UCO Bank
08:23
Showing posts with label non performing assets. Show all posts
Showing posts with label non performing assets. Show all posts
Tuesday, 18 July 2017
Tuesday, 23 May 2017
Reserve Bank of India
08:46
Prompt corrective action for banks
Prompt corrective action for banks
May 22, 2017:
As the financial health of banks had deteriorated over the last three years, the Reserve Bank of India (RBI) revised the norms for prompt corrective action early last month, and has promptly imposed those norms on a couple of public sector lenders.
What is PCA?
PCA norms allow the regulator to place certain restrictions such as halting branch expansion and stopping dividend payment. It can even cap a bank’s lending limit to one entity or sector. Other corrective action that can be imposed on banks include special audit, restructuring operations and activation of recovery plan. Banks’ promoters can be asked to bring in new management, too. The RBI can also supersede the bank’s board, under PCA.The provisions of the revised PCA framework will be effective April 1, 2017 based on the financials of the banks for the year ended March 31, 2017. The framework will be reviewed after three years.
When is PCA invoked?
The PCA is invoked when certain risk thresholds are breached. There are three risk thresholds which are based on certain levels of asset quality, profitability, capital and the like. The third such threshold, which is maximum tolerance limit, sets net NPA at over 12 per cent and negative return on assets for four consecutive years.
What are the types of sanctions?
There are two type of restrictions, mandatory and discretionary. Restrictions on dividend, branch expansion, directors' compensation, are mandatory while discretionary restrictions could include curbs on lending and deposit. In the cases of two banks where PCA was invoked after the revised guidelines were issued — IDBI Bank and UCO Bank — only mandatory restrictions were imposed. Both the banks breached risk threshold 2.
What next?
Some more lenders are expected to come under the corrective action framework as and when their asset quality worsens, putting profitability under pressure. Some public sector banks have breached the net NPA parameter as well as the profitability parameter. These banks are comfortable on the capital parameter, thanks to the government’s commitment to ensure the PSU banks are not starved of capital. However, as the government has its own commitment for maintaining fiscal discipline, it remains to been seen how long it can afford to infuse capital in these banks.
Source:Business Line
Tuesday, 28 March 2017
non performing assets
07:31
"Turn Around Plan" for 10 banks - AIBOC Bank Union Views
"Turn Around Plan" for 10 banks - AIBOC Bank Union Views
Officers’ union AIBOC resolves not to sign ‘turnaround’ plan for 10 banks
Calls for a viable and practical proposal; wants govt to hold dialogue with unions
COIMBATORE, MARCH 26:
The bank officers’ fraternity met at SBIOA House in Kolkata on Friday to discuss the finance department’s ‘turnaround plan’ proposal of 10 banks.
These 10 banks have been identified as ones where capital infusion by the government in future would be conditional.
The banks are: IDBI Bank, Bank of India, UCO Bank, Andhra Bank, Indian Overseas Bank, Dena Bank, United Bank of India, Allahabad Bank, Bank of Maharashtra and Central Bank of India. The government is understood to have asked the unions and associations in these banks to sign an agreement for the ‘turnaround plan’.
The All India Bank Officers’ Confederation (AIBOC) has resolved not to sign the proposal put forth by the government, instead negotiate for a “more viable and practical” plan.
Stating that it is unfair to ask the unions/associations to take responsibility for a turnaround when they have not been party to decisions, Thomas Franco, General Secretary, AIBOC, said: “Employees have practically no role in the government’s policy and credit decisions. The entire banking industry is facing the menace of NPA (Non-Performing Asset) because of environmental factors, and a major portion of the NPA are big-ticket loans, which include corporates and infrastructure projects. The credit decisions in such cases are not taken by the employees. It is, therefore, not fair to shift the onus of responsibility on the employees.”
‘Meaningless’ to target staff
“There is also a condition on realignment/reorientation of perquisites of employees and officers in the said 10 banks till they turnaround,” Franco said.
“Even if all the officers and employees forego their salaries and perquisites for a year, it will not help turnaround the banks. It is, therefore, meaningless to target employees and officers.”
The AIBOC has alternatively assured to recover smaller NPAs (wherever possible) through follow up, while demanding the government to publish the names of wilful defaulters and initiating stringent action against big-ticket (loan) defaulters.
“The demand for credit is huge in rural and semi-urban areas. This should be addressed not withstanding the need to strengthen finance support to smaller borrowers.
“The focus should be on NPA recovery instead of the push to cross-sell. Unnecessary travel expenses can be postponed, extravagant expenses can be reduced without touching staff expenses, and so on,” Franco said.
