Court Questions Appointment Process

SC Notice on Move for Private Sector Heads of Government Banks -
06.05.2015 Indian Express
The Supreme Court on Tuesday sought response from the central government and the Reserve Bank of India on a PIL challenging the government's move to appoint executives from private sector financial institutions as heads of five large public sector banks.

Issuing notice on a plea by K.D. Khera, a former president of All India Bank Officers Confederation, a bench of Justice Anil R. Dave and Justice R.K.Agrawal also sought response from the Punjab National Bank, IDBI Bank, Bank of Baroda, Bank of India and Canara Bank.

The PIL petition has challenged the February 26 advertisement by the department of financial services of the finance ministry, contending that inviting applications for the post of MD and CEO in the public sector banks is against the constitutional and statutory framework.

The government move to promote outsiders in the public sector banks is discriminatory to the "well-experienced, in-house staff of these banks, who are more capable to take up these appointments", the PIL said.

Khera told the court that the senior level personnel and employees at the public sector banks have worked there for decades and form the backbone of the Indian banking industry. However, they are now being "completely overlooked for these posts through the aforesaid advertisement".

Assailing the eligibility criteria advertised by the government for the MD & CEO of the five banks holding huge investments of general public, Khera has contended that criteria has been so designed that "all the all existing executive directors of PSB (who were the only people eligible under the old policy) will automatically become ineligible solely on account of cut-off age of 55 years with three years board experience".

Attributing "malafide", Khera has contended that cut-off age has been "purposely" kept at 55 years as it would make only private sector applicants solely eligible.

3 PSU Banks Seek Exemption From Dividend Payment-NDTV-02.05.2015
New Delhi: Three public sector banks - Bank of India, Union Bank of India and Allahabad Bank - have sought exemption from payment of dividend citing higher provisioning for non-performing assets (NPAs).

"These banks want to improve capital adequacy by ploughing back the profits as they are not finding conducive conditions to raise capital from the market," the Finance Ministry said recently.

The three banks have requested for "exemption from payment of dividend" on account of a decrease in profit due to higher provisioning against bad loans (NPAs).
As per the Budget Estimates 2015-16, the projections from 'dividend and profit' from public sector companies and banks has been pegged at about Rs 1,00,651 crore. The revised estimate for the last fiscal year was Rs 88,781 crore.

In 2014-15, Union Bank of India had deferred its plan to raise Rs 1,386 crore fund through qualified institutional placement (QIP) to the current fiscal year.
There are 24 listed public sector banks.
The three banks will be announcing their annual results for 2014-15 in the coming days.
Union Bank of India had reported a 13.33 per cent decline in net profit at Rs 302.42 crore for the October-December quarter of 2014-15. The bank had a net profit of Rs 348.94 crore in the third quarter of fiscal year 2013-14.

Bank of India had posted a profit of Rs 173.38 crore during the period, down from Rs 585.82 crore in October-December quarter of 2013-14.
Allahabad Bank's profit during the period had almost halved to Rs 164 crore year-on-year.
Government has approved dilution of equity share holding of 52 per cent based on the credit growth, available capital, market valuation and performance of the bank.
The dilution of holding based on efficiency parameters is aimed at ensuring that credit needs of banks are taken care of.

Banking majors shake hands with start-ups for data intelligence-Hindu Business Line
By Rajesh Kurup/K Ram Kumar 

State Bank of India had to decide whether or not to extend loans to customers looking to invest in a housing project in Noida.

Though everything about the project looked good on paper, including the developer’s brand name, SBI decided against entertaining loans for it. Thanks to a partnership with online real estate start-up PropTiger, SBI got access to data that indicated that many customers who had already invested in this project were exiting due to delays and land issues.

 

Like SBI, banks are increasingly joining hands with online real estate portals to get market intelligence and buying trends. Crucial decisions such as going slow on taking exposure to housing projects in one city and stepping it up in another are increasingly being taken by banks based on information sourced from such online platforms.

