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Banking News 16.02.2017

Union Cabinet clears merger of

SBI with five associate banks

 

The Indian Express

Published on February 16, 2017

 

 

New Delhi, February 15: The Cabinet on Wednesday approved the merger of five associate banks with State Bank of India (SBI), paving the way for the first such wide-scale consolidation exercise to create a banking behemoth.

 

State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Mysore and State Bank of Patiala will now be merged with SBI, finance minister Arun Jaitley said after the Cabinet meeting. A time frame for the proposed amalgamation will be announced in due course, he added. The Cabinet, however, hasn’t yet taken up a proposal for the merger of Bharatiya Mahila Bank with SBI, although such a move is under consideration, he added.

 

“The Cabinet had earlier (in June 2016) in-principle cleared the (merger) proposal. It had gone to the boards of various banks which have granted the approvals. The recommendations of the boards were considered today and the Cabinet cleared the proposal,” Jaitley was quoted by PTI as saying.

 

The country’s largest lender had last year announced the merger of the associate banks as well as the Bharatiya Mahila Bank into itself by March 2017, which was touted as one of the biggest decisions in the banking sector since the nationalisation move in the 1970s.

 

The combined entity was estimated to have an asset book of around Rs 37 lakh crore.

 

“With this merger, the SBI, with all these five subsidiaries merging in it, will also become a very large bank, not merely from a domestic point of view but actually a global player in its very size,” the minister said.

 

The Cabinet also approved the introduction of a Bill in Parliament to repeal the State Bank of India (Subsidiary Banks) Act, 1959, and the State Bank of Hyderabad Act, 1956.

 

 

From E-Group, Banking-News

 

 

SBI merger could spill over

to next financial year

 

Abhijit Lele

The Business Standard

Published on February 16, 2017

 

 

Consolidation of books to take 30 days

from announcement of merger date

 

Mumbai, February 16: State Bank of India (SBI) will need at least 30 days from the announcement of the effective date of merger of associate banks to consolidate the books.  The merger process is likely to spill over into the next financial year.

 

The Cabinet on Wednesday approved the merger of its associate banks — State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — with State Bank of India.

 

A formal notification in this regard is awaited from the Government of India, which would state the effective date of merger, SBI said in a statement.

 

The country’s largest lender will add at least two circles under its national banking group (NBG) to absorb the additional branches and network of associate banks after the merger.

 

It might have a circle based in Jaipur and one for Andhra Pradesh.

 

At present, NBG, which looks after banking to individuals, micro and small enterprises and rural banking, operates through 14 circles.

 

SBI executives said though preparations for the impending merger were ready, it was impossible to race through the process and set up a combined balance sheet for 2016-17. The board of the five associate banks would meet separately to approve the results for the fourth quarter of 2016-17.

 

The lender might present the first result for the combined entity at the end of the first quarter of 2017-18, an SBI official said.

 

After the announcement of the effective date for merger, SBI will have to give an offer to the employees of the associate banks to get their acceptance for joining the merged entity or to decide to part ways.

 

The bank will offer a voluntary retirement scheme for those opting to move out. The details of the scheme were being worked out.

 

Compensation would be linked to the number of years left in service, the SBI executive said.

 

Integration of human resource, systems and information technology process will continue simultaneously, based on prior work done for seamless transition.

 

SBI Chairman Arundhati Bhattacharya said the merger would result in the creation of a stronger entity.

 

This would minimise vulnerability to any geographic concentration risks faced by the associate banks.

 

This merger is an important step towards strengthening the banking sector, through the consolidation of public sector banks.

 

The merger is likely to result in recurring savings, estimated at more than Rs. 1,000 crore in the first year, through a combination of enhanced operational efficiency and reduced cost of funds, read a government statement.

 

 

From E-Group, Banking-News

 

 

Random Reflections – 1

SBI’s stand alone Results – 9MFY 2017

– How to reverse the trend?

 

D T Franco Rajendra Dev

President, All India State Bank Officers Federation

Date: February 14, 2017

 

 

Our Bank is facing many challenges now.  Every employee and everyone who cares for the Bank (30 crore is our customer base) have to seriously look at what is happening in SBI as one fifth of the Banking business of the country is handled by SBI.

