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Banking News 18.02.2017

SBI associates will offer VRS ahead of merger

 

The Business Line

Published on February 18, 2017

 

 

As of December last, the banks had 73,268 employees on their rolls

 

Mumbai, February 17: With State Bank of India getting Cabinet nod to acquire its five associate banks, the latter will soon come out with a golden handshake scheme to provide ‘a good opportunity to employees who may genuinely want to retire voluntarily on account of uncertainties related to possible relocation and change of job profile, post-acquisition’.

 

The voluntary retirement scheme (VRS) would be open to all permanent award staff and officers of the bank, except those specifically mentioned as ‘ineligible’, who have put in 20 years of service or have completed 55 years of age as on November 30, 2016, going by the in-principle approval granted by SBI’s central board for the scheme.

 

As of December-end 2016, the five associate banks —State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — had 73,268 employees on their rolls.

 

The total number comprises 27,648 officers, award staff (45,620), clerks (30,664) and subordinate staff (10,728).

 

The staff member whose request for retirement under VRS has been accepted will be paid an ex-gratia amounting to 50 per cent of salary for the residual period of service (up to the date of superannuation), subject to a maximum of 30 months salary. Salary for the purpose would include basic pay, stagnation increment, professional qualification allowance, special pay and dearness allowance.

 

Other benefits include gratuity as payable under the extant instructions, provident fund contribution as per the bank’s PF rules (for PF optees), pension in terms of the bank’s PF rules, including commuted value of pension (for pension optees) and encashment of balance privilege leave, as applicable. The outflow (of employees) will be controlled according to the bank’s administrative requirements. Towards this end, the bank will retain the discretion to limit the number of employees allowed to retire in each category of staff to be covered under VRS. As such, the bank will have the sole discretion as to the acceptance/ rejection of the request for voluntary retirement under VRS depending on its requirements.

 

Employees who fulfil criteria the relating to academic/professional qualifications and/ or those to whom special skills and training has been imparted in the last five years would not be eligible under the VRS scheme.

 

So, employees with academic/ professional qualifications (doctorate/MBA, Chartered Accountant/ Cost Accountant/ Chartered Financial Analyst), PG in Computer Science/ IT, professionals certified in risk management/ CISA – provided reimbursement/ honorarium claimed from the bank; those who received training abroad (minimum two weeks) or training at top-notch business schools (minimum three months), would not be eligible for the VRS.

 

Further, employees who have held assignments such as chief dealer/ dealer in money/ forex, project finance, risk management, asset liability management, and IT department will also not be eligible for the VRS.

 

 

From E-Group, Banking-News

 

 

Lack of preparedness led to controversy

 post-Demonetisation: C Rangarajan

 

The Times of India

Published on February 18, 2017

 

 

Hyderabad, February 17: The Demonetisation move by the Union government has certainly "sent shivers down the spines of some" but at the same time has impacted the economic growth momentum of the country in the short-term, former Reserve Bank of India (RBI) Governor C Rangarajan said on Friday here.

 

He was of the view that the lack of preparedness among the authorities was one of the major factors responsible for the controversy that followed demonetisation. "The immediate pain is real and tangible and sooner the phase comes to an end, the better for the economy.

 

In short, much of the controversy over demonetisation could have been avoided, had the authorities been better prepared. It is the inadequate supply of new currency to replace the old that has caused much of the storm," Rangarajan said while delivering the inaugural address at the 32nd conference of the All India Reserve Bank Employee Association (AIRBEA) here.

 

While in the short-term, demonetisation has caused a lot of pain, especially for the informal sector, the long-term gains such as reduction of cash transactions, widening of tax base and reforms in the real estate sector, will hinge on what new actions the government takes, he added.

 

The former RBI chief said that demonetisation cannot be a standalone tool to tackle the menace of black money. Factors such as transparency in governance, revised tax structure, improved tax administration, electoral reforms and changes in the funding of political parties will be crucial in the coming days.

