FM Talk Of Capital And NPA But Not Of Wage Hike

Fear of speaking truth is always harmful. Bank staff did not speak about exploitation of banking channel by politicians and now banks in general have been declared sick by these clever ad corrupt politicians.

Similarly a few top officials of bank indulged in corruption and for their vest interest sanctioned loans to bad borrowers and did everything possible to hide bad debts. In fear of action and transfer to remote places or rejection in promotion processes , bank staff remained silent spectator of all ill-motivated works of their bosses .

Bank staff did not stop bad lending, they did not stop concealment of bad debts and did not stop bad officers writing off of bad loans for vested self interest and this is why bank staff are  now facing the consequences of their silence. It is the result of freedom given to top officials of bank staff and silence of juniors that staff of almost all  banks are denied respectable wage hike . Now FM and IBA say that banks are facing capital erosion , facing rise in NPA, facing erosion in profits and hence banks are not in a position to give wage hike and later they will talk of wage curtailment as SBI has already cut various perks in last week.

Silence of bank staff has proved costly and still they are afraid of telling spade a spade. How log they will say Yes to all misdeeds of their bosses. They may get quick promotion or choice posting for some years but in the long run their survival will be endangered and their salaries and perks will be reduced.


Govt mulls new ways to raise capital for banks-The Hindu Business Line

The Finance Ministry and the Reserve Bank of India will discuss new ways of raising capital for banks on March 7. Finance Minister P Chidambaram also sees non-performing assets at the end of 2013-14 to be higher than in the previous year, which was 3.84 per cent of total advances.

“Bankers have given various suggestions for raising Tier-1 capital. These suggestions include investment by pension funds and insurance companies, rights issue for minority shareholders at the time of capital infusion by the Government and issuance of shares to employees,” Chidambaram told newspersons after a three-hour meeting with bankers here.

 

Capital requirement

It is estimated that banks need around ₹1-lakh crore capital in the next few years to meet business needs. Capital of a bank is mainly divided into two categories, Tier 1 and Tier 2. Tier 1 is the core capital and it includes equity and declared reserves, while Tier 2 capital refers to revaluation reserves, undisclosed reserves, hybrid instruments and subordinated term debt.

 

Financial Services Secretary Rajiv Takru told Business Line that pension and insurance money will flow intoTier-1 capital not as equity, but as bonds. It could be through various debt instruments, including perpetual bonds. Simply put, insurance and pension money will bolster the capital of banks through perpetual bonds issued by them.

The Pension Fund Regulatory and Development Authority has already allowed parking of pension money into bank capital as perpetual bonds. The insurance regulator will soon take a call on this matter. The IRDA board is likely to meet on March 10.

The Government has proposed to infuse ₹11,200-crore capital into banks in 2014-15 as against ₹14,000 crore in 2013-14. But Chidambaram said keeping in mind RBI regulations of bank’s CRAR (capital to risk assets ratio) of one per cent over and above Basel-III norms, more capital is required. That is why newer methods to mop up capital are being thought of.

 

Now, with the expansion of business and implementation of Basel-III norms, banks need more capital. The easy option is to offload shares in the market and mobilise money. But there is one problem. Rules say that Government’s equity in State Bank of India, its associates and nationalised banks should not go below 51 per cent. However, in practice, the effort is to keep minimum Government’s shareholding at 55 per cent. As a result, many banks have limited room to sell shares to the general public.

 

Non-performing assets

Terming NPAs as the biggest challenge facing public sector banks, the Finance Minister asked them to focus on recovery of bad loans, improving the asset quality and better credit appraisal.

He confessed that NPAs are high among large corporate accounts and small industries while they have fallen for the real estate segment. NPAs or bad loans of public sector banks rose 28.5 per cent from ₹1.83-lakh crore in March 2013 to ₹2.36-lakh crore in September last year.

He mentioned that banks have managed to recover ₹18,933 crore during April-December while accounts worth around ₹22,000 crore have been upgraded, which means the NPA threat has faded

 

FM P. Chidambaram to discuss United Bank of India crisis with RBI Governor-Financial Express

 

Finance Minister P. Chidambaram today said he will discuss United Bank of India's bad loan crisis with the Reserve Bank Governor later this week.
"United Bank is a special case. We will deal with that. It's not an alarming case...UBI issue will be discussed separately when the governor comes here on (March) 7th and we know the path forward. It will be resolved on 7th," he said.

The Finance Minister is scheduled to address the Reserve Bank of India board here on March 7. Besides the UBI issue, P. Chidambaram will discuss matters related to new bank licences.
Kolkata-based UBI posted a net loss of Rs 1,238 crore in the three months ended December, during which its gross non-performing assets (NPAs) surged to Rs 8,546 crore from Rs 2,964 crore at the end of March last year.
UBI has recovered Rs 400 crore in cash and has upgraded Rs 800 crore worth of accounts. NPAs have been reduced by Rs 1,200 crore, Chidambaram said after meeting with chief executives of PSU banks and financial institutions here.

The minister said a large part of the meeting was focused on bad loans and the steps needed to recover them.
Chidambaram indicated the government would soon appoint a chairman.
Archana Bhargava quit as UBI Chairperson and Managing Director in February, opting for voluntary retirement on health grounds. Bhargava had taken charge as CMD in April 2013 and her term was to have ended in February 2015.
"At the moment there is executive director and we will strengthen the management of United Bank," Chidambaram said.

An administrative enquiry is under way to find out why UBI's NPAs had been under-reported. Following the rise in bad loans, the Reserve Bank had ordered a forensic audit by a firm, which has submitted its report.
The government, which holds an 88 per cent stake in the bank, has provided Rs 700 crore as capital to UBI in this financial year.