INDIAN BANKING UPDATES

Sunday, April 14, 2019

Financial news today

14.04.2019: Today's Banking / Financial News at a Glance

RBI Governor says India's economy needs to grow even faster : India’s central bank chief said the expansion of the world’s fastest-growing major economy needs to pick up to around 8 percent to deal with poverty and other challenges. While the past few years’ average growth of around 7.5 percent was impressive, “the expectation is India can be better," Reserve Bank of India Governor Shaktikanta Das said at an International Monetary Fund event in Washington on Friday. He also said more structural reforms were needed in areas such as land and labor. India is expected to post real economic growth of 7.2 percent in the 2019-2020 fiscal year, and is seeing below-target inflation even as rising oil prices add an upside risk, the governor said. Still, he added that the inflationary impact from spikes in crude -- India’s biggest import -- can be exaggerated. “If there is a temporary spike of oil prices and again it comes down, then obviously the impact gets moderated," Das said. Any “sustained increase in crude prices will definitely have an impact on inflation, but we have to see how sustained it is.” - economic times

IL&FS case: SFIO arrests Ramesh Bawa ; Serious Fraud Investigation Office (SFIO) on Saturday arrested Ramesh C Bawa, Ex-Managing Director and Chief Executive Officer of IL&FS Financial Services Ltd. (iFIN) in connection with the ongoing investigations into the affairs of IL&FS and its group entities. Bawa has been arrested on the grounds of abusing his powers in IFIN through his fraudulent conduct and in granting loans to entities which were not creditworthy and caused wrongful loss to the company and its creditors. It may be recalled that IL&FS Financial Services Ltd. had borrowings of around 17,500 crore from debt instruments and bank loans. Provident Funds, Pension Funds, Gratuity Funds, Mutual Funds, Public and Private Sector Banks, are among those who had invested in these debt instruments. - business line

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Pension, provident funds have ₹9,134-cr exposure to IL&FS’ : Pension and provident funds have an exposure of ₹9,134 crore to debt-ridden Infrastructure Leasing and Financial Services (IL&FS), but these cannot be repaid immediately as it will impact the IBC-led process. This disclosure was made by IL&FS to the National Appellate Company Law Tribunal in an affidavit, which will take up the matter for hearing on April 16. “Whilst the objective of payment to certain categories of creditors (provident funds and pension funds) is laudable, the Union of India and Respondent No 1 submit that the same is not feasible for the following reasons: any payment which is ad hoc in nature will be contrary to the Resolution Framework Report...and any payment which disregards the legal sanctity and priority of payments of creditors will destabilise the financial market and distort or disarray borrowings by corporates and lending by banks and financial institutions,” said IL&FS. - business line

Unsecured lending categories grew at 31.3% in 2018, says CIBIL report : Unsecured lending categories like credit card loans, personal loans and consumer durable loans grew at 31.3 per cent in the fourth quarter of calendar year 2018 (Q4CY18), while secured lending — loan against property, auto loans and home loans — experienced a moderation in growth in the same period, according to a TransUnion CIBIL report on credit trends. In Q4CY18, loan against property, auto loans, and home loans grew 21.8 per cent, 17.4 per cent and 17.1 per cent, respectively. According to industry experts, the smaller base of unsecured lending helps it post a better growth rate, in percentage terms, than other loan segments. On the demand side, the link between income and expenditure is becoming weaker with rising aspirations especially among the younger working population, say experts. Hence, consumption spending is giving rise to unsecured shorter-term credit. - business standard

Digital lender Branch Int’l upbeat about India growth : Mobile app-based lender Branch International has, within a month of its foray into the Indian market, witnessed a huge uptake in loan applications. We have, in the last 45-odd days, received close to 1.2-lakh loan applications,” Charishma Chotalia, General Manager, told BusinessLine. The San Francisco-based start-up received an NBFC licence in January this year. Though new to India, this company, which focuses on the micro-lending space through the mobile app, entered the African market almost two years back, where it remains the most downloaded app. Without sharing details on the amounts disbursed in India till date, Chotalia said she was awed by the response to the product offering, as it proved the business potential in the digital-lending space.“We will be adding additional finance products and not remain just a lending platform.” Asked if Branch could do without a brick-and mortar presence, she said: “We only focus on micro-lending, making access to finance possible for the billions still unreached by banks. “The power of technology is phenomenal. We’ve used data science to create a robust model to assess the applicant’s profile and a completely different model to underwrite the risk. - business line

