BANKING E-BULLETIN · posed challenges to the banking sector institutions to clean up their balance...

Volume-45

February 2019

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THE ASSOCIATED CHAMBER OF COMMERCE AND INDUSTRY OF INDIA

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BANKING E-BULLETIN

2 - ASSOCHAM Banking e-Bulletin - Volume - 45

liberalising the FDI regime and REFLECTIONS ON CURRENT undertaking efforts to provide a POLICY ISSUES FACING THE conducive business climate. Let me INDIAN ECONOMY dwell a bit more on some of these (By Shri Shaktikanta Das, Governor, aspects.Reserve Bank of India, delivered at the Inflation: First, let me talk about Investors' Roundtable, 9th Vibrant inflation. Maintaining price stability in Gujarat Global Summit 2019 on Friday, the economy is a basic mandate for a January 18, 2019):-central bank. Delivering low inflation by As this august audience would know, the central bank induces greater India in recent years has emerged as one confidence among both domestic and of the most vibrant economies in the global investors. India has witnessed world. Not only has India survived many significant disinflation since 2012-13 - global shocks successfully in recent with headline CPI inflation moderating years, it also tops the list of fastest from an annual average of 10.0 per cent growing emerging market economies in 2012-13 to 3.6 per cent in 2017-18 (EMEs) in the world. According to the and 3.7 per cent in 2018-19 so far IMF's database, India's contribution to (April-December). As per the latest world growth has risen from 7.6 per cent reading, headline inflation stood at a low during 2000-2008 to 14.5 per cent in of 2.2 per cent in December 2018. The 2018. Multilateral agencies are further disinflation was marked by the optimistic on this as far as the medium-commitment of the Reserve Bank to term outlook is concerned. Most bring down inflation in a sequential importantly, India's growth story is manner – to 8 per cent by January 2015, b a c k e d b y s t r o n g d o m e s t i c 6 per cent by January 2016 and 5 per cent fundamentals. For instance, (i) inflation by Q4 of 2016-17 – which was called the has eased, (ii) central government glide path for inflation. This, in turn, remains committed to the fiscal targets, paved way for the formal adoption of and (iii) the current account deficit (CAD) flexible inflation targeting (FIT) through is far less than its peak level during the a legislative amendment to the Reserve stress period (i.e., taper talk period of Bank of India (RBI) Act under which price mid-2013). Indian economy has stability has been mandated as the witnessed an accelerated pace of primary objective of monetary policy, domestic reforms in recent years. These while keeping in mind the objective of reforms include, inter alia, the flexible growth. Price has been defined in terms inflation-targeting monetary policy of a numerical CPI inflation target set by framework, the Insolvency and the government at 4 per cent with a Bankruptcy Code (IBC), the Goods and tolerance band of ± 2 per cent. With the Services Tax (GST) and steps for formal setting up of a Monetary Policy enhancing foreign investments by

TOP RBI SPEECHES

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Committee (MPC), there has been a shift the current assessment of the Reserve

to a committee-based approach for Bank, the ratio may further improve to

determining the monetary policy. This 10.3 per cent by March 2019. The new

has enhanced transparency and resolut ion framework with the

accountability of the decision making Insolvency and Bankruptcy Code (IBC) as

process. Since the adoption of flexible its lynchpin and RBI's regulatory

inflation targeting in India, inflation has framework as its facilitator, is a game

been reasonably range bound within the changer. It endeavours to create an

target band. I must add here that easing environment in which maximum value

of global crude oil prices also augured can be realised from troubled assets,

well for our inflation outcomes. bolstered by the early identification of

incipient stress. The shift of power in Financial Sector: Let me elaborate on favour of creditors in the IBC framework some of the major policy developments will facilitate speedier and impartial in domestic financial sector in recent resolution process and help in improving years. Banking sector, We all know that the credit repayment culture. The Indian banking sector had emerged framework has been providing a largely unscathed in the aftermath of the market-driven, time-bound process for global financial crisis. However, insolvency resolution of a corporate headwinds from international and debtor, thereby helping financial domestic economic developments institutions to clean up their balance posed challenges to the banking sector sheets. Most importantly, it is aiding a in recent years. Indian banking system is paradigm shift in the extant credit on the cusp of a transformation, aided by culture and discipline. The progress of recent policy measures to reduce IBC framework so far has been vulnerabilities and improve its financial encouraging and has resulted in better health. Several initiatives are underway recovery as compared to the earlier to strengthen the regulatory and mechanisms. Data available till January accounting frameworks aimed at 3, 2019 suggest that the resolution increasing the resilience of the processes have been approved in 66 institutions. The Reserve Bank's cases, involving around ?800 billion as initiatives in the recent period are aimed resolution value to creditors. The at ensuring better and timely recognition gradually building resilience of the o f s t ressed asse ts , su f f i c i en t banking sector is evidenced by the fact provisioning and an efficient resolution that banks have improved their process. Recent supervisory data profitability ratios and capital positions. suggests that these efforts are bearing Other soundness indicators such as the some results and incipient signs of tier I leverage ratio at 6.7 per cent and improvement in asset quality of banks the liquidity coverage ratio at 134.8 per are emerging. After reaching a peak of cent as at end-September 2018 remain 11.5 per cent in March 2018, the gross well above the minimum regulatory non-performing asset ratio improved to requirements. Provision coverage ratio 10.8 per cent in September 2018. As per


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also increased to 52.4 per cent at end- regulatory approach of RBI has been and

September 2018 from 48.3 per cent at will be aimed at ensuring that the

end-March 2018. Bank credit is banking system withstands the

recovering from the risk aversion of transitory difficult phase and keeps

recent years. Bank intermediation in the playing a positive intermediation role in

flow of resources to the commercial supplementing the financial needs of our

sector is regaining lost ground. The growing economy.

growing size and complexity of the Non-Banking Financial Sector N o n -Indian financial system warrants banking financial sector is another strengthening of corporate governance segment that plays an important role in systems in banks. Incidence of financial the Indian financial system, given its frauds in recent times further un ique pos i t i on i n p rov id i ng underscores the significance of sound complementarity as well as competition corporate governance standards in to banks. This sector, with a size of banks. The Government, the Bank Board around 15 per cent of combined balance Bureau and the Reserve Bank are sheet of scheduled commercial banks currently engaged in developing an (SCBs), has been growing robustly in objective framework for performance recent years, providing an alternative evaluation and this should redefine the source of funds to the commercial contours of corporate governance in the sector. However, the sector has faced public sector banks (PSBs) with a focus challenging times recently. The debt on transparency, accountability and default of a systemically important NBFC skills.0. On the consumer protection highlighted the vulnerability and need front, improvements in grievance for strengthening regulatory vigil on the redressal, introduction of innovative sector in general and on asset liability products for digital payments, and management (ALM) framework in measures to improve cyber security in particular. The Reserve Bank intends to banking are all expected to expand strengthen the ALM framework for financial inclusion and provide financial NBFCs and harmonise it across different services efficiently and cost-effectively. categories of NBFCs with the objective of The Reserve Bank is cognisant of the fact enabling the NBFCs to play a vital role in that deepening of digital payment our economy. In order to allow additional systems will facilitate greater access to access to funding for the NBFC sector in institutional finance by the informal the wake of the recent crisis, the Reserve sector, furthering the cause of financial Bank has relaxed the norms for NBFCs to inclusion. We have very recently securitise their loan books. In addition, constituted a High Level Committee on banks have been allowed to provide Deepening of Digital Payments with Shri partial credit enhancement to bonds Nandan Nilekani as Chairman to suggest issued by the systemically important measures for increasing digitisation of non-deposit taking non-banking payments and enhance financial financial companies and Housing inclusion through digitisation. The Finance Companies. This measure will


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enhance credit rating of bonds and advanced economies are on the path of

enable the companies to access funds monetary policy normalisation, there

from the bond market on improved has been global portfolio rebalancing

terms. We are keen to foster a well- away from EMEs, including India.

regulated, well-functioning and vibrant Another factor that has repercussions

NBFC sector. for India's external sector is the recent

developments around Brexit. There are External Sector I n d i a ' s e x t e r n a l consequential policy challenges for India sector has remained resilient in recent which enjoys strong trade and period despite terms of trade losses due investment relations with UK and the EU. to the firming up of international crude We will carefully weigh the challenges prices and uncertain global demand and opportunities that lie ahead and conditions. The current account deficit undertake appropriate policy responses. since FY 2013-14 (i.e., period after the As regards policy environment relating taper talk) has been below 2 per cent of to the external sector, sectoral norms for GDP, though it rose to 2.7 per cent in the Foreign Direct Investment have been first half of the financial year 2018-19 eased gradually and now 100 per cent reflecting elevated crude oil prices. FDI is permitted in all sectors, barring a Modest current account deficit in recent few prohibited sectors. In recent years, years was accompanied by robust flows the focus has been to simplify the FDI of foreign direct investment (FDI). Strong policy regime by abolishing the Foreign FDI inflows and build-up of foreign I n v e s t m e n t P r o m o t i o n B o a r d , exchange reserve buffers have helped rationalising various procedures, India meet its external financing introducing e-biz portal as a single requirements despite domestic capital window for obtaining clearances from market facing sizeable outflows of the central government and using foreign portfolio investment. As a few


T a b l e : E x t e r n a l S e c t o r I n d i c a t o r s

( P e r c e n t , u n l e s s i n d i c a t e dt h e r w i s

I n d i c a t o r E n d-M a r .

2 0 1 3

E n d-M a r .

2 0 1 7

E n d-M a r .

2 0 1 8 E n d-S e p . 2 0 1

1 . C u r r e n t a c c o u n t d e

r a t i o * 4 . 8 0 . 6 1 . 9 2 . 7 * *

2 . E x t e r n a l D e b t t o G D 2 2 . 4 2 0 . 0 2 0 . 5 2 0 . 8

3 . R a t i o o f R e s e r v e s

D e b t 7 1 . 3 7 8 . 5 8 0 . 2 7 8 . 5

4 . R a t i o o f S ho r t-t e r m D e b t

R e s e r v e s 3 3 . 1 2 3 . 8 2 4 . 1 2 6 . 1

5 . R e s e r v e s C o v e r o f

( i n n u m b e r o f m o n t h s ) 7 . 0 1 1 . 3 1 0 . 9 9 . 5

* A v e r a g e d u r i n g t h e F i n a n c i a l Y e a r ; * * : A v e r a g e f o r H 1 o f 2-1 9

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information technology as enabler to priority is to preserve domestic

make governance more effective. Two macroeconomic and financial stability,

days ago, we have also substantially especially in a global environment that is

rationalised and liberalised the clouded by high uncertainty. Not only

regulations governing the External downward risks to global growth, trade

Commercial Borrowings by the Indian and investment have risen, the spill over

entities to improve ease of doing effects on emerging markets due to

business. The full impact of all these increase in global interest rates could

reforms and a stable domestic also be profound. We, therefore, need to

macroeconomic environment will brace ourselves for any sudden bout of

fructify in coming years. In fact, gross global financial market turbulence that

FDI inflows in India were at a record high domestic economy and financial markets

may face in the period ahead. In such a milieu, of US$ 61 billion in 2017-18. Further, domestic macroeconomic policy framework external debt to GDP ratio has fallen needs to be supported by sound financial

from 22.4 per cent at end-March 2013 to supervision and regulation. Let me highlight the

20.8 per cent at end-September 2018. key policy challenges that the Indian economy

Other external indicators, viz., import confronts at the present juncture.

o Inflation: A l t h o u g h h e a d l i n e cover and short-term debt to reserves inflation has moderated significantly in recent ratio are also better, relative to the taper years, as discussed earlier, its major components

talk period of mid-2013 when the Indian – inflation in food, fuel, and inflation excluding

rupee had come under severe pressure food and fuel – are exhibiting wide divergences

this year. While food inflation has turned

negative since October 2018 and fuel inflation Challenges And Outlook: India is widely has been highly volatile, inflation excluding food

believed to remain world's fastest-and fuel remains sticky at close to 6 per cent.

growing major economy in the medium Such wide divergences and large volatilities in

to long term. The growth projections of inflation across major groups pose challenges

for inflation assessment. Balancing the several global agencies rank India at the objectives of inflation and growth under a top among the G-20 economies. In the flexible inflation targeting framework would

medium term, annual growth is warrant careful analysis of every new data.

projected at around 7.5 per cent by the o Financial Sector: There is need for

IMF and the World Bank. It is likely that continued vigil on the asset quality of banks as

growth will be more sustainable now, well as resolution of stressed assets with a focus

on implementation of the new resolution propelled by investment and private framework. It will remain critical to ensure that consumption. The latest estimates of further slippages are contained. While

national accounts suggest that technology provides opportunities for growth

investment activity has accelerated by and innovation in the banking sphere, it also

12.2 per cent during 2018-19 as involves newer challenges and risks. Cyber risk is

a ma jo r cha l l enge . Fo rmu la t i on o f compared to 7.6 per cent in 2017-18. comprehensive cyber risk and resilience policies Investment activity is expected to and diligent implementation is critical. Another

strengthen further as the benefits of area where policy action is required is corporate

recent structural reforms begin to governance in banks with a focus on

materialise. Going forward, the foremost transparency and accountability.


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o External Sector: While positive policy of a long day when one is reflecting on settings and continued macroeconomic stability the subject, they start playing all over helped contain India's external vulnerabilities, a

again, without any reason and without close monitoring of external sector is required,

any conscious decision to rewind to given the sharp movements in global crude oil

them. In my case, a few striking images prices and global financial market volatility.

