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Banking News 24.07.2017

3rd round of Bipartite Talks with IBA on

Wage revision held, sub-committees formed


The UNI (News Agency)

Published on July 24, 2017



Chennai, July 23: (UNI): The third round of bipartite talks, on wage revision for employees and officers, was held between Indian Banks' Association (IBA) and United Forum of Bank Unions in Mumbai recently where separate sub-committees have been formed to facilitate expeditious discussions on charter of demands put forth by the unions.


All India Bank Employees' Association (AIBEA) General Secretary Ch Venkatachalam said today that IBA was represented by Mr R K Thakkar, Chairman of the Negotiating Committee along with other members of their team and UFBU was represented by leaders of all constituents.


In the sub-committees for workmen, those included were -- Mr Rakesh Sharma, (Chairman) --MD/CEO, Canara Bank, Mr HC Sati, GM, Allahabad Bank, Mr Mrityunjay Kumar Gupta, GM, Bank of India, Mr Punit Jain, GM, PNB, Mr T S Seshadri, GM, Indian Bank and Mr Ajay Kumar Singh, GM, SBI.


Mr Prashant Kumar, (Chairman) -- Dy. MD, SBI is included in for Officers and others were Mr Ujwal Kumar, GM, UCO Bank, Mr S K Chowdhary, Head-HR, Bank of Baroda, Mr C P Giri, GM, Canara Bank, Mr B Ashok, GM, Central Bank and M K Biswal, GM, Bank of Maharashtra.


Mr Venkatachalam said the negotiating committee will discuss the common demands and issues having direct financial implications, the other demands relating to service conditions of employees and officers which are of non-financial nature would be discussed in the respective sub-committees and added IBA has solicited names from Unions who will participate in the sub-committees so that the discussions at the sub-committee level will begin at the earliest.


The AIBEA General Secretary said, UFBU welcomed the formation of sub-committees to quicken the discussions and wanted the IBA to address the main demands also simultaneously so that the final settlement can be concluded in time.


We also reiterated that the IBA should review its stand to restrict the discussions upto Scale-III officers to which IBA had stated that the issue needs to be taken up with the concerned Banks since IBA's decision is based on the mandates given by those banks.


On the settlement to be effective from November 1, 2017, Mr Venkatachalam said the IBA agreed to it.



From E-Group, Banking-News



Reserve Bank of India to Lease Currency

Verification Systems to weed out Fakes


The Press Trust of India

Published on July 23, 2017



The central bank is currently engaged in counting huge pile of old Rs. 500/1000 notes which were scrapped following demonetisation on November 9, 2016.


New Delhi, July 23 (PTI): The Reserve Bank will hire 12 currency verification systems for six months to help it segregate fake ones from scrapped notes of Rs. 500/1000 denomination. The central bank is currently engaged in counting huge pile of old Rs. 500/1000 notes which were scrapped following demonetisation on November 9, 2016. Earlier in May, the Reserve Bank had floated a global tender for leasing of 18 'Currency Verification and Processing System (CVPS)'.


However, the tender was later cancelled and now a fresh one has been floated to lease 12 such systems. As per the tender document, the currency notes of all denominations received at regional office of the RBI would have to be processed at a minimum speed of 30 notes per second. The term of the lease contract will be of six months, extendable by three blocks of two months each, it added.


RBI Governor Urjit Patel, while appearing before a Parliamentary panel on July 12, had reportedly said the deposited banned notes were still being counted and therefore he was not in a position to give a figure on the scrapped currency that was back in the system.


Mr Patel did not provide any "specific number" on the amount of money that had been deposited post-demonetisation. According to the finance ministry, as on November 8, the day demonetisation was announced, there were 1,716.50 crore pieces of Rs. 500 and 685.80 crore Rs. 1,000 notes in circulation.



From E-Group, Banking-News



Debtors have filed over

33% of insolvency cases


Radhika Merwin

The Business Line

Published on July 24, 2017



With defaulters themselves triggering the

proceedings, resolution could happen faster


Essar Steel tried to stay insolvency proceedings against it by moving the Gujarat High Court. But not all Indian companies think along similar lines. Data put out on the website of the Insolvency and Bankruptcy Board of India show that Indian borrowers are gradually taking to the idea of filing for insolvency themselves.


Of the 148 cases approved so far by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC), more than a third were initiated by the defaulters themselves.