 

Speaking on the evolving role of the RBI, Rangarajan said that the financial system is on the threshold of a "quantum jump".

 

"NBFCs will grow and the RBI will have to find a suitable system to regulate them. Regulation may have also to be decentralised. Bank accounts will increase enormously with direct bank transfer in the case of various subsidy schemes.

 

“The launching of various digital payments and transfer systems will also expand the links with banks. Thus there will be a qualitative as well as quantitative change in the financial system and the tasks of RBI will rise manifold," he explained.

 

Meanwhile, AIRBEA general secretary Samir Ghosh also pointed out that the role of RBI is changing dynamically but it is important to ensure that the "autonomy" of the institution is preserved. He pointed out the case of monetary policy, wherein a committee now decides on the monetary policy as opposed to the RBI governor, who earlier used to be the sole arbiter.

 

On demonetisation, Ghosh pointed out that the way the exercise was carried out, it has certainly dented the image of the RBI in the country. He pointed out that the way things unfolded post demonetisation, it appeared as if the apex bank was not taken into confidence by the government with regard to the "implications" of the move.

 

 

From E-Group, Banking-News

 

 

Patel talks of rate hike possibility

 

The Times of India

Published on February 18, 2017

 

 

Mumbai, February 18: RBI governor Urjit Patel, who surprised markets on Wednesday by announcing the Monetary Policy Committee's decision to hold rates, has now said that interest rates might go up.

 

Explaining what the RBI meant by shifting its stance to neutral, Patel on Friday told CNBC TV18 that the MPC now has the option of hiking rates depending on the direction of inflation. The governor indicated that there is little headroom to ease rates, pointing out that the MPC is committed to move closer to the 4% inflation target.

 

"We needed to look beyond the headline number to see where the kind of disinflation that is needed to take us towards 4% would come from, and the committee felt that inflation, excluding food and fuel, is something that has been stubborn since September-October and has shown a little sign of coming decisively below 5%," said Patel.

 

According to Patel, the RBI decided to 'look through' the current level of low inflation as crash in vegetable prices, triggered partly by demonetisation, was temporary. Also, global commodity prices are expected to push up inflation.

 

"Internationally, commodity, food and base metal prices have firmed up. Crude prices continue to be in the mid-50s and are staying there for some time given the data of past few months. So, the MPC noted that while inflation will be in the range of 4-4.5% in the first half of FY18, it then increases to 4.5-5%."

 

The governor warned of global volatility arising out of US President Donald Trump's protectionist policies. "The change in policies from the largest economy in the world is something that the world will have to start getting used to. It is a major change in terms of openness to trade, in terms of trade barriers, in terms of the kind of fiscal policy that the new government may undertake, which against a backdrop of a tightening monetary policy stance by the US Fed, has a real possibility of financial volatility going forward," said Patel.

 

On US protectionism, Patel said that India should not change its policy of globalisation as it has stood the country in good stead. "I think one issue that people are not realising is that there will be a reaction to what the US does. That could get messy. Hopefully, wiser heads will prevail and we won't go down that road," said Patel.

 

 

From E-Group, Banking-News

 

 

All profitable PSUs to be listed: Centre

 

The Times of India

Published on February 18, 2017

 

 

Disinvestment target of Rs 72,500 crore for the next FY

 

New Delhi, February 18: The government on Friday said all public sector companies that have been earning profit for three years should be listed and put in place a detailed timeline to unlock value in state-run companies.

 

The guidelines, which come barely two weeks after the Budget announcement, have set the stage for listing of all central PSUs, although officials said only those with "some size" will hit the markets to ensure that there is enough investor appetite in the companies. Based on the detailed scheduled, first batch of PSUs would be ready to hit the markets around Diwali as the roadmap fixed the timeframe for listing to 165 days after a company is identified for listing.

 

The government has set an ambitious disinvestment target of Rs 72,500 crore for the next financial year, including sale of stake in five general insurance companies as well as strategic sale. Listing is one of the options for companies to raise fresh equity as well as for the government to cut stake and share the wealth with the public. The move comes at a time when the government is also looking to initiate mergers and acquisitions in the PSU space with state-run oil companies being the first target.

