Thursday, January 29, 2015

Bank Ke Achhe Din Kab Tak Ane Wale Hai

Opaque disclosures hurt govt banks' valuations-Business Standard-30.01.2015

PSU banks have failed to cash in boom time despite desperate capital need
The fact that the markets are touching new highs has failed to bring cheer to public sector banks (PSBs). Most of these have seen their capital adequacy ratios being depleting through the past few years, with non-performing and restructured assets ballooning, for which they have had to allocate capital by way of provisioning.

Though market conditions are conducive, most PSBs aren’t keen to tap the capital markets, primarily due to low valuations.

On Tuesday, the State Bank of India (SBI) board approved equity capital-raising of Rs 15,000 crore, though the bank hasn’t disclosed the timing of the fund-raising yet. The approval is valid for a year.

The Bank Nifty, the benchmark banking index, has doubled in the past year, outperforming the overall indices. Some private banks have seen their valuations double. However, barring a few, most PSBs have failed to reap the benefits of the bull run.

Both chief executives of these banks, as well as the government, have cited low valuations as deterrence to tapping the capital markets. The Reserve Bank of India (RBI), too, said capital-raising by public sector banks other than through capital infusion by the government faced challenges because of the relatively low valuations of these entities, compared to their private peers.

Why are investors not buying the PSB story? The dismal financial health of these entities isn’t the only reason. Analysts say the opaque nature of discloses might well explain the lack of investor appetite.

“Public sector banks are in a vicious cycle — they need to raise capital, but they are trading at less than book values, which implies capital-raising will be book value-dilutive in nature,” says Saday Sinha, an analyst with Kotak Securities.

Market participants say banks are unable to provide consistent estimates of certain crucial parameters that reflect headwinds to earnings, such as slippages from restructured assets and restructuring asset pipeline.

For investors, slippages on the restructured assets front are a concern. These have risen sharply in the past two quarters and are out of sync with the projections of bank managements. Restructured asset pipelines, too, have often been at variance with estimates.

According to RBI data, stressed advances in the banking system increased to 10.7 per cent of total advances in September 2014 from 10 per cent in March 2014. “At 12.9 per cent of total advances in September last year, PSBs continued to record the highest level of stressed advances; private banks recorded 4.4 per cent,” RBI said in its latest Financial Stability Report.

And, worries related to non-performing assets (NPAs) are far from over. “As far as NPAs are concerned, these banks are still not out of the woods. There could be some front-loading of restructuring assets during the fourth quarter, as the regulatory forbearance they enjoy won’t be there from April 1, 2015,” Sinha said.

RBI has mandated banks have to make provisioning for restructured assets in line with sub-standard assets — 15 per cent compared with the current five per cent.

According to RBI, Indian banks are expected to remain under pressure on account of additional requirements towards capital conservation buffers, countercyclical capital buffers and supervisory capital.

In addition, delay in appointments to senior management posts has hampered decision-making at PSBs. While the government appointed the chief executives of four banks last month, the top positions at four others, including Punjab National Bank, Canara Bank and Bank of Baroda, remain vacant.

“When a bank is going to investors for raising equity, the absence of a chief executive sends a wrong signal,” said a senior official at a PSB.
 
Banking industry yet to see achache din: Andhra Bank chief-Hindu Business Line-30.01.2015 ( my comments given below)
Andhra Bank, the mid-size public-sector bank whose home turf is Andhra Pradesh-Telangana, has been struggling with a large-size bad loan volume. The NPA situation is so bad that some employees’ unions had gone to the extent of staging dharnas in front of the defaulters’ offices. One union now plans to march to the residence of a Telugu superstar who owes the bank ₹40 crore! At a whopping gross NPA of 6 per cent, Andhra Bank has the sixth largest bad loan stockpile among the banks and rumours have been afloat that it would be merged with Bank of Baroda or some other bank.
 
CVR Rajendran, Chairman and Managing Director, said the splitting of Andhra Pradesh had taken a huge toll on the bank’s health. In an interview with BusinessLine, Rajendran, who will be retiring soon, says achche din is yet to come to the banking industry. (My Comment : He is retiring very soon and now  only he will tell the truth, As long as one is in service he remains to be number one Yesman of Minister to survive ))
Excerpts:

When the Modi Government took over, many bank chiefs were positive that its pro-business orientation would help reduce public sector banks’ NPAs in three months. Has achche din come to the banks yet?
 
We are all a little disappointed. The government is not as quick in making economic policy changes as we had expected. Maybe, it is making long-term policies. But you must remember that the PV Narasimha Rao Government had taken all the key economic decisions in its first 100 days. These policies changed India’s economy.

As a banker, when do you expect the economy to make a turnaround?
 
My guess is, one year. There are a lot of favourable factors that can help the government take critical decisions on key economic issues. The oil price is less than a half of what it had been. The current account position is comfortable. Global attitude to India is positive. And, the government has a majority in the Lok Sabha.

You attended the Gyan Sangam of public sector banks held at Pune in the first week of January. What were the takeaways?
 
Again, a little disappointing. We made our presentations and the government listened. The Prime Minister wanted us to work towards building two-to-four global-size banks like China’s through mergers and acquisitions.
But he said the government would not push for it; and that the process should be market-driven. He is willing to listen.
 
There was an informal consensus against mergers and takeovers at the meeting. Most banks are in trouble now and no one is willing to take over weak banks and bear the additional liabilities. For the next two years, I don’t think there would be any mergers between public sector banks.

So, Andhra Bank is not going to be merged with another bank?
 
No, at least not for two years. If it remains weak after two years and even after the economy improves, maybe. We are going to work hard to retain our separate identity. Our employees are against merger. Our top priority now is to recover the bad loans.

How did your bank acquire so much NPAs?
 
A huge chunk of the NPA is from the infrastructure and power sectors. A large number of infra and power companies in the country are owned by the Telugu people and naturally, being the lead bank in the State, they had taken loans from us. Many of these companies are now in ICU (intensive care unit). Delay in government’s policy-making is one major reason for this. Of course, there are a lot of wilful defaulters too.