The meeting resolved to impress upon the government the need for an immediate meeting with the unions/associations, appointment of officer/employee directors on the board of banks, implementation of the recommendations of the Parliamentary Standing Committee on NPA and release of compensation for the expenditure incurred in opening 27 crore Jan Dhan accounts and opportunity cost due to demonetisation.
Source:Business Line
Monday, 27 March 2017
Reserve Bank of India
07:42
No plans to introduce new currency notes, says RBI Deputy Governor
No plans to introduce new currency notes, says RBI Deputy Governor
Kumbakonam:The Reserve Bank of India currently has no plans of introducing new denomination currencies, a senior RBI official said on Sunday.
"Presently RBI has no idea to introduce currencies of new denominations. The central banking institution wants to encourage cashless transactions, which are helpful to the people", RBI Deputy Governor N.S. Vishwanathan said while speaking at a lecture here on "Credit culture and the financial system".
In this connection, Minister of State for Finance Arjun Ram Meghwal had told Parliament on Friday that the government is not planning to print Rs 5,000 and Rs 10,000 currency notes.
Referring to banks' non-performing assets (NPAs), or bad loans, Vishwanathan said here that these are affecting the income and profit of banks.
"Banks cannot escape from the responsibility of controlling NPAs in their balance sheets," he said.
Banks are expected to base their lending decisions on a careful and prudent assessment of the financial position and repaying capacity of the borrower, while credit should be given to only the right people, he added.
The magnitude of the problem can be guaged from the NPA figures of state-run banks, which at the end of the current fiscal's second quarter that ended in September, rose to Rs 6.3 lakh crore, as compared to Rs 5.5 lakh crore at the end of the first quarter.
Source:Newshead
Sunday, 30 October 2016
State Bank of India
19:30
State Bank Of India, associate banks merger may be a costly affair: Credit Suisse
State Bank Of India, associate banks merger may be a costly affair: Credit Suisse
The proposed merger of the operations of State Bank of India (SBI) with that of its associate banks may turn out to be an expensive affair, Credit Suisse Securities (India) has warned in a report.
The cost of merging the associates would outweigh the benefits in the short term as bad loans are expected to mount at the units, the financial services company's report said.
SBI is expected to bear Rs 3,500 crore on account of harmonisation of employee pension plans when it merges the associate banks with it. The country's largest lender is expected to complete the process by March 2017.
According to Credit Suisse, the pension obligation may be higher than earlier estimates, while the doubling of non-performing asset (NPA) ratios in associate banks over the last few quarters would further strain the parent after merger due to poor asset quality.
Gross NPAs at SBI's subsidiaries have more than doubled to 13.2% at the end of September from 6% in March, as the associate banks have been aligning their bad loan recognition norms in line with the parent's. This translates into a 23% rise in SBI's consolidated NPAs just from the associates.
“We, therefore, continue to believe that the initial financial impact of the merger will be negative on SBI and material synergy benefits may accrue only over the long term,“ Credit Suisse said.
Although the banks have made higher provisioning to cover doubling of sticky loan ratios in the first half to September, Credit Suisse said the coverage ratio has dipped 500 basis points to less than 40%. With the rise in under-provisioning, banks would need Rs 16,000 crore of provisions in order to raise coverage to 70%. In 2015-16, Rs 6,000 crore was required towards provisions to cover bad loans.
Over the past six months, all associate banks of SBI have reported losses totaling about Rs 4,300 crore in spite of higher treasury gains. These losses have led to associates banks' tier 1 capital ratio dropping by 120-150 bps.
The fall in bond yields by about 200 bps over the last six months may push pension obligations higher than earlier estimates.
For all the associate banks taken together, capital levels have fallen 120-150 bps, the report said, though capital levels for SBI and State Bank of Hyderabad hav e risen on account of revelation of assets done in the first quarter to June. State Bank of Patiala has seen an estimated 190 bps improvement on account of capital infusion of Rs 2,400 crore in the September quarter.
Source:Banking Updates
Wednesday, 10 August 2016
non performing assets
19:21
‘Pain in banking may continue for one-two more quarters’
‘Pain in banking may continue for one-two more quarters’
Indian Banks’ Association (IBA) chairman ASHWANI KUMAR says the banking sector is
expected to come out of the stressed asset problem as the economy has started picking up. In an interview to GEORGE MATHEW, Kumar, who is also the chairman and managing director of public sector Dena Bank, said, “There’re some positive signals and it is expected that economy will grow faster. However, the pain will continue for one or two more quarters.” Excerpts: Q : Do you think time is ripe for bank consolidation? Ans.: Banks are grappling with the NPA issue now … consolidation in the banking sector can be taken up at an appropriate time. In consolidation, human resources is a big factor. They should be on board. Banks have different IT platforms and geographical locations of branches … there are a number of issues that will have to be considered...