Tuesday, August 21, 2018

financial news 21-08-2018

5.With India's trade and current account deficits widening, the finance ministry is ‘not in favour’ of reducing the import duty
and GST on gold as was suggested by a panel set up by the NITI Aayog.
Business Line
1. Sembcorp Energy India Ltd (SEIL), through its wholly-owned subsidiary Sembcorp Gayatri Power Ltdd, has won a
competitive tender conducted by the Bangladesh Power Development Board to supply 250 MW power for 15 years.
2. Energy Efficiency Services Ltd (EESL) and the World Resources Institute (WRI) are teaming up to call for a start-up
challenge. This Energy Innovation Challenge will seek ideas for scalable solutions pertaining to grid management,
eMobility, energy efficiency, and market innovation segments.
3.India will have to do some heavy lifting on structural reforms and persist with macro-economic prudence if it were to
achieve and sustain over 8 per cent GDP growth in the coming years, say economists and economy watchers.The
suggestion comes in the wake of the Central Statistics Office (CSO) making public the reports of the working group that
was set up to provide an estimate of the GDP back series with 2011-12 as the base year.
4. West Bengal Chief Minister Mamata Banerjee has called for greater financial assistance to the MSME (micro, small &
medium enterprises) sector and asked the State cooperative banks to look for ways to increase lending to them.Bengal
currently has 53 lakh MSME units, employing about 1.1 crore people. Nearly 28,000 new MSMEs are set up every year in
the State.
5. Less than three months of the Union Cabinet approving the National Policy on Biofuels 2018,questions are being
raised on the lack of transparency in adopting the policy both in terms of technology and funding.
Business Standard
1.High values of stressed steel assets reflect uncertainty over greenfield.The upturn in the steel cycle is already in its
second year.
2. Net worth of nine realty firms dips 18% during IndAS 115 era: Study.The nine companies have seen a cumulative
impact of Rs 112.79 bn, an 18 % downward revision from their net worth as of March 31, 2018.
3.NCLAT grants stay on liquidation order passed against Jyoti Structures.According to the IBC regulations, any resolution
plan needs to be approved by a minimum of 66 per cent of the lenders.The stay order comes after a group of investors
led by Sharad Sanghi and 800 employees of the corporate debtor appealed against it.
4.EPFO revises down payroll numbers by 12% for September-May period.The payroll data has been revised downwards
for each of the nine months between September 2017 and May this year.
5.Shipping ministry eyes SEZ-like tax breaks to push coastal economic zones.The Union government had proposed
setting up CEZs, one each on the east and west coast of the country.
Live Mint:
1.Crystal Crop acquires 4 brands from FMC, to widen portfolio.Crystal Crop said that its acquisition of Furadan,
Splendour, Metcil and Affinity Force brands will help it strengthen its insecticide and herbicide portfolio.
2.Centre, states differ over who will foot bill for MSME tax break.Proposal seeks to share financial burden between centre
and states, which the latter are opposing.
3.Fotowatio Renewable Ventures looks to exit solar project in India.Edelweiss Infrastructure Yield Plus Fund and Actis
LLP’s Sprng Energy Pvt. Ltd have evinced interest in Fotowatio’s solar power project in Andhra Pradesh.
4.Alibaba is in talks with Reliance Retail to pick up as much as 50% stake for $5-6 billion to challenge Flipkart and
Amazon in India’s e-commerce market
5.India’s GDP rose fourfold in 1993-2012, while wages only doubled: ILO.Rural wage grew faster than urban wage, but
cumulative wage in urban India is more than double that of rural India, says ILO.