How did the division of Andhra Pradesh impact your bank?
 
The long agitation for a separate State of Telangana hit our business badly as 1,300 of our 2,300 branches are located in Andhra-Telangana States. It also fundamentally changed the credit culture in the region. Since political parties made competing loan waiver offers, borrowers refused to repay their loans. This affected farm and small loans most. We were the lead bank in the undivided Andhra Pradesh, now we have lost that status in Telangana (mainly because of ‘Andhra’ in the bank’s name).
 
But, in the long run, the split will benefit all the banks as well as the economy. There is going to be a feverish pace of development activities in both States because of their competitive development agendas.

What is your view of the Modi Government’s decision to split the Chairman-cum-Managing Director post in banks?
 
I support it because there is a lot of power concentrated in the hands of the CMD. The banks’ boards are not powerful in controlling the CMD.
 
However, the benefits will depend on who becomes the Chairman. If the Chairman, is corrupt he/she can collude with the CEO for their mutual benefits.
 
Also, if the Chairman’s post is created to accommodate a retired IAS officer or a ruling party politician, the situation will be worse.
http://www.thehindubusinessline.com/industry-and-economy/banking/banking-industry-yet-to-see-achache-din-andhra-bank-chief/article6835351.ece

PSU banks’ NPAs rise to Rs 2.16 lakh cr-The Statesman 30.01.2015
Mumbai, 29 January: The non-performing assets of nationalised banks increased sharply from Rs 9,190 crore in 2011-2012 to Rs 2,16,739 crore in 2013-2014, according to the Reserve Bank of India.

Former journalist Mr Ketan Tirodkar obtained this data from the Central bank under the right to information.

Mr Tirodkar has filed a public interest litigation in Bombay High Court seeking a CBI investigation into what he terms “an NPA scam”.

The High Court had, in March last year, directed the CBI to inform what action it had taken against 140 cases of fraud registered by the RBI in connection with the NPAs of nationalised banks

My Comment on above news is as follows: 

This refers to quarterly result of a few PS banks booking lesser profit and greater NPA in quarter ended December 2014 compared to past quarters. Keeping in view NPA position of banks, , CMD of Andhra Bank has also expressed his opinion candidly in an interview that position of banks is not likely to improve very soon and Achhe Din are yet to come. His has to retire very soon and hence some clarity has come out.As long as top officials are in service , their one and only one duty is to please ministers willingly or unwillingly.

They promise every quarter that bank's Balance Sheet will improve from next quarter as Previous Prime Minister Mr. Manmohan Singh used to say on price rise issue. When people used to cry on rising price, he used to tell them that situation will ease from next quarter. He used to dilute the intensity of angry people by saying that economy of the country is in control and in good condition and all possible efforts are being taken to contain rising prices.

Similarly in Public sector banks, Non Performing Assets has been rising every quarter and it will continue to rise quarter after quarter. And after bad quarterly result, CMD of each bank says that bad debts will be contained from next quarter and soon they will improve.

In one quarter they somehow or the other manage the data but in next quarter they declare some bad debts. This hide and seek policy has been in play since long. In every quarter , some bank will declare bad debts and book lesser profit or loss and in next quarter some other bank will book greater profit and improvement in NPA position. This vicious circle will never end. NPA of PS banks have crossed two lac crore in March 2014 and will undoubtedly cross 5 lac crore in March 2016 if RBI does not change the policy of  NPA and that of restructuring to please Crying CMDs and to please Modi Sarkar who are building pressure for more and more lending .

In my view , no power on earth can stop rising trend in NPA  without manipulation or without changing the norms of NPA. I have been of this view for last several years and I may be termed as negative minded by extremely positive minded person or by Yesman of the system. But sooner or the later reality precipitates and surfaces out in open.

We have seen the fate of many banks in the past , not only weak banks but also so called strong banks. I do not blame United Bank or Uco Bank or Central Bank or Allahabad Bank, Indian Bank or Indian Oversea Bank. Even banks considered as strong banks like SBI, PNB, Union, Oriental bank are gradually exposing their hidden sins. A bank used to be strong not because of inherent quality asset but due to clever mind of top officials of that bank who had so many fraudulent tools to conceal bad assets quarter after quarter. This is why , many times bad result comes out only after retirement of a Clever CMD. This has happened in SBI, PNB, Union Bank, Oriental, United , Central Bank, Indian Bank , IOB , Vijya Bank and other banks so many times.

Unfortunately neither RBI nor Ministry of Finance ever took the trouble to know why and how a CMD conceals Bad debts and how another declares it after former retires . Even if some audit is carried out for doing some SHOW business, the auditors is so chosen that he or she submits favourable report or the bad report if submitted is put under carpet to save top officials of the bank who have very excellent relation with top RBI officials or politicians. System has been bad since long. It is not that a few top officials are corrupt , but the corrupt officers at top post one after other has damaged the entire system and there is none to change the system. Now corruption has become the system and the culture of the bank.  Good officers in such case avoid taking promotion or taking higher responsibility and bank thus run by mostly bad officers or inexperienced officers.

The reign of flatterers and bribe earners is not going to end as long as drastic steps are not taken to correct the culture from its source , from its origin and until  a few from each bank are punished ,irrespective of the fact that he is in service or retired. Message of good or bad governance percolates down from top and not goes up from bottom. Unfortunately for every fault of top officials or ministers , blame goes to juniors and sometimes to middle management officials who had little role either in sanction of loan or in monitoring of loan or in account turning bad.

It is bad luck that inspecting, auditing, vigilance and all Regulating agencies are birds of same feather and hence they all avoid taking any punitive action against erring officials and try to pass the time or postpone taking decision on files related to corrupt officials. Actions are taken against some officers who do not have any Godfather backing him. There is deep rooted and strong unity among bad officials in all organisations specially in banks where good officials treat it better to keep mum and remain away from mainstream.

