Bank Unions Meet To Decide Pay Structure

 UFBU will sit together to decide new pay scale for submission of the same to IBA on 12th of this month.Views of Sri Kamlesh Chaturvedi appears Today On Facebook in this regard is submitted below.

पता चला है कि आज हमारे नेता हैदराबाद में नए वेतनमान को लेकर मंथन करेंगे और फिर अपना प्रस्ताव आईबीए को प्रेषित करेंगे फिर आईबीए और नेताओं के मध्य १२ मई को वार्ता होगी. २३ फ़रवरी को बनी सहमति के अनुसार २३ मई तक द्विपक्षीय समझौते पर हस्ताक्षर हो जाने हैं यानी मात्र १५ दिन का समय बाँकी है.

कारण कोई भी हो लेकिन यह एक निर्विवाद सत्य है कि सबकुछ रहस्मय अंदाज़ में गोपनीय तरीके से चल रहा है. किस्मत के मारे बैंक कर्मियों की कौन कहे बेचारे राष्ट्रीय पदाधिकारी तक यह बताने की स्थिति में नहीं हैं कि आखिर लोड फैक्टर कैसे निर्धारित किया जाएगा और संभावित नया वेतनमान और महंगाई भत्ते का फार्मूला क्या होगा. सबकुछ १०-१२ शीर्षस्थ नेताओं के इर्द गिर्द घूम रहा है और वो पूंछे गए प्रश्नों के उत्तर रहस्मय अंदाज़ में दे रहे हैं, एक ऐसा अनोखा अंदाज़ जिसमें दिए गए उत्तर से किसी तरह का निष्कर्ष निकालना सम्भव ही नहीं है.

अब यह तो स्वाभाविक ही है कि जब पारदर्शिता का आभाव होगा और सबकुछ रहस्मय और गोपनीय तरीके से चल रहा होगा तो अफवाहों और चर्चाओं का बाज़ार गर्म होगा. पहले माह के दूसरे और चौथे शनिवार को अवकास के बारे में झूठी ख़बरें इस अंदाज़ में प्रसारित हुईं कि बैंक कर्मी तो बैंक कर्मी अनेक अखबारों के संवाददाता तक फिरकी में आ गए और उन्होंने खबर छाप दी जो झूठ साबित हुई. अब एक अफवाह बड़ी तेजी से फैली है कि आईबीए ने ३० अप्रैल की अपनी मैनेजमेंट कमेटी की बैठक में वेतनमान को लेकर जो निर्णय लिया है उसमें ग्रेड पे दिया जाना सुनिश्चित किया है और बताते हैं कि आईबीए की मंशा न तो ग्रेड पे पर महंगाई भत्ता देने की है और न ही ग्रेड पे को टर्मिनल डूज़ में शामिल करने की और इससे हमारे नेता कुपित हैं और जल्द ही २ दिन की हड़ताल का आव्हान करने वाले हैं. अब सच्चाई क्या है ये तो शीर्षस्थ नेतृत्व ही जाने.

एक तरफ सरकार एक के बाद एक योजना के क्रियान्वन का भार बैंक कर्मियों पर जबरन थोप उनकी दयनीय दशा को नारकीय दशा में बदल देने को आमादा है, दूसरी तरफ नेता हैं जिनके लिए वेतनमान का निर्धारण करवाना टेढ़ी खीर साबित हो रहा है, वे सरकार द्वारा बैंक कर्मियों का उत्पीड़न और शोषण करने वाले तरीकों पर मौन धारण किये हुए हैं.

लगता तो यह है कि सरकार की मंशा लोकलुभावन किन्तु बैंकों को हानि पहुंचाने वाली योजनाओं के जरिए एक ऐसी स्थिति चालाकी के साथ पैदा कर देने की है कि अगर बैंक कर्मी इन लोक लुभावन योजनाओं का विरोध करें तो उन्हें आम जनता के रोष का सामना करना पड़े और अगर योजनाओं को क्रियान्वित किया जाए तो बैंको की लाभप्रदता इतनी काम हो जाए या फिर वे घाटे में आ जाएं ताकि बैंकों के निजीकरण की मांग उठने लगे और बैंक फिर से बड़े औद्योगिक घरानों के हाथों में चली जाएँ, बैंकों में श्रमिक संघ आंदोलन बिल्कुल नष्ट हो जाए और बैंक कर्मी बंधुआ मज़दूर बन जाएँ.