Friday, August 17, 2018

Financial news today 17-08-2018

Good Morning Sir

Crude:@$65.41(+0.62%)

Brent:@$71.38(+0.88%)

JPY @110.86/$

Euro@ 1.1373/$

10 year US @2.870%(+0.20%)

INR @ 70.1625/$

G SEC 2028 @ 7.861%

Economic Times:

1. A strengthening dollar and a weakening China are the biggest risks to emerging markets, said investor and author Ruchir Sharma. The recent weakness in the rupee is part of the overall rout in emerging market currencies and the course of the Chinese yuan will play a big role in their direction, said Sharma

2. Axis Bank is looking to sell a dozen distressed accounts to ARCs to exit them before August-end which is the deadline set by the RBI to either resolve the accounts or refer them to bankruptcy court.The total loans on the block is about ₹1,000 crore and include large borrowers but Axis Bank has a small share of loans,

3. Bids to buy Chennai based micro lender Madura Microfinance is intensifying with a US private equity fund matching first suitor Federal Bank’s offer, and the close race underlined the potential of the industry.They said Federal Bank was ready to pay ₹720-750 crore to fully acquire the MFI with a loan portfolio of ₹1,184 crore.

4. The Indian Railways plans to invest ₹44,000 crore to build a 1,100-km greenfield freight corridor on the east coast connecting Kharagpur in West Bengal with Vijaywada in Andhra Pradesh. The corridor, which is expected to carry about 200 million tonnes of freight per annum, is likely to be announced in the budget proposal for 2019-20.

5.The government has asked state-run power plants holding large fuel stocks to increase generation to allow others to run at a lower capacity and build inventories before the festive season. At present, 117 power plants with supply agreements with Coal India have a cumulative stock of 15.2 million tonnes, enough to generate power for 10 days but 14 of them don’t have enough coal to run the plant for one day.

6. India will test a plan to operate its underutilized natural gas-fired power generators as “peaker” plants that can switch on quickly when there’s high demand, according to the country’s power planning body. The project will start with four NTPC Ltd. plants with a combined capacity of 2.3 gigawatts that will run only in the evenings.

7.Bank credit grew 12.70 per cent to Rs 86,79,741 crore in the fortnight to August 3, according to the latest RBI data. In the the year-ago fortnight, bank advances was at Rs 77,01,926 crore. The increase in advances in the reporting fortnight was higher than the growth registered in the previous fortnight ending July 20 when it had risen by 12.44 per cent to Rs 86,13,164 crore.

Financial Express:

1. Independent power producers have urged the RBI to extend the last date for finalising resolution plans for defaulting projects to November 16 from August 27, as the central bank itself delayed releasing the list of authorised credit rating agencies, an indispensable part of the process.34 stressed power plants worth Rs.2.5 lakh crore, with a combined capacity of 39 GW, are expected to come up with resolution plans by end-August, failing which insolvency proceedings will have to be invoked against these assets.

2. Operational creditors of Binani Cement on Thursday alleged before the National Company Law Appellate Tribunal (NCLAT) that the resolution professional (RP) kept them out of the resolution process and their claims were never verified. The counsel for operational creditors also alleged that there had been a great deal of misconduct by the RP.

3. Cash-strapped, troubled airline Jet Airways is understood to be tapping homegrown NBFCs to monetise its forward sales to raise around Rs 1,500-2,000 crore.Basically, all the bookings done through credit cards will directly go to the concerned NBFC.

4. State Bank of India (SBI) has put on sale a fresh batch of NPAs worth Rs 383 crore, days after it put on the block two accounts with a total outstanding of Rs 2,490 crore. The latest set of seven NPAs put on sale includes four Kolkata-based accounts and one each from Bhubaneswar, Ludhiana and Mumbai. The largest of these accounts is Ludhiana-based Yogindra Worsted (Rs 68.33 crore), for which the reserve price has been set at Rs 28.13 crore.

5. After a 7% drop in July, truck rentals on the trunk routes recovered sharply by 5% in the mid of August.The charges of retail parcel freight rose 5% in the past two weeks.As price of diesel rose Rs 1.30 a litre; soft surveillance of e-way bill digital transit pass system began; cargo offerings from fruits, vehicles, food items, general merchandise on trunk trade routes surged 10%, consumer spending had gone up significantly high and so had consumption in metros, tier-I and -II cities.

Business Line

1. The income of agricultural households, which account for nearly half of rural households in the country, surged to Rs. 1,07,172 in 2015-16, growing at a compounded annual growth rate (CAGR) of 12 per cent from 2012-13, according to a survey carried out by the NABARD.