This heartening trend is thanks to the provision under the new bankruptcy code that allows a borrower, who could be a corporate or an individual, to initiate the insolvency-resolution process, once it or he has defaulted on a debt.


This allows a business stuck in the vicious cycle of debt to move on and start with a clean slate. With corporate defaulters themselves triggering the insolvency proceedings, resolution could happen faster.


NCLT green signal


According to the data, the NCLT has given the go-ahead to initiate insolvency proceedings against 148 borrowers so far. The Tribunal has been in operation for less than a year. Of these accounts, 56 have been filed by borrowers.


Interestingly, the list includes many listed players, including Ennore Coke, Educomp Solutions, Gujarat NRE Coke, Unity Infraprojects, Clutch Auto, LML Ltd, Marmagoa Steel and Roofit Industries.


The market appears to have already factored in the concerns plaguing these defaulters. Their stocks are trading at a very low price — below ₹10 apiece in most cases. Nicco Corporation and Facor Steels are the other listed players against which the NCLT has ordered insolvency proceedings. These stocks are trading at less than a rupee on the BSE.


“If a corporate borrower is unable to pay its creditors, it can also file for a fresh start. Here, again, the application is filed with the NCLT. The NCLT then assesses whether the company is worthy of a fresh start. This is done based on the borrower’s assets and liabilities. “It is then decided on how much the borrower can pay and once that is settled, the debtor can have a fresh start,” says Neha Malhotra, Executive Director, Nangia & Co.




Under the new bankruptcy code, the resolution is time-bound — 180 days with 90 days extension — which can be a win-win for lenders and borrowers. “Even under the earlier structure borrowers could file a petition for winding up, but it was a long process, one considered a taboo,” says Malhotra.


In the past, banks took as long as 15 years in certain cases to recover their money which eroded the value of the assets substantially.


According to a World Bank report, it took, on an average, more than four years to wind up a company in India, which was more than twice the time taken in China and in the US (1.5-1.7 years).


In the process, creditors in India recovered only 25 cents to a dollar, compared to 36 cents in China and a substantial 80 cents in the US.


Many lenders such as Bank of India, ICICI Bank, SBI, Bank of Maharashtra, Indian Bank, and IDBI Bank have also filed for insolvency against defaulters and received NCLT approval. Likewise, asset reconstruction companies such as Alchemist and Edelweiss have also initiated insolvency proceedings against some borrowers and received NCLT approval.



From E-Group, Banking-News



Despite 21% jump in NPAs, education

loan disbursals top Rs 20,000 crore in FY17


The Press Trust of India

Published on July 23, 2017



Mumbai, July 23 (PTI): Despite increasing number of students not paying back their loans spiking NPAs to over 10 per cent, lending continues for higher education with the disbursals topping Rs. 20,000 crore in fiscal 2017, according to a report.


Banks and other lenders together disbursed around Rs. 20,000 crore in education loans in FY17, up from around Rs. 17,000 crore a year ago, while total outstanding grew 1.6 per cent to Rs. 81,600 crore.


Non-performing assets (NPAs) within the education loan book of the system ballooned 21 per cent in the reporting year, spiking the NPA ratio to 10.2 per cent as of March 2017, said a report by credit information company Crif High Mark.


The state—run banks dominate the space with a 90 per cent market share, both in value and volume, while non—banking lenders target the over Rs. 10—lakh segment, which has low asset quality concerns.


Among the states, the NPA situation in Tamil Nadu and Kerala is of “concern”, with Chennai, Thiruvananthapuram, Coimbatore, Kancheepuram, Thiruvallur, Tiruchi, Alapuzzha, Thanjavur and Erode witnessing higher NPAs, the report said.


It can be noted that virtually all the other segments in retail lending, excluding agriculture — considered resilient and a refuge for banks in face of high NPAs in their corporate loan books — have shown very low NPAs.


Illustrating a jump in the cost of education, the average ticket has now moved up to Rs. 6.8 lakh, which has more than doubled from Rs. 3.25 lakh five years ago, it said.


A greater 65 per cent of loans are in under the Rs. 4-lakh bracket, while 20 per cent are in the Rs. 4-10 lakh bracket, said the report.


The top six states for educational loans are Tamil Nadu, Kerala, Maharashtra, Karnataka, Andhra Pradesh and Telangana, according to the report, which also said these states constitute for 66 per cent of the overall book, down from 70 per cent two years ago.


Tamil Nadu alone constitutes for 24 per cent of the over Rs. 81,600 crore portfolio, it said.