अगर ऐसा हुआ तो इस सबके एकमात्र जिम्मेदार हारे थके बूढ़े नेता होंगे जिन्होंने निहित स्वार्थों के चलते बैंकों में आई नयी युवा पीढ़ी का सदुपयोग और मार्गदर्शन न कर ट्रेड यूनियन को इतना कमज़ोर कर दिया कि सरकार के लिए मनमानी और तानाशाही करना आसान हो गया.

अब भी समय है, ईमानदारी के साथ अपनी भूल स्वीकार करने का, स्वार्थ से ऊपर उठ के पारदर्शिता के साथ यूनियन में क्रांतिकारी बदलाव के जरिये चुनौतियों का सामना करने के लिए युवाओं के हाथों में यूनियन सौंप उनका मार्ग निर्देशन करने का.

Profitability and social objectives are two distinct and separate matters. Both can't run together. When major Banks were nationalised way back in 1969, this aspect of profitability and fulfilment of social objective was debated in length. While involving banks to fulfil social objectives of the government, you can't expect public sector banks to deliver large profits. The effects of Government Schemes on profitability of Banks need to be assessed objectively and loss sustain...ed by banks in fulfilling the social objectives of the Government must be quantified.

After PMJDY, Modi ji is going to launch 3 social security schemes on 9th May from Kolkata. So far as objectives of these schemes are concerned we welcome these schemes.
But then our concern is its adverse impact on existing work force of the banks and on profits of the bank. Most of the public sector banks are suffering from acute shortage of staff due to unreasonable, unscientific, irrational and subjective staff strength assessment techniques adopted by the bank instead of scientific and objective assessment. As a result, existing work force is subjected to late sitting and working on holidays. Banks have not been able to fulfil required formalities of PMJDY till now due to abnormally increased world load of the scheme. Now the role of banks in implementation of these 3 social security schemes is going to create vicious circle. Further for implementation of the Rs.330 scheme, Rs.30 have been allocated for bank. Out of these Rs.30/, only Rs.11/ would be available for the bank, rest amount will go to business correspondent. A simple Registered Letter would cost bank Rs.40/. Thus a net loss of Rs.29/ already without quantifying the cost of manpower.

Government must use banks as tool for implementation of its social security schemes because its major stake holder but them how same Government deny equality in the matter of Salaries, Pensions and other benefits at par with its Government Employees in the name of paying capacity? On the one hand you are assigning unprofitable loss making implementation of Government Schemes to public sector banks and on the other hand you talk about profitability and show your helplessness in bringing bank employees at par with government employees citing paying capacity?

These questions must agitate the minds of bank employees in general and those apex leaders in particular who are negotiating on behalf of bank employees with IBA.

PMJJBY and PMSBY Accounts-By Sri Pannvalan Pann

For opening one PMJBY/PMSBY account, you need to talk to the identified person for minimum 6 minutes, to explain things, answer his queries and clarify his doubts. (This is the least estimated time). Then you take additional 6 minutes to fill up the form, get his signature and issue acknowledgement. Then you enter the particulars in the system and get it verified. It takes another 3 minutes. Thus, at least 15 minutes you need to spend for successfull...y mobilising one account.

Most of the people we met - including the well educated ones - do not want to fill up any forms. They simply dictate to us, saying "Show the place where I have to sign; you fill up the remaining particulars".
Even the particulars of 'Nomination', they want us to copy from the deposit account opening form without any change.

Alright, for linking 500 accounts, you need a bare minimum of 7,500 minutes. Even assuming that a staff works for 8 hours a day (average of a Clerk and an Officer), you need 15.625 man days, if one person is made to attend to this job exclusively without a break, suspending all other banking activities.

