RBI Plans To Withdraw Its Director From Bank Board

RBI wants to keep off PSB boards, says interests clash--Economic Times 11.03.2014

Financial services secretary Rajiv Takru had pronounced that a Reserve Bank of India should have reacted some-more fast to issues plaguing a lender.

NEW DELHI: The executive bank wants to lift out a nominees from a play of state-owned banks over probable dispute of seductiveness – it’s a banking regulator – though a pierce might have been stirred by supervision critique over bad loans during United Bank of India.

Financial services secretary Rajiv Takru had pronounced that a Reserve Bank of India should have reacted some-more fast to issues plaguing a lender. “Their (RBI’s) hopeful executive should have been far-reaching awake,” he had told a newspaper.

The executive bank has created to a supervision seeking to repel a member from a play of state-run banks, pronounced an executive requesting anonymity.

“RBI has told a supervision that a use of hopeful executive of RBI on bank play leads to dispute of seductiveness and dignified jeopardy issues and should be dispensed with,” a chairman said. RBI had motionless to repel a nominees from a play of private zone banks in 2005, also citing probable dispute of interest. The Committee on Banking Sector Reforms, popularly called a Narasimham committee, had also suggested that RBI relinquish seats on bank boards. As for state-owned banks, a executive bank opted to designate late RBI officials to a house in 2007-10 though afterwards switched behind to nominating portion officers.

The RBI communication to a financial method seems to have been done around a time Archana Bhargava quiescent as chairperson and handling executive of Kolkata-based United Bank amid a swell in bad loans during a lender. “These are some issues that have been flagged by a Reserve Bank. We are in discussions and it is too early to get conjectures out of RBI’s observations,” pronounced a comparison supervision executive who spoke to ET on condition of anonymity. But a comparison RBI executive told ET that there are critical differences between a executive bank and a supervision on governance issues in open zone banks (PSBs).

“We have already forked out that ‘fit and correct criteria’ have not been laid down for appointment of tip executives in PSBs,” a RBI executive said, adding that a routine is not during standard with what is laid down by RBI for private zone banks.

The executive combined that some of these observations have also been mentioned in RBI’s paper on supervision and governance issues in open zone banks.

Former financial services secretary DK Mittal authorized of RBI’s move. “All existent RBI nominees should renounce as a government, underneath a existent law, has to designate RBI’s nominees on bank boards,” he said, adding that a regulator should not be on a board.

http://economictimes.indiatimes.com/news/economy/policy/rbi-wants-to-keep-off-psb-boards-says-interests-clash/articleshow/31859905.cms

Why public sector banks are in a mess

BISWA SWARUP MISH(Hindu Business Line

Forced to ramp up lending, they lent to dubious big ticket borrowers, while neglecting the retail segment

The United Bank of India fiasco once again brings into focus the bloated NPAs (non-performing assets) of the banking sector.

The recent Reserve Bank of India’s report on financial stability tries to grapple with the NPA problem, including its possible contagion effects and remedial measures.

There seems to be an overemphasis among pu

blic sector banks on the growth of business rather than profitability. In their zeal to achieve new milestones in business, PSBs do not follow prudent risk management practices. They extend credit to borrowers with lower ratings, which make the asset vulnerable to slippage.

The RBI’s study reports that while the share of ‘A and above’ rated corporate exposures of SCBs, attracting less than 100 per cent risk weights, declined from around 45 per cent of the total long-term rated advances on March 2009 to 22 per cent on March 2013, the share of those rated ‘BBB and below’ (attracting risk weights in the range of 100 to 150 per cent) increased from around 55 per cent to around 78 per cent during the same period.

Though the report does not provide the numbers separately for PBSs and non-PSBs, anecdotal evidence suggests that lending to lower-rated borrowers is more prevalent among PSBs. PSBs have a low share of retail loans — around 16 per cent of all loans, compared to 30 per cent in the case of new private banks (NPBs), as on September 2013.

The larger share of retail loans has helped NPBs contain their NPAs. The risk is less when it is spread across a number of borrowers. The PSBs should make a conscious effort to increase the share of retail loans in their asset portfolio.