On a city—wise break—up, higher average ticket sizes of Rs. 9—10 lakh are in Hyderabad, Mumbai and Delhi, while Ernakulam, Thane and Vishakapatnam have seen high disbursements in the last six to 12 months.


Generally, ticket sizes have been found to trend higher in the first two quarters of every fiscal, which indicates a higher demand from foreign education aspirants.


It can be noted that the RBI has been highlighting the pitfalls in the student loans and the then Governor Raghuram Rajan had flagged issues in May 2016.


“We have to be careful that student loans are repaid in full by those who have the means, while they are forgiven in part for those who fall on bad times or those who take low-paying public service jobs,” he had said.



From E-Group, Banking-News



GST system is robust: Centre


The Hindu

Published on July 23, 2017



Tells Rajya Sabha that the network

is not directly exposed to the Internet


New Delhi, July 22:  The Goods and Services Tax (GST) system is not exposed directly to the Internet and has a dedicated round-the-clock security operations command centre in its network against cyber-threats, the government has told the Rajya Sabha.


To a question, the government said on Friday that any interaction with the system was only through APIs (application programming interfaces). It had a multi-layered security architecture and had operational segregation through use of a virtual local area network.


Access privileges


There was segregation of duties, least privilege access principles, Internet Protocol (IP) filtering and blocking of rogue IPs, resiliency at each layer, secure coding practices ensuring security of GST software development throughout Software Development Lifecycle, and at-rest and in-transit data encryption, the government said.


The data sharing mechanism ensures that any data transfer from the GST system is in encrypted format. The system banks on thorough security testing and full-system vulnerability assessment and penetration testing of IT infrastructure, besides the apps used licensed tools and customised scripts, said the government.


Security incidents


According to the Indian Computer Emergency Response Team (CERT-In), a total of 44,679, 49,455, 50,362 and 27,482 cybersecurity incidents were observed during 2014, 2015, 2016 and 2017 (till June), respectively, the government said in response to another query.


The types of cybersecurity incidents include phishing, scanning/probing, website intrusions and defacements, virus/malicious code, targeted attacks, ATM malware, ransomware and denial of service attacks among other threats.


The government had taken a series of measures to strengthen the cybersecurity infrastructure. All financial institutions had been advised by CERT-In, through the Reserve Bank of India (RBI) to conduct an audit by empanelled auditors on a priority basis and take immediate steps accordingly.


Crisis plan


All organisations providing digital payment services have been mandated to report cyber security incidents to CERT-In expeditiously. The government has also formulated a Cyber Crisis Management Plan for countering cyber attacks for implementation by all ministries and departments.



From E-Group, Banking-News



Letters to the Editor:

United fight for pension


The Business Standard

Published on July 23, 2017



Managements of banks and the RBI, at the

behest of the govt, have denied updated pension


Government and family pensioners have been getting updated pension while current employees are getting salaries, according to revised pay scales since January 1996.


Pension schemes were introduced by the Reserve Bank of India, the National Bank for Agriculture and Rural Development, banks, LIC and GIC in January 1986 in accordance with central government pension rules with sanction from Parliament. However, managements of banks and the RBI, at the behest of the government, have denied updated pension to these pensioners.


LIC pensioners have been fighting for updated pension and 100 per cent neutralisation in dearness relief for pre-August 1997 pensioners in high courts and the Supreme Court for the last two decades. Cases filed by the RBI and bank pensioners, too, are pending in the courts for long. Meanwhile, hundreds of pensioners have died without getting justice.


Unfortunately, the government and the managements do not take cognisance of the genuine demands of citizens and workers unless there are large-scale protests. The pensions of State Bank of India employees were improved when then went on strike for six days. The government sanctioned One Rank, One Pension (OROP) after defence personnel surrendered their gallantry medals and went on hunger strike at Jantar Mantar in New Delhi.


The government is unlikely to intervene and courts might take several years to decide the pending cases. Hence, it is incumbent on the employees and pensioners of the RBI, LIC and others to fight together. They must display their strength by holding protests and dharnas in Mumbai, Chennai, Kolkata, New Delhi and other cities.


Ramanath Nakhate   Mumbai



From E-Group, Banking-News



Government nominees on RBI MPC

 to get Rs 1.5 lakh a meeting


The IANS (News Agency)

Published on July 23, 2017



Mumbai, July 23 (IANS): The government nominees on the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) are to be paid Rs 1.5 lakh per meeting along with air travel and other reimbursement, according to a decision taken by the RBI.