In a small branch, even if 2 persons are made to attend to this job exclusively without a break, suspending all other banking activities, you need 7.8125 man days, as explained above.
I have not included in this, the time spent on identifying target group, visiting them at their place of work/residence and getting back to the branch. If this time is also added, you have to add several more man days. This part is the most challenging one and most time consuming, but no objective assessment of this part of job can be made.
I have also not included the time spent on opening of fresh accounts in case of non-account holders.

Even for enrolment under PMSBY by paying Rs.12, people think a lot.
They are asking several questions and say so many things.

1. How long I have to pay this amount?
2. Suppose nothing happens to me, will you pay back this amount to me?
3. I have to consult my wife/father/brother/son and let you know tomorrow.
4. Suppose something happens to me, in the absence of a separate policy or at least a certificate from the bank, how will others in my family remember that I have taken such policy? Will not this problem arise, after a few years?
5. If any other party/coalition comes to power at the centre, what will happen to this scheme and whether those who are already into the scheme and paying annual premium regularly will continue to be covered?
6. Will the bank help in processing and settlement of claims?
Now, you tell me, in a branch of say 3 to 7 staff, how many of these accounts can be opened in 4 days time?

Taxpayers will need to disclose all their bank accountBy Remya Nair --Livemint

Tax department tightens rules for income-tax returns, to seek details of foreign travel

Taxpayers will now have to disclose all bank accounts held by them in India and details of their foreign travel in their income-tax returns as the tax department moves to check black money both domestically and abroad.

 

Taxpayers will have to declare income accruing from foreign assets in the returns, besides details such as foreign bank accounts, foreign assets and immovable property located outside India that they had to disclose earlier.

 

They will also have to give their Aadhaar number in the tax return if they have one.

The changes, effective from assessment year 2015-16, will require taxpayers to give many more details to the tax department than previously sought. Since the department is now seeking information about foreign travel and bank accounts held over the previous year, it will make the filing of the tax return a long and tedious process, analysts said.

 

“Additional disclosures mandated in the new income tax return forms reaffirm the government’s intent to track taxable income overseas and in India. Changes incorporated in the tax returns were expected from the budget speech of the finance minister and subsequently with the introduction of Undisclosed Foreign Income and Assets (Imposition of Tax) Bill,” Tapati Ghose, a partner at consultancy Deloitte Haskins and Sells Llp, said in a note.

 

The government introduced the bill in Parliament’s budget session to tackle unaccounted money stashed in overseas banks by Indians. It also proposes to bring in a stronger Benami Transactions (Prohibition) Bill to check domestic black money. Benami transactions are those made under a fictitious name or in the name of a person who holds an asset as a proxy for the real beneficiary.

 

As per the format of income-tax returns notified by the Central Board of Direct Taxes, the return requires individuals to give the number of bank accounts they held at any time during 2014-15, along with the balance on 31 March as well as details of joint holders. In case of foreign travel, the taxpayer will have to disclose the passport number, the countries visited, the number of trips abroad in the previous fiscal and expenses incurred from own sources of income. Even in cases of business travel overseas, the taxpayer will have to maintain a report of expenses incurred.

 

A taxpayer will not be able to file manual returns if a refund is being claimed or if she has income from sources abroad. The tax department has also sought more details of short- and long-term capital gains and asked for information pertaining to tax residency certificates that enable firms and individuals to seek benefits under tax treaties.

“Till now, such information was sought for by the tax officer during tax assessments and the requirement reflects the government’s intention to collate the information at time of filing of the tax return,” said Ghose.

 

The tax returns also seek additional details on computation of agricultural income.

RBI issues framework for banks to tackle fraud-LiveMint 08.05.2015 

Time-bound framework must be established without impacting banks’ business or risk-taking ability, says RBI

Noting the increased incidence of loan frauds, the Reserve Bank of India (RBI) on Thursday issued a framework for banks to help them in the prevention, early detection and reporting of such frauds.

 

RBI said that a time-bound framework must be established but in a way that does not impact the bank’s business or its risk-taking ability, while also ensuring that no new and onerous responsibilities are placed on the banks. The government is also looking at the issue of more timely and coordinated action by law enforcement officials, said the central bank in a release late on Thursday.