Structural change

The exposure limits permitted by the RBI are at variance with international best practices. The RBI report acknowledges this. In India, a bank’s exposure limit for a single borrower is 25 per cent and group exposure limit is 55 per cent of its total capital.

This is much higher than the international practice, where the threshold for large exposures has been recommended at 5 per cent of tier-1 capital. The RBI should enforce norms to reduce concentration risks.

PSBs are instructed by the government to lend to certain sectors which may carry higher risk. In this context, to improve financial stability. While government as owner can ask banks to lend to riskier sectors like infrastructure, it should also be ready to infuse the necessary capital to support such lending.

Given the limited fiscal space, the government can reduce its stake to below 51 per cent to garner the required capital.

The last few years have seen many experienced banking professionals retiring from PSBs. Though PSBs have recruited on a mass scale in the past five years, there is a dearth of experience.

The limited managerial competence available in PSBs especially at the top management level can be harnessed better by merging some of the smaller PSBs.

Governance issues

The government’s interference in day-to-day functioning, lack of a fixed tenure for CMDs and the appointment of independent directors on the basis of merit are governance issues that need to be addressed.

By reducing its stake to 26 per cent, the government can retain power to give strategic direction while subjecting the bank to market discipline.

The PSBs are encumbered both by legacy issues and misplaced priorities. Both need more attention.

(The writer is the dean of the Xavier Institute of Management, Bhubaneswar. The views are personal)

http://www.thehindubusinessline.com/opinion/why-public-sector-banks-are-in-a-mess/article5774123.ece

Here's how you can aviod being a bank defaulter

Through this article, we will try to explore what are the options so as to avoid a default and maintain your credit worthiness

Investment Yogi  |  Hyderabad  

March 12, 2014--Business Standard

Bank loans play an important role in fulfilling your financial dream. They help you enjoy exotic holidays and serve you well in medical emergencies. Imagining life without a loan is quite difficult now a day as it’s difficult to bear costs related to house, vehicle, education and holidaying at one go.

You enjoy all the benefits simultaneously by paying EMI’s which are quite small as compared to total cost involved. But in case of emergencies like job loss or medical problems, people face difficulty in paying EMI’s. Inability to pay EMI’s on time will tag you as a defaulter and your credit score will go for a toss.

If you fall in such a situation and are on the verge of defaulting on your EMI, do not panic, as you can negotiate with the bank to find a solution. Through this article, we will try to explore what are the options so as to avoid a default and maintain your credit worthiness.
 
What is Loan Default?

In simple terms, default occurs when a debtor (who has taken the loan) fails to pay back the loan or has not made a scheduled EMI payment, either willingly or unwillingly. We will be discussing the case where debtor is willing to pay, but is not in a position to pay because of job loss or other emergencies.
 
What are the options?

You are on the verge of defaulting on the loan because of reasons like higher EMI, job loss, medical emergency or business loss. Intentionally, you do not want to default and lose your credit rating. What to do in such a scenario? There are various options which you can explore such as:
 
1. Increasing tenure of the loan – In case the EMI burden is too heavy, negotiate with your bank so as to increase the tenure of loan. Increasing the tenure will reduce the EMI and you will avoid defaulting on the loan.
 
2. Deferring EMI payment – You can negotiate with the bank to defer EMI payments for a certain period of time in case of emergencies like job loss. Normally, banks do not deny genuine customers, but you need to pay some deferment charges in such conditions.
 
3. Loan against PPF or FD – If interest burden is high and you are finding it difficult to pay EMI, you can opt for loan against FD or PPF as they are available at cheaper interest rates. You can use this amount to prepay higher interest loan and continue paying EMI’s for loan against FD or PPF with reduced EMI burden. Be ready to pay pre-closure charges in this case.
 
4. For Home Loans – You can ask your bank to increase the tenure of home loan if the EMI burden is unbearable. Normally home loan tenure can be increased by one year.
 
Conclusion

Negotiation is the keyword here. You just need to sit with bank officials and search for a viable solution. You can choose the most suitable option from above and can easily avoid defaulting on the loan. Keep in mind, default will damage your credit history forever, leading to financing problem in the future.

http://www.business-standard.com/article/pf/here-s-how-you-can-aviod-being-a-bank-defaulter-114031200117_1.html