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Thursday, April 30, 2015

Dearness Allowance For Bankers From May 2015

D.A. increased by 4 slabs = 0.60%

 (0.15% per slab as per IXth Bi-partite Settlement).

 Now total slabs =738 =110.70% for the quarter
May to July'15....


Bank unions’ concern over slow progress of wage talks -Hindu Business Line 01.05.2015

The United Forum of Bank Unions (UBFU) has expressed concern over the slow progress of negotiations to settle the 10{+t}{+h} bipartite wage revision accord.
In a letter to the Chief Executive, Indian Banks’ Association (IBA) that represents the management, the UBFU recalled the minutes of discussions signed on February 23 between the two parties in this regard.
Terms agreed

The understanding was that the wage negotiations be concluded within a period of 90 days, which falls on May 22, 2015.
Important among issues on which a consensus was reached was that every second and fourth Saturday of the month will be a holiday and other Saturdays will be full working days.
All issues of the managements and unions/associations discussed during the process of negotiation will be settled to the mutual satisfaction.
The parties will meet on mutually convenient dates to draw out a detailed bipartite settlement/joint note on various issues on which consensus position have been reached.
“The parties will endeavour to finalise the bipartite settlement/joint note within a period of 90 days,” the minutes of the meeting of February 23 had said.

In the letter dated April 28, the UBFU pointed out that only peripheral and non-monetary issues had been discussed so far in the sub-group meetings held in the interregnum between the IBA and its representatives.
What was of immediate concern was that discussions on construction of pay-scales and settlement of other important monetary issues are yet to take place.
The UBFU letter sought to remind the IBA that the deadline for conclusion of negotiations, as per the minutes of discussions signed February 23, ‘is fast approaching.’
It requested that meetings of negotiations with UBFU representatives be held at regular intervals in order to arrive at a settlement on revision of wages and other service conditions well within the agreed time limit.
The United Forum also requested the IBA to keep it updated on latest developments in the matter.

Bank mergers are not a smooth ride

SS TARAPORE  Hindu Business Line Ist May 2015
April 30, 2015:  
Meeting the capital requirements of public sector banks has been of concern to the authorities for the past 25 years, but a sustainable resolution has been elusive. Official committees have advocated that the minimum 51 per cent government holding in PSBs be brought down. Governments of different political hues have considered reducing the minimum share of government below 51 per cent but the body politic has turned it down.
When the government recapitalised PSBs in the early 1990s it was felt this would be a one-time burden. This was belied, and year after year the government has had to recapitalise PSBs. The weaker the bank the larger the capital infusion. This has resulted in stronger and weaker banks growing at more or less the same pace.
The Basel III capital norms will require PSBs to raise equity tier 1 capital of about ₹2.4 lakh crore by March 2019. It is estimated that if the share of government in PSBs is reduced to 52 per cent, ₹1.61 lakh crore can be raised from the market. The government would need to provide only ₹79,000 crore, and net of dividends the requirements would be only ₹44,000 crore.
It would appear that an ‘open sesame’ approach has resolved the financing requirements of PSBs. The snag is that the stronger banks have already brought down the percentage holding of the government while those banks which still have a very high government proportion are invariably the weak banks which may not be able to access the market.
Merger of small banks
From time to time the government has mooted the merger of weak PSBs with stronger banks. The experience of the New Bank of India with the Punjab National Bank (PNB) in the 1990s was not without a massive drain on the exchequer besides a drain on the PNB which took years to recoup from this.
More recently, it is reported that the working group on consolidation and restructuring of PSBs has proposed that with a view to increasing profitability, PSBs could consider sharing infrastructure, including back office space, and IT and telecom contracts through shared services.
It is also stressed that PSBs should improve risk management, shift to profitability-linked performance metrics, leverage technology, and develop capital-light business models. Small PSBs are to exit from areas which are unprofitable, according to news reports. The target group of small banks (with less than ₹2 lakh crore loans plus investments) which need to be taken over are Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab and Sind Bank, Vijaya Bank and United Bank.
The story so far
The stronger banks which have capabilities for taking over small PSBs include Bank of Baroda, Bank of India, Canara Bank, PNB and Union Bank. The working group rightly stresses that that any consolidation should be driven by market forces and the decision should be taken independently by the boards of these banks. But the way boards are presently constituted, their independence is a mere fig leaf. The track record is that voluntary mergers without strong intervention by the government just do not take place. Where the majority owner (government) is passive, unions can effectively block such mergers.
Mergers invariably involve bloodshed and the bank undertaking the merger expects compensation from the government; this is precisely what the government wants to avoid. As rightly pointed out in the editorial, ‘Mix, but also match’ (April 25), bank mergers in India have all along been used to bail out weak banks. Thus, voluntary mergers of weak PSBs with larger PSBs are unlikely to fructify.
Given the relatively small size of Indian banks and the increasing globalisation of finance, the merger of strong PSBs would be desirable. The Bank of India and the Union Bank did consider a voluntary merger but in the absence of explicit government support the proposal was aborted. The merger of strong PSBs would not resolve the government’s financing problem of recapitalising weak banks.
At present, PSBs account for a little over three-fourths of the commercial banking system. If the government is willing to allow the share of PSBs to gradually decline to, say, 65-70 per cent, there could be a significant reduction in the burden of recapitalisation.
A viable alternative
What could be considered is that government would restrict its capital injection into each PSB equal to the bank’s dividend to government. Under such an arrangement, with a proviso that government’s share would not fall below 51 per cent, the government should treat holdings in PSBs of public sector units as part of the government’s 51 per cent holding.
Since the weaker PSBs would not be able to generate adequate profits they would have to ensure that their loan portfolio grows at a rate substantially below that of the system. These banks would restrict their lending to very safe lending, government securities and money market instruments such as commercial paper. Moreover, the weak PSBs should ensure that they raise deposits at the lower end of the deposit interest structure. In other words, the weak PSBs should be required to operate as narrow banks.
It is appreciated that at the present time neither the government nor the regulator are enamoured by narrow banking. It would be recalled that in the 1990s, a number of weak banks came out of the red precisely by resorting to narrow banking. The choices before the government are clear. Either the government accepts a continuing drain on the fisc of periodically recapitalising the weak PSBs, or the weak banks are directed to go back to narrow banking. A viable third alternative just does not exist.
The writer is a Mumbai-based economist