 

As part of the framework, RBI has introduced a concept called Red Flagged Account (RFA), which are accounts where the suspicion of fraudulent activity is thrown up by the presence of one or more early warning signals).

The central bank has highlighted a list of 45 early warning signals, which may be adopted by a bank.

 

The list includes unpaid loans to multiple banks, bouncing of cheques, raids by tax or excise duty officials, and frequent change in the scope of project to be undertaken. High value electronic payments to unrelated parties has also been flagged off as a warning signal.

All accounts with loans over Rs 50 crore reported as RFAs will have to be reported to the RBI’s central repository of information on large credits in addition to reporting to the respective bank’s chief, the regulator said.

 

The RBI also asked banks to sensitize their employees to
the risk of fraud and detect early warning signals. Such signals should be promptly reported to the Fraud Monitoring Group or any other group constituted by the bank for the purpose immediately, the central bank stated.

To ensure that the exercise remains meaningful, such officers may be held responsible for non-reporting or delays in reporting, RBI said.

 

The regulator pointed out that detection of fraud at present takes an unusually long time. Banks tend to report an account as fraud only when they exhaust the chances of further recovery. Among other things, delays in reporting of frauds also delays the alerting of other banks about the modus operandi through caution advices by RBI that may result in similar frauds being perpetrated elsewhere.

 

“The most effective way of preventing frauds in loan accounts is for banks to have a robust appraisal and an effective credit monitoring mechanism during the entire life-cycle of the loan account. Any weakness that may have escaped attention at the appraisal stage can often be mitigated in case the post disbursement monitoring remains effective,” RBI noted

The regulator also stressed on prevention of fraud through improved market intelligence.

In the pre-sanction period, the risk management group or any other appropriate group of the bank could collect independent information and market intelligence on the potential borrowers which could be used as an input by the sanctioning authority, the RBI said.

In its framework, the RBI said that penal provisions applicable to wilful defaulters would apply to the fraudulent borrower including the promoter director(s) and other whole time directors of the company insofar as raising of funds from the banking system or from the capital markets by companies with which they are associated is concerned, etc.

Accounts under the wilful default category are not allowed further access to bank finance as per existing rules.

In particular, borrowers who have defaulted and have also committed a fraud in the account would be debarred from availing bank finance from scheduled commercial banks, development financial institutions, government owned non-banking financial companies and investment institutions, for a period of five years from the date of full payment of the defrauded amount.

Additionally, no restructuring or grant of additional facilities will be allowed for fraud accounts.

The central bank also said that it is in the process of creating a central fraud registry, a centralised searchable database, which can be accessed by banks.

“The CBI and the Central Economic Intelligence Bureau have also expressed interest in sharing their own databases with the banks. More information in this regard would follow once the structure is finalized,” RBI said.

 

Support Modi, don’t get disillusioned: Ratan Tata to India Inc-Indian Express-18th April 2015

 

At a time when India Inc is showing its disillusionment over the slow pace of reforms and ease of doing business, Tata Group chairman emeritus Ratan Tata on Friday came out in support of Prime Minister Narendra Modi and advised Corporate India to “not get disillusioned so fast”.

 

“All of us should understand that it’s a new government, and we need not get disillusioned and dissatisfied with so fast,” he said during the convocation of the Mumbai International School of Business Bocconi.

 

“There’s a great deal of hope in the inspirational leadership of Modi. He is still in the early stages of defining what he hopes to deliver a new India. The implementation hasn’t really taken form this year. But we still have to give him the opportunity to implement what he has promised,” Tata said while replying to a question on the economy under the Modi government.

 

Extending his support to the NDA government, Tata said, “We’re all hopeful that the country will move forward in the manner that Modi predicted. We really need to support it if we need to have a new country and outlook both internationally as well as domestically.”

“In short, we’re all hopeful that the country will move forward in the manner that Modi predicted,” Tata said. After retiring from the top position in the Tata Group, he is now heading various Tata trusts which own significant stakes in major Tata companies.