These are the two global shocks that have flash across my eyes. I have tried in what implications for our CAD and financial flows. follows to describe these images and Another challenge that Indian companies may

what their collage means for me. They face pertains to developments around Brexit.

also convey how I try to think about Indian companies and policy makers need to

economics and finance more generally – suitably weigh all opportunities and challenges,

and accordingly re-strategise to respond as the media to understand daily appropriately. situations of households around us and Let me conclude by saying that at the RBI, we are

to derive insights on how these committed to play our role as the monetary

situations could be made better, most authority for maintaining mandated price often in some small ways and stability objective while keeping in mind the

objective of growth; and as the regulator and occasionally with a big bang… After all, supervisor of the banking sector and payment the origin of the word 'economics' is in systems. We will take necessary steps to

the ancient Greek term 'oikonomía', maintain financial stability and to facilitate

meaning 'management of a household'. enabling conditions for sustainable and robust Based on careful research, many [notably growth. In October 2018, when I had absolutely

no clue that I would be landing up in the Reserve Professors Abhijit Banerjee and Esther Bank in December 2018, I had tweeted, “Central Duflo of Massachusetts Institute of Banks across countries have a very critical role at

Technology (MIT)] contend, that it is the the current juncture. The challenge is to try and

poor who often practice the best read the situation and take decisive steps in economics as the costs they face from pursuit of their multiple responsibilities.” As

Governor of the Reserve Bank of India, it would mismanaging their households can be be my endeavour to act according to these rather high. So let me describe these principles.

images that flash across my eyes one by

one.SOME REFLECTIONS ON

Image One: Many evenings or nights MICRO CREDIT AND HOW A when I stroll with my brother on our PUBLIC CREDIT REGISTRY terrace in Mumbai, we are greeted on

CAN STRENGTHEN IT one side by the Pawan Hans Helipad, the

(Dr Viral V Acharya, Deputy Governor, sprawling slums of Nehru Nagar, the

Reserve Bank of India - December 15, deafening din from the Swami

2018 – Delivered at IIT Bombay Tech Vivekananda Road (S V Road), and the

Fest) serene breeze and waves of the Juhu

Sometimes when I sit down to write down Beach. I grew up on a crowded street in

a new set of remarks, the same old Girgaum, in south Mumbai. Observing

thoughts cross my mind, a bit like one's from our first floor window how people

favorite songs that are so deeply went about their lives on the streets was

entrenched in the psyche that at the end a favorite pastime in our childhood days.


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Conditioned by that, while I'm on the ponder for a few seconds but then switch

terrace my eyes invariably end up attention to the incessant honking of the

focusing on the slums of Nehru Nagar. S V Road vehicles.

Far into the narrow alleys, bustling and Image Two: Until about ten years back, I jostling in high density are the slum- used to spend a decent chunk of my time dwellers, appearing as diminutive as a doctoral student, and later as a figurines, with much activity and life all professor, working with an Indian NGO, around. A man is fixing dish antenna on focused on pre-primary and primary top of his blue roof; an old couple are education. This activity had become my perched outside a modest hut, savoring umbilical cord to India. On my holiday what must be some scrumptious desi trips back home from New York or chat; a woman slamming blow after blow London, I would take out a few days to on the clothes she has carefully aligned visit some of their baalwadis (daycares) to wash; and almost always a group of in urban areas, and if travel plans children gleefully running around, permitted, also the delivery centers for mostly playing cricket and seasonally accelerated reading programs in flying kites. Some of the evenings, a villages. These visits made my plane takes off from the domestic or interactions with stakeholders more international airport in the east and credible, engaging and vivid. But they heads westward on its way; and a were also personally rewarding. There chopper swings in and lands at Pawan are a few sights, if any, more uplifting Hans with much acoustic fanfare. As than of a child figuring out the alphabet these sophisticated means of modern for the first time, reading the first book, transportation make their noisy flipping pages over and over again in presence felt, you can see the children boundless excitement and frenzy, or bunch together, one of them pointing at counting and adding up his or her the sky, others galvanising around him collection of stones, subitizing them to marvel at the spectacle. An instant soon after – as in figuring out the exact later of course, the children are count without counting, by merely nonchalantly back to gully cricket or glancing at the collection of treasures! It running after a fallen kite. One cannot might be the innocent spark on the but hope that these children – in that child's face, or that “Aha!” or Eureka brief moment of marvel – have been moment as the child discovers how to imbued with ambition; that their eyes are read, how to count, how to learn – now set on the sky; that they will have the whatever it is, it works like magic in initiative and will get all opportunity to bowling over the beholder. One returned do what it takes to bridge the gap from from these visits with a shot in the arm to their narrow alley to Pawan Hans Helipad do more; one felt like nurturing the next door and to the flight of the giant umbilical cord to India further; one mechanical birds that fly above. Will realised that joyful learning is an these children take off? How will their essential groundwork for the journeys, journey be? Where will they land? I the flights and the ascent that these


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children will undertake in due course. descent.

Image Three: I am usually en route Image Four: Ea r l y on a Sa tu rday

in car to the office at RBI or Bombay morning, already quite bright and sunny,

Gymkhana during early mornings. I need a banker carrying his thela (a shoulder

to be on S V Road before turning for the bag) steps into the passageway next to a

Milan subway or now the flyover, which series of kachcha-pukka homes. The

connects to the Western Express surrounding is semi-urban. By the time

Highway. Just before the turn, before one you have blinked an eye, an army of

reaches the Hanuman temple and about twenty women, mostly in saris, of

Santacruz bus depot, on the left ages spanning from 20 to 50, and a few

sidewalk, there is – always – a mother even 50-plus, have gathered around

toiling away no matter what time of the him. They have all borrowed certain

day. It is clear she is homeless; she has at sums of money from the banker. They

least two children, both roughly of the make their repayments one by one; each

same age. Depending on the time of the transaction is logged in a physical

morning, she has her work cut out. Some register; it is also swiped digitally onto

days she is waking up the kids with some their bank cards with a point-of-sale or

sternness on her face; on others she is POS-style machine. Some of the women

bathing them with water from an are borrowing again; some taking out

ingeniously figured out water-supply; at monies from their accounts. The

times she is getting them dressed in registrar of this group of women,

school uniforms; and then she is often appointed for the month, signs off the

running with the kids, who have their log after checking the account entries

b a c k p a c k s o n , t o w a r d s t h e carefully. Banking is now done. Growth is

neighborhood school. From a distance, about to begin. I am curious to hear more

she seems to be driven with a single- about what these women are doing with

minded focus of ensuring that her kids the money. All of them, without

get their chance to fly and soar. Her role exception, are entrepreneurs. One has

as a mother certainly seems a mighty started a sari trading business, buying

one, as Yudhisthir answered to the them from the city and selling them in

Yaksha Prashna in Mahabharata, when the neighborhood with a margin; she has

asked what is heavier than the Earth. built her enterprise over several years

How does the mother make it all work? and is the recipient of the biggest loan

Can she afford the books and the (one lakh rupees) with the longest

supplies? Is she home when the kids maturity (one year) in the group; her

come back? What job does she do during friend has acquired a sewing machine

the day? Could she be a micro with the loan and is stitching blouses to

entrepreneur? The mind is so fickle, go with the saris; another has opened a

however; as soon as the car turns left at beauty parlor; yet another has started a

the traffic signal and moves onto the soft-drinks stall in her husband's

flyover, it leaves these questions in stationery store as there is extra, unused

background and embarks on its daily space therein, well utilised especially


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during the afternoons when customer our children, the skilling of our youth,

traffic is thin for stationery but the heat and lighting up of their minds with fire

unbearable. There seemed absolutely no and imagination so they can propel

shortage of services to be provided in themselves, their families, and the rest

their immediate sphere of influence. I of us, forward. Education is perceived by

was especially eager to know what many families as ticket to the ride that

prompted these women to become will catapult them out of economic

entrepreneurs in the first place. The stress. Leaving aside minor exceptions,

answer I got was not entirely expected: as a rule education is indeed a ticket to

in nine out of ten cases, women had such ride. A mother taking up an

become entrepreneurs to send their kids enterprise to shape her child's future has

to a 'top, English medium school', or to all the willingness to pay her debt. As the

have extra monies for private coaching child grows, her needs too will rise. She

so the child could excel in the state-level will need a clean credit record to be able

exams, or to get the kid to learn some to borrow again so as to finance her now

computing and programming as that is bigger liquidity requirements. This way,

where future jobs lie! there is full incentive compatibility

between her and the finance provider.

Besides her willingness to pay, the deft Collage Of The Images: As these images handling of her enterprise, induced by flashed across my eyes, I realised that the necessity to keep buying the r a t h e r t h a n b e i n g e n t i r e l y education ticket over time, will compartmentalized, these images were strengthen her ability to pay. At any rate, all linked, that there was a connection the financier can start with a small loan, between finance – my day job, and these use a short tenor to assess repayment images that my mind had been ability, and open for her a bank account subconsciously gathering in mornings, that can help track other payment flows evenings and during holidays. An and improve credit assessment. The important link was established from reputation of the woman entrepreneur financial inclusion to education of as a borrower can build swiftly as she children – from micro finance for women keeps repaying and enable her to secure entrepreneurs to them sending children more credit over longer tenors. to schools, the children in turn having Borrowing as part of a group reinforces their “Aha! I did it!!” moments in reading the strong incentives to repay; default by and counting, and to their taking off for a borrower when all others are repaying the limitless sky and beyond. Access to can lead to stigma. Conversely, finance is the lifeblood of an economy. encouraging of defaults by some can Its judicious allocation is known to lead to vitiation of the otherwise rich unlock opportunity and growth. It can, in credit culture. The financier, in turn, can fact, aid even the most fundamental make a healthy spread over own cost of reform for growth by supporting, borrowing funds, even accounting for directly or indirectly, the education of


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some losses from early defaults, upon these accounts is only 23 per cent of the

whose realisation the entrepreneur can total. Is there a big opportunity for us to

be rationed from future loans or offered rethink and reshape our credit eco-

only stricter loan terms and tenor. This system for the future so that micro credit

way, the availability of micro finance for can thrive to unlock economic value, as I

micro entrepreneurs thrives and benefits laid out in my collage of images? At the

the society all around.So let me turn RBI, we firmly believe so. We have

from these images to my day job at the initiated work on a Public Credit Registry

RBI and what efforts we are undertaking (PCR). We are excited about how we can

to help ensure that micro credit becomes solve in a fundamental way the

available to more borrowers; micro information problem affecting access to

finance provided a robust foundation; credit for micro entrepreneurs. Let me

micro enterprise given an additional elaborate on the information problem

fillip; and indirectly, in the process, our and how a PCR can help get around it.

children offered greater opportunity for Information asymmetry with the

schooling and skilling. borrower is the major difficulty faced by

any lender while granting a loan. Put

simply, the borrower has more Public Credit Registry (PCR) An information about her own economic Important Step to Democratize and condition and risks than the lender. Formalize Credit: In an emerging Credit information systems aim to economy like India, it is always felt that reduce this asymmetry by enabling the the smaller entrepreneurs, mostly lender to know the credit history with operating under the informal economy, past lenders and the cur rent do not get enough credit as they are indebtedness of the borrower. They informationally opaque to their lenders improve efficiency of credit allocation, as who prefer to provide loans to more the lender can use credit information transparent larger businesses. Data as of systems to properly differentiate and March 2018 of scheduled commercial appropriately price (interest rate) as well banks (SCBs) from RBI's basic statistical as alter terms (maturity, collateral, returns (BSR) shows that close to half of covenants, etc.) of the loan. What would the outstanding credit is for ticket size occur without the credit information above a hundred million rupees and systems? As borrowers build history, thirty per cent is above one billion lenders would like to protect the rupees. Credit penetration is particularly information of their profitable low for Micro, Small and Medium customers and may not be ready to share Enterprises (MSME) sector where the it directly with other lenders. This way, ticket size is generally believed to be borrowers can get locked to their initial between one to ten million rupees. Even lenders, become vulnerable to gouging though more than 95 per cent of in loan terms, and worse, be unable to accounts with SCBs are having convey their credit quality to new lenders sanctioned credit limit less than one if existing lenders experience problems million each, the amount outstanding on


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of their own (such as due to capital envisaged the Public Credit Registry

erosion from recognition of losses, as (PCR) to be. The HTF examined the data

was witnessed in India over the past gaps in the current credit information

decade in the form of high retail and system in India and recommended that a

MSME cost of borrowing from banks due PCR be set up, backed by an appropriate

to spillover from their large corporate Act, to improve the information

bo r rowe r l oans tu rn ing non- efficiency of the credit market and

performing). This is where third-party strengthen the credit culture in India.

credit information companies come in to How Will The Public Credit Registry (PCR) play, those that will pool the data from For India Work?: The PCR has been lenders and share the information with envisaged as a database of core credit other lenders as per the laid down policy. information – an infrastructure of sorts Globally, Private Credit Bureaus (PCBs) on which users of credit data can build and Public Credit Registries (PCRs) both further analytics. It will strive to cover all operate in this space. PCBs can be regulated entities (i.e., financiers) in legislatively authorised to receive credit phases and in this way get a 360-degree data; however, being for-profit view of borrowers. It will facilitate enterprises, they may focus primarily on l inkages with related anci l lary those data segments around which it is information systems outside the most profitable to build a business banking system including corporate model (e.g., provision of credit scores filings, tax systems (including the Goods based on data gathered). Indeed, it is and Services Network or GSTN), and found internationally that a PCR, being a utility payments. The PCR will have to be non-profit enterprise, is able to ensure b a c k e d a n d g o v e r n e d b y a much better data coverage than PCBs. In comprehensive Public Credit Registry turn, the PCBs when given access to Act to be brought in consultation with comprehensive data from a PCR can the Government. It will have to follow the provide better and greater value addition latest privacy guidelines based on a laid through data analytics and innovations, down consent framework.complementing the PCR. One can easily The Proposed Public Credit Registry surmise that to be useful, it is important (PCR) Information Architecture: Let me for credit information systems to gather now spend some time on how the PCR complete credit information, possibly will work and help strengthen the credit even asset-side and cash-flow details culture.about the borrower, which is sometimes o First, PCR will make borrower referred to as the '360-degree view'. information more complete with Also, the latest information is more increasing coverage of lending entities. important, giving rise to the demand for In particular, it will eventually reach out near-real-time data. That is how the even to the smallest primary agricultural Report of the High-Level Task Force credit societies. It will also cover entities (HTF) on Public Credit Registry for India, which may not be regulated by the RBI. chaired by Shri Y.M. Deosthalee, has This will have to be done in phases and it