 

Let us start with the glimpses of the third Quarter results.

 

Net profit increased by 134.01% from Rs.1115 cr to Rs.2610 Cr.  This includes profit from sale of 3.90% stake in SBI Life for Rs.1755 Cr.  If SBI life is yielding good income for which every employee is forced to sell SBI Life policies, should we keep selling the shares to increase our profit? Is it not amounting to selling the family silver? This is part of the idea of the Central Government to reduce shares in Public Sector.

 

Interest income on Advances increased only by 3.36%.  This is mainly due to reduction in base rate / MCLR rate.  The Govt. which talks of autonomy should not keep forcing Banks to reduce interest rate.  There is tremendous need for credit.  In rural and semi urban areas our Bank has an advantage.  The interest rate and service changes will be accepted by the customers as they are borrowing at double or triple the rate from money lenders / NBFCs / Financiers.  So why keep reducing rates?

 

The interest income for the Quarter is Rs.29831 Cr whereas interest expenses on deposits is Rs.27046 Cr. The interest income on advances for 3 quarters is Rs.89643 Cr (3.73 % growth) and interest expenses is Rs.78335 Cr (6.20% growth). So the spread is too low.  By lending more in the rural and semi urban areas to the Agriculture and allied activities and small industries and small business we can earn much more. 

 

Total deposits has grown by 22.1%  to Rs.2040778 Cr of which CASA deposits is Rs.7,08,536 Cr (34.74% Growth).  This deposit is likely go down once the withdrawal limit is gone.  Moreover with the payment Banks coming into operation and giving 7.75% interest our deposits are likely to move out.  So the urgent need is to provide better services by adding more staff and also by providing loans and other services to the customers.

 

It is interesting to note that the advances increased by 4.81% only and is Rs.1497164 Cr, out of which Rs.3,08,283 Cr is to large corporates (20%), Rs.2,04,200 Cr (13%) to Mid Corporates, Rs.362219 Cr (24%) is to Retail Advances. SME advances have decreased to Rs.161829 Cr (11%) and Agriculture advances is Rs.125068 Cr (8%) and International advances is Rs.285536 Cr (19%).  This once again indicates that we are not doing adequate to take care of the SME Sector and Agriculture Sector which provides maximum employment.  It is high time we look at this issue sympathetically and critically as scope for us is more as of now and soon we will loose our space to small Banks, MFIs and NBFCs.

 

The NPA has increased to Rs.108172 Cr which brings an alarm bell.  There is need for implementation of the recommendations of the Parliament Standing Committee on Finance.  We have to fight for this continuously to save the Banking Sector.

 

At the Grass root level each officer can bring changes by providing credit to the needy within the norms.  Are we ready to take the Challenge?

 

 

From E-Group, Banking-News

 

 

Random Reflections – 2

Payment Banks –

Digital Banking and Privatisation

 

D T Franco Rajendra Dev

President, All India State Bank Officers Federation

Date: February 15, 2017

 

 

The advertisements of Airtel Payment Bank showing crowded branches, indifferent staff and different interest rates have been prepared to show public sector banks in poor light and an abuse on the employees of Public Sector Banks. It says why the Banks have to be like this?  The ethics to be followed in advertisement is completely given a go by.

 

Chalo School automated” has sent me an email asking to use pay U money for online payment using credit / debit cards, wallet and net banking as easy as movie ticket booking.  It says, “Chalo-lets move to cashless mode to build Digital India

 

Another email from paytm says Review & Get 200, Refer & Earn extra  100.

 

Yet another email received from Funds India says “Save in Super Savings Account and earn 8.65% growth”.  At the bottom of the one page advertisement which lures with “Free ATM Card” says the Super Savings Account invests in Reliance Money Manager Fund” and adds “subject to market risk”.

 

The fourth email of today from Fullerton India says, “Fulfil your dreams with special offers from Fullerton India Personal Loans – Interest rate starts from 11.99%.  Check Eligibility – Apply online”.

 

I remember reading “Banking’ means the accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise”.

 

Are these companies mentioned above who send emails to us and numerous similar companies not doing “Banking”? How this is happening without a Banking Licence?