 

The guidelines issued by the Department of Investment & Public Asset Management (Dipam) on Friday has asked all government departments to identify companies within a month of finalisation of audited accounts of the last financial year.

 

Officials said companies could start the listing process, based on audited accounts for the last quarter and update it at the time of filing of the draft prospectus with Sebi. Companies with positive net-worth, no accumulated losses and earning profit in the three preceding years would be considered eligible for listing. An inter-ministerial panel of officers has been proposed to work out details with the cabinet committee on economic affairs tasked with clearing the issues.

 

"We are in discussion with the administrative departments. Generally , they are very positive on listing of all public sector enterprises and we are hoping that working closely with the administrative departments will be fruitful," Dipam secretary Neeraj Kumar Gupta said.

 

The government will sequence the issues based on fund requirement of companies as also market conditions and avoid bunching of IPOs. At present, 71 PSUs are listed with market capitalisation estimated at over Rs 15 lakh crore at January-end. These firms accounted for just around 13.5% of the total market cap of BSE and NSE. Only three of the top 10 companies by market cap -ONGC, State Bank of India Coal India -were PSUs, which tend to be undervalued compared to their private sector peers.

 

Sebi rules require at least 25% public shareholding although the initial listing will see government stake fall by a lower proportion.

 

 

From E-Group, Banking-News

 

 

Random Reflections – 3

Banks Board Bureau – Indra Dhanush and ESOP

 

D T Franco Rajendra Dev (ngcfranco@gmail.com)

President, All India State Bank Officers Federation

Date: February 16, 2017

 

 

Business Standard, Editorial of February 15, 2017 titled, ‘Chasing rainbows- Banks Board Bureau is conspicuous by its inaction’, Economic Times article on the same day, ‘ESOPs for star performers at State-run Banks in the Works’ and the Finance Ministry’s news that they will soon announce Indra Dhanush – 2, made me to think.

 

BBB, Indradhanush and ESOPs are part of the recommendations of P.J. Nayak Committee and endorsed by Gyan Sangam – 1 held at Pune on Jan 2&3, 2015.

 

The role of BBB are, “Appointment of Board of Directors, advise Govt on appointments, advise Govt on desired structure at Board Level, help Banks to develop a robust leadership succession plan, to build a data bank, to advise Govt on a code of conduct and ethics for Managerial persons in PSBs, to advise Govt on evolving suitable training and development programmes for management personnel and help banks in terms of developing business strategies and capital raising plan etc”. All these by part time shows the intention – Rubber stamp of Govt.

 

The constitution of the BBB to replace Appointments Committee has not improved the situation in anyway. BBB is only an interim body and will be collapsed into a Banking Investment Company as per Gyan Sangam. The Govt share will be transferred to the Company. It is proposed to reduce the share holding of GOI in Public Sector Banks to 40% in stages. It has not acted where it has to but interferes in areas like wage revision which is not its mandate.

 

It’s almost an year. The BBB has only recommended 9 names for Executive Directors. Many Boards of Banks have vacancies. Some Banks do not have Managing Directors. There are more than 40 vacancies of Officer / Employee directors in Public Sector Banks including SBI and though BBB has no role, its told that the recommendations have been sent to the Chairman, Bank Boards Bureau.

 

The Chairman, Shri Vinod Rai, retired from Civil Service in 2008 and was appointed as CAG for 5 years. He did a good job. IDFC website still has his name as Director. He is also now incharge of BCCI and a member of a Committee on Public Sector appointed by Kerala Govt. All the members are also part timers. Ms. Rupa Kudwa, Member, BBB is also Director in Infosys and Omadayar Group. Two directors are secretaries in DFS and Dept of Public affairs who do not have time. One more is RBI Deputy Governor and the RBI is under cloud. Mr. Anil Khandelwal’s report was rejected by all Trade Unions in the Banking Industry like that of Nayak Committee, and he is also a member of BBB. Mr. H.M. Sinor was Joint MD of ICICI and he will advice Public Sector Banks as member of BBB. What a strange coalition?