The six-member MPC, constituted last year, has three persons appointed by the government while the others, including the Governor, are from the RBI.


The central government appointed members would “receive a remuneration of Rs 1,50,000 for devoting time and work for each meeting of the committee which they attend, and other expenses relating to air travel, local transportation and accommodation as may be decided by the central board from time to time,” according to the RBI’s latest regulations on the MPC’s functioning.


The regulations stipulated that all the MPC members will need to observe a “silent period” seven days before and after the monetary policy review meeting for “utmost confidentiality”.


“Members shall observe a silent or blackout period starting seven days before the voting/decision ray and ending seven days after the day policy is announced. During this period, they will avoid public comment on issues related to monetary policy other than through the MPCs communication framework,” the regulations said.


Moreover, members cannot reveal outside the committee any confidential information accessed during the monetary policy deliberations, the RBI said.


The three government nominees to the panel are Chetan Ghate, Professor at the Indian Statistical Institute, Pami Dua, Director at the Delhi School of Economics, and Ravindra H. Dholakia, Professor at the Indian Institute of Management, Ahmedabad.


The RBI also asked MPC members to be mindful of any conflict between their personal and public interest while interacting with profit-making organisations or making personal financial transactions,


“While interacting with profit-making organisations or making personal financial decisions, they shall be mindful of, and weigh carefully, any scope for conflict between personal interest and public interest,” it said.


All members need to disclose their assets and liabilities and update this information once a year.


The RBI normally holds its monetary policy review once every two months and the latest regulations said the schedule of the MPC meetings for the entire financial year needs to be announced in advance.


Normally, at least 15 days of notice is required for convening a meeting, but an emergency meeting can be called with 24 hours notice for each member, while technology-enabled arrangements need to be made for meetings called at even shorter notice.


In this connection, the central bank has earlier said that the decision to demonetise Rs 1,000 and Rs 500 currency notes was taken by the RBI board at 5.30 p.m. on November 8, which was less than three hours before Prime Minister Narendra Modi announced the measure to the nation.


Following the RBI’s latest policy review last month, Governor Urjit Patel told reporters here that the RBI Monetary Policy Committee had turned down the Finance Ministry’s invite for a discussion ahead of the panel’s policy review meeting.


The RBI maintained its key interest rate at 6.25 per cent for its fourth successive monetary policy review, dashing the government’s hopes of a reduction.



From E-Group, Banking-News



The whys and hows of

bank consolidation in India


Tamal Bandyopadhyay

The Mint

Published on July 24, 2017



Bank consolidation is the flavour of the season, but one

should not lose sight of the fact that India needs more banks


Maidavolu Narasimham, 80, the 13th governor of the Reserve Bank of India (RBI), must be a happy man in Hyderabad today. What he had ideated in a seminal report on banking reforms more than two decades ago may finally see the light of day. At least, recent media reports suggest that. His report in 1991 recommended merger of public sector banks to make them stronger. It had envisaged a three-tier banking structure with three large banks with international presence at the top, eight to 10 national banks at tier two, and a large number of regional and local banks at the bottom.


Ever since the Narasimham report made this recommendation, there have been several rounds of discussions on mergers and consolidation of banks in India at periodic intervals. While the objective has, all along, been building scale and strengthening the risk-taking ability, the trigger for the latest round of discussion is the pile of bad assets under which some of the state-owned banks are likely to get buried.


A recent PTI report, citing an unnamed government official, said the government is working on a consolidation plan for public sector banks, in order to create a three-tier structure that will have three to four global-sized banks and reduce the number of state-owned lenders to about 12 from 21. According to the report, some “region-centric” banks like Punjab and Sind Bank and Andhra Bank will continue as independent entities, while some medium-sized lenders will also co-exist.


A TV channel even explained graphically the new banking structure. It seems that Oriental Bank of Commerce, Allahabad Bank, Corporation Bank and Indian Bank will be merged with Punjab National Bank; Union Bank will absorb IDBI Bank Ltd, Central Bank and Dena Bank; Syndicate Bank, Indian Overseas Bank and Uco Bank will be merged with Canara Bank; and Bank of India will grow by merging Andhra Bank, Bank of Maharashtra and Vijaya Bank with itself. The list does not mention Bank of Baroda playing any role in the new structure even as some reports suggest that the government wants the large banks themselves to explore the idea and it is up to them how they want to go about it. Finally, media reports also say that the government think tank NITI Aayog and a few other global consulting firms are examining the possibility of consolidation of these banks and the NITI Aayog will set the road map for this exercise.