2. Inflationary headwinds have prompted India Ratings (Ind-Ra) to lower the nation’s growth projection for FY19 to 7.2 per cent.The rating and research agency also expressed apprehension that populism ahead of the 2019 general elections might upset the fiscal mathof States.

3. Japan will get interest repayment in perpetuity or forever for the low-cost loan that it extended to India for building the western dedicated rail freight corridor. The interest will be about Rs.2,800 crore every year.This is similar to the dividend that the Indian Railways pays to the Consolidated Fund of India, which was also termed “interest in perpetuity”.

4. The Rs. 94-crore fraud at Pune-based Cosmos Co-operative Bank, involving breach of the firewall in servers that authorise ATM transactions, has brought the focus back on banks’ tardiness in bolstering control measures at ATMs.Despite the RBI’s constant prodding on upgrading ATMs and strengthening security measures, about 30 per cent of the two-lakh ATMs in the country still operate on Windows XP and other unsupported operating systems.

5. Canara Bank plans to open its newly conceptualised digital banking branch Candi in each of the 21 circles of the bank across the country, according to its Chairman TN Manoharan.

Business Standard

1. NHAI borrowings jump a little over 18 times to Rs 620 billion since 2014.The NHAI recently finalised a loan for Rs 250 billion with State Bank of India as part of its fund raising for the current financial year.

2. Govt asks RBI to water down PCA scheme, feels norms have put burden on PSBs.Department of Financial Services Secretary Rajiv Kumar expressed confidence that PSBs will come out of the PCA this fiscal year.

3.Japan, South Korea steel exports to India surge on tariffs, high-end demand.The flood of imports is so big that the government in New Delhi is considering measures to control imports.

4.Sebi cuts timeline for listing of debt securities to six days from 12.Besides, Sebi has made ASBA mandatory for all investors for making payment, while applying in a public issue of debt securities.

5. Trade war:Donald Trump tariffs to stay on Turkey; Qatar offers aid.After hitting a record low of 7.24 this week, the lira gained some support from Qatar's investment pledge and rose to 5.76 against the US currency.

Live Mint:

1. Dilip Shanghvi-promoted Sun Petrochemicals Pvt. Ltd has bid for the assets of debt-ridden Assam Co. India Ltd (ACIL).Kolkata-based ACIL is India’s oldest tea company, and has businesses in infrastructure and oil and gas.

2.Chokhani Securities, a NBFC recently acquired by former Religare Enterprises CEO Shachindra Nath, has raised ₹112 crore through a qualified institutional placement (QIP).Chokhani Securities has so far raised ₹1,000 crore in the last six months across three tranches.

3. India’s fiscal position is likely to worsen ahead of the general election in 2019,UBS Securities India Pvt. Ltd said.As global uncertainties escalate due to trade wars and rising global crude oil prices, emerging market economies running twin deficits, including India, are likely to face financial market volatility and downside risks to their growth outlook, the brokerage said in a report.

4. 16 state-run banks wrote off over Rs.31,000 cr in June quarter, a 37% rise from a year ago.Loan write-offs at public sector banks grew at a faster clip than outstanding loans in the June quarter on account of low credit demand, selective lending to corporates and the focus on recoveries.

5. PE industry lobbies CCI for anti-trust exemptions.CCI approval may be required even for passive investments by PE investors, if they are acquiring over 5% stake in a company, in a sector or market segment, where they already have an existing investment.

Thursday, August 16, 2018

financial news 16-08-2018

16.08.2018: Today's Banking / Financial News at a Glance

To tackle NPA problem, RBI puts 200 stressed bank accounts under scanner : As part of its effort to contain rising non-performing assets (NPAs), the RBI has started scrutiny of 200 large accounts to assess the level of stress and provisioning done against them by respective banks. Reserve Bank of India (RBI) is examining as to whether banks have followed prudential norms in respect of these stressed assets, a senior public sector bank official said. It is also assessing classification, provisioning and debt recast in respect of those loans, the official added. This is a part of a regular annual inspection of the book of the banks that the central bank undertakes each year after the closure of the financial year, another official said. - Business Standard