Read more >> Click here
Thursday, 2 June 2016
public sector banks
08:29
Banking sector: More bad news expected
Banking sector: More bad news expected
Poor March quarter numbers indicate more bad news in the offing. Experts say prices not cheap. Is the worst over for banking stocks? Poor March quarter numbers indicate more bad news in the offing. Experts say prices not cheap. Is the worst over for banking stocks?
The RBI may be going soft on banks in its asset quality review for the March quarter, but there is no respite from burgeoning bad loans for the lenders. The current earning season shows that asset quality-related stress at banks remains very high. Lender after lender, particularly public sector ones, have reported massive losses. Most bank stocks have seen prices tanking. The PSU bank index has fallen 37% in the past year, and lost 11.6% per year for the past five years. Is the worst over for banking stocks ??
Last year was particularly bad for the banking sector. Loan book growth for 25 banks (the latest March quarter numbers were declared until 17 May), including private and public sector players, stood at 10.7% in 2015-16—the slowest in two decades. On top of that, these banks nearly doubled their gross non-performing assets (NPAs) to Rs 2.43 lakh crore over the last fiscal.
This sharp ramp-up in NPA was mostly owing to the mandatory asset quality clean-up by the RBI that requires banks to recognise and provide for non-performing loans. Higher provisioning eats into the bank's profitability. Earlier, the banks maintained profitability by keeping certain stressed assets out of the NPA category. That way they did not have to set aside funds for them. However, the RBI mandated asset quality review has got the skeletons tumbling out of the cupboard.
The quantum of provisioning and additional slippages in the March quarter has surprised analysts. Punjab National Bank posted the largest quarterly loss ever reported by an Indian lender at Rs 5,367 crore. Its provisioning cost rose three-fold to Rs 10,485 crore, eating away all profits. As a percentage of its loan book, PNB's gross NPAs now stand at a whopping 12.9%.
Another PSU lender, Bank of Baroda's continuing asset quality pangs shocked markets too. After reporting a loss of Rs 3,342 crore in the December quarter owing to 'one-off' provisioning for bad loans, the lender followed it up with another loss of Rs 3,230 crore in the March quarter. While announcing the numbers for the preceding quarter, the bank's management had indicated that the worst was over as it had taken the entire provisioning hit in a single quarter, unlike other banks which opted to spread it out over several quarters.
Four other state-run lenders, UCO Bank , Dena Bank, Allahabad Bank and Central Bank of India , have reported a weakening balance sheet in the just concluded quarter. The extent of additional provisioning by these banks indicates higher than anticipated stress in balance sheets. Numbers from the country's largest lender State Bank of India are still awaited (due on 27 May) and could reveal more. Given how the situation across banks, the country's biggest lender is not likely to paint a different picture.
Meanwhile, experts are not sure whether the worst is over for PSU banks. Vikas Gupta, CIO, ArthVeda Capital, says, "We are not comfortable with PSU banking stocks yet. More bad news could be in the offing and prices do not look cheap compared to fundamentals." Within the PSU banking space, mid-sized entities like Allahabad Bank, Dena Bank, Union Bank of India and Andhra Bank are in particularly bad shape.
Apart from high asset quality stress, they are hampered on the operational front too, points out a Edelweiss Securities report. "We perceive clear demarcation between large and mid-size PSU banks and expect pressure to continue in latter. Given increasing BASEL III (capital adequacy) requirement and limited capital support from the government, dilution risk is imminent at weak multiples, which will be detrimental to shareholders' returns," says the report.
Despite ongoing woes, prices of several PSU bank stocks surged around mid-February after the RBI announced that it would go easy in the asset quality review. The passage of the Bankruptcy Bill boosted stocks and the sharp decline in prices earlier also supported the rally. However, once the weak results were announced, prices of most banking stocks took a renewed hammering. Most PSU bank stocks are now trading at a discount to book value, leading some to argue that the downside for these stocks is limited and that they could be great value picks at current prices.
"The valuations of PSU banks factor in the potential stressed loans and weak core operating performance for 2016-17," says Alpesh Mehta, Research Analyst, Motilal Oswal Securities. But he prefers private banks over state-owned banks. Ambareesh Baliga, an independent market expert, says the risk-reward is more in favour of PSU banking space now given that the market has mostly discounted continuing asset quality pangs. There is a belief that many of the banks' books are now cleaner after the hefty NPA provisioning, and that these lenders are now done with most of it. "Public sector banks are not likely to provide any further surprises. However, risks are more prominent in private banking stocks where negative results have come as a surprise," says Baliga.