 

The government has liberalised everything to encourage the private sector.  Who will supervise?  How the customers will be safe guarded? Every year so many NBFCs are blacklisted. Still the Government does not bother unless huge scams like Saradha Scam surface.

 

The report of Boston Consultancy Group & Google “Digital Banking 2020” says telecom players like Airtel, Reliance, Vadafone and Tech centric payment players like paytm who are given payment Bank licence cannot earn lending revenues and hence digital banking and cashless Economy have to be pursued.

 

In a country where 26% are illiterate, 8.43 Cr children do not attend schools in the school going age and only 10% can read and write English, this digital modes are going to further marginalise the marginalised. 10% of the population is 12.7 crores.  These are the once who are Banking with us but now getting lured by the agencies.  This will affect the public sector Banks badly.  Once the profit gets decreasing the banks will be blamed for poor performance and high NPA and they will be privatised.  This has already happened in other countries.  As trade Unions are strong here the Governments are finding alternate ways to privatise.

 

This can lead to dotcom like scams.  This can lead to looting of common man’s money.  This can also lead to failure of the Banking system. We had only one East India Company which could make us poor slaves and needed 200 years of struggle to send them back. Now hundreds of MNCs, Consultants and Indian Corporates together looting us. 

 

So time has come for the common man and the Bankers have to come together.  Understand the long-term goal of the Government and the private corporates.  Save the common man.  You will save yourself.

 

 

From E-Group, Banking-News

 

 

Ease norms to tackle bad loans: SBI chief

 

The Times of India

Published on February 16, 2017

 

 

Mumbai, February 15:  SBI chairman Arundhati Bhattacharya has called for relaxation in rules which are impeding resolution of bad loans and getting businesses back on the rails. The chief of the country's largest bank has sought changes in three areas.

 

First, spreading out the 'haircut' or the share of loss that the bank is willing to bear, over several quarters.

 

Second, in cases where debt is required to be converted into other instruments like equity, the bank wants exemption from certain Sebi guidelines.

 

Third, to embolden banks to take decisions, Bhattacharya has called for an Oversight Committee that will ratify the decision taken by banks.

 

Bhattacharya's call for changes comes a time when around 15-17% of the total credit in the banking industry is weak, according to rating agency ICRA. These 17% loans include bad loans, restructured loans, loans exchanged with asset reconstruction companies for bonds or other exposures to entities facing credit issues. This amounts to between Rs 11 lakh crore and Rs 12.4 lakh crore, of which around Rs 7 lakh crore is recognised as NPAs.

 

"We are looking for some dispensation which will enable resolution of bad debts," said Bhattacharya. Enabling the bank the amortise the 'haircut' will protect its capital. Some of the other dispensations which SBI has sought are already there for some category of trouble loans.

 

For instance loans that are sought to be resolved under the strategic debt restructuring (SDR) scheme are exempt from Sebi takeover norms and norms on pricing of new shares. Sebi rules require that fresh equity issues, when made to select investors, should be priced on average market price.

 

Also takeover norms require investors to make an open offer when shareholding crosses a certain threshold. Also there is an independent oversight committee which ratifies that loans restructured by banks under 'Scheme for Sustainable Structuring of Stressed Assets' (S4A) is done as per norms.

 

Replying to questions at the launch of the Korea Desk, Dai Hyun Lee, vice chairman of Korea Development Bank said that KDB has a long history in corporate and investment banking, and assisting stressed companies. "We can collaborate with SBI to restructure and revive companies," he said.

 

 

From E-Group, Banking-News

 

 

Forgers getting better? NIA says fake

Rs 2000 notes ‘identical to the original’

 

Rajesh Ahuja

The Hindustan Times

Published on February 16, 2017

 

 

New Delhi, February 15: The National Investigation Agency (NIA) has seized three “high quality” fake Rs 2,000 banknotes from a fugitive from West Bengal, who is accused of operating a counterfeit Indian money racket.

 

The anti-terrorism agency arrested Umar Faruq, who is from Malda in West Bengal, on Tuesday when he was on his way to deliver samples of the note to a fellow smuggler of fake currency. He was on the run since he was implicated for smuggling fake currency notes two years ago.