FE Best Banks awards: When the going gets tough, these people get going-Financial Express

It was a tough year, one that most banks would not like to recall — a time when the economy had slipped into a slowdown, quality assets were scarce and more loans were turning toxic. But amidst the gloom of 2012-13, a few banks showed they could rise to the task and come through with flying colours.

And it’s to these eight banks that The Financial Express will raise a toast on Friday. Giving away the FE Best Banks awards at a glittering ceremony in the country’s financial capital will be Jayant Sinha, union minister of state for finance. Also present on the occasion will be Maharashtra chief minister Devendra Fadnavis.

The FE Best Banks awards are the most coveted in the banking space with banks vying with one another to own one. For 2012-13, HDFC Bank walked away with the prize in the new private sector banks category while Bank of Baroda (BoB) was at the top of the heap in the public sector banks category.

HDFC Bank also picked up a couple of awards for profitability and efficiency. As always, Aditya Puri, managing director, accepted the announcement with his usual equanimity. “We’re more optimistic now than ever before about the future,” Puri remarked.
Ranjan Dhawan, executive director, BoB, told FE his bank was highly honoured to be recipient of the Financial Express award.

Ravneet Gill, chief executive, Deutsche Bank, adjudged the winner among foreign banks, said he was delighted to win an award from a publication as highly admired as The Financial Express. “The award is a recognition of Deutsche Bank’s sustained and unwavering focus on clients, product innovation and principled growth,” Gill said.
Rana Kapoor, MD & CEO, Yes Bank, runner-up among new private sector banks, endorsed the prestige the survey carries with it. “Yesbankers are pleased to win this coveted recognition from The Financial Express which reinforces Yes Bank’s growing stature as a leading Indian private sector bank,” Kapoor said.

HS Upendra Kamath, MD & CEO, Tamilnad Mercantile Bank, also expressed his delight. “We are happy to receive this award from a prestigious institution like Financial Express this year as well,” Kamath said.

K Venkataraman, MD & CEO, Karur Vysya Bank, said it’s been a great honour to receive this award for the fourth year in a row. “In the tougher environment, getting continuous recognition gives satisfaction to all of us the in bank,” Venkataraman said.

The Financial Express has always taken care to ensure the survey is a fair one. Since numbers play a big part in the methodology, consultancy firm EY makes sure the weightages assigned to various parameters are relevant. Given the criteria are tough, only the very best make the cut.

Among others who rose to the challenge, this time around, are HSBC, which won for strength and soundness, BNP Paribas, which was ranked number one for credit quality, and Bank of Maharashtra, which picked up an award for growth.

Oriental Bank of Commerce Q3 net down 91.3% at Rs 19.56 crore-Businss Standard

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14
 
Public sector lender Oriental Bank of Commerce (OBC) today reported a 91.27% decline in net profit at Rs 19.56 crore for the third quarter ended December 31, 2014, dragged by higher provisions.

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14, OBC said in a BSE filing.

OBC's total income rose by 7.79% to Rs 5,458.79 crore during the October-December period from Rs 5,063.98 crore in the same period last year.

During the quarter under review, the bank's provisioning other than tax and contingencies jumped by 57.75% to Rs 885.14 crore from Rs 561.1 crore in the same quarter of the previous fiscal.

The bank's gross NPAs increased to 5.43% at the end of third quarter from 3.87% in the corresponding period in the previous year.

Shares of Oriental Bank of Commerce were trading at Rs 292.70 apiece, down 6.49% from its previous close on the BSE.


Union Bank slips on poor results-Hindu Business Line 28.01.2015
January 27, 2015:  
The stock of Union Bank of India slipped 7 per cent on Tuesday, after the company delivered disappointing results for the December quarter. The bank’s net profit fell by 13 per cent over last year, primarily driven by increase in employee cost and provisioning on bad loans.
 
The bank’s advances grew by a subdued 8.9 per cent during December, lower than the industry credit growth of 10 per cent during this period.
 
Credit growth
Aside from a slower credit growth, rise in bad loans, which is now 5 per cent of loans, up from 4.69 per cent in the September quarter, also impacted the bank's earnings. With restructured assets, another 5 per cent of loans, the bank’s stressed assets have been weighing on the bank’s capital base.
 
Union Bank of India has a tier I capital of 7.3 per cent (6.5 per cent norm) as of December 2014, stretching it thin. The return on equity is an abysmal 6.6 per cent down from about 8.3 per cent in the previous year.
 
Net interest margin
The bank’s net interest margin, which has been under pressure, is likely to face further stress as the bank lowered its base rate by 25 basis points after the RBI’s policy rate cut on Januay 15. The yield on loans is already down 10 basis points sequentially in the December quarter

Read also Government Plan for Merger of Banks and Idea Of Low Interest Regime

Important News On Banks

Oriental Bank of Commerce Q3 net down 91.3% at Rs 19.56 crore-Businss Standard

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14
 
Public sector lender Oriental Bank of Commerce (OBC) today reported a 91.27% decline in net profit at Rs 19.56 crore for the third quarter ended December 31, 2014, dragged by higher provisions.

The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14, OBC said in a BSE filing.

OBC's total income rose by 7.79% to Rs 5,458.79 crore during the October-December period from Rs 5,063.98 crore in the same period last year.

During the quarter under review, the bank's provisioning other than tax and contingencies jumped by 57.75% to Rs 885.14 crore from Rs 561.1 crore in the same quarter of the previous fiscal.

The bank's gross NPAs increased to 5.43% at the end of third quarter from 3.87% in the corresponding period in the previous year.

Shares of Oriental Bank of Commerce were trading at Rs 292.70 apiece, down 6.49% from its previous close on the BSE.


Union Bank slips on poor results-Hindu Business Line 28.01.2015
January 27, 2015:  
The stock of Union Bank of India slipped 7 per cent on Tuesday, after the company delivered disappointing results for the December quarter. The bank’s net profit fell by 13 per cent over last year, primarily driven by increase in employee cost and provisioning on bad loans.
 