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may take up to three to five years to will help the users to access other data

accomplish, possibly sooner. on borrowers' assets and evolving cash

flows, which are essential for taking o Secondly, PCR will vastly simplify efficient credit decisions.and reduce the reporting burdens on the

lenders. Other entities including o Finally, it will be possible within

regulators and supervisors will be able to the PCR architecture to address privacy

access it for core credit information and concerns and control access to data with

supplement it with only the incremental a proper consent-based framework for

part as per their requirement. Many of appropriate usage, better than what is

the statistical returns presently collected currently feasible. These concerns will

by the RBI may also accordingly be have to balance the objective that the

substantially rationalised and pruned, PCR is just a step in helping the

freeing up resources in the financial eco- democratisation of credit, whereby

system for analysis instead of repetitious credit data is not only used for regulatory

efforts in data collection, follow-up and / supervisory purposes, but also

cleaning. The same would be the case leveraged to expand the credit market

with other entities that presently collect efficiently. In particular,

such data from banks. § While an individual will have

o Thirdly, PCR will have credit data access to her data stored in PCR, she

available digitally at a higher frequency should be empowered to share it with

than at present. Therefore, it will make other lenders for availing credit.

credit decision-making faster and § Similarly, lenders need to be given efficient. access to their own customers' complete

o Fourthly, as the chart here shows, data for monitoring such accounts.

with linkages to other information § Regulators / supervisors will systems like corporate data from the require full access to the data for their Ministry of Corporate Affairs (MCA21) work so that they can address systemic and tax filing or invoicing data (GSTN), it risk concerns with the advantage of a


I N D I A

holistic view. and being linked to various digital

systems in place (as shown in the chart To appropriately put in place the above), it would be possible to identify required access and control policies, the and get to know well businesses, even High-Level Task Force recommended m i c r o e n t e r p r i s e s a n d m i c r o that a separate Public Credit Registry Act entrepreneurs. In other words, the PCR (PCR Act) be brought in. The PCR Act will could supply the missing link, which is need to ensure adequate safeguards on the complete '360-degree view'- data while at the same time address information of the borrower or extant restrictions on sharing of credit prospective borrower. This will allow data that prevent efficient allocation and lenders to assess the borrower's credit regulatory supervision of credit. The PCR risk keeping in view the viability of cash Act would also have to be comprehensive flows, ask the relevant questions (e.g., so as to bring in data from the section of are there other underlying issues that lenders who do not directly fall under the are affecting ability to pay the loan in RBI regulations. To this end, the RBI spite of healthy cash flows from the plans to engage with the Government micro enterprise?), and price the loan and other regulators in the coming terms without compromising on due months. In the meantime, the RBI has set diligence.Based on these, nearly-up an Implementation Task Force that is au tomated loan sanc t ion and putting the systems infrastructure in disbursement mechanisms can be place to kick-start the PCR with data devised, as are also being attempted by from regulated entities that can be fin-tech companies.In fact, credit covered either under, or with minor products could get transformed with the tweaking, of the extant legislative possibility of sanctioning small ticket framework.loans with short maturity and zero or low Public Credit Registry Can Help collateral requirement. Borrowers and “Sachetise” Micro Credit: To build credit entrepreneurs can build their reputation models for individuals and small credits, and credit quality by repaying well such the financier and its modelers are ideally initial information-building loans. required to know not just outstanding Gradually, they can borrow more and at credit for the micro borrowers, but longer maturities, potentially making possibly also their entire repayment capital investments to enhance history and their cash flow fluctuations, productivity. Once their size increases so as to tailor the terms of credit and they register with the GSTN, tax suitably. In the absence of such invoices can act as the cash-flow information, many borrowers may verification with PCR. Robust credit simply get 'rationed' out of the market history built over a period can work as due to severe information asymmetry sturdy collateral, building the trust of the faced by financiers.With a PCR tracking lenders. Such 'sachetisation' of credit every credit transaction from its can rapidly expand access to credit for origination to closure (initial terms, those micro and small enterprises, repayment, default, restructuring, etc.),


I N D I A

hitherto not included in the formal credit achieving our mark.”

market.As I stressed while describing NEW YEAR CHEER FOR BANKS, the ability to pay and willingness to pay NPAS SEE FIRST FALL SINCE of micro entrepreneurs, it would remain

2015 important not to undermine their

The Reserve Bank of India, which has inherently strong credit culture by

been relentlessly pushing banks to making it easier for borrowers not to

recognize bad loans, believes that they repay. That would compromise the

may be over the worst with the industry essence of how micro entrepreneurs

likely reporting a decline in non-build a reputable credit history to

performing assets (NPAs) in the current differentiate from others and over time

fiscal year for the first time since 2015, grow in size and economic value

when the regulator began tightening creation.

norms. The central bank forecast gross Let Me Conclude: There is a deep bad loans will decline to 10.3% of total connect between the images I started loans by March 2019 from 10.8% at the with, their collage in my mind, and my end of September 2018 and 11.5% in day job at the RBI. Ultimately, while March 2018. The net NPA ratio also central banks are not always visible to registered a decline during the period. In the common person, their policies have a sign of possible recovery from the the potential to touch her in a impaired asset load, the GNPA (Gross meaningful way. As its etymology Non-Performing Assets) ratio of both suggests, this is what economics must public and private sector banks showed help achieve in the end – better a half-yearly decline, for the first time management of the household. It is since since March 2015, the financial perhaps too ambitious a vision of our year-end prior to the launch of asset future to believe that a fundamental quality review. The banking stability change in the f i nanc i a l da ta indicator (BSI) shows that asset quality of infrastructure such as a Public Credit the banks has improved, although Registry can help improve access to profitability continues to erode.” The micro credit as well as improve schooling Indian banking industry was plunged and skilling outcomes for our children into gloom after RBI's asset quality and youth, but so be it. My son's poster review in 2015 forced lenders to at his school last year introduced me to a reclassify many standard loans as bad gem from Michaelangelo, which assets. These had been shown to be underscores why we must keep painting standard by either ever-greening or such a vision and persist with efforts to restructuring on terms that were convert it into reality. It says,“The impossible to achieve. Many corporate greatest danger for most of us lies not in borrowers with revamped loans setting our aim too high and falling continued to struggle and default on short; but in setting our aim too low, and


TOP BANKING NEWS

I N D I A

payments. The turnaround will be good the same period, the PCA-PSBs

news for the government, which has registered negative growth in both credit

been looking to shore up credit growth and deposits. Shri Patel quit as RBI

to spur economic activity and generate governor following differences with the

jobs. Financial services secretary Shri government over issues such as the

Rajiv Kumar mentioned that bad loans of restrictions on weak banks under the

state-run banks were declining and that PCA regime, easing liquidity for non-

they had recognized most of their banking finance companies and the level

stressed assets. While the overall of reserves the regulator needed to hold.

https://economictimes.indiatimes.com/industrsituation is improving, the jump in bad y/banking/finance/banking/new-year-cheer-loans under a stress test scenario will for-banks-npas-see-first-fall-since-2015 leave many banks vulnerable and push /articleshow/67331225.cms Dated:Jan 01, 2019

t hem be low m in imum cap i t a l

requirements. Sensitivity analysis RBI ALLOWS RESTRUCTURING

indicates that 18 SCBs (scheduled OF MSME LOANS UP TO RS. 25

commercial banks), including all public CROREsector banks (PSBs) under Prompt The Reserve Bank of India (RBI) has Corrective Action (PCA) may fail to allowed lenders to recast loans of maintain the required CRAR (capital to stressed micro, small and medium risk weighted assets ratio) under a two enterprises (MSME), provided the total standard deviation shock to the GNPA fund and non-fund based exposure to ratio, unless capital infusion takes place such a borrower does not exceed Rs. 25 and banks improve their performance. crore. Such a debt restructuring, would Although the industry shows signs of not lead to a downgrade in asset stabilizing, the gulf has widened classification. RBI has decided to permit between banks under PCA due to their a one-time restructuring of existing weak finances and those with sufficient loans to MSMEs that are in default but capital. There has been a further 'standard' as on January 1, 2019, without widening between PCA and non-PCA an asset classification downgrade. The PSBs. While the non-PCA PSBs' credit government has been pushing RBI to growth improved from 9.1% in March provide relief to the stressed MSME 2018 to 13.6% in September 2018 and sector. The central bank's board on 19 deposits increased from 6.1% to 7.9% in


I N D I A

November advised RBI to consider a depending on the delay in repayment of

scheme to recast loans of MSMEs, which loans. While borrowers delaying

have been hurt by the disruption caused repayments by up to 30 days should be

by demonetization in late 2016 and the classified as SMA 0, those delaying by

implementation of the goods and 31-60 days and 61-90 days will be

services tax (GST) in July the following classified as SMA 1 and SMA 2,

year. The MSME loan restructuring, respectively. The loans still remain

according to the RBI statement, has to be standard even in these categories and

implemented by 31 March 2020 and a turn bad only after a delay in payment of

provision of 5% of the total outstanding more than 90 days. According to data

loan, in addition to the money already from the central bank, for the six months

set aside to cover potential losses, will ended March 2017 (the latest available),

have to be made for such borrowers. 137,282 MSME loan accounts were

Each bank or non-banking financial referred for resolution. Of these, banks

company (NBFC) should formulate a used rectification in 80,905 cases,

policy for this scheme with board recovery in 54,180 cases and only 2,197

approval which shall, inter alia, include loans were recast. However, the

framework for viability assessment of quantum of loans for these categories is

the stressed accounts and regular not available. The amount of gross bad

monitoring of the restructured accounts. loans in the micro and small enterprises

The regulator also mentioned that sector (no data for medium) has been

MSMEs form an important component of growing over the last few years and

the Indian economy and contribute stood at Rs. 82,756 crore in FY17, up

significantly to the country's gross from Rs. 70,842 crore in the previous

domestic product (GDP), exports, year and Rs. 51,952 crore in Fy15.Source:

https://www.livemint.com/Companies/rgl4JNpindustrial output and employment nGsE7rKerrpaNJJ/RBI-issues-norms-for-generation. Considering the importance restructuring-loans-to-MSMEs.html Dated: Jan

of MSMEs in the Indian economy, it is 02, 2019

considered necessary at this juncture to

take certain measures for creating an COMPLAINTS WITH BANK enabling environment for the sector. The

OMBUDSMAN SURGE 25% IN issue of restructuring of MSME accounts,

FY18RBI added, was discussed in the RBI The number of complaints registered at

board meeting on 19 November and also banking ombudsman offices have seen a

during RBI's recent interactions with 25% increase in the fiscal year 2018, with

banks and other stakeholders. In March majority of these complaints coming

2016, RBI had notified a mechanism for from urban centers owing to increased

resolving stressed MSME loans of up to awareness and poor internal redressal

Rs. 25 crore. As per the guidelines banks mechanisms of banks. The banking

should classify stress in such loans into ombudsman offices in Tier-1 cities like

three categories special mention New Delhi, Mumbai, Chennai, Kolkata,

account (SMA) 0, SMA 1 and SMA 2


I N D I A

Bengaluru and Hyderabad accounted for commitments and mobile banking. In

more than 57% of the total complaints b a n k - w i s e d i s t r i b u t i o n , m o s t

received by all BO offices. The higher complaints received against public

proportion of complaints from urban sector banks were pension-related while

areas in recent years is largely due to most complaints received against

increasing awareness about grievance private banks were for credit cards

redressal mechanism among bank discrepancies. The RBI plans to set up a

customers and also the efficacy of compliance and tracking system portal

internal grievance redressal mechanism to tackle the problem of cyber-fraud

in banks, not being up to the desired under the ombudsman scheme taking in

level. Of all the complaints received at light the growing impetus of banks and

the ombudsman's offices, 97% of them financial institutions on digital

were resolved in 2017-18, up from 92% transactions and the Centre's push to a

a year earlier. Currently, there are 21 less cash economy.

https://economictimes.indiatimes.com/industrfunctional banking ombudsman offices y/banking/finance/banking/complaints-with-in the country. These offices were b a n k - o m b u d s m a n - s u r g e - 2 5 - i n -established under Banking Ombudsman fy18/articleshow/67343150.cms Dated Jan 02,

Scheme, 2006, and are the first points of 2019

contact for consumers seeking

grievance redressals and resolutions BOB SETS SHARE SWAP aga ins t consumer f r auds and

RATIO FOR MERGER WITH discrepancies in the banking system.