HDFC chairman Deepak Parekh’s recent statement that India Inc’s patience was wearing thin with little improvement on ease of doing business has prompted big players in the manufacturing sector to admit the impact was still not visible on the ground.

 

http://indianexpress.com/article/business/business-others/support-modi-dont-get-disillusioned-ratan-tata-to-india-inc/

 

Hinduism not a religion but a way of life, says Modi -The Hindu

“The Supreme Court has said that Hindu dharam is not a religion but a way of life... I believe the SC’s definition shows the way,” the Prime Minister said while visiting the Lakshmi Narayan Temple near Vancouver.

Accompanied by his Canadian counterpart Stephen Harper, Prime Minister Narendra Modi on Thursday visited a gurdwara and a temple in Vancouver and said Hinduism is not a religion but a way of life.

 

Mr. Modi and Mr. Harper, who arrived from Toronto, went straight to the gurdwara. They participated in the prayer meeting and were presented Saropas (gifts of honour presented by the Sikh community — usually a length of cloth for tying a turban or a scarf worn over the shoulders).

 

Addressing the gathering there, Mr. Modi said the Sikhs in Canada had won respect for India through their work here.

He talked about the teachings of Guru Nanak and the role of Sikhs in India’s Independence struggle, including that of Bhagat Singh.

He emphasised the need for working for humanity as he highlighted how Sikhs had set examples in giving sacrifices.

 

Subsequently, Mr. Modi and Mr. Harper went to the Lakshmi Narayan Temple where again he praised the Indians living in Canada.

He talked about the need for working for humanity through Hinduism.

 

“The Supreme Court in India has given a nice definition to Hindu dharam… The Supreme Court has said that Hindu dharam is not a religion but a way of life... I believe the SC’s definition shows the way,” Mr. Modi said.

 

He said the Hindu religion had worked for the benefit of nature, including wildlife, through the scientific way of life. “This can show a way out of small problems of life,” he said.

The Prime Minister also referred to the U.N. declaring June 21 as International Yoga day with a record co-sponsorship in 2014, 125 days after he made a suggestion in this regard in the world body.

 

He asked the Indian diaspora to spread the message about yoga for the benefit of humanity.

He highlighted the role of Indian-origin Canadians in developing bilateral relations at both the religious places.

World Bank chief praises PM's Jan Dhan Yojna-DNA 18th April 2015
The World Bank chief Jim Yong Kim on Friday said that the "strong visionary leadership" of Prime Minister Narendra Modi has resulted in "extraordinary effort" by India on financial inclusion of its people.

The World Bank in a report released this week said by January 2015, 125 million bank accounts had been opened under the Pradhan Mantri Jan Dhan Yojna launched in August 2014 for comprehensive financial inclusion with the goal of opening a bank account for every household in India. As a point of comparison, a 2013 survey had found that fewer than 400 million people in the country had an account, the Bank said in a report.

"This is an extraordinary Indian effort," Kim said at a panel discussion here organised on the sidelines of the annual Spring meeting of the International Monetary Fund and the World Bank. Kim attributed this to the "strong visionary leadership" of Modi and the Reserve Bank of India Governor Raghuram Rajan. Kim also said access to financial services can serve as a bridge out of poverty.

"We have set a hugely ambitious goal – universal financial access by 2020 – and now we have evidence that we're making major progress," he said. "This effort will require many partners – credit card companies, banks, microcredit institutions, the United Nations, foundations, and community leaders. But we can do it, and the payoff will be millions of people lifted out of poverty," he added.

India to grow at 7.8% in 2015-16: Asian Development Bank-Hindustan Times-24th March 2015
The Asian Development Bank (ADB) on Tuesday projected India's growth rate to surpass China and improve to 7.8% in next fiscal and further to 8.2% in 2016-17.
India's growth and investor confidence will improve on the back of government's structural reform agenda and improved external demand, the Asian Development Outlook (ADO), an annual publication of the ADB, said.
It forecasts that India's growth will improve from 7.4% in current fiscal to 7.8% in 2015-16 and further to 8.2% in 2016-17.
As regards China, the ADB projected the economic growth to decelerate from 7.4% in current fiscal to 7.2% next fiscal and 7% in 2016-17.
"India is expected to grow faster than the People's Republic of China in the next few years. The government's pro-investment attitude, improvements in the fiscal and current account deficits, and some forward movement on resolving structural bottlenecks have helped improve the business climate and make India attractive again to both domestic and foreign investors," ADB Chief Economist Shang-Jin Wei said.