Private lenders ICICI Bank and Axis Bank posted weaker than expected numbers in the March quarter and also came out with weak guidance for this fiscal. While ICICI Bank has indicated likely stress in Rs 44,000 crore worth of loans going forward, Axis Bank has put Rs 22,628 worth of loans on watch. A handful of private banking stocks like Yes Bank , IndusInd Bank, HDFC Bank and Kotak Mahindra Bank have displayed consistent resilience to the NPA issue. These are considered more retail-centric banks where asset quality issues are under control. Not surprisingly, these stocks have surged over the past few months even as others have stumbled. Most analysts have maintained 'buy' rating on these stocks.
Stay away from PSU banking funds
EQUITY FUNDS focused on banking stocks continue to be weighed down by the gloom surrounding the sector. Over the past year, this fund category has tailed international funds as the worst performing category, clocking a negative return of 7.53%. The worst affected funds have been the ones purely focused on the PSU banking segment. Kotak PSU Bank ETF and Goldman Sachs PSU Bank BeES Fund have both seen a 36% drop in their NAV over the past year.
Investors willing to bets on the banking sector should not restrict their exposure to PSU bank focused funds. If at all, opt for funds which invest across banking and financial services stocks. Here the fund manager has the freedom to pick from a basket of private banking as well as non-banking financial services players that boast of better quality loan books, apart from PSBs. These funds have done relatively better in recent times.
Source:Sapost
Saturday, 7 May 2016
Sarfaesi Act
19:22
DRTs to go online, dispose cases faster
DRTs to go online, dispose cases faster
In a bid to expedite non-performing assets’ (NPAs) recovery, the government is trying to make debt recovery tribunals online and enable non-institutional investors to buy asset reconstruction companies’ security receipts.
The government will introduce two Bills to amend The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, and the Recovery of Debts Due to Banks and Financial Institutions (DRT) Act, 1993, in the current session of Parliament.
The amendment to the DRT Act will strengthen these tribunals and focus on improving the existing infrastructure, including the computerised processing of court cases to support reduction in the number of hearings and faster disposal of cases.
“The DRT will become the country’s first online court,” Finance Minister Arun Jaitley had said in March, at the second edition of Gyan Sangam. Changes in the Sarfaesi law will enable non-institutional investors to invest in security receipts issued by asset reconstruction companies (ARCs,) which buy bad loans from banks at a discount.
In case of corporate bond defaults, the changes will allow bond and debenture trustees to use provisions of Sarfesi Act as well. So far only banks and financial institutions can use these rules in bond default cases.
The change may give “secure creditors” the first right to auction an asset in order to recover the dues. This may take precedence over state laws. The amendment would also aim at reducing the number of adjournments so that litigation time is reduced. Besides, the government is setting up a central registry for lodging records of multiple loans given to same parties. “We have got inter-ministerial approval for amendment of Sarfesi Act and DRT laws. It will help make recoveries faster for banks,” said a finance ministry official.
Source:BankingUpdates
Source:BankingUpdates
Friday, 22 April 2016
Reserve Bank of India
09:17
Red flag: Another Rs 6 lakh crore of bank loans may turn into NPAs
Red flag: Another Rs 6 lakh crore of bank loans may turn into NPAs
Bank loans that aren’t non-performing assets (NPAs) just yet but could turn toxic amount to over Rs 6 lakh crore or close to 9% of total advances, data sourced from the Reserve Bank of India (RBI) show. The total troubled loans of Rs 6,24,119 crore at the end of December 2015 were 9% higher than the Rs 5,73,381 crore at the end of June 2015.
While Rs 3,06,180 crore worth of loans were classified in the SMA-1 category where repayments are overdue between 30 and 60 days, another Rs 3,17,939 crore was in the SMA-2 category where repayments are overdue between 60 and 90 days.
These special mention accounts follow a fiat from the RBI in 2014 asking banks to put in place a mechanism to red-flag troubled loan accounts early in the day so that these could be dealt with speedily. If the loan is not serviced after 90 days, it must be classified as an NPA.
Since these are standard accounts, the provisioning requirements are small at just 0.4%. However, envisaging that some of this exposure could become stressed, the central bank had asked lenders to provide more than the mandated amount. After taking a close look at banks’ exposures, the RBI chose to flag some 150 accounts that had either turned toxic or were in danger of getting there. It asked lenders to provide adequately for this “emerging stress” and called for exposures to be classified uniformly across a consortium to ensure any stress was captured evenly.
