Consolidation ‘must’ for a global size bank: Chidambaram
CHENNAI, DEC. 22:
India needs a ‘world size’ bank to be globally competitive and there is a need for consolidation in the banking system, said Finance Minister P. Chidambaram.
India has local cooperatives to national players. But while China has three of the world’s 20 largest banks, India has none. There is a need for consolidation, he said addressing a book release function of IOB @ 75 – the saga of good people to grow with.
Whether the century-old Central Bank of India; or State Bank of Bikaner celebrating its Golden Jubilee or Indian Overseas Bank in its 75th year – functions he had participated since yesterday, a common thread across these events was their Founders’ vision for a healthy financial system and banks, he said.
IOB’s Founder M.Ct.M. Chidambaram Chettyar had set up one of the first three branches overseas in Rangoon (now Yangon, Myanmar) recognising the importance of overseas trade, open economy and currency and exchange.
The Centre is committed to further strengthening the banking system and will infuse over Rs 15,000 crore new capital before March 2013. In the next 5-10 years, over Rs 1 lakh crore will be needed and the Government will find ways to do it.
Chidambaram urged the banks to fully cooperate in making the unique identity based Direct Benefit Transfer scheme, which envisages cash transfer to beneficiaries of development schemes.
“It is pure magic”. The way technology will help beneficiaries get the cash support the instant a Ministry or Department ‘signs off’ on a scheme. The unique identity platform envisaged in India is unparalleled globally with 1.25 billion people identified using biometric system.
The Government “looks to the banks to deliver on the promise it has made to the people,” Chidambaram said.
Beginning from January 1, in specific districts covering select schemes, it will be rolled out countrywide for all schemes by the year end. “All of next year, I will devote hours every day to ensure banks make the direct transfer of benefits a success,” he said.
http://www.thehindubusinessline.com/industry-and-economy/banking/consolidation-must-for-a-global-size-bank-chidambaram/article4229638.ece
Proposed RBI draft guidelines positive for NBFCs: India Ratings
MUMBAI, DEC 19:
Non-Banking Finance Companies (NBFCs) are likely to benefit from the proposed guidelines of the Reserve Bank of India (RBI) which focus on enhanced corporate governance, disclosure standards and tightened liquidity management requirements.
“Domestic non-banking finance companies (NBFCs) will benefit from the enhanced corporate governance and disclosure standards and tightened liquidity management requirements proposed recently by the Reserve Bank of India,” a report by India Ratings and Research said.
It also said there would be limited financial impact on NBFCs of the proposed revisions in asset classification, provisioning norms and higher tier-I capital ratio requirements.
The RBI released the new draft guidelines for NBFCs based on the Usha Thorat Committee report recommendations on December 12, 2012.
According to the proposed guidelines, NBFCs have to recognise a loan as a non-performing asset (NPA) if it is not serviced for 90 days from the current 180 days NPA norm.
The new guideline also proposes to implement the 10 per cent capital adequacy ratio (CAR) norm for most NBFCs.
Referring to the capital adequacy ratio, the report said, “We do not expect any significant impact on the operating performance of the requirement of a minimum Tier-I capital ratio of 10 per cent (current requirement of 7.5 per cent for retail finance NBFCs).”
It also added that the transition of NBFCs to the 90-day NPA norm from the current 180 days from the first quarter of FY16 would not have a significant impact on profitability.
“The transition of NBFCs to the 90-day NPA norm from Q1FY16 (same as at banks) from a 180-day NPA norm is unlikely to have a significant impact on NBFCs’ profitability in the medium term,” the report said.
It, however, added that NPA ratios on a 90-day delinquent basis could nearly double as most of the major NBFCs and incremental provisioning expenses (including assuming the provision for standard assets at 0.40 per cent, against the 0.25 per cent mandatory) could reduce return on average assets (RoA) by around 5-40 basis points.
The rating agency also noted that the monitoring and collection systems and borrower behaviour were likely to adjust during the transition phase and 90-day delinquencies were likely to reduce substantially by the proposed time of implementation.
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