The bank’s advances grew by a subdued 8.9 per cent during December, lower than the industry credit growth of 10 per cent during this period.
 
Credit growth
Aside from a slower credit growth, rise in bad loans, which is now 5 per cent of loans, up from 4.69 per cent in the September quarter, also impacted the bank's earnings. With restructured assets, another 5 per cent of loans, the bank’s stressed assets have been weighing on the bank’s capital base.
 
Union Bank of India has a tier I capital of 7.3 per cent (6.5 per cent norm) as of December 2014, stretching it thin. The return on equity is an abysmal 6.6 per cent down from about 8.3 per cent in the previous year.
 
Net interest margin
The bank’s net interest margin, which has been under pressure, is likely to face further stress as the bank lowered its base rate by 25 basis points after the RBI’s policy rate cut on Januay 15. The yield on loans is already down 10 basis points sequentially in the December quarter

Read also Government Plan for Merger of Banks and Idea Of Low Interest Regime
Stop asking for ‘no due certificate’: RBI to banks-Business Line-29.01.2015
Mumbai, January 28:  


To ensure hassle free credit to all borrowers, the Reserve Bank of India has asked banks to dispense with obtaining ‘no due certificate’ from the individual borrowers in rural and semi-urban areas for all types of loans.
 
Instead, the central bank said banks should use an alternative framework of due diligence as part of their credit appraisal exercise.
 
The alternative framework could, among others, consist of: credit history check through credit information companies; self declaration or an affidavit from the borrower; CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) registration; and peer monitoring.
 
The ‘no due certificate’ can be dispensed with in view of technological developments and the different ways available with banks to avoid multiple financing, the RBI said in a notification,
 
The central bank issued this directive as it has received complaints from borrowers that banks are refusing to grant loans without ‘no due certificate’, especially in rural and semi-urban areas.
Specifically, banks have been asked to dispense with obtaining ‘no due certificate’ from the individual borrowers (including self help groups & joint liability groups) in rural and semi-urban areas for all types of loans.
 
The loans will include loans under Government sponsored schemes, irrespective of the amount involved unless the scheme itself provides for obtaining ‘no dues certificate’.
In 2007, banks were advised to dispense with the requirement of ‘no due certificate’ for small loans up to ₹50,000 to small and marginal farmers, share-croppers and the like and, instead, obtain self-declaration from the borrower.
Cap on collateral-free education loans may be raised
Mumbai, January 28:  


With rising cost of higher education causing anxiety to both parents and their wards, the Finance Ministry and banks are jointly weighing the possibility of raising the limit of collateral-free education loans.
A proposal to hike the limit of collateral- (or security) free education loan from ₹4 lakh to around ₹ 7 lakh under the Indian Banks’ Association’s model education loan scheme for pursuing higher education is under consideration. 
 
Guarantee fund
Bankers clued in to the deliberations on revamping the model education loan scheme say they will agree to the proposal only if the Government operationalises the Credit Guarantee Fund Scheme for Education Loans to cover possible defaults.
 
The Fund was announced in the Budget for 2012-13 to encourage banks to lend to deserving students. However, it has not yet seen the light of day.
A senior public sector bank official said the Credit Guarantee Fund cover is necessary as within the education loans segment banks have experienced maximum defaults in the collateral-free education loan segment.
 
According to an Asian Development Bank report ‘Counting the cost: Financing Asian Higher Education for Inclusive Growth’, “…more than 50 per cent of the higher education in India is probably imparted through private institutions, mostly unaided.”
“…Many private higher education institutions charge high fees, which in effect exclude the poor, however bright or able.”
 
The report observed that in India, the so-called self-financing courses have mushroomed in public universities and colleges, where fees for high-demand courses (undergraduate engineering, medicine, teacher education, graduate management, and computing) at times match those of private higher education institutions.
 
The banker quoted above said as part of the exercise to overhaul the model education loan scheme, banks are seeking tighter norms for accreditation of education institutions and better monitoring of teducation loans.
In the first six months of the current financial year, public sector banks collectively disbursed education loans aggregating ₹3,707 crore. As at September-end 2014, these banks, numbering 27, collectively had an outstanding education loan portfolio of ₹61,963 crore.
 
Model loan scheme
The model education loan scheme was developed by IBA in 2001 to help meritorious students pursue higher education in technical and professional courses. The main emphasis of the scheme is that no deserving student is denied an opportunity to pursue higher education for want of financial support.
As the focus is on development of human capital, repayment of the loan is expected to come from future earnings of the student after completion of education.
Hence, assessment of the loan is based on employability and earning potential of the student upon completion of the course and not the parental income/family wealth.
 
When the scheme was last revised in 2012, the Association underscored that the cost of education has been going up in recent times and since the student has to bear most of the cost, there is a clear case for institutional funding in this area.
 
 
SC upholds changes in Sarfaesi Act; banks free to decide NPAs-Financial Express-29.01.2015
Dismissing appeals filed by around 60 companies, the Supreme Court on Wednesday upheld the amendment to the Securitisation Act that gave power to every financial institution to decide a period after which a bad loan can be declared as a non-performing asset (NPA).

Before the 2004 amendment to the Securitisation Act and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (Sarfaesi Act), RBI was the regulator for the banking, non-banking and securitisation institutions for deciding the period after which loans could be treated as NPA. Till 2004, RBI had set the NPA period for banks at 90 days and at 180 days for NBFCs.

Power Finance Corporation has a six-month period to classify an asset as an NPA. Besides, there are a few other institutions like Exim Bank, National Housing Bank under NHB Act, Nabard, Rural Electrification Corporation and Indian Railway Finance Corporation who are governed by their own regulations.