The central bank wants banks’ balance sheets to reflect the true quality of assets by March 2017. This “clean-up” has begun and resulted in a sharp jump in provisioning for most state-owned lenders in the December quarter. The additional capital that would be needed to be set aside is estimated at around Rs 50,000-70,000 crore and lenders must provide adequately for the 150 accounts by March 2016.
On a rough reckoning, troubled loans at 27 public sector banks stood at R2.67 lakh crore. While State Bank of India’s SMA-2 accounts stood at Rs 60,228 crore, or 5.17% of its total advances, at Punjab National Bank this exposure is approximately 6.31% of its total loan book or R24,824 crore.
Between them, 21 private sector banks have `49,689 crore of troubled exposure. ICICI Bank tops the list with `10,897 crore worth of SMA-2 loans, followed by Axis Bank with `9,549 crore and Yes Bank with `7,066 crore.
The total stressed assets for the banking sector — the sum of restructured loans and NPAs — rose to 11.3% in September 2015 from 11.1% in March, RBI data show. Public sector banks have seen their NPAs rise sharply over the last couple of years as the economy slowed and companies’ cash flows became strained. Gross NPAs at Central Bank of India at the end of Q3FY16 stood at 8.95%, at PNB they were 8.47%, at SBI they were 5.1% and at ICICI Bank they were 4.72%.
In the past, banks have often delayed adequate provisioning by restructuring loans and giving companies easier repayment terms. However, the central bank withdrew the forbearance from April 2015 mandating that “restructured” loans should be provided for at 15%. In FY15 alone banks restructured loans worth `72,000 crore through the corporate debt restructuring cell, on the back of recasts to the tune of `1 lakh crore in FY14.
The central bank had also directed banks to provide credit information regarding their exposures above `5 crore to the Central Repository of Information on Large Credits. As soon as an account is classified under SMA-2, banks have to form a lenders’ committee called the joint lenders’ forum to evaluate the asset and work towards early resolution of stress in the account.
Source:Financial Express
Wednesday, 20 April 2016
Reserve Bank of India
18:28
Reserve Bank Of India Clear Message On NPA And Fraud Cases
Reserve Bank Of India Clear Message On NPA And Fraud Cases
RBI Governor Raghuram Rajan has said the issue of bad loans gets “loaded with a lot of morality” and it is necessary to keep criminal liability separate to put stressed assets back on track.
It is not a point whether defaulters are good people or bad people , whether the company is big or small, whether is popular or unpopular etc.
Questions are asked whether non-performing assets (NPAs or bad loans) were a concern for him given that some “big names and big companies” are linked to the problem.
The Reserve Bank Governor made it crytal clear that the NPA clean-up is simply about whether the loan is “performing or not performing.
There may be good reasons or bad reasons behind a Non -performing asset.It may have become non-performing simply because someone had terrible luck or somebody else’s fault. Sometimes licences are cancelled , sometimes approvals are given to company by statutory bodies in time, sometime one of partners or directors do not perform or commits blunder , commit fraud or sometime divert the fund of the firm for self use or for different use and so on. There may be all sorts of reasons why companies get into trouble.
MR. Rajan said clearly , "if companies get into trouble, the loan becomes a non-performing asset and “we very much want these assets to be back on track,”
It is a completely separate issue of who to blame and whether there is criminal liability involved in a NPA account or with some defaulting firm. In a fraction of the cases there may be criminal liability involved. That should be separated from the whole issue of putting the assets back on track.
Asset is not a criminal. Asset can produce value and can function. Asset should be allowed to produce value even while there is a separate case going on if there was criminal activity involved.
Rajan emphasised that the government has said very clearly it will not interfere in the process of granting loans and “I think that is a very important development. The next stage has been on trying to improve the administrative structure in the banks.”
Rajan said the last part of the stabilisation agenda has been to clean up the stressed assets in the banking sector in order to ensure banks have the room to lend again.
Rajan has said it clearly and without any ambiguity that we want to have our banks get their money back. For that we need a proper bankruptcy system, a court system that functions in finite time and we didn’t have that in the past.
He expressed hope that “there is a reasonable chance” that the bankruptcy code bill will be passed soon and that it will ensure a fully functioning system.
Under bankruptcy code banks and borrowers can renegotiate outside of bankruptcy. Newly framed bankruptcy code keeps you from getting away with too much either on the banking side or the promoter side.
Number of frauds in banks has been rising quarter after after, year after year. Many cases of frauds are not even reported to RBI or reported with inordinate delay. RBI has said clearl that banks have to make provision for the entire amount of a loan in transactions where fraud has been detected in a period not exceeding four quarters.