RBI rejects tool used for Kotak stake dilution : The Reserve Bank of India (RBI) rejected the means by which Uday Kotak diluted his promoter stake in Kotak Mahindra Bank. The lender insisted it was compliant with regulations, setting the scene for a possible showdown with the regulator as a December deadline looms. Kotak had sought to lower his stake to 20%, as stipulated, by selling nonconvertible perpetual noncumulative preference shares (PNCPS) to a group of investors earlier this month. The limit has to be met by December. “RBI has today communicated to us that our PNCPS issuance does not meet their promoter holding dilution requirement,” Kotak Mahindra said in a statement to the exchanges on Tuesday evening. “We continue to believe that we have met the requirement and will engage with the RBI in this behalf.” A Kotak Mahindra spokesperson said the bank does not have anything to add to the stock market notice. - Economic Times

NPCI blames Cosmos Bank's 'own IT environment' for Malware attacks : The National Payments Council of India (NPCI) on Wednesday blamed the Cosmos Bank's "own IT environment" for the unprecedented cyber loot which left the Pune-based bank poorer by Rs 94.42 crore. In a statement, the NPCI's Head Risk Management, Bharat Panchal, said "the NPCI's systems are fully secure and this particular issue has occurred within the (Cosmos Bank's) own IT environment. "This has happened due to malware-based attack on the bank's IT system which has caused a fraud. Under the attack, maximum transactions have been reported from outside India," Panchal pointed out. - Economic Times

North Korean connection to Cosmos hacking? Signs point to Bangladesh heist masterminds : Hackers targeted an 112-year-old Pune bank, Cosmos, last week in a multi-pronged attack to transfer over Rs 94 crore over multiple days to foreign bank accounts. About Rs 78 crore was withdrawn in more than 12,000 ATM transactions in 28 countries between 3 pm and 10 pm, India time, on Saturday. Another 2,800 transactions were made in different places within India, amounting to about Rs 2.5 crore, during the same period. On Monday, Rs 13.5 crore was transferred to a Hong Kong-based entity using the Society for Worldwide Interbank Telecommunications (SWIFT) facility. The highly orchestrated event, according to some experts, could be the handiwork of Lazarus, North Korea's most prolific hacking group that has pulled off some audacious attacks around the globe -- from leaking and destroying Sony Pictures' data to siphoning of tens of millions of dollars from banks in Poland and Bangladesh. - Economic Times

Banks finalising power firms' debt resolution plans : Banks, led by State Bank of India, are close to finalising resolution plans for at least half a dozen stressed power companies involving total loans of ₹50,000 crore, which could result in banks taking more than 50% haircut, bank officials said. Haircut is the amount that lenders will have to forgo to settle a loan. The race for a quick resolution is to meet the August end deadline set by RBI for referring these companies to the bankruptcy court. Lenders are of the view that a resolution for power companies outside the bankruptcy court would fetch them better value compared with their likely recovery under the bankruptcy process. “Lenders have shortlisted Adani for KSK Mahanadi, Edelweiss ARC is sole bidder for Coastal Energen, JSW Energy is highest bidder for Prayagraj Power, and Agri Trade Resources is likely to acquire SKS Power,” said a senior bank official who requested not to be identified. - Economic Times

India Post Payments Bank launch by PM Modi on Aug 21 to be a grand affair : The launch of the much-delayed India Post Payments Bank (IPPB) promises to be a grand affair. Prime Minister Narendra Modi will do the honours in Delhi’s Talkatora stadium along with Communications Minister Manoj Sinha on August 21. Simultaneous launches are also being planned across all the 650 districts of the country and a schedule for the same is being drawn up. The importance of the launch can be gauged from how ministers have been asked to inform the Prime Minister’s Office and take prior permission before leaving the country on August 21. In case a minister wishes to leave the country, separate arrangements need to be made, sources clarified. - Business Standard

Government accepts NHB MD Sriram Kalyanaraman's resignation : National Housing Bank (NHB) Managing Director Sriram Kalyanaraman has resigned amidst allegations of favouring housing finance companies. The government has accepted the resignation and also ordered a vigilance inquiry against him. There are allegations that unethical practices were adopted by the housing regulator for sanctioning refinance facility to various housing finance companies. A senior government official confirmed the developments and said that Kalyanaraman had tendered his resignation which has been accepted. “This is a part of the government’s endeavour to clean the banking system. Any maleficence will not be tolerated,” the above quoted official said. - Economic Times