 

This is first such seizure of fake notes by the central agency. Before Tuesday’s recovery by the NIA, the Border Security Force (BSF) had also seized 40 fake currency notes in the denomination of Rs 2,000 on February 8 in Malda district, which is on India-Bangladesh border. The case is being probed by state police.

 

NIA officials said the seized notes looked identical to the original. A detailed forensic analysis is on to check how many security features of the genuine currency have been found to be replicated in them, they added.

 

The NIA has been mandated by the government to look into only those cases where recovered Fake Indian Currency Notes (FICNs) are of high quality and involvement of organised gangs from across the border is suspected.

 

Tuesday’s recovery triggered concerns that forgers are getting better at replicating security features of the new high-value notes, introduced after the Centre demonetised Rs 500 and 1,000 bills in November last year to fight corruption, counterfeiting and terrorist funding.

 

“There have been around half-a-dozen cases in which fake Rs 2,000 notes were recovered after the demonetisation exercise. But they were of inferior quality, mostly printouts of scanned copies of the note. But the recovery on Tuesday by our investigators appear to be of high quality. That’s why we have sought their detailed forensic examination,” a senior NIA official said.

 

Of the 17 security features on the Rs 2,000 note printed by the Reserve Bank of India, 10 were found on the seized notes, according to intelligence sources. More details would be known once they get the forensic report in a couple of weeks.

 

Preliminary inquiries by the BSF revealed that counterfeiters have managed to copy six front features —including the see-through register where the numeral 2,000 can be seen when held against light; the Devanagari inscription, portrait of Mahatma Gandhi, and the Ashoka pillar emblem.

 

They have copied four back features, including the year of manufacturing (2016), the Swachh Bharat logo, the value written in 16 languages, and the motif of Mangalyaan.

 

Counterfeiting has been reportedly rampant with rackets suspected to be based in Bangladesh, Nepal and Pakistan pushing huge sums of fake money into the Indian economy. It was one of the reasons the government gave when it recalled the two high-value notes, draining out 86% of the cash in circulation.

 

At the time of introducing the new bills of Rs 2000, the Reserve Bank of India listed out their security features that included a latent image with the denominational numeral 2,000, which can be seen when it is held at a 45 degree angle at the eye level, a colour-shifting windowed security thread with the inscription ‘भारत’, RBI and 2,000 and a see-through register with the denominational numeral 2,000 which can be seen when the note is held up to light.

 

“We want to see how far the forgers, most likely sitting in Pakistan, have managed to replicate these features of new bills,” said the NIA official.

 

 

From E-Group, Banking-News

 

 

Non-food credit growth ebbs

to two-decade low of 4.76%

 

The Financial Express

Published on February 16, 2017

 

 

Mumbai, February 15: The growth in non-food credit slowed to an at least two-decade low of 4.76% year-on-year (y-o-y) during the fortnight ended February 3, according to data released by the Reserve Bank of India (RBI).

 

This marks a worsening from the increase of 5.18% clocked in the previous fortnight. The outstanding non-food credit in the system grew to Rs 73.72 lakh crore at the end of the fortnight.

 

Food credit as on February 3 stood at Rs 1.07 lakh crore, 0.4% lower than the year-ago period. Overall bank credit rose 4.68% y-o-y to Rs 74.79 lakh crore, as against a 5.14% growth in the previous fortnight.

 

Deposits with the banking system rose 13.58% y-o-y during the fortnight under review to Rs 105.62 lakh crore. The number is marginally higher than the previous fortnight’s figure of Rs 104.95 lakh crore.

 

Banks had been seeing a steady rise in deposits since the government announced the demonetisation of Rs 500 and Rs 1,000 notes on November 8. Some of these deposits have already begun to flow out of the system as the drop in deposits during the fortnights ended January 20 and December 23 suggests. Most banks expect around 40% of the deposits received after demonetisation to remain with them.

 

The credit-deposit (CD) ratio of the banking system, or the proportion of deposits deployed as loans, rose to 70.81% from 70.68% in the previous fortnight. The latest figure is nevertheless a near-seven-year low. The ratio had been falling since demonetisation as banks sat on piles of deposits in an environment of weak credit demand.