VIJAYA, DENA BANKSMost complaints received at these

Bank of Baroda (BoB) has finalized the offices were related to non-observance

share swap ratio for merger of Vijaya of the fair practices code followed by

Bank and Dena Bank with itself. As per those related to ATM, credit and debit

the Scheme of Amalgamat ion, cards, and for failure to meet


I N D I A

shareholders of Vijaya Bank will get 402 favorable share swap ratio. Recent prices

equity shares of BoB for every 1,000 suggest that traders were anticipating a

shares held. In case of Dena Bank, its swap ratio of not less than 150 shares of

shareholders will get 110 shares for BoB in return for 1,000 Dena Bank

every 1,000 shares of BoB. The shares. The announced ratio of

government in September last year had 110:1,000 comes as a huge let down.

announced merger of state-owned Assuming BoB shares stay where they are

Vijaya Bank and Dena Bank, with larger when trading resumes, Dena Bank's

peer Bank of Baroda, aiming to create the shares need to correct by about 28% to

third largest lender after SBI and ICICI align with reality. Not that this is a

Bank. massive relief for BoB. While the dilution

in its equity will be lower than https://www.livemint.com/Industry/XihVSI

wxVQZEmG1BMqL3BP/BoB-sets-share- anticipated, and may cause a relief rally, swap-ratio-for-merger-with-Vijaya-Dena- the drag from the bank merger is a far banks.html Dated: Jan 02, 2019 bigger worry. It's little wonder that BoB

shares have underperformed the Nifty

MERGER OF DENA BANK, PSU Bank index by about 12% since the

merger was announced in mid-VIJAYA BANK, BOB AN ALL-September. BoB shareholders are getting ROUND LOSING GAMEsaddled with the tattered balance sheet The merger of Dena Bank and Vijaya of Dena Bank, which has low capital and Bank with Bank of Baroda (BoB) was seen no ability to lend. Dena Bank has been as a rescue mission for Dena Bank. Now, barred from lending by the regulator for the share swap ratios confirm that the the last seven months. So, essentially, mission will leave everyone a loser. Even what BoB shareholders are getting is a Dena Bank's shareholders have ended up fistful of deposits and a toxic pile of as losers, in contrast to the earlier loans. Dena Bank has a gross bad loan expectation that they will gain from a


I N D I A

pile of Rs. 16,140 crore, for which the BOOST FOR BANKS WITH BIG lender has provided for less than 60%. It LOANS AGAINST PROPERTYhas a 13,440 strong workforce, for Banks with a larger share of loans against which BoB will have to make good the property are likely to benefit from the shortfall in provisions towards gratuity RBI's latest relief on small value loans to as per rules. This is over and above the micro and medium level companies and requirement to absorb all employees in lenders like DCB Bank, Federal Bank, City the bank merger. While merger Union Bank and Kotak Mahindra Bank announcements typically talk of cost could see earnings improve, nudging synergies, this one points to an increase them to open up credit lines to ease the in costs. Note that past instances of freeze. RBI has allowed a one-time mergers, including the massive merger restructuring of existing loans to MSMEs of State Bank of India (SBI) with its five that are in default but 'standard' as on associates, show that the months that January 1, 2019, without an asset follow are horrible for the merged entity. c l ass i f i ca t ion downgrade . The SBI had to contend with depressed restructuring has to be implemented by operating performance as its staff March 31, 2020. RBI has allowed the became busy in dealing with new scheme for restructuring of stressed colleagues, new systems and new assets with credit facilities not cultures. Streamlining processes took a exceeding Rs 25 crore as on January 1. toll on the lender and its bad loan ratio When borrowers fail to repay loans due surged, while credit growth slowed. to genuine reasons, lenders relax terms Analysts fear the same fate for BoB. In and conditions for repayments, known the case of Vijaya Bank, the share swap as restructuring in market parlance. The ratio is close to what the markets had RBI move has instilled just such anticipated. But that is little comfort for con f idence . Se lec t banks w i l l its shareholders, as their fortunes have significantly do well in future as also been tracking the drop in the value creditworthiness of small companies is of BoB. The fact that this is despite Vijaya likely to improve giving opportunity for Bank's superior financial performance credit expansion. The latest RBI move makes it even more painful for its was in line with the government's shareholders. In its bid to create the intention. This will help both credit flows third largest lender with a balance sheet and the holistic economy as this will add size of more than Rs. 14 trillion and a confidence among all banks, private and network of 9,489 branches, the public. MSME loans mostly happen government has subjected itself and through loan against properties with other shareholders to a painful merger banks like DCB, IndusInd, Kotak having process. The erosion of value has only larger share. Such banks' earnings would begun. be positively impacted over a period of https://www.livemint.com/Money/9NBbmXVLF time as the move will help in the long 25jWx2EL2dXfJ/Merger-of-Dena-Bank-Vijaya- term. Benefits of the latest MSME relief Bank-BoB-an-allround-losing-ga.html Dated:

are likely to be derived over a long period Jan 03, 2019


I N D I A

of time in the form of improved GST to genuine reasons, lenders relax terms

compliance and resultant improvement and conditions for repayments, known

in credit flows. The move will be interim as restructuring in market parlance. The

relief for banks in the form of lower RBI move has instilled just such

provisioning requirements. The twin conf idence . Se lec t banks w i l l

impact of demonetization and GST has significantly do well in future as

impacted them negatively and this creditworthiness of small companies is

measure can ensure better credit flows. likely to improve giving opportunity for

Banks can restructure loans only if such credit expansion. This will help both

borrowing companies are GST credit flows and the holistic economy as

compliant. This means, more companies this will add confidence among all banks,

are expected to come under GST regime, private and public. MSME loans mostly

pushing up the government's tax happen through loan against properties

collections. A GST compliant company is with banks like DCB, IndusInd, Kotak

seen as more creditworthy compared to having larger share.Such banks'

non-complaint entities. earnings would be positively impacted

https://economictimes.indiatimes.com/industr over a period of time as the move will y/banking/finance/banking/boost-for-banks- help in the long term. Benefits of the with-big-loans-against-property/articleshow latest MSME relief are likely to be derived /67358901.cms Dated: Jan 03, 2019

over a long period of time in the form of

improved GST compliance and resultant BOOST FOR BANKS WITH BIG

improvement in credit flows. The move LOANS AGAINST PROPERTY

will be interim relief for banks in the Banks with a larger share of loans against

f o r m o f l o w e r p r o v i s i o n i n g property are likely to benefit from the

requirements.The twin impact of RBI's latest relief on small value loans to

demonetization and GST has impacted micro and medium level companies and

them negatively and this measure can lenders like DCB Bank, Federal Bank, City

ensure better credit flows. Banks can Union Bank and Kotak Mahindra Bank

restructure loans only if such borrowing could see earnings improve, nudging

companies are GST compliant. This them to open up credit lines to ease the

means, more companies are expected to freeze. RBI has allowed a one-time

come under GST regime, pushing up the restructuring of existing loans to MSMEs

government's tax collections. A GST that are in default but 'standard' as on

compliant company is seen as more January 1, 2019, without an asset

creditworthy compared to non-c lass i f i ca t ion downgrade . The

complaint entities. restructuring has to be implemented by

https://economictimes.indiatimes.com/industrMarch 31, 2020. RBI has allowed the y/banking/finance/banking/boost-for-banks-

scheme for restructuring of stressed with-big-loans-against-property/articleshow

/67358901.cms Dated: Jan 03, 2019assets with credit facilities not

exceeding Rs 25 crore as on January 1.

MOBIKWIK REPORTS When borrowers fail to repay loans due


I N D I A

DOUBLING OF REVENUE, BUT PARLIAMENTARY PANEL LOSSES KEEP PILING UP ASKS RBI TO REVIEW CAPITAL The company, which competes with the NEEDS FOR BANKS likes of Paytm and PhonePe, has been In a hard-hitting report, a parliamentary facing tremendous competition from its panel has asked the Reserve Bank to ease rivals in the payments space. Gurugram- capital adequacy norms for banks, based digital payments company review supervisory framework PCA, and Mobikwik has doubled its revenue to Rs urged the government to set up a 85.6 crore in 2018 against Rs 44.3 crore committee to look into issues in 2017, even though losses piled up 51 concerning accountability of the central per cent to Rs 200 crore against Rs 132 bank as a regulator. The standing crore in the same period. The company, committee on finance also asked the RBI which competes with the likes of Paytm to evaluate the efficacy of its own and PhonePe, has been facing guidelines on dealing with frauds. tremendous competition from its rivals Besides, the committee headed by in the payments space. Therefore it has veteran Congress leader and former made an effort to move on to become a Union Minister Shri M Veerappa Moily broader fintech player by entering also suggested increasing the retirement lending and investments as well. Further of age of chiefs of public sector banks to the company also made disclosures that 70 years and effect proper manpower its co-founders Singh and Upasana Taku planning and HR development strategies earned Rs 2.15 crore each during the in PSBs. The report of the committee was reported year. 2018 has also been a very tabled in Parliament. Questioning the critical year for Mobikwik having made RBI's decision to keep capital adequacy its first acquisition in the FINTECH space. norms higher than prescribed under The company acquired Mumbai-based global framework of Basel III, the investment platform Clearfunds. lawmakers mentioned that the central Mobikwik, which was founded way back bank has restricted lending capacity of in 2009, is backed by marquee investors banks and increased the burden on the like Sequoia Capital, American Express government for recapitalization of PSBs. and even counts Bajaj Finance as one of The committee mentioned that it has its strategic backers. It was one of the been informed that while Basel last standalone payment entities till it framework requires application of entered other services as well, since capital standards to internationally Paytm became a bank, Freecharge was active banks of the 21 PSBs, nine PSBs are absorbed by Axis Bank and Citrus not internationally active as also most of Payments got bought by PayU. the older private banks are also not https://economictimes.indiatimes.com/industr internationally active. In respect of the y/banking/f inance/banking/mobikwik- nine PSBs, (Central Bank of India, Andhra reports-doubling-of-revenue-but-losses-

Bank, OBC, Corporation Bank, Vijaya keep-piling-up/articleshow/67369159.cms

Bank, Bank of Maharashtra, United Bank Dated: Jan 03, 2019

of India, Dena Bank and Punjab and Sind


I N D I A

Bank) which had aggregate risk weighted of these banks and relax/review the PCA

assets of approximately Rs.9.93 lakh framework. With regards to spurt in

crore as of March 2018, this translates frauds in banking system, the panel

into additional capital requirement of asked the RBI to look into and review the

approximately Rs 35,000 crore. As per role and effectiveness of various types of

the parliamentary panel stipulated audit conducted in banks and its inability

additional capital requirement for these so far to mitigate incidence of frauds in

nine banks (who are already under RBI's banks. The RBI should also evaluate the

P C A f r a m e w o r k w i t h l e n d i n g efficacy of their own guidelines of May 7,

restrictions), if waived, will release huge 2015 providing a framework for dealing

funds to the extent of approximately Rs with loan frauds. On the issue of RBI

5.34 lakh crore, representing 51 per cent seeking more powers, the panel

growth in the loan book of these banks. mentioned that it has recommend that

This will lead to generation of additional the government should constitute a

interest income of about Rs 50,000 crore high-powered committee to evaluate

annually, "which will obviate the need" the role, powers and authority of RBI in

for additional capital infusion into these "its entirety", while also appraising the

banks through our fiscally constrained economic impact of the various NPA

national budget. The committee further reso lu t ion gu ide l ines/schemes

notes that the RBI has been tightening formulated by RBI from time to time. The

the screws on the operations of 11 PSBs proposed Committee should look into

including their lending and hiring those provisions of the RBI Act, Banking

activities under the Prompt Corrective (Regulation) Act and other relevant

Action (PCA) framework. The RBI's statutes with a view to ensuring the

revised PCA framework, implemented in accountability of RBI as the regulator of

2017, monitors and classifies banks into the banking sector including the matter

three risk parameters based on their of having RBI nominees on the Boards of

capital adequacy, net non-performing banks. The panel also suggested that a

assets (NPAs), return on assets and three-month overlap may be provided at

leverage. The committee would CEO level to facilitate smooth transition

therefore expect the RBI to provide a in PSBs. Further, with a view to utilizing

coherent and positive road map for each the expertise of senior bankers, the

of these 11 banks to come out of the retirement age of CEOs of PSBs can be

stringent PCA framework within a raised to 70 years as in the case of their

stipulated timeframe, so that they can private sector counterparts. The

resume the i r no rma l bank ing committee also desired that RBI as

operations. The panel "apprehensive" regulator should consider separate

that the PCA framework may end up treatment of NPAs due to willful

bringing more and more PSBs under its defaulters and those where defaults are

ambit. The Committee would therefore because of extraneous reasons such as

urge both the RBI and the government to cancellation of coal blocks and policy

constantly monitor the situation for each interventions by the judiciary and


I N D I A

general policy changes in various sectors Rajiv Kumar mentioned that they will

such as coal, power, steel, telecom, ensure the merged entity is well-

roads. For this purpose, the concerned capitalized and would provide growth

RBI guidelines/circulars should be capital as well. The government had

reviewed noted in a statement that the

https://economictimes.indiatimes.com/industr amalgamation will help create a strong, y/banking/finance/banking/ parliamentary- globally competitive bank with panel-asks-rbi-to-review-capital-needs-for- economies of scale and enable banks/articleshow/67364976.cms Dated: Jan

realization of wide-ranging synergies. 04, 2018

As per Finance Minister Shri Arun Jaitley,

government would invest 41,000 crore GOVERNMENT, RBI IN TALKS in state-run lenders, over and above

OVER MERGER OF THREE PSU what had been announced earlier, to

BANKSstrengthen their capital base. This would

The government is in talks with the enhance the total recapitalization in the

Reserve Bank of India on the details of current financial year to 1.06 lakh crore

the first three-way merger among public from 65,000 crore. This would augment

sector banks, which will create an entity the lending capacity of public sector

that will become a 'systemically banks and help them exit the RBI's

important financial institution.' The Prompt Corrective Action framework,

U n i o n C a b i n e t a p p r o v e d t h e which imposes curbs on certain business

amalgamation of Dena Bank and Vijaya operations.

Bank with Bank of Baroda. The merger https://economictimes.indiatimes.com/industr

will come into force on April 1, 2019, y/banking/finance/banking/ government-rbi-

making the entity the country's second- i n- t a l k s-ove r-merge r-o f- th r ee-psu-

banks/articleshow/67374848.cms Dated Jan largest public sector bank and third-04, 2019largest lender, with a combined business

of 14.8 lakh crore. The RBI has so far RBI PCA BANKS, QUEUE TO identified the State Bank of India, the

CHECK OUT OF HOTEL largest lender, and privately owned ICICI

Bank and HDFC Bank as domestic CALIFORNIA IS SLOWLY systemically important banks (DSIBs). FORMINGBanks designated as DSIBs have to Dena Bank will be the first lender to exit provide for extra capital based on the the prompt corrective action (PCA) RBI's assessment, in addition to meeting framework, the Reserve Bank of India's regular capital norms. The additional (RBI) intensive care unit. But this exit is Common Equity Tier 1 requirement for through death, as the lender would DSIBs will become fully effective from cease to exist as an entity after April, April 1, 2019. As per Financial services when its merger with Bank of Baroda secretary Shri Rajiv Kumar, after the takes effect. It is hard to say when the cabinet's approval that the key ratios of remaining 10 lenders still quarantined the amalgamated entity are healthy. Shri under RBI PCA framework would come


I N D I A

out. But the recent commitment of the chance to exit PCA. Bank of India has the

government to infuse capital seems to lowest net bad loan ratio among PCA

suggest that the distance to the door just banks and also has a stronger capital

got reduced. At least, the investors adequacy ratio. A bank is dragged into

holding the scrips of these lenders seem PCA if it breaches thresholds for capital,

to think so, as six of them have surged bad loans, leverage ratio and return on

more than 10% in the last three weeks. assets. The Reserve Bank of India (RBI)

The optimism comes on reports that the looks into the performance of the

government will soon infuse about Rs. lenders on an annual basis to determine

27,000 crore into six PCA banks. It is whether they are strong enough for it to

also willing to pour in Rs. 41,000 crore remove restrictions imposed on them

over and above the original commitment under PCA. The government's capital

of Rs. 65,000 crore into 21 public sector infusion seeks to mend the capital ratios

b a n k s a s p a r t o f t h e b a n k of weak banks under PCA and also help

recapitalization plan. What investors are them make provisions to bring down the

betting on is that the government will be net bad loan ratio to below 6%. In a

the parent who gives the maximum nutshell, fresh money should enable

attention to the weakest child. Hence, banks to get the numbers to exit PCA. Of

the RBI PCA banks would receive the course, some relaxation of norms may

biggest chunk of funds. Indeed, in the still be required from the central bank,

previous round of infusion in fiscal year on parameters such as return on assets,

2018, the government did exactly that. since most state-owned lenders have

The fact that Bank of India received a been running losses. To be fair, some

whopping Rs.10,086 crore infusion last banks have shown marked improvement

month shows how serious the in strengthening their balance sheet, but

government is in putting life back into most others continue to lag. The

the lenders. According to analysts at government's principal economic

Kotak Institutional Equities, the lender adviser Shri Sanjeev Sanyal had chided

needed Rs. 4,100 crore additional capital RBI to have a Hotel California approach

in 2019-20 to offset provision to PCA. To borrow the reference to the

requirements. As of September, Bank of 1970s song of that title by American

India's common equity Tier-I ratio was rock band Eagles, the queue to check out

7.5%, far higher than the regulatory of the hotel is slowly forming.

minimum of 5.5% and the additional

capital infusion will boost this further.