He, however, cautioned that although the economic prospects look promising, "there are still many  challenges". ADB's estimates is, however, lower than the 8-8.5% growth estimates of Indian government for the 2015-16 fiscal beginning April.

It is better than 7.5% projection by the International Monetary Fund (IMF). The ADB said that strong growth outlook is contingent on further acceleration in investment activity.
"The prospects look promising". It said the measures undertaken by the government including accelerating environment clearances for infrastructure projects, easing the process of land acquisition for infrastructure and industrial corridors, allowing auction of coal mines to the private sector, and easing the compliance burden of labour laws on small and medium-sized industries would help boost growth.

The ADB said that India's most pressing policy challenges is to promote cities as engines of economic growth and jobs. "To fully reap the benefits of urbanisation, the government must make further efforts to coordinate urban and industry planning to attract industries into cities, and provide the necessary supporting infrastructure," it said.

Praising the India's 'Make In India' campaign to boost domestic manufacturing, Shang said "Indian government's programme is even more striking (in comparison to China)". As regards external sector, he said that the Indian government and the RBI have been trying to build up reserves and frame policies to monitor risk.

"India is in stronger position today than what it used to be. Government is making effort to increase FDI to deal with financial instability," Shang said. As regards the new monetary policy framework, under which the RBI's primary objective would be to maintain price stability while remaining mindful of growth, the ADB said it would help in restraining inflation and improve the coordination between monetary and fiscal policy.

Govt to hold 'stress relief' programmes for officers: Dr. Jitendra Singh

The Union Minister of State (Independent Charge) of the Ministry of Development of North Eastern Region (DoNER), MoS PMO, Personnel, Public Grievances, Pensions, Atomic Energy and Space, Dr. Jitendra Singh has said here today that the Govt of India's Department of Personnel & Training (DoPT) will hold a series of regular "stress relief" and rejuvenating programmes including Yoga, workshops, sports, cultural events, etc. for IAS, Civil Services and other government officers in order to help them maintain a conducive frame of mind and ensure a harmonious well-being. At the same time, DoPT has also mooted a "stress management" segment in the Induction course for new employees joining State Services in the three States of Jammu & Kashmir, Tamil Nadu and Maharashtra, and based on the experience from these three States, the same practice would be replicated in other States as well.

Dr Jitendra Singh said such efforts not only help in rejuvenating the energies and spirits of officers who are subjected to increasing work load and office stress but also help in bringing together the fraternity of civil service officers from all over India thus promoting a spirit of comradeship among them.

Increasing accountability and rising expectation level in administrative work tend to take their toll, said Dr Jitendra Singh and therefore, in-house provisions for stress management are called for. In this context, he referred to a two-day "Stress management" programme for officers being organized at New Delhi on 28th and 29th of this month followed by a Yoga course for officers beginning from April in forty different centers across India.

Dr Jitendra Singh said, the DoPT will not only plan events for government officials but will also devise programmes for their children in the form of academic tutorials, summer coaching camps, etc.

***

      
Banking system’s bad loans on the rise: RBI report -Hindu Business Line-07.05.2015

Bad loans of the banking system have risen alarmingly in fiscal year 2015 due to continued economic slowdown, according to the Reserve Bank of India.

 

The stressed assets ratio (gross non-performing assets plus restructured standard advances to gross advances) for the system as a whole rose to 10.9 per cent at the end of March 2015 compared with 10 per cent in March last year.

 

This means that nearly ₹7.05-lakh crore worth of bank loans now fall in the stressed category compared with ₹5.91-lakh crore last year.

According to the central bank’s Financial Stability Report, five sub-sectors — infrastructure, iron and steel, textiles, mining (including coal), and aviation — had significantly higher levels of stressed assets.

