9 points to 15,809.40.
The rupee, too, extended losses, falling another 10 paise to close at a record low of 77.72 against the US dollar on Thursday, weighed down by a negative trend in domestic equities and unabated foreign fund outflows.
Foreign portfolio investors (FPIs) pulled out another Rs 4,899 crore, taking the total outflows to Rs 42,836 crore in May. Domestic institutions bought stocks worth Rs 3,225 crore but failed to prevent the market slide. The Sensex has fallen 4,183 points in May alone. LIC shares fell by 4.05 per cent to Rs 840.75 as against the IPO offer price of Rs 949. RIL plummeted 2.35 per cent, SBI 2.24 per cent and TCS crashed 5.17 per cent.
Markets plunged sharply lower, pressurised by weak global cues. The meltdown in the US markets, on the fear of aggressive rate hikes, rattled investors and triggered a weak start. “The situation worsened further due to heavy selling in the index majors across sectors wherein IT and metal majors were among the top losers,” Ajit Mishra, VP – Research, Religare Broking Ltd.
The broader indices too traded in sync with the benchmark and lost in the range of 2.5-3 per cent.
Thursday’s fall indicates that bears are in control as the Nifty has completely reversed the recent gains and again reached closer to the March low. In this highly volatile market, investors can focus on sectors like FMCG, pharma, capital goods and manufacturing whose valuations are moderate and reasonable on a long-term basis, said Vinod Nair, head of research, Geojit Financial Services.
On Wall Street, key indices extended losses on Thursday as investors fretted over the impact of surging inflation on US economic growth and corporate earnings. At 2:32 pm ET, the Dow Jones fell 0.5 per cent to 31,318 while the S&P 500 dropped 0.2 per cent to 3,914.
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