The promoters of around 60 companies had moved the Supreme Court questioning every financial institutions power to decide its own NPA period, saying it is a violation of right to equality. They had also challenged the RBI’s competence to regulate all banking and NBFCs in this regard. A bench headed by Justice J Chelameswar, while dismissing the appeals, asked the distressed companies to pay 1% of their loan outstanding amount to the lenders as costs.

The ruling came on two batches of petitions against the high courts of Gujarat and Madras as both the courts have differed on the issue. The Gujarat High Court while striking down the powers of different regulators in defining NPAs (under Section 2(1)(o)(a) of the Securitisation Act, 2002) had restored the power of the RBI to decide the period after which the bad loan can be called as an NPA.
However, the Madras High Court while rejecting petitions of various companies and individuals, including Deccan Chronicle Holdings and Marg, had upheld the constitutionality of Section 2(1)(o) of the Act and the guidelines issued by the RBI on the classification of assets as NPAs. Interestingly, Delhi High Court had upheld this 2004 amendment in the securitisation law.

Challenging the Gujarat HC’s April order that termed the decision of Parliament to take away the power from RBI as wrong, the promoters and companies had alleged that its prudential norms defy the right to equality under Article 14 of the Constitution of India.


Questioning the reason for the difference of NPA periods among financial firms, they argued that the 2002 Act should be applied uniformly across all borrowers and challenged the RBI guidelines on income recognition, provisioning and asset classification under prudential norms as being unconstitutional.

“The RBI guidelines are discriminatory, arbitrary, unreasonable and ultra vires the Securitisation Act and that the definition of the NPA as per RBI is contrary, distinct and contradictory to the definition of the NPA under the Central Act, and hence, the same is unconstitutional,” senior counsel Soli Sorabjee had argued.

Debtors of various banks who have appealed against the Madras HC’s order said that issuing guidelines relating to asset classification is essential legislative function and, therefore, it cannot be delegated. They argued that the guidelines issued by the RBI cannot be used for defining NPAs and there should be a separate legislation in this regard.

Sarfaesi Act gives powers to seize and desist to the banks under which the banks need to send a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days. In case the borrower fails to comply with the notice, the bank can take either take possession of the security for the loan, sell or lease or assign the right over the security or appoint any person to manage the same.
Read About Merger Plan And Low Interest Policy Of Government

Tuesday, January 27, 2015

Government Plan OF Low Interest Regime And Merger of Banks

If interest rate is made uniform, public sector banks will try for giving best service to customers of banks to attract more and more business and stop unhealthy practice of giving concessions in interest and other charges to take over business from other public sector bank. It is important to point out here that if one out of 28 PSU banks loses and other gains, it is finally not a gain to the government or to bank staff. Ultimately such banks compromise with quality of lending and pave the way for account turning to Non Performing Asset at a later date.
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This is why quick mortality in all banks has been increasing quarter after quarter. Here Quick mortality means Advance given by a bank goes bad in the same financial year or in next year. But clever bank officers hide its for two to three years to avoid action from bosses and finally write it off on flimsy ground Or enter into compromise settlements with defaulters sacrificing all interest earned and even principal amount of loan . Bank officers normally try to keep loan account in standard category by hook or by crook till his is posted in that branch or till he is promoted or retired from bank's services




Some officers in bank raise a question why merger is not the solution to problem of interest rate competition among various PS banks. It is true that merger of all PS banks to form a big banking company will solve the issue of interbank competition in interest rat or in other charges for various services. Bank thus formed will strive hard simply for business and there will be end of unhealthy practice of taking over business from other banks. Any bank will not fear that if they do not reduce interest rate ,other bank will attract the client.

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There is good point if the business is snatched from a private bank. It is rather true that private banks are snatching business of PS banks at a greater speed even though their charges are higher and interest rate is more.

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If merger is done of all PS banks, PS banks will then try to serve the customers in better way or face the fate what BSNL or AIR INDIA is facing. But if merger is not done but only uniformity of interest rate is maintained as per national priorities of various loan segments, I hope banks will save money in loss of interest and reduce chances of account turning bad to a great extent. Not only this, there will be genuine competition in standard of service of various PS or private banks.

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Business men want excellent , quick, comfortable, hassle free and personalised service , they do not bother charges or interest rate hike .They know how to earn profit and hence they focus on capital which they get from bank , they do not focus on interest load they have to bear. Contribution and role of interest in profitability of their business is minimum.


It is also true that in case of mergers in parts or mergers done selectively without taking car of conflicting work culture will spoil overall culture and ignite fire among union people. Therefore GOI have to convince bankers with pros and cons of merger and then take a bold step to merge all banks and tell bank staff clearly that their wage will be protected and linked with CPC. Majority of bank staff will slowly agree to it if it is found to be loaded with more positive points than negatives points.


GOI has to be serious and not only do only politics on it. GOI just want to save their face from tarnishing if some of PS banks fail to comply Basel III norms for capital. If merger is suggested by government only to avoid capital infusion in weak bank, they are prescribing wrong and harmful step to solve capital issue and they will have to face repercussion of this wrong step which will be more disastrous than they will face without opting selective mergers.

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GOI has to be serious and make the legal machinery effective to recover the money from defaulters. If this is done entire problem of capital deficiency will be solved. After all tool of merger of PS banks may solve issue of capital or interest rate risk temporarily and give some relief to GOI for some time. But it may not be a permanent solution until they decide to plug all loopholes and stop all pilferages from banking system in loaning , recruitment and promotion processes..

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Bankers will have to focus on profit and not on achievement of target of deposits and advances through manipulations and through window dressing. Banks are meant for doing business and particularly PS banks are to focus on social banking and not entirely on only profit making.They will lhave to stop non-banking business like insurance or demat service and focus on only lending and lending .Doing non-banking business may earn them a few crore of rupees as non-interest income but at the same time they may adversely affect the health of asset portfolio which may result in loss of hundreds of crores of rupees of the bank. Banks as such have to stop being penny wise and pound foolish.