Sometimes banks feel that if huge provisions are done in a quarter it may adversel affect the finacial report of the bank and are afraid of erosion in image of the bank and its stock value. To smoothen the effect of such provisioning on quarterly profit and loss, banks have the option to make the provisions over a period, not exceeding four quarters, commencing from the quarter in which the fraud has been detected.
RBI said that the banks have to make suitable disclosures with regard to the number of frauds reported, the amount involved in such frauds and the quantum of provision made during the year. This tight and hard instruction will in the long run change the dirty culture of bank officials who in order to save their employees from criminal actions conceal cases of fraud. It is important to say here that the culture of hiding evil acts of an employee who commit fruad like crime lead to escalation in volume and value of such frauds.
Banks must scrupulously adhere to the extant guidelines on classification and reporting of frauds. It is in overall interest of the bank and the country as a whole.
Source:importantbankingnews2
non performing assets
18:15
Morgan Stanley downgrades Bank of Baroda and ICICI Bank
Indian banks are unlikely to see a slowdown in bad debt formation this fiscal as they will continue to be impacted by a weak economy, a struggling corporate sector, and the Reserve Bank of India's intention to clean bank balance sheets, Morgan Stanley has said.
The US investment bank on Monday downgraded private sector ICICI Bank and public sector Bank of Baroda (BoB) to so-called equal weight because of expectations that these banks will have to provide more money to cover for non-performing assets (NPAs) in the current and next fiscal year.
Equal weight means investors should detest from accumulating these stocks, but may hold on to their existing investment.
"BoB has made good progress in cleaning its balance sheet, but we think profitability will take time to pick up," Morgan Stanley analysts Sumeet Khariwala and Subramanian Iyer said in a note on Monday .
Morgan Stanley said it prefers lenders with a high retail base, but among banks with a corporate focus Yes Bank and Axis Bank are better off because of a minimum impact from RBI's asset quality review (AQR), in which banks were directed to recognise some standard loans as bad.
"We agree FY16 level was high, causing many banks to become loss-making; we estimate the banks we cover reported 4.5% of loans as new NPLs (around `2 lakh crore). FY16 was tough, yet we don't expect FY17 to be close to a normalised year. We expect FY17 NPL formation to stay elevated at around 3% of loans as economy remains weak implying corporate profitability will stay weak," the Morgan Stanley note said.
Source:BankingUpdates
Thursday, 14 April 2016
non performing assets
07:50
The Central Vigilance Commission (CVC) is awaiting sanction to prosecute 98 banks officials
The Central Vigilance Commission (CVC) is awaiting sanction to prosecute 98 banks officials
Banks delay action against nearly 100 corrupt officers
New Delhi, Apr 10 () Public sector banks have delayed action against nearly 100 corrupt officers despite the uproar over cases of bank fraud and non-performing assets, according to a CVC report.
The Central Vigilance Commission (CVC) is awaiting sanction to prosecute 98 banks officials, including those at the level of Senior Manager, Chief Manager and General Manager allegedly involved in financial irregularities, for over the last four months.
Sanction for prosecution is also awaited in these 43 cases against 49 government officials. Of the 43 cases, the highest number of seven are pending with Indian Overseas Bank, two each with State Bank of India and Bank of India, and one each with Oriental Bank of Commerce, Corporation Bank, State Bank of Patiala, Exim Bank, Bank of Baroda, as per CVC's performance report for February.
As per norms, the matter of granting sanction for prosecution has to be decided within four months.
"We have been raising the issue of delay in grant of sanction to prosecute corrupt officers in various inter- ministerial meetings. But still the number of cases continue to rise. We will write again to all the departments where such cases are pending," a senior CVC official said.
Interestingly, six cases involving at least ten government officers, most of them belonging to the Indian Administrative Service (IAS), are pending with Department of Personnel and Training, which acts as the Centre's nodal authority responsible for enforcing anti-corruption measures.
Three cases each seeking sanction to prosecute corrupt officials are pending with Defence Ministry and Steel Ministry (Steel Authority of India), two each with Home, Finance, Railways, and Health and Family Welfare ministries, among others, the CVC said.
"In five cases involving eight officials (two cases pertaining to Ministry of Personnel Public Grievances and Pensions, one case of SAIL, one case of State Bank of India and one case of Bank of Baroda), Commission agreed with the departments and organisations that sanction for prosecution is not necessary. However, final action taken or decision is awaited," the probity watchdog said.