I am not sure of the authenticity of these reports, but one thing for sure is that both finance minister Arun Jaitley and Reserve Bank governor Urjit Patel are in favour of consolidation in public sector banks, which roughly account for 70% of the industry but are fast losing their market share. If, indeed, the government and RBI want to go ahead with the plan, they can do so as any merger between two public sector banking entities takes place under an Act that stipulates that two banks can initiate merger talks, but the scheme of the merger must be finalized by the government in consultation with the central bank and it must be placed in Parliament, which reserves the right to modify or reject the scheme. In case of a merger between a public sector bank and a private bank too, parliamentary approval is a must. Section 44A of Banking Regulation Act 1949 lays down the norms for voluntary mergers and “forced” mergers are done under Section 45 of the Act.


It may not be easy to arrive at the swap ratio as rights of minority shareholders—the government stake in these banks varies between 85.23% in United Bank of India and 58.38% in Oriental Bank of Commerce—have to be protected, but the government will not find it difficult to push through the mergers in Parliament. Since 1969, when Bank of Behar was merged with State Bank of India (SBI), and till Kotak Mahindra Bank Ltd took over ING Vysya Bank Ltd in 2015, most bank mergers have been an offshoot of the central bank’s efforts to protect the financial system and depositors’ money, and very few of them have been driven by the need for consolidation and growth. The only instance of a state-owned bank being merged with another was in 1993, when New Bank of India was merged with Punjab National Bank and this was not a voluntary merger.


Why do we need consolidation? Since financial stability is not threatened and depositors are not running the risk of losing money (as long as the banks have government backing), the logic for consolidation should be cutting cost and acquiring efficiency. In one press conference, Jaitley had said that weak banks will have to sell assets, reduce overheads and shut loss-making branches, among others. Patel had said in New York that consolidation of banks could entail sale of real estate where branches are redundant, as well as offering voluntary retirement schemes to manage headcount and adding younger, digital-savvy personnel. Technology may not be a big hurdle for mergers as most banks are working on a platform managed by the same vendor but the key to success of any merger will be large-scale shutting of branches in urban centres, reduction in staff strength and exploring the right business synergy and work culture. Despite automation, most Indian banks have gone for massive expansion of their branch networks in urban India, many of which will be redundant when some of them merge.


Another critical point to ponder is— Do our relatively large banks have the ability to absorb weaker peers? Punjab National Bank, the largest among them with Rs7.21 trillion assets, has 12.53% gross NPAs (92% of its capital and reserves or net worth); Bank of Baroda (Rs6.95 trillion assets) has 10.46% gross NPAs (49.23% of net worth); Bank of India (Rs6.95 trillion) has 13.22% gross NPAs (90.42%); Canara Bank (Rs5.8 trillion) has 10.56% gross NPAs (76.55%) and Union Bank (Rs4.54 trillion) has 11.17% gross NPAs (88.02%). (Out of these, Canara Bank’s NPAs are of the June quarter and the rest relate to the March quarter.)


Yes, five SBI associate banks have been merged with their parent, catapulting the entity in the league of top 50 global banks in terms of assets, but even SBI has not been able to escape the pain of merging its associates with itself. Following the merger, its gross NPAs have jumped from Rs1.08 trillion to Rs1.79 trillion. In percentage terms, it rose from 7.23% of its advances to 9.04%.


While its own net profit was Rs 2,815 crore in the March quarter, the merged entity reported a loss of Rs 3,300 crore.


If this could happen to India’s largest lender following the merger of its own entities run by the same management, it’s anybody’s guess what will happen to a bank that takes the lead in the merger process, if it finds that the merged entities have not made the right disclosures and need massive fund infusion to take care of the bad assets.


If we are serious about mergers among public sector banks, along with identifying business and geographical synergies, the quality of assets of the banks to be merged must be put under the scanner and the government should be ready to infuse fresh capital. In the process, if we find the health of some of the banks to be too bad, they must be allowed a painless death with their real estate, performing loans and deposits being sold to others and employees being redeployed in other banks or given a severance package. Ideally, the consolidation process starts after these banks are nursed back to health but if we are in a hurry, then the experiment should start with one bank and be taken forward after a few years only if it succeeds.


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