Private sector lender ICICI Bank, for instance, is the preferred financial partner for three-year-old IndiaProperty.com, while three-year-old Housing.com has tie-ups with biggies such as Standard Chartered, HDFC and Axis Bank.

 

“Banks and private equity firms planning to take an exposure in real estate projects need a lot of data before lending at a project level or approving home loans to customers buying apartments in a particular project. We provide this data, which can be then sliced and diced,” said Dhruv Agarwala, Chief Executive Officer and Co-Founder of PropTiger.

Data analytics and ability to track user behaviour online is prompting the tie-up between banks and the start-ups. This includes data related to developer background, developer track record, information on new projects, demand-supply equation in a region and configuration and reigning prices, among others.

 

The monthly home loan uptake in the country is about ₹15,000 crore and analysts said partnerships with online players can increase uptake. The online sites get 3-5 million visitors a month and banks can convert these leads into business.

“We are great at technology, and banks are looking at tapping into customers who use online and mobile technologies for home buys. For banks, these tie-ups help them focus on their core competency,” said Advitiya Sharma, co-founder of Housing.com.

Project certification

In return, banks certify the projects listed on the website following a due diligence, giving them “trust and credibility”.

Banks to witness higher attrition this year: Experts-Business Standard 04.05.2015

The new banks are expanding their teams at a rapid pace and existing banks are grappling with talent retention

 

Banks are likely to witness up to 50 per cent increase in attrition this year compared to last year as new players entering the sector would prefer seasoned industry professionals to grow their operations, say experts.

The two new banking licences, that were given by RBI to infrastructure financing firm IDFC and micro-finance firm Bandhan Financial Services, are also expected to create job opportunities across the board in the banking space, they said.

The new banks are expanding their teams at a rapid pace and existing banks are grappling with talent retention. The existing players are looking to either rebuild their teams to pre-crisis levels or at expansion in their verticals to make the most of favourable economic sentiments.

"In fact, we expect 50 per cent higher attrition level compared to last year across all revenue-generating functions in banking," Michael Page India Regional Director Nicolas Dumoulin told PTI.

While, he said for support functions the attrition levels are likely to be higher by 25 per cent compared to last year.

GlobalHunt Managing Director Sunil Goel said, "Large pool of jobs is expected to be created wherein the maximum number of the jobs will include the bottom of the pyramid, but yes existing banking and financial professionals will get recruited by the new players so the attrition will get added another 15-20 per cent for current companies."

Though all the existing players will try to retain talent by giving large portfolio and decent compensation, but boom in the industry will bring the attrition higher than ongoing rate, he opined.

Dumoulin said that this trend has already picked up pace over the last six months as new entrants, foreign banks- both existing as well as new entrants, and global pension funds (setting up offices in India) are driving the current recruitments in the market adding to higher churn in the market.

Recently Qatar-based Doha Bank commenced operation in the country.

This attrition, Dumoulin said, will coincide with the appraisal cycle

 

Why mergers between public sector banks remain a non-starter -Hindu Business Line -05.05.15
Mergers between private banks have happened at regular intervals. Last week, Kotak Mahindra Bank completed all formalities for the acquisition of ING Vysya Bank. That not only helped Kotak leapfrog to the fourth place among private banks in terms of size but has also given it a strong pan-Indian presence.

At about the same time, a Finance Ministry panel recommended that smaller public sector banks get ready for merger with their bigger brothers. For anyone following the debate, it would seem that this is another trial balloon floated to prepare public opinion about the need and benefits of consolidation.

Public sector banks are 27 in number. From the time of the Narasimham Committee (1991), there has been talk of creating four global-sized banks and about a dozen large domestic banks.

Every one agrees there is need to build scale, consolidate capacity, avoid unnecessary competition and preserve scarce government capital for deployment in fewer banks.

No progress

Despite finance ministers of various political denominations floating the idea of consolidation many times, the issue has remained exactly where it was two decades ago — at discussion stage.

The matter came up once again at the Finance Ministry-convened Gyan Sangam earlier this year. The outcome was a damp squib since bankers decided it was not the appropriate time to discuss the issue in view of the difficulties faced by banks over non-performing assets and capital-raising.