Last but not the least is that GOI cannot stop public sector banks going from bad to worse merely by changing policy framework or by changing system or by changing CMD or ED or by merger or by changing location. Any system is not fool proof and all system have some merits and some demerits.. GOI will have to learn how to execute its policy honestly and in true spirit. They have to learn how to assess an individual's performance potential and post him at suitable place where he or she may give maximum output. They have to learn to properly assess the quality of an employee and give him timely promotion without punishing anyone only because he or she did not act as perfect Yesman.


Banks cannot be run by a person who possess maximum degree or who can deliver good speech or who is best flatterer and yesman. It is a service oriented industry where skill to serve the customer in best way keeping bank's interest intact is an unique art which is not derived merely by degrees or speaking expertise but by culture, attitude and character which is imbibed in his or her blood by natural parent and official guardians .

Banks cannot prosper until the management of banks as well as GOI stop promotions and postings based on flattery and bribery .Officials of GOI , ministers and RBI have to be active and effective in their roles and make administrative and legal set up strong and effective. Similarly officials of Bank managements should learn from private counterparts how they recognise the potential of junior individual and how they get maximum output by their employees without inviting any industrial problem. Pay package is not that much significant as far as performance of a person is concerned. Had it been so, PS banks could have done far better than private banks because average pay of PS bank employees is even now more than that of private banks. Therefore it is totally the faulty HR management which is to a great extent responsible for current ill-health of PS banks.

Neither low interest rate nor merger plan of GOI can save banks from disaster in isolation.

Union Bank slips on poor results-Hindu Business Line 28.01.2015
January 27, 2015:  
The stock of Union Bank of India slipped 7 per cent on Tuesday, after the company delivered disappointing results for the December quarter. The bank’s net profit fell by 13 per cent over last year, primarily driven by increase in employee cost and provisioning on bad loans.
 
The bank’s advances grew by a subdued 8.9 per cent during December, lower than the industry credit growth of 10 per cent during this period.
 
Credit growth
Aside from a slower credit growth, rise in bad loans, which is now 5 per cent of loans, up from 4.69 per cent in the September quarter, also impacted the bank's earnings. With restructured assets, another 5 per cent of loans, the bank’s stressed assets have been weighing on the bank’s capital base.
 
Union Bank of India has a tier I capital of 7.3 per cent (6.5 per cent norm) as of December 2014, stretching it thin. The return on equity is an abysmal 6.6 per cent down from about 8.3 per cent in the previous year.
 
Net interest margin
The bank’s net interest margin, which has been under pressure, is likely to face further stress as the bank lowered its base rate by 25 basis points after the RBI’s policy rate cut on Januay 15. The yield on loans is already down 10 basis points sequentially in the December quarter
 

Union Bank of India Q3 profit drops 13.33% to Rs302.42 crore-Live Mint

Net interest income increased 8.03% to Rs.2,121.23 crore from Rs.1,963.50 crore a year ago
Mumbai: Union Bank of India on Tuesday posted net profit of Rs.302.42 crore in the three months ended 31 December, declining by 13.33% from Rs.348.94 crore in the year-earlier period, mainly because of higher provisions and contingencies.
 
The bank’s profit was lower than the estimate of Rs.511.5 crore forecast by 24 analysts polled by Bloomberg.
 
Net interest income, or interest earned on loans minus interest paid for deposits, increased 8.03% to Rs.2,121.23 crore from Rs.1,963.50 crore a year ago.
 
Provisions and contingencies for the quarter rose 39.57% to Rs.851.92 crore compared with Rs.610.40 crore in the year-ago quarter.
 
Other income rose 29.03% from a year ago to Rs.877.24 crore
 
Net non-performing assets (NPAs) rose to 2.95% versus 2.26% last year while gross NPA rose to 5.08% compared with 3.85% a year ago.
 
At 11.53am, Union Bank of India was trading at Rs.237.60 on BSE, down 5.5%, while India’s benchmark Sensex rose 0.15% to 29,322.42 points.
Read also Government Plan for Merger of Banks and Idea Of Low Interest Regime

See restructuring loans worth Rs 1600 cr in Q4: Union Bank-Money Control-28.01.2015


Union Bank of India's third quarter net profit fell 8.1 percent year-on-year to Rs 302.4 crore, impacted by higher provisions. Other income, however, supported the bottomline but asset quality of the bank deteriorated during the quarter.
 
Union Bank of India  disappointed the Street with the third quarter net profit falling 8.1 percent year-on-year to Rs 302.4 crore, impacted by higher provisions. Other income, however, supported the bottomline but asset quality of the bank deteriorated during the quarter. Net interest income grew 8 percent to Rs 2,121 crore in the quarter ended December 2014 from Rs 1,963 crore in the year-ago period, which was in line.
 
In an interview to CNBC-TV18, Arun Tiwari, CMD of Union Bank of India, discusses the company’s numbers and its future outlook.

Below is the transcript of Arun Tiwari’s interview with Masavi Ghelani on CNBC-TV18.

Q: The results are little disappointing, there has been a drop in the net profits as well a shift in your net interest margins (NIMs). Can you give us a sense on what happened there and do you see that panning out even for the next few quarters, what is your expectation like?

A: If incidence of NPA increases I have to write back and going forward I have no interest income; predominantly it has been that reason only. As I shared sometime back the numbers about the slippage of the last quarter, Rs 738 crore which was Rs 968 crore in the Q2 of the current financial year, going forward if I look the industries which comprises non-performing assets (NPA) they will be a quarter or two here and after when there will be an uptick. I am sure because most of it is power, metals, in some cases roads. If we are talking about 6 percent plus economy growth all these segments of the industry have to perform well. Once they perform well one, I will be earning interest on that, two, there will be write back of my provision already locked in there.

Q: As of today what is your restructuring pipeline like and in future do you see that trend continuing as well?

A: Let me give you a comparative number. Last quarter when the same question was asked our ballpark number was somewhere around Rs 1700-1800 crore. However, actual restructuring happened for Rs 1212 crore. Within restructured portfolio which is about Rs 12000 crore plus, a small amount of Rs 240 crore which is comprising within Rs 1738 crore got in to NPA.