 

Lenders have been banking on interest rate cuts to push demand for credit. However, the RBI’s February 8 decision to change its stance to ‘neutral’ from ‘accommodative’ may have signalled an end to the rate-easing cycle that began in January 2015.

 

The industry has relied on retail lending, which has been seeing growth rates in the mid-to-high teens in the past few years.

 

Bank credit to industry recorded negative growth on a y-o-y basis for the third straight month in December, dropping 4.3% to R25.79 lakh crore.

 

Arundhati Bhattacharya, chairman of State Bank of India, had told reporters on February 10, “In respect of the corporate loan book, the growth is very low and though we expect it to come up in Q4, we would like to be cautious. So, overall, we are not expecting to go above 6.5% in terms of loan growth for the full year.”

 

 

From E-Group, Banking-News

 

 

Five ratios that show banks still in deep trouble

 

Aparna Iyer, The Mint

Published on February 16, 2017

 

 

Five ratios that indicate that banks still have

a long way to go to put their house in order

 

Mumbai, February 16: The December quarter results of banks show that the bad loan wound has not only festered for many lenders but that banks have gotten the diagnosis incorrect in many cases. What investors need to ask is whether banks were the victim of circumstances because of demonetisation or did they not learn their lesson of judicious provisioning.

 

These are five ratios that indicate that banks still have a long way to go to put their house in order:

 

Gross non-performing assets: Nearly all banks showed a rise in the GNPA ratio for December from a year ago period, which essentially means that bad loans have been piling up at pretty much the same pace. Granted, the sharp deceleration of credit growth for most public sector banks would somewhat bloat this ratio for them. However, may smaller banks not just showed shrinkage in their loan book but also a larger part of the book going bad.

 

For the 38 listed banks put together, the gross bad loan stock rose 59% to a massive Rs6.82 trillion in December. Eighteen of the twenty four listed public sector banks have 10% of their loan book as bad. Not only do banks have a gargantuan task of providing further as these NPAs age but they have to also push for quicker resolution lest this ratio turns uglier. Needless to say big players may succeed more than smaller lenders in this.

 

Net NPA: On a net basis too, banks have shown an increase in bad loan ratios. A rising net bad loan ratio simply means that past bad loans have not turned around even as new ones are added. Most banks have reported dismal recoveries and upgrades in accounts. Baring three lenders, all other banks reported a rise in net NPA ratio. Indian Overseas Bank had the highest ratio at 14.32%, only one of the signals that the bank is in deep trouble. The net NPA stock for the 38 banks showed a rise of 57% in December from a year ago.

 

Stressed asset ratio: In order to build some credibility, many banks had announced a watch list of accounts that has the highest propensity to go bad. But quarterly results have shown that not everyone made the right diagnosis and pain can emerge outside the list too. Stressed assets are a combination of gross NPAs and restructured standard assets.

 

ICICI Bank, HDFC Bank and even State Bank of India didn’t see a rise in this ratio from a year ago. Smaller lenders such as UCO Bank, United Bank of India, Vijaya Bank and even Oriental Bank of Commerce all showed a rise and have ratios in the high teens. Of the 38 lenders, this ratio was readily available only for 17 banks.

 

Tier-I capital ratio: Many lenders saw a disastrous dip in their common equity Tier-I capital and total Tier-I capital following the colossal provisioning done in the wake of the asset quality review (AQR) last year. A shrinking loan book has meant that capital was conserved but not every bank has been lucky. While Andhra Bank has fallen below the mandated 7% ratio, many others are perilously close to slipping too.

 

What this could mean is banks would continue to shrink their loan book as the government has not added to the recommended Rs10,000 crore recapitalisation for all lenders it owns.

 

Provision coverage ratio: Have all banks learned to be careful after burning their fingers last year? If the fall in this ratio is an indication, lenders are still swimming naked in the bad loan pool. Not all banks have disclosed this ratio. Among private lenders, Axis Bank showed a sharp fall in PCR while most public sector banks showed an improvement, albeit small.

 

An improved PCR in their case was merely because of a smaller accretion of bad loans rather than cautious provisioning. Some lenders such as Bank of Baroda have indeed provided proactively in the previous quarters.

 

 

 From E-Group, Banking-News

 

 

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