Sebi eyes framework for timely disclosure of loan defaults by listed firms : Markets regulator Sebi is looking to stipulate a framework for timely and detailed disclosures of loan defaults by listed entities to enhance transparency. Several companies and rating agencies have come under the regulatory scanner for failing to make timely disclosure about the loan default risks. Tightening of the disclosure norms is aimed at helping banks to recognise their stressed assets as non-performing more uniformly and enhance transparency in the securities market. "Sebi aims at examining stipulation of timely and detailed disclosures pertaining to defaults on debt obligations by listed entities to enhance transparency," the regulator said in its annual report for 2017-18. - Business Standard

Videocon loan issue: ICICI Bank explores consent option with Sebi ; ICICI Bank has intensified efforts to settle the alleged conflict of interest issue involving Managing Director and Chief Executive Officer Chanda Kochhar with the Securities and Exchange Board of India (Sebi). The bank's newly-appointed chairman, Girish Chandra Chaturvedi, met Sebi chief Ajay Tyagi on Monday and discussed how the matter could be resolved, said people with direct knowledge of the development. Chaturvedi showed his intention to file a consent application with the capital markets regulator to end the ongoing probe into the Videocon loan matter, they said. - Business Standard

Canara Bank to hire social media agency for customer outreach : Canara Bank plans to hire a social media agency as part of its brand promotion and to reach customers in a better way. The bank is looking for a social media service provider who can assist in creating and managing a strong social media presence as per the prevailing market trend and requirements of the bank, Canara Bank said in a notice. Currently, the bank’s marketing and retail resources wing uses manual methods for managing its social media accounts. “The bank intends to engage a service provider who can provide social media services and assist in creating and managing a strong social media presence,” the bank said detailing the scope of work. - Live Mint

Accused in Rs 5,000 crore bank fraud case held in Dubai : Nitin Sandesara, an absconding director of a Gujarat-based pharma company which is being probed in a Rs 5, 000 crore fraud case, has been arrested in Dubai, officials said. Officials said Sandesara was arrested by Dubai police based on a non-bailable arrest warrant issued by an Indian court. "The legal process post the arrest is taking place in Dubai. We are waiting for details. Indian agencies will try to get him deported," a senior official said. Reportedly, Indian probe agencies had information on Nitin Sandesara being in Dubai, following which the authorities alerted the officials in United Arab Emirates. The company and its directors are being probed. CBI has booked Vadodara-based Sterling Biotech, its directors Chetan Jayantilal Sandesara, Dipti Chetan Sandesara, Rajbhushan Omprakash Dixit, Nitin Jayantilal Sandesara and Vilas Joshi, chartered accountant Hemant Hathi, former director Andhra Bank Anup Garg and some unidentified persons in connection with the alleged bank fraud case. - Economic Times

Larger UCBs surprised at not being allowed to spread provisioning for MTM losses on G-Secs : The Reserve Bank of India’s move to restrict the option of spreading provisioning for mark-to-market losses on government securities to smaller urban co-operative banks (UCBs) has stumped the larger players in this segment. The central bank had initially given this option of spreading provisioning for mark-to-market losses (MTM) that arose due to the systemic impact of sharp increase in the yields on Government Securities only to scheduled commercial banks and small finance banks. But when co-operative banks raised questions about being denied this benefit, the RBI extended it to UCBs, but only to those with deposits of less than ₹100 crore. - Business Line

Insurers see rising demand for policies on online platforms : A large number of Indians are also shopping for insurance policies.Though the number of insurance policies sold online is still small, online insurance marketplaces and insurers are seeing a lot of interest not just from large towns but also from smaller towns for online policies. Insurance penetration was at an estimated 3.49 per cent in India in 2016-17, which is much below the global average, and the online space is creating not just awareness but is also helping customers who do not have to depend on agents. “Customers are using online marketplaces to read up on insurance covers, understand exclusions and make informed choices,” said Rakesh Goyal, Director, Probus Insurance, adding that the company sells nearly 18,000 policies online every month with plans to expand their portfolio of products thanks to high demand. - Business Line