Current quarter Q4, our rough numbers indicate that restructuring could be somewhere Rs 1500-1600 crore. However, as past says we take very bullishly these numbers but the actual numbers which gets restructured is much lesser; two thirds of that.

Q: Could you help us with the breakup of your provisions and your recovery this quarter, would that also continue in the next quarter and the next financial year?
A: During this quarter if I look at, cash recovery was Rs 358 crore which was in previous quarter Rs 183 crore. So, year-on-year (YoY) if you look at cash recovery it was Rs 183 crore in December 2013 quarter which has gone up to Rs 358 crore in December 2014 quarter that is Q3.

My Comment:
Profit of every public sector ban has to fall and Non performing asses of every PSU bank have to go up . RBI and GOI can not stop it until they diagnose the real and root cause of sickness. Unfortunately they prescribe the same as medicine for curing the disease which is in face the cause of disease .

HR policy based on flattery and bribery cannot cure the sick PSU banks. Every quarter some bank or the other declare rise in bad debts and fall in profits. For some quarters they manage to hide bad assets by manipulations and restructuring , but finally truth comes out and goes beyond control.

Even banks which are considered by Government as strong bank are also slowly falling in line because they appeared stronger only because they were master in the game of manipulation and fraudulent tapering of data.

Extend special asset classification benefit’-HBL

Mumbai, January 27:  


Union Bank of India Chief Arun Tiwari on Tuesday said banks, under the aegis of the Indian Banks’ Association, will make a request to the Reserve Bank of India to extend the deadline for withdrawing the special asset classification benefit for all restructured loan accounts by a year.
 
The central bank last year said the special asset classification benefit will be withdrawn for all loan restructuring cases with effect from April 1, 2015.
 
Currently, the provision requirement on restructured loan accounts is 5 per cent.
 
Downgrade of accounts

But come April 1, 2015, when the restructured loan accounts will get downgraded (to the non-performing asset or NPA category), the provisioning will go up to 15 per cent.
The increased provisioning will weigh on banks’ profitability from the first quarter (April-June) of FY 2016 onwards. In the reporting quarter, out of Union Bank’s total restructured loan accounts of ₹12,000 crore, loan exposure aggregating ₹240 crore turned sour

 Improve the Conditions of Public Sector Bankers
-This draft of petition has appeared in a website called change.org  Link of which is given below
https://www.change.org/p/prime-minister-of-india-improve-the-conditions-of-public-sector-bankers

माननीय प्रधानमंत्री जी,
यह याचिका समस्त बैंकरों की तरफ से आपको भेजी जा रही है. इस याचिका में बैंकरों का दर्द है,हताशा है और पनपता आक्रोश है. सार्वजानिक क्षेत्र के बैंकों में हालात बहुत ही खराब हो चुके हैं और युवाओं का इससे मोह भंग हो रहा है. अगर हालात नहीं बदले तो बैंकों में काम करने वाले लोग नहीं मिलेंगें और जो हैं वो भी छोड़कर चले जायेंगे. बैंकों की दुर्दशा का हाल यह है कि यहाँ के अधिकारियों का वेतन सरकारी क्लर्क से भी कम हो गया है और बैंक के क्लर्क तो सरकारी चपरासी के बराबर भी नहीं हैं. महोदय इस याचिका पर गौर फरमाएं और बैंकरों की हालत सुधारने के लिए आवश्यक कदम जल्द से जल्द उठायें.
Read also Government Plan for Merger of Banks and Idea Of Low Interest Regime
 
Dear Prime Minister,

This petetion carries with it the pain,frustation and anger of the bankers. We would like to bring to your notice that Public Sector Bankers in India are working under pathetic conditions and still giving great results. Recently they brought pride to the nation by entering Guinness Book of World Records for opening largest number of accounts in one week under Jan-Dhan Yojna. This is their ability and strength.They work for unlimited hours under heavy stress with bare minimum resources and without caring for their family and health.They are the backbone of the nation and carry the responsibility of whole economy. But now this backbone is in deep trouble and due to this, nation faces serious risk regarding proper development of the economy.

It is very painful to inform you that this sector is loosing its charm and the youngsters are moving away from this field which was once among most desirable. The situation is that this sector is no more attracting the top talents.

Every year thousands of youngsters are quitting their job in the public sector banks. If the conditions will not improve, the future of PSBs will be in jeopardy. In this era of tough competition if banks will not be able attract and hold the talent, they will not able to survive and this will be very dangerous for the country.

Working conditions and remuneration in PSBs is very unattractive and repelling for the youngsters. Here the point to be noted is that public sector bankers are very poorly paid and face extreme conditions of working. Situation is so bad that from January,2016 after implementation of 7th pay commission the salary of new joining bank officer will become less than that of central government clerk.It is a huge difference and very depressing for the banker.Bankers have to work all the 6 days and even on 7th day too without being able to give proper time to himself and his family.Bankers are suffering from almost all stress related diseases and all time feel the pressure.

Dear Prime Minister, in the view of all these things we request you to save this sector. Please take necessary steps to attract and hold the talent. Create the conditions where the bankers feel themselves as appreciated and happy. Create the conditions where they feel energetic and motivated to bring out best everyday.

For this we request you to take proper care of salary revision and other demands of the bankers.
  • (i). Central Pay Commission - Please compensate the bankers respectfully to the extent that they do not feel less than their counterparts in other sectors.It will bring happiness to them and will motivate them and also will attract young talent. For this We demand implementation of Central Pay Commission for bankers too.
  • (ii). 5 Days working - We demand 5 days working in banking sector. Bankers are under constant stress and due to work pressure they are not able to take care of their health and also they are not able to spend time with their families.This completely drains them emotionally and physically and they find themselves depressed and demotivated.  5 days working will provide them proper rest and energy to work more on the working days. Moreover due to availability and reach of alternate channels common public will not miss the bankers. For your kind attention, Reserve Bank of India and Indian Share market too work only 5 days a week.
 