 

SS Mundra, Deputy Governor, RBI, in a recent speech, had said that though on the whole the banking system remained resilient, its asset quality was under pressure due to continued economic slowdown.

When a loan account ceases to generate income for a bank, it is termed a non-performing asset (NPA). NPAs and restructured assets eat into the profitability of banks as they have to set aside money to cover defaults in loan repayments.

 

As per preliminary data received by the RBI, the gross NPAs have increased to 4.45 per cent of gross advances for the banking system from 4.10 per cent in March-end 2014. The net NPAs (after making provisions) have also climbed to 2.36 per cent of net advances from 2.20 per cent.

 

“When seen in isolation, the NPA ratios do not appear very distressing. However, if we add the portfolio of restructured assets to the GNPA numbers, this rises alarmingly,” explained Mundra.

He also pointed out that the level of distress is not uniform across bank groups and is more pronounced for public sector banks (PSBs).

The gross NPAs for PSBs as on March 2015 stood at 5.17 per cent while the stressed assets ratio stood at 13.2 per cent, nearly 230 basis points more than that for the banking system.

Mundra referred to the observations made in the IMF’s Global Financial Stability Report that 36.9 per cent of India’s total debt is at risk, which is among the highest in the emerging economies while India’s banks have only 7.9 per cent loss absorbing buffer, which is among the lowest.

“While these numbers might need an independent validation, regardless of that, it underscores the relative riskiness of the asset portfolio of the Indian banks,” he said.

 

Sick PSU banks can put you in trouble, IMF warns India-Business Standard-07.05.15

Report points out corporate vulnerability indicators remain elevated

 

A further weakening in balance sheets of banks and companies might pose a risk to the nascent economic recovery, the International Monetary Fund’s (IMF) staff report on India has said.

In the past few years, there has been a sharp deterioration in the asset quality of banks, especially the public-sector ones, which account for three quarters of assets in India’s banking system. Part of this deterioration, the report points out, is because of the banking system’s high exposure to infrastructure projects, many of which continue to face regulatory and legal hurdles.

The report estimates public-sector banks’ (PSBs’) non-performing assets (NPAs) in 2013-14 at 4.7 per cent of total advances. This is higher than the NPAs of the entire banking system which rose to 4.1 per cent in the year. Further, at 7.2 per cent as of March 2014, PSBs’ restructured loans are estimated to be significantly higher than the entire banking system’s 5.9 per cent. This has resulted in a sharp slowdown in credit outflow to industry.

Further, a deterioration in corporate balance sheets has limited the space with industry for fresh investments. The report points out that corporate vulnerability indicators remain elevated, with the share of loss-making companies and those with leverage ratios over two increasing to 22.9 per cent and 31.4 per cent, respectively, over the previous year.

So, to kick-start the investment cycle, the Fund sees improving banks’ asset quality and maintaining financial stability as key. The report recommends strengthening regulation for banks’ credit quality classification; increasing provisioning, particularly for all types of restructured assets; and bolstering capital buffers at PSBs which is critical to ensuring banks are able to support the economic recovery.

But here lies the problem. According to the Fund’s analysis, if the government were to provide the full amount of capital required by banks, it would cost between 1.2 per cent and 1.7 per cent of the country’s estimated gross domestic product in 2018-19. Given its limited fiscal space, however, the government is unlikely to be able to provide the required capital. While many had earlier hoped the Budget for 2015-16 would provide some clarity on this issue, there was no announcement on lowering of government stake in PSBs and allowing these banks to directly raise capital from the markets.

Among other measures the report proposes for improving banks’ debt-recovery mechanism by providing incentives for swiftly dealing with delinquent borrowers and promoters, measures to enhance the corporate bond market in India, and reworking the financial regulatory architecture on the basis of the recommendations of the Financial Sector Legislative Reform Commission (FSLRC). The Budget has announced some measures in line with these recommendations. It has proposed a new bankruptcy law likely to help in debt recovery, and a public debt management agency likely to help create a more vibrant bond market, besides giving indications on introduction of the Indian Financial Code.