KYC norms breach: RBI fines on BoM, Dena Bank, OBC-Te Hindu 30th April 2015

Bank of Maharashtra, Dena Bank and Oriental Bank of Commerce have been imposed with a monetary penalty of Rs 15 crore each by the Reserve Bank of India (RBI) for violation of Know Your Customer (KYC)/ Anti Money Laundering (AML) norms.
“Failure on the part of these banks to take timely remedial measures had aggravated the seriousness of the contraventions and its impact,” RBI said in a release.
The RBI also cautioned eight other banks -- Central Bank of India, Bank of India, Punjab and Sind Bank, Punjab National Bank, State Bank of Bikaner & Jaipur, UCO Bank, Union Bank of India and Vijaya Bank – “to put in place appropriate measures and review them from time to time to ensure strict compliance of KYC requirements in future.
“The penalties have been imposed in exercise of powers vested in the Reserve Bank…taking into account the violations of the instructions/directions/guidelines issued by the Reserve Bank from time to time. This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank and its customers,” the central bank said.
RBI said it received a complaint from a private organisation, on the basis of which a scrutiny of fixed accounts opened in its name in Mumbai based branches of certain public sector banks was undertaken in July 2014.
“With more complaints and involvement of other banks coming to light, a wider thematic review was conducted. In all, 12 branches of 11 Public Sector Banks were covered.
“The scrutiny/thematic review looked into the modus operandi of the alleged frauds involving accounts of certain organisations in these banks, deficiencies/irregularities while opening Fixed Deposits (FD) and extending Overdraft (OD) facility there against them. Besides, the effectiveness of systems and processes in place pertaining to implementation of KYC norms/AML standards in respect of these accounts was also looked into,” the RBI added.
The findings revealed violation of some regulatory guidelines as also other disquieting actions on the part of the banks such as non-adherence to certain KYC norms, monitoring of transactions in customer accounts, RBI’s instructions regarding funds received through Real Time Gross Settlement System (RTGS), opening of FD accounts and granting overdrafts without due diligence or process, weaknesses in the internal control systems, management oversight, use of internal accounts for parking customer funds and involvement of middlemen/intermediaries in opening of accounts as also subsequent

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