This petition represents all the Public Sector Bankers and we believe that Mr Prime Minister will take necessary steps to fulfill the long pending demands of Public sector bankers and provide them the relief they deserve.
With this petition we want to persuade Government of India to take proper care of about 1 million Public Sector Bankers. We request all the bankers,their family members and their well wishers to sign this petition and make it as much effective as possible.
 
Dear supporters,
Please sign this petition and make others sign it too. Our collective efforts are must to make impact and desired changes. For this you will have to work on it personally.Share this petition with as much people as possible, you can use facebook, email, twitter etc for spreading it. Please spread it so that we can persuade Prime Minister of India to take care of bankers.
 
प्रिय मित्रों एवम शुभचिंतकों,
भारतीय बैंकरों की दुर्दशा बयान करती यह याचिका भारत के प्रधनमंत्री को भेजी जायेगी और उनपर दबाव डाला जाएगा की वे भारतीय बैंकरों की दशा सुधारने के लिए कदम उठायें. यह तभी संभव है जब हम लोग इस याचिका को मजबूत बनाएं और भारी संख्या में समर्थन हासिल करें. आपसे अनुरोध है की इसे व्यक्तिगत मिशन बनाएं और जितने हो सकें उतने लोगों से इसे समर्थन दिलाएं.
 
किसी भी बड़े बदलाव के लिए साथ जुड़ना और खड़े रहना जरूरी है.
 
Thanks 

Monday, January 26, 2015

AIBEA Presents Progress In Wage Negotiation

AIBEA Circular No.27/111/2015/7, dtd. 25th January, 2015 - Developments in the Negotiations

Dear Comrades,

  • AIBEA CC calls for cautious but decisive approach to clinch 10th Bipartite wage revision settlement
An emergent meeting of the Central Committee of AIBEA was held at Mumbai on 10th January, 2015 to take stock of the developments relating to the on-going negotiations for 10th Bipartite Settlement.  A detailed reporting was made about the developments in the negotiations since our CC/GC meeting held at Kolkata in August, 2014.  


The meeting observed that not only was  there no improvement in the offer of IBA but rather a new offensive had been unleashed by seeking a revised mandate from all the Banks, ostensibly in an attempt to foist Khandelwal Committee recommendations of differentiated wage increase in different Banks based on their profits and profitability. The meeting endorsed the decision of the Negotiation Committee that this should be viewed more seriously than even the wage revision itself.   The meeting also endorsed the suggestions made in the UFBU meeting that all-out effort should be made to thwart this blatant attempt to dismantle uniform wage revision for all the Banks. 

Viewed from this perspective, the CC appreciated the stand taken by AIBEA and
UFBU in deferring the strike action in the light of the positive developments both with regard to improvement in the offer of IBA as well as the assurance made by IBA that the mandate issue would not be allowed to be precipitated by the Banks and would resolve the same amicably. 

The CC noted that while the present offer of 12.5 % amounted to Rs. 3940 crores towards Payslip components ( as against Rs. 2980 crores achieved in the 9th BPS ), the same is far from adequate and hence there has to be substantial improvement in the offer of IBA before we could clinch the deal. 

There are also other important demands of the employees as well demands pertaining to pension related issues which need to be sorted out. Hence the Central Committee while taking note of the above developments and the IBA’s fixing up meetings of the Sub-Committee to discuss these issues observed that the negotiations have been brought on track and have to be taken forward through further discussions. 

Hence the CC decided that we have to move cautiously, but act decisively so that no derailment takes place in the negotiations.



Meetings of the Sub-Committee:  As scheduled, IBA so far held 3 meetings of the Sub-Committee, one on the issues of the officers ( on 14-1-2015) , another on the revised medical reimbursement scheme (19-1-2015) and the third on the demands of the workmen employees ( 19-1-2015) .  

Revised Medical Reimbursement Scheme:  In the meeting on reimbursement of medical expenses,  it has been agreed to introduce a revised scheme by which employees would get full reimbursement of the medical expenses incurred by them without the existing ceilings, sub-limits and other restrictions which result in employees going out of pocket. The Scheme would incorporate and consist of various improvements also.

Discussions on service conditions of workmen employees:  In the Sub-Committee meeting held on 19-1-2015, participated by all the 5 workmen unions, all the demands of workmen unions as raised in the common Charter of Demands were taken up for discussion.  There was detailed discussions on issues pertaining to leave benefits of the employees and certain improvements have been agreed upon by IBA.

Next meeting of Sub-Committee on 30-1-2015:  Another round of Sub-Committee meeting on the demands of the workmen employees has been fixed to be held on 30-1-2015 wherein in other demands will be taken up for discussion.

Next round of negotiations on 3-2-2015:  IBA has also informed that the next round of negotiations with UFBU will be held on 3-2-2015 when the issues relating to wage increase will be taken up for discussions.

We are entering the crucial zone – beware of false propaganda:  Comrades, while the negotiations have been put on popper track, from now on, the negotiations would be very crucial. While all endeavours would be made by the Negotiating Committee to proceed on the lines of the decisions of our CC meeting to achieve our demands for a fair and adequate wage revision and improvement in other service conditions, it is important that we are fully backed up by total unity of our rank and file membership.  Our units and members should also be alert and prepared for any programmes that may be warranted to meet any eventual hurdle in the way of realising our demands.  Nothing should be taken for granted at this statge.

Already the market is flooded with rumours, misinformation, false propaganda, canard against leadership – all deliberately targeted against AIBEA.   Social media is also being used to denigrate AIBEA  and we have located the elements behind the same.  But we shall not allow our attention to be diverted to replying to all these engineered and orchestrated attempts.  While our units and members should be guarded against the same, such mischievous attempts should be befittingly answered with our dogged unity and unflinching faith on our organisation.

With greetings,

snapdeal danendra

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