Given the increased elbow room in

capital, the lender can write off loans to

bring down its net bad loan ratio below

the required threshold and exit PCA.

Analysts at Kotak believe that Bank of

India, Oriental Bank of Commerce and

Corporation Bank now have a strong


I N D I A

https://www.livemint.com/Money/b1qQ2NYdw total currency in circulation amounting itA9M6OwQLK3H/RBI-PCA-banks-Queue-to- to Rs 18,037 billion at the end of March check-out-of-Hotel-California-is-slo.html

2018, Rs 2000 notes accounted for 37.3 Dated: Jan 04, 2019

per cent, down from 50.2 per cent at the PRINTING OF RS 2,000 NOTES

end of March 2017. The old Rs 500 and NOT STOPPED, CLARIFIES

Rs 1000 bank notes that were scrapped GOVERNMENT in November 2016 accounted for around Denying reports that the Reserve Bank of 86% of the total currency in circulation at India (RBI) had stopped the production of the time.Rs 2,000 currency notes, the finance https://www.livemint.com/Companies/dEB2b6ministry mentioned that printing was MlHjRCPuJ18pMuyH/Rs-2000-currency-note-

printing-stopped-government-rbi.htmlplanned according to the projected Dated: Jan 04, 2019requirement. Printing of notes is planned

as per the projected requirement. As per

NAYARA ENERGY TAKES RBI, Economic Affairs Secretary Shri Subhash

Chandra Garg more than adequate notes ED TO COURT OVER FEMAof Rs 2,000 in the system with over 35% Nayara Energy, earlier known as Essar Oil

of notes by value in circulation being of Ltd, has moved the Bombay high court

Rs 2,000. He also mentioned that there seeking a stay on a Reserve Bank of India

had been no decision regarding Rs 2,000 (RBI) order fining it for alleged violation

note production recently. A media report of foreign exchange regulations and an

had earlier claimed the government had invest igat ion launched by the

stopped the printing of the high-value Enforcement Directorate (ED) into the

currency note as it was being used for matter. RBI imposed a penalty of Rs. 4.96

“hoarding, tax evasion and money crore on the refiner after finding it guilty

laundering”. Another report, by PTI, of violating the Foreign Exchange

mentioned that printing of the Rs 2,000 Management Act (FEMA). According to

b a n k n o t e , i n t r o d u c e d p o s t - the central bank, the company breached

demonetisationin November 2016, had the limit for transfer of foreign exchange

been brought down to a minimum. under the Liberalised Remittance

Immediately after the sudden decision to Scheme while issuing global depositary

ban old Rs 500 and Rs 1,000 currency shares in 2010. After the matter came to

notes by the government, the Reserve the attention of RBI, it imposed the

Bank of India had come out with the Rs penalty on 27 April 2017 and directed

2,000 note along with a new look 500 the ED to look into it in January 2018. The

rupee note as part of its remonetisation ED then initiated an investigation in

exercise. According to RBI data, there January 2018 and summoned the

were 3,285 million pieces of Rs 2,000 company's representatives to appear

notes in circulation at the end of March before it. Nayara Energy appealed RBI in

2017. A year later (on March 31, 2018), April 2018 to quash the penalty. This

there was only a marginal increase in the was, however, rejected by the central

number at 3,363 million pieces. Of the bank in May 2018. Nayara Energy, now

,


https://www.livemint.com/Politics/kuYmD8C3ixSrC9JxOP3ABI/Rs500-currency-notes-worth-Rs3000-crore-printed-everyday-S.html

I N D I A

https://www.livemint.com/Companies/dEB2b6part of Russian energy major Rosneft MlHjRCPuJ18pMuyH/Rs-2000-currency-note-and Trafigura-United Capital Partners printing-stopped-government-rbi.html Dated

(UCP), said in its application to Bombay Jan 04, 2019

high court: Pass an ad-interim order SYNDICATE BANK MD DRAWS

staying the investigations being carried UP GROWTH, CLEAN-UP PLANSout by the Directorate of Enforcement,

Syndicate Bank MD Shri Mrutyunjay Mumbai pursuant to the summons dated

Mahapatra has drawn up a multi-January 11, 2018, issued by the

pronged plan to clean up bad loans, Respondent No 3 (ED) to the Petitioner

improve advances and grow fee income. No 1 (Nayara Energy). Holding that the

Shri Mahapatra is one of the six SBI letter dated May 25, 2018, issued by the

deputy MDs chosen by the Centre to General Manager, RBI, rejected the

head nat iona l ized banks . The application of Nayara Energy, invoking

government had decided to tap SBI with the supervisory jurisdiction of RBI

the object of bringing some of the best Governor is unreasonable, arbitrary,

practices of the country's largest bank illegal and void as the same is in

into smaller nationalized banks. To contravention of Rule 4(3) of Foreign

improve Syndicate Bank's Tier I capital Exchange (Compounding Proceedings)

adequacy ratio well over the 6.7% Rules 2000. The petition was filed on 2

prescribed by the regulator, its August 2018 and there has been one

committee of directors will meet on hearing so far, on 15 October. A division

January 7 to approve raising Rs 500 crore bench of the Bombay high court,

by issuing equity shares to eligible staff comprising Justices B.P. Dharmadhikari

members under an Employee Stock and S.V. Kotwal, will hear the case again

Purchase Scheme. This capital-raising on 25 January. Law firm Cyril Amarchand

exercise comes on the back of the Mangaldas is representing Nayara

government investing Rs 2,460 crore in Energy while law firm Udwadia & Co is

two tranches. As per Shri Mahapatra, representing the central bank in the case

business plan is to build even as we are A Nayara Energy spokesperson declined

repairing.As part of this mission, the to comment on the ground that the case

bank has created a new stressed asset was filed by the erstwhile management.

vertical. As a result, all troubled loans In August 2017, Russian oil major

above this figure will be referred from Rosneft and Kesani Enterprises (a

the branch to the head office directly consortium of Trafigura group and UCP

without having to go to the zonal or PE Investments) acquired a 49.13% stake

regional offices. To boost lending to each in Nayara Energy Ltd (then Essar Oil

small businesses, the bank has taken Ltd), along with captive port and power

two new initiatives. First, it is tying up assets from the Essar group for $12.9

with FINTECHs to distribute loans. It has billion. Nayara Energy operates a 20

already tied up with Atyati Technologies, million tonne oil refinery at Vadinar in

a FINTECH with a technology platform Gujarat and more than 4,473 petrol

'GANASEVA' to provide loans to hitherto pumps across the country.


I N D I A

uncovered med ium and sma l l duly audited by the bank's statutory

enterprises for up to Rs 10 lakh. It has central auditors every year. PNB has also

also tied up with SREI Equipment apprised that no amount was taken back

Finance, which has a lion's share of the or withdrawn from the trusts' account.

infrastructure equipment finance market With regard to placement of the matter

in India. Under the partnership SREI will before the bank's audit committee of

originate loans for Syndicate Bank.The board (ACB), the bank has further

bank will do a proof of concept by selling apprised that the bank's annual financial

policies in three zones before taking up accounts for the financial year 2016-17

sales on an all-India basis. are audited by the bank's statutory

https://economictimes.indiatimes.com/industr central auditors and have already been y/banking/finance/banking/ syndicate-bank- approved by the ACB and the board. The md-draws-up-growth-clean-up-plans/ bank has also reported that it has articleshow/67376741.cms Dated: Jan 04, 2019

initiated steps to further lay the reference

received as well before the ACB.NO CASE OF PENSION,

https://economictimes.indiatimes.comGRATUITY FUND DIVERSION

/industry/banking/finance/banking/noAT PNB -case-of-pension-gratuity-fund-As per Finance Minister Shri Arun Jaitley,

diversion-at-pnb-fm-arun-jaitley/ Punjab National Bank (PNB) did not

articleshow/67380433.cms Dated: Jan engage in any misappropriation of

04, 2019pension and gratuity funds in the past

and no amount was taken from the trusts' NO JOB LOSSES DUE TO

account. The minister was responding to MERGER OF PUBLIC SECTOR

a question asked by BJP MP Kirit Somaiya BANKSif the government was aware of the As perFinance Minister Shri Arun Jaitley, misappropriation of the Employees' there would be no loss of jobs due to Pension Fund Trust and Gratuity Fund by merger of public sector banks. Earlier PNB in 2016-17, and, if so, the MP also this week, the Cabinet approved merger sought details. PNB has informed that of Vijaya Bank and Dena Bank with Bank there is no misappropriation of funds, of Baroda. As per Shri Jaitley, there would and that the pension fund and gratuity be no job losses due to merger of the fund trusts are separate entities and the banks and that the move would create a bank is not authorized to operate the bigger entity like the State Bank of India trusts' accounts or transfer any amount (SBI). The cost of lending could also from the trust. The bank has further become cheaper. During the Question mentioned that adequate funds for Hour, the minister mentioned that out of pension and gratuity are maintained as the 21 public sector banks, 11 are under per the actuarial valuation report without PAC (Prompt Corrective Action) any exception that the same are in strict framework. PAC is initiated against compliance of accounting standards. banks that have high levels of Non-PNB has informed that these funds are


I N D I A

Performing Assets (NPAs). The curve of Those studying Nursing Courses formed

non-performing assets would go down the largest category that was unable to

and that the Insolvency and Bankruptcy repay their loans constituting 21.28% of

Code has helped in bringing back around the total education sector bad loan

Rs 3 lakh crore into the system. The State portfolio of banks. Engineering students

Bank of India (SBI) and other public stood third at 9.76% of the total bad loan

sector banks have been making portfolio till March 2018. Loans

operational profits. They incurred losses disbursed towards nursing course in

due to provisioning for non-performing 2017-18 stood at Rs 2,263 crore as

assets. With regard to recapitalization of compared to Rs 1,154 crore in the

Public Sector Banks (PSBs), the minister previous fiscal. RBI declines to share bad

mentioned that Rs 51,533 crore has loan data with SEBI. The Reserve Bank of

been infused into them in the current India has refused to share list of certain

financial year till December 31. In the corporate entities which have defaulted

budget estimates of FY 2018-19, Rs on their loans with market regulator,

65,000 crore has been allocated for Securities and Exchange Board of India

recapitalization of PSBs and an amount (SEBI). Minister of state for finance Shri

of Rs 51,533 crore has been infused in Pon Radhakrishnan informed Lok Sabha

PSBs till December 31, 2018. The in a written statement that SEBI had

minister also mentioned that in recent sought the information in order to

past, Rs 90,000 crore was allocated in enable it to assess the impact on

the Union Budget and infused in various investment vehicles which could have

PSBs by the government during financial invested in such entities. SEBI has further

year 2017-18 informed that, RBI had expressed its

https://economictimes.indiatimes.com/industr inability to share the list of such troubled y/banking/finance/banking/no-job-losses- accounts primarily due to the reasons of due-to-merger-of-public-sector-banks- such defaults/ NPAs not being willful finance-minister-arun-jaitley/articleshow/

defaults and the issue of customer 67379951 .cms Dated Jan 04, 2019

confidentiality. It was informed by SEBI

that the market regulator had sought STEEP RISE IN BAD LOANS IN information from the Reserve Bank of

EDUCATION SECTORIndia (RBI) on list of certain corporate

Banks have reported a steep rise in entities who have defaulted on bank

education loans going bad. As per data credit and/or been classified as Non-

provided by 'Indian Banks Association Performing Assets (NPA). In a separate

(IBA) non performing assets or NPA in response the government informed the

education sector have risen to 8.97% at lower house that as per data till August

the end of March 2018, as compared 2018, state run lenders have registered

with 7.29% in March 2016. The Lok 2,571 FIRs against willful defaulters,

Sabha was informed by the government 9,363 suits have been filed for recovery

that bad loans of PSBs in education from them, and action has been initiated

sector were at 5.70% in March 2015. unde r t he Secu r i t i z a t i on and


I N D I A

Reconstruction of Financial Assets and strike call materialises, "the workmen of

Enforcement of Security Interest Act, our bank may take part in the proposed

2002 in respect of 7,616 cases of willful strike on the mentioned date, in which

defaulters occasion the normal working of the

https://economictimes.indiatimes.com/industr branches/offices of the Bank may get y/banking/finance/banking/steep-rise-in- affected during the day". Ten central bad-loans-in-education-sector/articleshow trade unions- INTUC, AITUC, HMS, CITU, /67383941.cms Dated: Jan 05, 2019