The Government also deferred to the prevailing sentiment and said that it will not force mergers and that it was up to the bank boards to take the issue further. That completes the usual loop that finance ministers go through after first proposing the idea.

Why has it been so difficult to put through even a single merger in the public sector bank space — except when it has meant a forcible rescue operation mounted at the behest of the regulator?

Bankers in the public sector feel that they simply don’t have the time to take a long-term view as private bankers are often able to in matters relating to consolidation.

One reason why private banks such as ICICI Bank, HDFC Bank or Kotak have been able to put through mergers and grow has been the long tenure of the top management.

Chanda Kochhar, for instance, has been with the ICICI Bank and its parent ICICI right through the past two decades, as have some of her key officials.

In HDFC Bank, Aditya Puri and Paresh Sukthankar have been with the bank since inception in 1994. And Kotak too has retained most of its core team since the last two-and-a-half decades when it started as an NBFC.

The stability in tenure, long innings, and the reputation and personal stake of the top management at these banks have made a difference and enabled them to think long term.

Limited time

Public sector bank chiefs don’t get this opportunity. They usually get a three-year term, which again is varied across different banks.

They come into office after a long stint with another public sector bank. It usually takes a couple of months to get a hang of what is going on.

Then the focus is on undoing the ‘misdeeds’ of the predecessor and bringing some change to help the organisation cope with changing realities. This takes up much of the second and third years.

And before year three is over, it is time to stop taking decisions, cover the flanks and pack up.

A merger is the last thing on their minds when they have a dozen other problems to handle. There is no incentive to take ownership for a tough decision that involves people and which the CMD will not be able to see through fully in his/her tenure.

So, it looks as though for some more time, PSB mergers will be basically an intellectual pastime and a seminar topic.

One solution

If the government really wants the mergers to happen, then perhaps there is perhaps only one way. The Finance Secretary will just have to call two bank chairmen and ask them to get on with it.

That may not be a great advertisement for corporate governance and board autonomy and such other pious ideals. Given the current realities, expecting public sector bankers to do it on their own is asking for the impossible.

FinMin initiates process of identifying chairmen for PSU banks

There are eight vacancies for this slot at various public sector banks including Punjab National Bank, Bank of Baroda, Syndicate Bank and Canara

 

The Finance Ministry has initiated the process of identifying persons like retired bureaucrats and bankers who could be appointed as non-executive chairmen of various public sector banks.

Vacancies for the position of non-executive chairman have arisen following the government decision to bifurcate the post of Chairman and Managing Director at PSU banks last year.

.There are eight vacancies for this slot at various public sector banks including Punjab National Bank, Bank of Baroda, Syndicate Bank and Canara Bank

The government is also looking for appointing chairmen at Bank of India and IDBI Bank in place of the incumbents.

In December, the government had appointed Managing Director and CEO in four state-owned banks -- Indian Overseas Bank, Oriental Bank of Commerce, United Bank of India and Vijaya Bank.

According to sources, people would be shortlisted as per the eligibility guidelines issued by the Finance Ministry.

There would be no interviews for these people who could either be former private or public sector bankers or retired bureaucrats, they said.

The Finance Ministry has initiated the process of selection and decision in this regard would be taken soon, the sources said.

Besides, the ministry has also invited applications from eligible candidates for appointment of CEO and Managing Directors at five large public sector banks.

The last date for filing application for these vacancies is tomorrow as per the relaxed eligibility criteria.

Last month, the ministry had issued norms for the appointment of non-official directors.

As per the new norms, the applicant would need to have at least a graduation degree and should be less than 67 years of age, with 20 years of work experience.

Eminent persons with special academic training or practical experience in the fields of agriculture, rural economy, banking, cooperation, economics, business management, among others would be considered for the post.

Retired senior government officials; academicians; directors of premier Management; Banking Institutes; professors and Chartered Accountants with 20 years experience would also be considered.

A high-level search committee would go through the applications and recommend names to the government for approval.