 

So there is no way BBB can do justice. It’s constitution itself is ultra virus. To avoid Parliament it was constituted. So it has to be dismantled and further plans for BIC has to be stopped. Banks require autonomy and not over interference.

 

The ESOP scheme is being pushed by Gyan Sangam and now by Mr. Vinod Rai. He has not discussed anything with the Associations, who are stakeholders inspite of our request. Now this part time, retired officers are being advised by reports of Multinational Consultants like Mckinsey and Boston Consultancy Group, who are guided by IMF & WB. This is not going to strengthen the Public Sector Banks.

 

The objectives announced in Indra Dhanush have not been achieved. They were capitalisation, De stressing PSBs, strengthening risk control measures and NPA disclosures, empowering of Banks, A frame work for accountability and Governance Reforms. There is no progress in reducing NPA or improving Governance or other objectives. The new Chairmen and MDs announced by Indradhanush including some from Private Sector have not been able to make any turnaround.

 

So what is needed for Banking Industry is not ESOP for the so called star performers or variable pay. Appreciation by this methods have not helped any industry. Appreciation can be in the form of certificates, promotions, awards etc.

 

What the Public Sector Banks need are

 

v         Functional Autonomy

 

v         Appointment of Directors and Chairman nominated by institutions like IIM, IIT, and an Independent RBI.

 

v         No interference but policy directions for the country.

 

v         More staff to provide better services

 

v         Attractive salary taking into account the risk and responsibility

 

v         Focus on rural and semi urban network and credit

 

v         Adequate power to recover loans.(Implementation of recommendations of Parliament Standing Committee on NPA)

 

Public Sector Banks have proven strength. Please let them function. They have saved this country during demonetisation and during all crisis periods in addition to regular contribution to the economic growth.

 

Public Sector Banks are like Temples. Let us respect them.

 

 

From E-Group, Banking-News

 

 

Random Reflections – 4

Banking Sector Reforms?

 

D T Franco Rajendra Dev (ngcfranco@gmail.com)

President, All India State Bank Officers Federation

Date: February 17, 2017

 

 

The meaning of reform is improvement / reorganisation / restructuring / modification / transformation / alteration / change / development as per dictionary. Reform should bring positive changes, reform should help the larger majority. But in the name of reform what are we doing?

 

Between 1969 and 1991 the Public Sector Banks fulfilled the objectives of Nationalisation. The number of rural branches increased, Credit–Deposit Ratio improved. Small credits and agriculture credit increased and the economy as a whole improved. From 8,262 branches the network increased to 62,000 out of which 58% in rural areas. CD ratio reached 65% with rural branches reaching upto 97% in CD Ratio. The so-called BIMARU states had big expansion of Bank branches. From 0.2%, the agriculture credit reached 18%, credit to SSI Units increased from 6.9% to 13.5%.

 

Between 1972 and 1983 there were 21.2 million additional Bank Loan accounts of which 93.1% were with credit limit less than Rs.10,000. In 1983 RBI Reporting raised the limit for small borrowal accounts to Rs.25,000. Between 1983 and 1992 another 36.0 million additional loan accounts were added of which 95% were less than Rs.25,000. Reaching 62.5 million small borrowers was a historic achievement.

 

Then came the reforms in 1991. Narasimham Committee-1 recommended removal of social objectives.

 

The recommendations were influenced by IMF & WB. It argued that directed credit (Priority Sector) should be removed slowly.

 

Expansion of branches should depend on “need, business potential and financial viability”, it recommended.

 

It also wanted larger role to Private and Foreign Banks.

 

This was followed by Narasimham Committee-2, Raghuram Rajan Committee, Anwarul Hoda Committee, Khandelwal Committee and then P.J. Nayak Committee.