AIUTUC, AICCTU, UTUC, TUCC, LPF and

SEWA have also called for a nationwide BANKING SERVICES MAY BE

general strike on January 8-9 against HIT AS BANK UNIONS CALL

what they call "anti-people" policies of FOR STRIKE ON JANUARY 8-9 the Centre and have placed a charter of Banking services are likely to be affected 12 demands before the central on January 8-9 as a section of PSU bank government. Earlier on December 26, employees would go on a two-day strike 2018, nine bank unions or close to 1 in support of the nation-wide strike call million employees of various banks, given by 10 central trade unions against including private lenders, had observed the government's alleged anti-worker a one-day strike to protest against the policy. The All India Bank Employees proposed amalgamation of Vijaya Bank Association (AIBEA) and Bank Employees and Dena Bank with Bank of BarodaFederation of India has informed the https://economictimes.indiatimes.com/industr

Indian Banks' Association (IBA) of the y/banking/finance/banking/banking-services-

may-be-hit-as-bank-unions-call-for-strike-two-day nationwide strike on January 8-on-january-8-9/articleshow/67397447.cms 9, 2019, IDBI Bank said in a filing to the Dated: Jan 05, 2019

BSE. In a stock exchange filing,

Allahabad Bank mentioned that the NEARLY 9 PERCENT OF

issues and demands are of industry level EDUCATION LOANS BY PSBS and strike call is also given at industry TURNED BAD IN FY 18level. Therefore, if the strike takes place, Nearly 9 per cent of the education loans the functioning of branches of the bank extended by public sector banks (PSBs) may be affected. The bank is taking all were categorized as non-performing the necessary steps in terms of the assets in the last financial year, existing guidelines for smooth according to the government. As per functioning of bank's branches/offices information provided by Indian Banks' on the day of strike(s), in the event the Association (IBA), NPAs of PSBs increased strike materializes. Public-sector Bank from 7.29 per cent as on March 31, 2016 of Baroda mentioned that in the event of to 8.97 per cent as on March 31, 2018. AlBEA and BEFI proceeding on strike on Among the NPAs of PSBs under January 8-9, 2019, the functioning of education category, the highest 21.28 bank's branches/offices in some of the per cent originated from nursing courses zones may be affected. Private sector followed by engineering (9.76 per cent), Karur Vysya Bank mentioned that if the


I N D I A

other professions (9.49 per cent), to reduce the wide gap in their

medical profession (6.06 per cent) and compensation package and that of the

MBA (5.59 per cent). As at March 31, private sector peers. Public sector banks

2015, education sector bad loans stood (PSBs) ought to step up hiring at junior

at 5.7 per cent. The banks received and middle levels to ensure there is no

repayment of education loans worth Rs vacuum following retirement of large

13,766.82 crore in 2017-18; Rs number of employees in the near future,

11,548.87 crore in 2016-17; Rs the lawmakers said in a report to

9,124.95 crore in 2015-16 and Rs 8,537 Parliament. In PSBs, 95 per cent of GM

crore in 2014-15. In a separate question level employees, 75 per cent of Deputy

about loans to micro, small and medium GM level employees, and 58 per cent of

enterprises (MSMEs), more than Rs 9.06 Additional GM level employees will retire

crore was disbursed during 2017-18 in 2019-20. The Standing Committee on

across all states and union territories. In Finance has observed there has been

2016-17, the MSME sector got loans of "strangely a discernible" fall in the

more than Rs 7.89 lakh crore from number of candidates registering for

banks, Rs 8.77 lakh crore in 2015-16 clerical, probationary officer and

and Rs 7.76 lakh crore in 2014-15. As specialist officer positions at PSBs as per

per the minister government and the data available from the Institute of

Reserve Bank have taken several steps to Banking Personnel Selection. The

ensure access of credit to MSMEs. He committee believes that while banks

also informed the House that the online reducing their recruitment could be a

lending portal with a majority ownership factor, undue stress and work pressure

of 6 PSBs and financial institutions, their from long hours and difficult working

associate companies have been conditions without commensurate

launched to provide loans of up to Rs 1 compensation/incentive package may

crore in 59 minutes. be discouraging prospective candidates.

https://economictimes.indiatimes.com/industr The panel headed by veteran Congress y/banking/finance/banking/nearly-9-per- leader Shri M Veerappa Moily has cent-of-education-loans-by-psbs-turned- expressed apprehension that there bad-in-fy18/articleshow/67381988.cms

could be "sudden vacuum" because of Dated: Jan 06, 2019

large number of retirements in the near

future in state-owned banks at various FAST-TRACK HIRING TO

levels. The committee desires that OVERCOME MANPOWER proper manpower planning and human SHORTAGE DUE TO resource development strategies should

RETIREMENTS: be put in place in PSBs, so that the

staff/officers groomed into the system, PARLIAMENTARY PANEL TO remain motivated and a sudden vacuum PSBSis not created at the junior/middle levels The committee has made a case for more due to manpower shortage. Further, the incentives and a better remuneration committee has made a case for more package for senior management of PSBs


I N D I A

incentives and a better remuneration banks, while ensuring the economic

package for senior management of PSBs viability of ATMs for all stakeholders, so

to reduce the wide gap in their that a forced cash crunch is not imposed

compensation package and that of the on the public. The panel headed by

private sector peers. As per the report, senior Congress leader Shri M Veerappa

the committee has desired that in case M o i l y a l s o n o t e d t h a t R B I ' s

the lateral mobility policy of senior r emone t i sa t ion d r i ve has no t

officers in PSBs at the Board level is being augmented/resolved the cash supply to

considered by the government by ATMs in rural/semi-urban areas, forcing

promoting DMDs of SBI, then the shutdown of many ATMs. The committee

"movement should be made both ways, has expressed concern that "there are

that is from SBI to PSBs and from PSBs to just not enough" ATMs being installed or

SBI" added to cater to the rising demand for

https://economictimes.indiatimes.com/industr cash in an expanding economy, even as y/banking/finance/banking/fast-track-hiring- more and more debit cards are being to-overcome-manpower-shortage-due-to- issued and large number of Jan Dhan retirements-par-panel-to-psbs/articleshow

accounts opened by banks. ATMs have /67404318.cms Dated: Jan 06, 2019

become an important channel for

withdrawing money even after the close PARLIAMENT PANEL NUDGES of banking hours. Digital transactions

RBI TO FIX THE PROBLEMare also catching up. Besides ATMs,

A parliamentary panel has asked the basic banking services are provided by

Reserve Bank to address the problem of business correspondents through their

perpetually dysfunctional ATMs so as to micro ATMs.

avoid any situation of forced cash https://economictimes.indiatimes.com/industr

crunch.The Standing Committee on y/banking/f inance/banking/dry-atms-

Finance has also asked banks to install parliament-panel-nudges-rbi-to-fix-the-

adequate number of ATMs. As per a data problem/articleshow/67403917.cms Dated: Jan

06, 2019of RBI, there were 2,21,492 Automated

Teller Machines (ATMs) in the country as

at September-end 2018. These include ANDHRA BANK TO DEPLOY 1,43,844 ATMs of public sector banks, OVER 1,600 BUSINESS 59,645 ATMs of private banks and CORRESPONDENTS TO BOOST 18,003 of foreign banks, payments FINANCIAL INCLUSION banks, small fiance banks and White

PROGRAMMELabel ATMs (WLAs), which are owned and

State-owned Andhra Bank will deploy operated by non-bank entities. As

over 1,600 business correspondents to digital transactions have not become

provide a host of services like account anywhere near universal, the committee

opening, door-step banking, ATM would urge upon RBI to pursue the

deployment and NPA recovery under its lingering problem of dysfunctionality as

financial inclusion project. The bank will well as shortage of ATMs vigorously with

deploy these business correspondents


I N D I A

mainly in Andhra Pradesh and expected to operate from different

Telangana. The lender has been locations in other states. Andhra Bank

implementing the financial inclusion will give priority to the authorized

project since 2010 through the business functionaries of well-run self-help

correspondent model with micro groups (SHGs) which are linked to banks

ATMs/kiosk banking technology. to act as BC agents. Besides, any

A m o n g o t h e r s , t h e b u s i n e s s individual or entities approved by the

correspondents (BCs) may also be bank, individuals including retired bank

assigned with other financial and non- employees, retired government school

financial transactions like recovery of teachers, kirana shop owners, dealers

loans, enrolment of social security working in public distribution system,

schemes as well as mobilization of new retired government employees and ex-

business for the bank. They may also be servicemen may also be deployed. As per

required to carry on with all government the proposal document, the business

schemes including Aadhaar, mobile and correspondent agent's age should be

PAN seeding, insurance sales, banking preferably between 20 to 40 years, and

transactions and any new initiatives should not exceed 50 years. At present,

taken up by the bank from time to time. Andhra Bank uses separate Financial

The bank has invited bids from corporate Inclusion Gateway (FIG) solution

business correspondents (CBCs) or procured from a third-party vendor for

vendors, who wil l oversee the all financial inclusion transactions. The

d e p l o y m e n t o f b u s i n e s s lender said it also proposes to deploy

correspondents, by January 31, 2019. 2 0 0 - 1 , 0 0 0 d i r e c t b u s i n e s s

Andhra Bank invites proposals for correspondents over five years. The

selection of corporate business bank will procure the devices and the

correspondents (CBCs) for end-to-end selected bidder to provide application

implementation of financial inclusion software for deployed devices and also

project. As of now, the bank has facilitate end-to-end operations by

deployed about 2,200 BC agents acquiring the transactions.

t h r o u g h c o r p o r a t e b u s i n e s s

correspondent (CBC) model across BANDHAN BANK SET TO Andhra Pradesh, Telangana, Odisha and ACQUIRE GRUH FINANCE IN some locations of Maharashtra, Tamil SHARE SWAP DEALNadu, Chhattisgarh and Bihar. The Bandhan Bank Ltd is set to acquire selected vendor will deploy all the mortgage lender Gruh Finance Ltd via a banking applications on the micro share swap, a move aimed at cutting the ATMs/ mobile devices/kiosk without any bank's promoter holding and expanding extra cost to the bank. As per the project, its housing finance portfolio, two people the bank wants to deploy 922 BC agents wi th d i rect knowledge of the in Andhra Pradesh and 695 in Telangana development said. Shareholders of Gruh by March 2019 apart from some mobile Finance, which is 57.83% owned by business correspondent agents who are Housing Development Finance Corp.


I N D I A

(HDFC) Ltd, will receive three shares of Bandhan Bank. The proposed deal

Bandhan Bank for every five shares held entails HDFC emerging as a promoter for

in the home financier, the people said. Bandhan Bank, apart from being the

The swap is based on the six-month promoter of India's largest private lender

weighted average price of the shares of HDFC Bank, where it owns 19.72% as of

the two companies.As a part of the deal, 30 September. RBI also does not allow

HDFC will also cut its stake further by the promoter of one bank to hold more

around 5.5% (in the merged entity) by than 10% in another bank as a promoter.

selling shares to a clutch of public To meet this requirement, HDFC is in

institutional investors or in the talks with a clutch of institutional

secondary market so that HDFC's total investors to sell at least 5.5% in the

holding as a promoter in the combined combined entity. The report, however,

banking entity is brought down below did not specify any modalities of the

10%, which is in accordance with the deal. In regulatory filings in response to

bank ownership norms stipulated by RBI exchanges seeking clarification on the

(Reserve Bank of India).The merger could news report, the two companies had

be announced as early as this week declined to comment on what they

following board meetings of the two termed market speculation. In the

companies. RBI's banking license rules September quarter, Gruh Finance

required Bandhan Financial Holdings Ltd disbursed loans worth Rs. 2,738 crore.

to halve its stake from 82.3% to 40% The loan book stood at Rs. 16,663 crore

within three years of starting business. at the end of the quarter. The home

RBI had in September placed restrictions financier, which is primarily focused on

on Bandhan Bank for its failure to meet retail segment, recorded a net profit of

the rules by freezing branch expansion Rs. 220 crore for the first half of the

and remuneration of founder and chief current fiscal.

htps://www.livemint.com/Companies/ZdcrOpeiexecutive Shri Chandra Shekhar Ghosh. vAwSFG7ntJpBl I/Bandhan-Bank-set-to-Bandhan Bank currently commands a acquire-Gruh-Finance-in-share-swap-market value of around Rs. 63,000 crore, deal.html Dated: Jan 06, 2019

while Gruh Finance has a market cap of

around Rs. 23,000 crore. The six-month NPA LEVEL OF BANKS ON

volume weighted average prices of THE DECLINE, RBI GOVERNOR

Bandhan Bank and Gruh Finance are at SHRI SHAKTIKANTA DASRs. 528.61 and Rs. 318.50, respectively, RBI's recent FSR report said stress tests on BSE. On that basis, the merger will suggest there would be further result in HDFC's ownership falling to improvement in banks' asset quality in 15.44% in the merged entity and the new year. Reserve Bank of India (RBI) Bandhan Financial's share dropping to Governor Shri Shaktikanta Das around 60.27%. Given that 'Bandhan e x p r e s s e d s a t i s f a c t i o n o v e r Financials stake is still above the RBI-performance of the banking sector stipulated 40% norm, it will have to take saying bad loans have declined, more steps to cut its ownership in


I N D I A

particularly of state-owned banks. The government bond yields, and quickening

RBI has also initiated stakeholder bad loan recoveries should buttress the

consultation on governance reform in profits at Indian lenders in the December

the banking sector. Various initiatives quarter. Bank credit growth has revived

taken by the government have yielded in the second half of the fiscal, helped by

results, with the bad loans of public a favorable base effect and demand from

sector banks (PSBs) declining by over Rs individuals to buy homes, cars and other

23,000 crore from a peak of Rs 9.62 lakh consumption goods and services.

crore in March 2018. There is Liquidity constraints at NBFCs have

considerable amount of improvements helped banks step up their lending in the

which have to be sustained if banks have fiscal third quarter. Bank credit growth

to fulfil their responsibility and if some improved to a year-on-year rate of 15%

of the banks have to become healthy. in the fortnight ended December 21, the

The RBI's recent FSR report said stress latest RBI data showed, compared with

tests suggest there would be further 10% growth recorded a year earlier.

improvement in banks' asset quality in Analysts said stronger demand for loans

the new year. In the baseline scenario, and better margins are likely to help

the gross NPA ratio might decline from banks in the third quarter. Jefferies

10.8 per cent in September 2018 to 10.3 expects an aggregate 28% on-year

per cent in March 2019 and 10.2 per cent increase in banking profits in the

in September 2019. After a prolonged quarter. Overall credit growth has picked

period of stress, the load of impaired up steadily for banks, although personal

assets was receding, with banks loans continue to grow strongly, credit

reporting their first half-yearly decline in to the services sector has picked up in

the gross NPA ratio since September the past few months. Large corporate

2015. On governance reform in the infrastructure credit has picked up over

banking sector, it is an important issue the past few months, albeit from a low

and the RBI has initiated consultation base. Trading income should provide

with various stakeholders as to what support to banks due to fall in yields. The

kind of reforms can be brought in. value of bonds rises when yields fall.

https://economictimes.indiatimes.com/industr Yields on the benchmark 10-year y/banking/finance/banking/npa-level-of- government bond dropped to 7.36% at banks-on- the-dec l i ne- rb i-gove rno r- the end of December from 8% at the start shaktikanta-das/articleshow/67422586.cms

of the quarter, and that should help Dated: Jan 07, 2018

banks make mark-to-market gains on

their investments. G-sec yields have GOOD CREDIT GROWTH TO sharply declined versus the consensus

HELP BANKS' NUMBERSview, two months ago, of rising interest

Higher credit demand, better pricing rates. This entails positive earnings

power due to liquidity woes at impact for banks in the form of higher

competing para banks, more trading treasury gains, more so for PSU banks

income because of the decline in than private. The recovery of bad loans is


I N D I A

another area benefitting lenders. Banks conform to RBI guidelines issued after

will benefit from the improvement in the Supreme Court's judgment on

recoveries by the upgradation of the Aadhaar that barred private companies

Jayaswal Neco, Binani Cements and from using the database for paperless

Uttam Galva loan accounts. Jayaswal verification of customers. There is no

Neco, a maker of cast iron pipes, was in eKYC, the RBI has not told us anything

the second list of loans referred to the clearly about the alternative KYC

bankruptcy court by RBI. It owed lenders mechanisms that they plan to approve.