Citing a Supreme Court order, the CVC has already told all departments that "time limit of three months for grant of sanction for prosecution must be strictly adhered to. However, additional time of one month may be allowed where consultation is required with the Attorney General or any other law officer in the AG's office". AKV SK MNG
Source:TOI
Saturday, 26 March 2016
public sector banks
18:14
Banks need to recognise an NPA when it happens, says YH Malegam
Banks need to recognise an NPA when it happens, says YH Malegam
YH Malegam, country's finest chartered accountant and foremost financial expert, in an interview to CNBC-TV18’s Latha Venkatesh opens up on why banks are still struggling with non-performing assets (NPA). Along the way, he offers solutions on how to stop the loans from going bad.
YH Malegam, who could easily be called the country's finest chartered accountant and foremost financial expert, in an interview to CNBC-TV18’s Latha Venkatesh opens up on why banks are still struggling with non-performing assets (NPA). He also offers a number of solutions on how to fix the problem of bad loans. "I would suggest that they [banks] should concentrate more on cash flows. As far as possible they should lend in the form of loans rather than in the form of cash credits and overdrafts," says the former president of the Institute of Chartered Accountants of India. These are, however, only two of the five solutions he offers.
What should be the way forward especially for public sector banks?
Monday, 15 February 2016
Reserve Bank of India
18:10
Reserve Bank of India seeks Rs 26k-cr more for capital infusion by 2018
Reserve Bank of India seeks Rs 26k-cr more for capital infusion by 2018
RBI seeks Rs 26k-cr more for capital infusion by 2018The Reserve Bank of India (RBI) has sought an additional Rs 26,000 crore from the government to be injected into state-run banks by 2018. The point here is that current capital pledges may be inadequate because stressed assets have swelled. The government may announce an increased amount in the Budget itself. So far in this fiscal, the government has spent Rs 20,000 crore on bank capitalisation and will infuse another Rs 5,000 crore before March. The government has pledged Rs 70,000 crore toward this end until FY19; Rs 25,000 crore of this in the next fiscal year.
Background:-
•RBI has informed the government about the additional capital that will be needed by state-owned banks until 2018 as part of implementing Basel-III standards.
•If a bank’s profitability is insufficient, it may need capital to meet that provision. RBI has been pushing banks to clean up balance sheets and make adequate provision for bad
•loans.
•As per finance ministry data, gross non-performing assets (NPAs) of PSBs increased by 25.19% to Rs 3.14 lakh crore at the end of September 2015 from Rs 2.5 lakh crore at the same time in the previous year.
Additional points to be noted:-
•Banks have been allowed to bring down the government holding in them to 52%.
•The government has also been pressing the banks to divest non-core assets.
•The finance ministry estimates that state-run banks will require Rs 1.8 lakh crore of additional capital in the next four financial years, of which Rs 1.1 lakh crore will have to be raised from the market by the lenders.
•Bankers argue that market conditions are not conducive for public offerings. It will be extremely difficult to get investors when your books are laden with non-performing loans.
•The country’s largest bank, State Bank of India, has extended the period of approval for raising equity capital of about Rs 15,000 crore until March 2017.
Source:BankingUpdates
Source:BankingUpdates
Friday, 6 November 2015
Reserve Bank of India
08:06
Reserve Bank of India allows cooperative banks to roll out Internet banking services
Reserve Bank of India allows cooperative banks to roll out Internet banking services
The Reserve Bank of India (RBI) on Thursday allowed all cooperative banks to offer Internet banking services to their customers.
In a notification on its website, the central bank said any urban cooperative bank (UCB), state cooperative bank (StCB) and district central cooperative bank (DCCB) that has implemented the core banking solution in full will be allowed to provide non-transactional services to their customers.
Core banking solution refers to linking of various branches of a bank with a common computerised system, which allows customers to access their bank account from any branch, irrespective of where they opened the account. This is typically useful in retail banking services.
The non-transactional services include balance enquiry, balance viewing, account statement download, request for supply of cheque books, etc., RBI said in its notification.
The commencement of these services will have to be reported to the regional office of the RBI and also to the National Board for Agriculture and Rural Development (NABARD) in case of StCBs and DCCBs.
To provide transaction services, the regulator has set stiff conditions which these cooperative banks will have to fulfil.
A cooperative bank looking to roll out online transactions must have a minimum capital adequacy ratio of 10%, with a networth of at least Rs.50 crore on 31 March of the preceding financial year. It must also have a gross non-performing asset (NPA) ratio of less than 7% and a net NPA ratio of not more than 3%.
The cooperative bank should have made a net profit in the preceding financial year and, overall, should have made a net profit in at least three out of the preceding four financial years, RBI said. Defaults on maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) would not be allowed.
The bank must have a track record of regulatory compliance, with no monetary penalty imposed on it for violation of RBI directives/guidelines during the two financial years preceding the year in which the application for transaction-based Internet services is made, RBI said.