 

The common recommendations were:

 

v         Bring down stake in Public Sector Banks to 33% or 40%

 

v         Merger and Acquisition in the name of consolidation

 

v         Liberal entry to Foreign Banks

 

v         Increase in FDI share in Private banks to 74%

 

v         Proportionate voting right to share holders

 

v         Provide new banking licences including to corporates

 

v         Phase out priority lending

 

v         Outsource Bank jobs

 

v         Promote Asset Reconstruction Companies

 

v         Reduce staff strength sharply

 

v         Performance based pay structure

 

Step by step, from Congress to NDA to UPA to UPA-II to NDA Governments have speeded up these process except during the period of UPA-I.

 

The big industries turned corporates who had been running banks before Nationalisation, want to own them again. New Corporates like Reliance want to have a major share.

 

The experience of Mexico, Brazil, Greece and many other countries have shown how the Banking Sector has been taken over by Private Corporates and Foreign Banks over a period of time.

 

This has lead to the Banks shifting to only one motto. “Profit”.

 

The deposits are of the common man and major credit portfolio goes to the benefits of the rich leading to increase in income inequality. The 2008 crisis of US Banks showed the weakness of Private Banks, many of them became bankrupt and the rest had to be saved by the Govt.

 

Our Constitution promises equal opportunity for all. But in the name of reforms the majority of the weaker sections, marginalised sections and socially deprived sections are getting out of the Public Sector Banks and becoming dependent on money lenders including MFIs and NBFCs.

 

The latest Data released by RBI on 10th March 2016 as on March 2015 reveals the status. The outstanding small credit less than Rs.25,000 is just 0.5% of total credit. Above Rs.25,000 and below Rs.2 lakhs is 7.7%. Above Rs.2 lakhs to Rs.5 lakhs is 7.7%. Above Rs.5 lakhs up to Rs.10 lakhs is 4.3%. Even if we take borrowers upto a credit limit of Rs.10 lakhs as small borrowers the percentage out of the total is 20.8% only. If we take upto Rs.2 lakhs it is only 8.2%. Interestingly outstanding credit from 1 Cr to 2.5 Cr constitutes 6.5%, Rs.2.5 Cr to Rs.10 Cr constitute 15.4% (31,995 borrowers) and above Rs.10 crores constitutes 31.5% (11,000 borrowers)

 

The NPA of the big borrowers is increasing rapidly and the Govt is not willing to declare wilful defaulters as criminals. Mallaya is a creation of reforms. There are many more.

 

Agriculture is in crisis; unemployment is increasing and small entrepreneurs are failing due to non-availability of cheap credit.

 

The rural branches have come down to 38%. Inspite of the failures of Private Banks licences are being given including for small Banks and Payment Banks.

 

To help payment Banks, cashless economy is being forced. The main beneficiaries are Reliance, Airtel and Paytm. How long they will survive is not known.

 

In the name of reforms there is an attempt to end bipartite settlements for wage revision at Industry Level and another attempt to divide and rule by bringing in Performance based variable pay. When the branches do not have identical level playing field, how can you measure and compare performance?

 

These are the result of Banking Sector Reforms. Are we going the Greece way?

 

Before mass appraisal of people, the Government has to change direction and reorient Banking towards the larger majority and fulfil social objectives also. Former Chief Justice of India Shri. Markandey Katju has said that there is going to be a revolution. Can’t we have a bloodless revolution once again through policy changes?

 

"Before you do anything, stop and recall the face of poorest most helpless destitute person you have seen and ask yourself, is that what I am about to do going to help him.”

– Mahatma Gandhi

 

 

From E-Group, Banking-News

 

 

Digital wallet cos have no future: Puri

 

The Times of India

Published on February 18, 2017

 

 

Mumbai, February 17:  HDFC Bank MD Aditya Puri took a jibe at Paytm and other digital wallets saying they have no future as they don't have enough margins to sustain their businesses. "The wallet proposition as a valid economic proposal is doubtful. Paytm's reported l

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