Rs 3,522 crore. Last month, some The deadline is just a few weeks away

lenders led by SBI sold their loans to an and we cannot adhere to (it) with this rate

assets reconstruction company headed of progress.There have been discussions

by Bank of America. SBI has recovered around alternative KYC mechanism like

65% of its Rs 1,363 crore dues from the using video-based verification or XML-

company. based KYC, but neither has been

https://economictimes.indiatimes.com/industr formally approved by the banking y/banking/finance/banking/good-credit- regulator. Mobile wallets kickstarted the growth-to-help-banks-numbers/articleshow Indian digital payment revolution about /67430351.cms Dated: Jan 08, 2018

four years ago but now only a few such

companies remain in the fray. Most of RBI KYC DEADLINE MAY

the PPI license holders such as PUNCH A HOLE IN WALLET MobiKwik, PhonePe and Amazon Pay are COMPANIES PLANS either focusing on Unified Payments As per payments industry executives, Interface business or have diverged into most of India's mobile wallets may other fintech activities. A large chunk of become non-operational by March, as the wallets which were used for they fear companies will be unable to remittance have anyway moved to the meet the central bank's deadline to business correspondent channels complete verification of all customers by because of regulatory restrictions. Only the end of February 2019. Prepaid standalone wallets will be directly payment instruments (PPIs) or mobile affected by the (current impasse). As per wallets were mandated by the Reserve Shri Sachin Seth, FINTECH leader for Bank of India in October 2017 to capture India, Middle East and Africa for EY, only all information required under the those mobile wallets that have know-your-customer (KYC) guidelines. developed compelling use cases will be So far, companies have been able to able to sustain. The entire proposition verify just a fraction of their total user around ease of opening wallets is not base, and are yet to complete biometric there anymore; hence it is now only or physical verification of the majority of about use cases where wallets will be a users. More than 95% of the mobile staging area where you can store money wallets in the country could stop being and transact. After the central bank operational by March. The payments directed wallets to become fully KYC industry has been scrambling to compliant payment instruments in 2017,


I N D I A

companies like PhonePe, Amazon Pay Association (AIBEA) and Bank Employees'

and Paytm began asking customers for Federation of India (BEFI) have supported

identification documents. Paytm, which the strike, which has impacted banking

had received a banking license, went all operation where these two unions are

out to use biometric dongles and field strong. However, the operation in SBI

agents to convert its existing wallets into and private sector banks remained

full KYC ones and to also open bank unaffected as other seven unions in the

accounts. A company executive banking sector are not part of the strike.

estimates that Paytm has managed to Many public sector banks have already

convert 70% of its user base into full KYC informed their customers about likely

ones. But other payment companies impact on services if strike materializes.

have struggled. These companies are If the strike materializes, a section of the

hoping that Parliament approves bank's employees may take part in the

pending legislation, which allows proposed strike on the said dates, in

voluntary use of the Aadhaar number by which case, the normal functioning of

consumers for online as well as offline the branches/offices of the bank may get

verification. Looking at the convenience affected. A two-day strike on January 8

factor, consumers would opt for Aadhaar and 9 has been called by the central

verification, but it all depends on how trade unions against the alleged

the Act is passed, it would have helped if repressive policies for workers adopted

we could get some assurance from the by the government.

https://economictimes.indiatimes.com/industrcentral banky/bank ing/ f inance/bank ing/bank ing-https://economictimes.indiatimes.com/industroperations-partially-affected-due-to-trade-y/banking/finance/banking/rbi-kyc-deadline-union-strike/articleshow/67432321.cms Dated may-punch-a-hole-in-wallet-companies-Jan 08, 2018plans/articleshow/67430125.cms Dated Jan 08,

2018

BANKS PROPOSE $900 BANKING OPERATIONS MILLION TURNAROUND PLAN PARTIALLY AFFECTED DUE FOR JET AIRWAYS

Local lenders to Jet Airways (India) Ltd, TO TRADE UNION STRIKEA two-day strike on January 8 and 9 has led by State Bank of India (SBI) proposed

been called by the central trade unions a $900 million resolution plan,

against the alleged repressive policies comprising fresh equity infusion and

for workers adopted by the government. restructuring of $450 million of its

Banking operations have been affected loans. The Jet Airways' turnaround plan,

in some parts of the country as a section if approved by all stakeholders, will

of employees refrained from work in trigger a change in Jet Airways'

support of the two-day strike call given shareholding, with founder chairman

by 10 central trade unions to protest Shri 'Naresh Goyals stake falling below

against alleged anti-labor policies of the the current 51%. The resolution plan was

government. All India Bank Employees' shared with Jet Airways' lessors and


I N D I A

vendors at a meeting chaired by SBI and December that Etihad Airways has

attended by the airline's senior offered to guarantee loans worth $150

management, including Goyal and a million for Jet Airways to keep the airline

representative of Etihad Airways PJSC, operational.According to estimates, Jet

which holds a 24% stake. While the finer Airways needs close to $500 million

details are still being worked upon, the between now and April to meet

broader contours entail that Shri Naresh repayment obligations and manage

Goyal and Etihad will together infuse operat ing expenses.There is a

$450 million in the company, while the possibility that Goyal may cede

Indian lenders will restructure another operational control to Etihad, which can

$450 million of the airline's debt, which increase its stake to 49% under the

is up for maturity between now and current regulation. Requests for

March this year. The final plan will be put comments sent to Jet Airways and SBI

in place by the end of January and the remained unanswered until publishing

lenders are hopeful that the resolution of this story.An Etihad Airways

plan will be in force by 31 March this spokesperson said the airline “does not

year, which is well before the 180-day comment on rumour or speculation”.Jet

period under the Reserve Bank of India's Airways, which has been facing financial

(RBI's) 12 February circular. The 12 turbulence for a while, has been in talks

February RBI circular relates to how with potential investors to raise fresh

lenders need to deal with stressed equity. The various fundraising options

assets. The circular said a resolution it has explored include a stake sale in its

professional should be appointed within loyalty programme, Jet Privilege Pvt. Ltd,

180 days for defaulting accounts with and a stake sale in the airline to the Tata

aggregate exposure of Rs. 2,000 crore group. While the stake sale in the loyalty

and above. Jet Airways defaulted on its programme drew interest from several

debt repayment on 1 January, following private equity funds, including TPG

which ratings agency ICRA Ltd cut from C Capital and Blackstone Group,

to D the long-term rating on loans and discussions with the Tata Group ended

bonds issued by the airline, which has over Goyal's future role at the airline.

reported three consecutive quarterly https://www.livemint.com/Companies/losses of over Rs. 1,000 crore each since bxFwwHNTpH6sbmavKjoujK/Banks-the quarter ended March 2018. The propose-900-million-turnaround-lenders have also assured Jet Airways' plan-for-Jet-Airways.html vendors and lessors that their dues will Dated: Jan 09, 2018be cleared in three tranches till April, by

which time the lenders expect the BANKS UNCERTAIN ABOUT payment cycle to become regular. As RECOVERING THEIR DUES part of the restructuring, the lenders

AFTER FEO TAG ON SHRI have also proposed a moratorium on

VIJAY MALLYArepayments on loan facilities which are Lenders to Shri Vijay Mallya seem due till April. Mint reported on 7


I N D I A

uncertain about the fate of their dues say the new law would lead to some

after the beleaguered liquor baron was changes in the procedure for banks

declared a Fugitive Economic Offender making their claims. The FEO is a

(FEO) last week, with provisions of the completely different Act and banks will

new law allowing the government and its eventually have to file a separate

agencies to confiscate the defaulter's application in an appropriate forum to

assets. Confiscation makes the seized claim their dues.

https://economictimes.indiatimes.com/industrassets the property of the government, y/banking/finance/banking/banks-uncertain-leaving some bankers rather worried about-recovering-their-dues-after-feo-tag-that they may lose the right to recover on-vijay-mallya/articleshow/67450105.cms

their loans. Under the provisions of the Dated Jan 09, 2019

Prevention of Money Laundering Act

(PMLA), the properties were attached and ICICI'S SHRI SANDEEP lenders could make an application for

BAKHSHI IS CLEARING the sale and release the assets to the new

COBWEBS AS THE BANK owners, helping recover their dues. The CEOnew act, however, is unclear on this ShriBakhshi has started on a similar provision. Top legal experts say the laws note. If he pulls it off, he may well turn applicable under PMLA are not out to be India's Gorman. The 11th floor applicable under FEO and bankers will executive dining arena at the ICICI Bank need further clarity before staking claim Towers in Mumbai's financial district had to the confiscated assets estimated at an unwritten rule on who sits where on Rs. 12,200 crore. The lenders, as the table. That was mostly driven by interested parties, were part of the hierarchy. That has changed since Shri application filed by the Enforcement Sandeep Bakhshi occupied the corner Directorate (ED) to declare Mallya a office in October 2018. And that's just fugitive. However, there is no clarity on the beginning. Succeeding someone as a how to make the claims. There is a chief executive when the scenario is provision under this law for interested normal is an ideal position to be in, but parties like creditors and even unrelated Shri Bakhshi does not have that luxury. parties, who could have purchased Even for troubled institutions, the assets from Mallya that were later challenge mostly would be either attached. Bankers say they hold the first financial or a tarnished public image. For right on pledged shares as a charge was Bakhshi, after a tumultuous 2018 for the created while disbursing loans to Shri bank, it is both. As Shri Bakhshi sets out Mallya and his companies. The ED is to reinvent the institution that has compiling a list of immovable property played a role for over six decades in for confiscation. Bankers said under the different avatars, the job on hand is to PMLA, the ED could sell assets where remove the cobwebs that have grown there is no charge, but banks held the over the years, project an image that's right to pledged shares where a charge compliant and friendly, and also lay out a has already been created. Top lawyers


I N D I A

path that would be less bumpy in the as the CEO. Enterprises evolve to survive

future. Along the way, there would be and thrive, else they perish. The Global

compromises and confusion though. Financial Crisis showed how giant

The intentions are right and the strategy financial services firms such as

is clear. But the more difficult part is to Citigroup, Morgan Stanley and JPMorgan

junk past priorities and direct staff to reoriented themselves to grow. In the

think and act differently. Now, they will local market, ICICI Bank is a standing

be averse to sectors where they have example of how reinvention helped it

burnt their fingers. Shedding the past is survive the onslaught of market

more important for a struggling economy in the 90s, when its peers of

institution than executing new ideas yesteryears such as IFCI and IDBI Bank

because the weight of the past if allowed struggle to stay afloat. Under the

to fester could leave any new initiative universal bank model spearheaded by

ineffective. In what could well be the Shri Kamath, it grew substantially in

most significant statement of his retail while still doing project funding.

stewardship, Shr i Bakhshi has When the dependence on wholesale

mentioned no to project funding the funding got the bank into trouble, his

seed which was sown in 1994 as successor Ms. Kochhar fixed it by

Industrial Credit and Investment growing retail deposits aided by

Corporation of India that evolved into executive director Rajiv Sabharwal. When

ICICI Bank. The aversion to project even the state-run banks are struggling

funding is understandable. The banks' for low-cost deposits, ICICI Bank has

stressed assets bad loans plus the nearly half of its deposits in the low-cost

restructured loans is at 8.54% of total current and savings accounts. Just like

loans. The chunk of bad loans is because Shri Kamath's record Rs 25,000-crore

of lending to power projects and other equity helped it tide over the stress, the

infrastructure related ones. While that retail buffer built by Ms. Kochhar could

may be the way to go in an era when well be the springboard for the next take

individual consumers have become more off. With the buffer of low-cost funds, it

dependable than billionaire corporates is looking to expand the retail footprint

with stretched balance sheets and poor enabled by cost-effective technology

equity positions, every burnt lender is and into small and medium enterprises,

going the same way. But that means which have now become bankable

compromise on size. The days of heady because of the Goods and Services Tax.

assets growth may well be behind it. Retail, which comprises 57.3% of its

Under Ms. Chanda Kochhar, who quit last overall loans, may grow further in the

year amid a probe into her corporate next few years. SME which is at 4.6%, will

governance practices, the bank's assets also see a fresh boost with the its centres

grew 1.5 times to Rs 8.74 lakh crore in sanctioning loans nearly doubling to 70.