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Technology has helped us open multiple channels to serve rural customers’ : Ujjivan Small Finance Bank is putting technology to good use to bring a slew of banking services, including government schemes, to the doorsteps of the unserved and under-served segments of society. Vijay Balakrishnan, Chief Marketing Officer, sheds light on the journey so far and the way forward. Ujjivan SFB’s pre-launch research indicated that most of its customers had limited exposure to formal banking channels, and even those who did, had found the experience daunting, given that a significant percentage of them are neo-literates or semi-literates. Technology has enabled us to open multiple channels to serve customers and reduce our operating costs. Ujjivan offers to its customers services such as instant account opening on a wireless hand-held device, 24/7 internet and mobile banking, and biometric ATMs where fingerprints are the new pins, and form-free banking. - Business Line

Challenges ahead as Ayushman Bharat insurance scheme gets set for launch :Prime Minister Narendra Modi has announced that the government-sponsored health insurance scheme – Ayushman Bharat, now rechristened Pradhan Mantri Jan Arogya Abhiyan – would now be launched in less than a month-and-a-half. It surely seems an ambitious target. However, as the deadline looms, challenges on the ground remain immense. Since a month now, close to 7,000 hospitals have applied to be empanelled, said the scheme’s CEO, Indu Bhushan. “We have yet not closed the application process on the portal. Meanwhile, we are in the process of vetting hospitals. If the hospital does not adhere to norms infrastructurally, they cannot be a part of the scheme,” he said. North-eastern states and others such as Bihar have poor hospital infrastructure to begin with, he explained. - Business Line

Foreign exchange market being monitored: Jaitley : Sending out a word of assurance, Union Minister Arun Jaitley said on Wednesday India’s foreign exchange reserves are comfortable by global standards and sufficient to mitigate any undue volatility in the currency market. His remark has come a day after the rupee slipped to an all-time low of 70.09 in intra-day trade. The country’s currency exchange rate market is being monitored to address any unexpected situation, he said. “The developments are being monitored closely to address any situation that may arise in the context of the unsettled international environment,” Jaitley said in a series of tweets. - Business Line

Monday, June 4, 2018

Merger plan of state run four banks in India - an unauthenticated news

Several News agencies are reporting that Indian govt. is planning for merger of four state run banks

The banks that could face the merger are: Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India, These four banks are under pressure with combined loss of Rs 21,646.38 crore in the financial year 2017-18. The merger will allow the weak banks to sell assets, reduce overheads and shut money-losing branches, the report said.

The government’s likely move is also in line with the stance taken by the Reserve Bank of India (RBI). In April 2017, RBI governor Urjit Patel had said that the Indian banking system could be better off if some public sector banks were consolidated to have fewer, but healthier entities, as it would help in dealing with the problem of stressed assets. The department of financial services, under the finance ministry, is also simultaneously considering a 51% stake sale in IDBI Bank to a strategic partner, for Rs 9,000-10,000 crore, the people said on condition of anonymity. “Dilution of (government) stake in IDBI Bank could also be achieved through stake sale to private equity investors,” said one of the two people cited above.

If the plan goes through, the merged entity will become the second largest bank in the country after State Bank of India (SBI), with combined assets of Rs 16.58 trillion.

Queries have been emailed to IDBI Bank, Bank of Baroda, Oriental Bank of Commerce and Central Bank of India did not elicit any response.

"The decision is expected to facilitate the creation of strong and competitive banks in public sector space to meet the credit needs of a growing economy, absorb shocks and have the capacity to raise resources without depending unduly on the state exchequer."

The mechanism will oversee the proposals coming from boards of PSBs for consolidation.

Except Bank of Baroda, all three banks - IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India - are under the RBI's Prompt Corrective Action (PCA) framework.

The PCA framework is a mechanism to maintain sound financial health of the banks. It facilitates banks - in breach of risk thresholds for identified areas of monitoring such as capital and asset quality - to take corrective measures so that they are protected from going into financial crisis.

Once placed under PCA, the banks are barred from distributing dividends, remitting profits and disbursing fresh loans. Banks are also stopped from expanding their branch networks and need to maintain higher provisions. Recently, IDBI Bank created a special department for managing bad loans and monitoring credit after it was put under watch by the RBI

Sunday, May 13, 2018

Prompt Corrective Action of Reserve Bank of India for 11 weak public sector banks

On 11-05-2018, Dena Bank reported a net loss of Rs 1225.42 crore compared to a net loss of Rs 380.07 crore in the same quarter last year. The bank saw its gross nonperforming assets rise to 22 percent from 19.5 percent in the previous quarter. The bank reported a negative return on assets at 4.07 for the quarter ended March 2018.