“The bank will report to the concerned regional office of RBI (and also NABARD in case of StCBs /DCCBs) every breach or failure of security systems and procedures and the latter, at its discretion, may decide to commission a special audit/inspection of such bank,” the notification said.
Source:BankingUpdates
non performing assets
07:56
IDBI bank may be merged with private lender
IDBI bank may be merged with private lender
The government has hired SBI Capital Markets to draw up plans for the sale of a strategic stake in IDBI Bank and is open to a range of options including merger with a nonstate lender and preferential allotments to institutions of sound financial standing.
Other proposals that have emerged in early talks include a follow on public offer and sale to institutional investors through the open market, said persons with knowledge of the two rounds of discussions that have already been held. Amerger would face the minimum regulatory hurdle.
This will only need the Reserve Bank of India's permission, the person said. The government currently owns 76.5% of IDBI Bank. IDBI Bank is governed by the IDBI Act and the government can lower its stake without having to approach Parliament. That's in contrast with the position at other state-run banks, where the government has committed to retain a 52% holding at least.
Earlier this week, ET had reported that the government will soon set up a high-level committee headed by the cabinet secretary that will oversee strategic divestments, including the IDBI stake sale. The investment banking arm of the country's largest bank will work on valuation, different divestment models and how to sell overseas assets and liabilities.
A senior government official told ET that the idea is to identify the core assets of the bank and the regulatory steps that may be required to bring down the government's stake. How much it will sell hasn't been decided yet. "There is no cap that we have thought of as of now on equity dilution. We will identify all the alternatives and then proceed for relevant regulatory approvals," said one of the two persons cited above. Based on Wednesday's closing price of Rs 84.8 a share, IDBI Bank's market value amounts to Rs 13,600 crore.
OPPORTUNITY TO GROW BIG
Possible merger partners could include entities that have recently got approval to set up small banks. "This can turn out to be an opportunity for them to get into the league of larger banks," said one of the officials cited above. The valuation methodology will be made transparent to protect the process from legal challenge.
"In the past we have seen that any strategic disinvestment has led to lot of issues mostly on valuations. We do not want that in this case," said the first official cited above. IDBI Bank said on Wednesday that September quarter net profit remained almost flat at Rs 119.5 crore compared with Rs 118.49 crore in the year earlier. Net non-performing assets (NPAs) widened to 3.16% from 2.79% of loans in the year-ago period.
Last month, minister of state for finance Jayant Sinha had said that the government was considering transforming IDBI Bank in a manner similar to that of Axis Bank, formerly UTI Bank. The government is looking to raise a record Rs 69,500 crore from asset sales this year.
Monday, 26 October 2015
public sector banks
11:48
Bank officers to be liable for loan information now
Bank officers to be liable for loan information now
Stung by mounting bad loans and growing instances of bogus paperwork, authorities have now made bank officials directly accountable for assessing borrowers’ documents as part of a broader move to fortify loan appraisal processes.
It has now been made mandatory for public-sector bank officials to give a written confirmation that they have verified and authenticated borrowers’ documents before signing off on a loan application.
The move comes after the Central Vigilance Commission (CVC), India’s anti-graft watchdog, found evidence of loans granted to companies on fake documents, including balance sheets and profit and loss accounts.
“Banks were accepting documents without proper validation,” chief vigilance commissioner KV Chowdary told HT.
“The situation is such that no bank official owns up on the documents that have been submitted and accepted for approval of loans,” he said.
“Nor is there any prescription in banks that whenever a balance sheet is submitted, it should be verified with respect to the person who signed it or in case of a company, referred to the ministry of corporate affairs,” he added.
While in some cases balance sheets have been found to be certified by non-existent chartered accountants, in others companies were found to have presented documents to banks different from the ones certified by the auditors.
Banks find it difficult to recover funds from companies that default on loans taken on forged documents.
There is rising suspicion about the alleged involvement of bank officials in allowing such acts of forgery to get past the existing due-diligence system. The move to make them accountable for verifying loan-related paperwork is primarily aimed at plugging this gap.
“In many cases, action is in progress against errant bank officials either from the point of view of culpability of the bank officials who may have facilitated these loans incorrectly or for failure to take action,” Chowdary said.
India’s banks are grappling with mounting bad loans, partly because of stalled projects that have hurt companies’ earnings and also because of bogus paperwork of some companies that inflated their ability to repay.
Bad loans or non-performing assets had topped R3 lakh crore as on December 2014, of which R2.62 lakh crore belonged solely to nationalised banks.
Source:BankingUpdates