The bank’s capital adequacy ratio stood at 11.09 percent and its tier-1 capital adequacy ratio at 8.81 percent. This is above the minimum tier-1 capital ratio mandated by the Basel norms.

The bank’s advances stood at Rs 65,581 crore at the end of March 2018 compared to Rs 72,574 crore in March 2017, suggesting that the bank’s loan book has anyway been contracting.

Stage Two Of Prompt Corrective Action?

While the bank did not specify the reason behind the RBI’s directive, the strictures are likely part of the RBI’s prompt corrective action (PCA) framework.

In April 2017, the RBI tightened the rules under its ‘Prompt Corrective Action Framework’ which aims to rein in lenders whose operational and financial metrics are looking weak. The new framework laid down three risk thresholds based on gross non-performing assets, net NPAs, capital adequacy ratio and return on assets. Once under the framework, restrictions are placed on dividends, branch expansion and, in some cases, lending based on the discretion of the regulator.

In Dena Bank’s case, while the capital adequacy ratio is above the regulatory minimum, the net NPA level of 11.95 percent falls in the second risk threshold. Also its negative return on assets could place in this category.

As per the RBI’s rules, banks that fall in the second risk threshold may be asked to make higher provisions and restrict branch addition. In addition, the RBI may take ‘discretionary actions’ against the bank. These actions could be ‘credit risk’ related and ‘market risk’ related among others.

Taking Stock of PCA Banks

Close to half of the government owned banks are under prompt corrective action now. On Friday, reported that the government has planned a review meeting of these 11 weak banks.

The meeting, scheduled for May 17, will take stock of the measures taken by individual banks to improve their financial position.

Reserve Bank has initiated prompt corrective action against public sector lender Dena Bank in view of high non-performing loans, restricting the bank from giving fresh credit and new hiring. The public sector lender yesterday reported widening of its net loss to Rs 1,225.42 crore in the March quarter on mounting bad loans and higher provisioning to cover them.

The net loss stood at Rs 575.26 crore in the January-March quarter of 2016-17.

Sequentially, the loss widened from Rs 380.07 crore in December quarter of 2017-18.

"Reserve Bank of India, vide their letter dated May 31, 2017, has initiated Prompt Corrective Action for Dena Bank and imposed certain restrictions, in view of high Net NPA and negative RoA ( return on assets)," the bank said in a regulatory filing.

In continuation to the above, "we wish to inform that the RBI vide their letter dated May 07, 2018 (received by the Bank on May 08, 2018) has restricted the Bank from assuming fresh credit exposure and recruitment of staff," it said further.

Dena Bank said it was put up to the Board in its meeting held on May 11, 2018.

Bank's asset quality has worsened with the gross NPAs hitting a high of 22.4 per cent of the gross advances as on March 31, 2018, from 16.27 per cent as of end-March 2017.

In value terms, the gross NPAs or bad loans rose to Rs 16,361.44 crore from Rs 12,618.73 crore.

Net NPAs were also up at 11.95 per cent (Rs 7,838.78 crore) from 10.66 per cent (Rs 7,735.12 crore).

Earlier in January this year, Allahabad Bank had informed about being placed under RBI's PCA mechanism.

The RBI has initiated similar action against other public sector banks, including IDBI Bank, Indian Overseas Bank and UCO Bank before this.

The RBI in April 2017 had issued a new set of enabling provisions under the revised PCA framework with a clause that if the bank does not show improvement then it could be either be merged or taken over by other bank.

Since April, 11 banks have been put under the corrective action framework. The latest is Allahabad Bank which informed exchanges on Wednesday that it was now subject to the RBI’s corrective action. Other banks under the corrective framework include Bank of India, Central Bank of India, IDBI Bank, UCO Bank, Dena Bank, Oriental Bank of Commerce, Indian Overseas Bank, Bank of Maharashtra and Corporation Bank. United Bank of India, which was among the first lenders to be put under corrective action in 2014, is also back on the watch list.