September 2018, from Rs 3.79 lakh Risk-adjusted profitability will go up.

crore in March 2009, the year when she Some of the mistakes of last time will not

was elevated to succeed Shri KV Kamath be repeated. Algorithms would get


I N D I A

bigger than humans at ICICI retail, as it the key functions of cost control and

pushes the 'insta' of everything. It will manpower allocations were determined

eliminate paper and human intervention at the head office, but that has since

to the last level. The direction on been given to local offices and branches

everything is insta. Cost of acquisition is with specific targets. This would enable

zero. No one questions decisions. more freedom to managers at midlevel

Conserve branch staff for advisory, and generate more involvement and

despite turning to technology, it would responsibility. Shri Bakhshi has been

net hire 3,500 staff this fiscal. Despite working towards easing internal

the well-meaning directional changes, processes and removing bottlenecks to

projects could falter if things on the enable faster turnaround time for

ground do not change. It could hold true customers.A shift to prudence always

for ICICI Bank as well. So, how is the leads to lower growth rate and investor

execution planned? Decongest.Cutting anxiety, but ultimately leads to

the clutter in the process is the priority sustained growth as seen with the likes

for Bakhshi. There is a lot of delegation of Morgan Stanley under James Gorman

that's going on at the front end. As an since the credit crisis. The most

insider, if a job took two days, now it important thing we are focused on is the

happens in less than half a day. culture of our management team to

Processes that have accumulated over never put our shareholders or society in

the years are getting weeded out. Earlier, the kind of jeopardy like in 2008.


I N D I A

https://economictimes.indiatimes.com/industr people, and Suryoday 200-250 people. y/banking/finance/banking/icicis-sandeep- Other small-finance banks are also bakhshi-is-clearing-cobwebs-as-the-bank-

expanding their networks. With 464 ceo/articleshow/67464881.cms Dated:

branches, Ujjivan has hired 5,729 people Jan 10, 2019

in the last nine months to take the SMALL BANKS TO HIRE 5,000 current staff strength to 14,304. The MORE STAFF IN 3 MONTHSdiversification at these smallfinance Banking in India is spreading beyond its banks into areas such as two-wheeler urban bailiwick, and small banks are financing, affordable homes, and SME taking something more durable than just financing requires a new talent pool. loan funds to the hinterland – Smallfinance banks have intensified jobs. AU, Ujjivan, Utkarsh, Suryoday and their recruitment drive creating job ESAF, the leading names in India's small-opportunities in smaller towns and finance banking business, are set to hire cities. AU Small Finance Bank's human about 4,000-5,000 people in smaller resource head Shri Manoj Tibrewal towns between January and March, mentioned that the bank would recruit executives heading the expansions at around 500 people every month t h e l a s t m i l e l e n d e r s t o t h e between January and March for branch underprivileged told ET.While hiring has banking business to add to the current been a continuous process in the strength of 13,000 people. This hiring is fledgling small-finance banks, the pace part of our preparation for next year as is quickening as all these lenders are in this is the season for campus the final lap of opening branches in line placements. Small-finance banks, as a with their initial plans.Larger branch group, have total loans outstanding of Rs footprint is leading to more job creation 24,972 crore as on Septemberlast year and relocation opportunities for people with a share of 17% in the country's Rs to want to move to their home-towns. 1,46,741-crore microfinance portfolio. AU Small Finance Bank is looking to hire These banks are hiring both fresh about 1,500 people in the next three graduates and experienced bankers. months, while Ujjivan would add about Talent with experience at overseas 600 people. ESAF wants to hire 500 lenders wants to work in these banks


I N D I A

that have a restricted lending mandate. related parties as a condition for fund

According to TeamLease, the jobs on based working capital finance by way of

offer include those in analytics, investor pre-shipment or packing credit in

relations, operational risk, and branch foreign currency. Also, all existing

management. borrowers with outstanding of Rs 50

https://economictimes.indiatimes.com/industr crore or more would have to convert y/banking/finance/banking/small-banks-to- partnership firms into corporates by h i r e-5000-more-s t a f f - i n-3-months/ December 2019 - a move that would articleshow/67464600.cms Dated Jan 10, 2019

increase their tax liability. Diamond

houses that are unable to transform into STRICT BANK RULES FORCE

corporates would have to bring in CHANGES IN DIAMOND

additional collateral and pay half a TRADE PRACTICES percentage point higher interest on A year after the Nirav Modi-Mehul Choksi loans. SBI's policy, which could be scam rattled the nation, diamond houses emulated by some state-owned banks, in India are being pushed to change the follows instances of frauds, money-way they have been doing business for laundering and sharp practices that few many decades. Harsh new rules laid diamond houses indulged in. Some down by large banks would force them to restrictions have put a question mark on restructure their entities, change the way they function. Introducing business associates and spend more. restrictions based on geography would The largest lender to diamantaires, State hurt the trade badly. One can understand Bank of India, has imposed funding the exclusion of Dubai. But a quarter of restrictions on borrowers for exports to polished stone exports is to Hong Kong, countries other than USA and Europe, with China, along with Hong Kong, capped exposure at Rs 1,000 crore per emerging as one of the largest borrower, and set stiff credit rating manufacturing centre for studded condition on diamond houses for jewellery. Today, Belgium and Hong additional finance. In its credit policy for Kong are the largest centres for diamond houses, finalized in 2018-end, distribution and trade. The curbs on the bank has stipulated that borrowers dealings with related parties would would have to give an undertaking that compel many diamond houses to rejig rough or cut and polished stones are not themselves in a trade that is known for its procured from associate concerns or secrecy and dealings among community 43 - ASSOCHAM Banking e-Bulletin - Volume - 45

I N D I A

members. As per the latest rules by SBI, incremental credit expansion of Rs. 6.3

advance payments for procurement of trillion in the current fiscal, Rs. 4.8

rough diamonds will be permitted to only trillion was in the last four months ended

mining companies as per the list December. The divergence between

approved by the RBI and Gems & credit growth and deposit growth has

Jewellery Export Promotion Council. widened to 600 bps (basis points), as per

While diamond traders validate some of the RBI data. This means a few banks

the safeguards that SBI is putting in have become more aggressive in lending

place, they feel some conditions could be post the liquidity tightness for NBFCs

stif l ing. A corporate, unlike a (non-banking financial companies).

partnership, would have to disclose to Several small NBFCs with lower credit

the Ministry of Corporate Affairs the r a t i n g s h a v e b e e n c u r t a i l i n g

charges on assets against loans. So, disbursements for want of adequate

there would be greater disclose, they funds. The good thing is that

agree. They also admit that the incremental credit growth that had

restriction on advance payment probably slowed down in October has again

follows a few parties making multiple picked up robust pace in November. This

remittances from different banks. is encouraging and clearly evident

https://economictimes.indiatimes.com/industr across retail loans, including housing y/banking/finance/banking/strict-bank-rules- and personal loans (loans to salaried f o r c e - c h a n g e s - i n - d i a m o n d - t r a d e - class, etc) and industry. One of the practices/articleshow/67465635.cms

reasons for the widening gap between Dated: Jan 10, 2019

credit and deposit growth could be the

flow of funds from the bond market to BANK LOAN GROWTH PICKS the credit market. Over the last one year,

UP PACE EVEN AS DEPOSITS bond yields have climbed up from 6.48%

STAGNATE on 1 September 2017 to 8.18% by 9 The loan-to-deposit ratio, or how much November 2018. Also, the recent a bank lends out of its deposits, touched liquidity squeeze because of defaults by a 47-year high in December as IL&FS led to a disruption in the companies approached banks for funds commercial paper market, resulting in a after defaults by Infrastructure Leasing boost to credit growth. Deposit growth and Financial Services Ltd (IL&FS) dried has been stagnating over the last few up demand for commercial papers. months and credit growth has been According to a 7 January report by JM pushing up. With elections approaching, Financial, banks' credit-to-deposit (C- currency leakage could continue and D) ratio rose to 78.6% in December, the slow down deposit accretion to banks. highest since March 1971, when it was That could weigh on credit growth over 79.3%. Credit grew 15.1% from a year the next two months. According to earlier in December, while deposits grew brokerage JM Financial, banks are likely 9.2% in the same period, Reserve Bank of to raise deposit rates if the high C-D India (RBI) data showed. Of the total ratio persists. SBI's analysis says


I N D I A

incremental retail credit expansion in YES BANK DIDN'T CONSULT the three months to November at Rs. SHRI RANA KAPOOR, MS. 73,800 crore was the highest in a MADHU KAPUR ON CEO decade. It also mentioned credit to NAMESindustry picked up in November, with

The board of Yes Bank Ltd has food processing, fertilizer, cement and

independently shortlisted two potential infrastructure leading the way.

successors to its managing director (MD) Incremental credit to NBFCs fell further

and chief executive officer (CEO) Shri to Rs. 3.7 trillion from Rs. 16.5 trillion in

Rana Kapoor without the consent of the October and Rs. 56.5 trillion in

two estranged promoters of the bank- September, while that to MSMEs showed

Ms. Madhu Kapur and Shri Rana Kapoor. negative growth. Despite all this, credit

Private lender Yes Bank's knotty articles to NBFCs and retail account for 45% of

of association (AoA), which was incremental credit expansion for the

registered with the ministry of corporate three months till November.

affairs in 2005, states that the https://www.livemint.com/Industry/1urZtxOI7

appointment of any whole-time director 7iSqYlL2B83UI/Bank-loan-growth-picks-up-

of the bank will require the joint approval pace-even-as-depos i ts-s tagnate .html

of the two promoters. The board has Dated: Jan 10, 2019

shortlisted the names after the

nomina t ion and r emunera t i on

committee of the bank approved the

n a m e s a c c o r d i n g t o t h e

recommendations of the search and

selection committee and the appointed

leadership advisory firm Korn Ferry. The

two promoters have not been asked for

their recommendations or consent in

this entire process. This is significant

because the bank's AoA states that

without the approval of the promoters

and the Reserve Bank of India (RBI), a

whole-time director cannot be

appointed. A managing director is a

whole-time director. The Bombay high

court ruled in 2015 that the bank must

follow the AoA. Section 127A of Yes

Bank's AoA mentions that to appoint any

whole-time director, the board shall

follow the recommendation made by the

promoters. It also says that the board

may appoint one of its members as a


I N D I A

whole-time director, but even that BIMAL JALANwould be subject to the AoA and RBI Shri Jalan went on to voice hope that

approval. The conflict between Yes differences with the government would

Bank's promoters began in 2009, a year be settled. The Reserve Bank of India is

after co-founder Shri Ashok Kapur was accountable to the government and

killed in the 2008 terrorist attack in should make policies within the

Mumbai. The board declined to appoint framework set by the government,

Ms. Shagun Gogia, daughter of Shri according to a former central bank chief

Ashok Kapur, as a director because it now heading a panel tasked with framing

was felt she might not meet RBI's fit- guidelines for the transfer of the RBI's

and-proper criteria. In 2013, Ms. Madhu surplus funds to the government. Shri

Kapur (widow of Shri Ashok Kapur) and Bimal Jalan, the 77-year-old ex-

her daughter Ms. Gogia approached the bureaucrat, was appointed to chair the

Bombay high court seeking greater say panel late last month, just weeks after a

in appointing directors and wanted the f i e r ce row over cen t ra l bank

court to uphold their right to jointly independence led to a change at the top

nominate directors. In case Yes Bank of the RBI. Having clashed with the

wants to appoint a whole-time director, government over policy issues for

joint approval of the promoters will be several months, Shri Urjit Patel resigned

required. On 21 November, Mint as governor on Dec. 10, and was swiftly

reported that the bank's promoters were replaced by a former finance ministry

seeking a mutual resolution to ensure official, Shri Shaktikanta Das. One of the

better support and coordination for most contentious issues between the RBI

outstanding issues. Despite the two and Prime Minister Narendra Modi's

promoters initiating talks to settle their government was how much of the profit

family feud, over the past two weeks, Yes made from central bank's trading in

Bank's shares have fallen almost 50% bonds and currencies should be

from its peak in the past year on BSE. The transferred to the government, and how

bank has recently taken measures to much should be retained to build up

improve its corporate governance, reserves. Shri Modi faces an election by

accounting and audit processes. The May and his government is urgently

bank has sent a report on the recent seeking extra funds to finance populist

measures in this regard to RBI in measures like financial aid to farmers

October. and tax cuts for small businesses and the

https://www.livemint.com/Companies/dA27vX middle class. Shri Jalan, who was the Xdx1tk0hwrHs0gfM/Yes-Bank-didnt-consult- RBI's governor between 1997 to 2003, Rana-Kapoor-Madhu-Kapur-on-CEO-

declined to comment on his committee's name.html Dated Jan 10, 2019

recommendations, but he set out his

view on the relationship between the RBI ACCOUNTABLE TO

government and the central bank. The GOVERNMENT, SAYS

RBI is accountable to the government for RESERVES PANEL CHIEF SHRI executing the kind of monetary policy


I N D I A

that has been announced. There may be RBI TO SCAN Q3 RESULTS differences of views between the BEFORE DECIDING ON RELIEF autonomous institution and the FOR PCA BANKSgovernment. In this case, the Eleven Indian state-owned banks will government should take a larger view have to wait for about a month before depending on what the political situation knowing which of them will have lending is, what is actually happening on the curbs eased after a Reserve Bank of India ground. On the other hand, the (RBI) panel reviews their December autonomous institution has to deliver quarter results. The government has the services that the government has been pressuring the central bank to ease approved as part of policy framework. the curbs on at least some of the banks in Shri Jalan went on to voice hope that an attempt to boost lending and the differences with the government would economy ahead of a general election due be settled, now that the central bank was to be held by May. The RBI's Board for under new management. Soon after Financial Supervision (BFS), chaired by taking office on Dec. 12, Shri Das the central bank's new Governor Shri mentioned that he would consult more Shaktikanta Das, met and looked at closely with the government on policy estimates for the financial performance issues. Under Shri Das, the central bank of the banks in the October-December is likely to transfer an interim dividend of quarter. Based on those estimates, about 300-400 billion rupees ($4.32 billion- three to four of these banks, which in $5.8 billion) to the government by recent years were targeted by the RBI for March, Reuters reported earlier citing tough lending restrictions because of a three sources with direct knowledge of surge in bad loans, capital depletion and the matter. Shri Das has also struck a mounting losses. However, the panel will dovish tone on prospects for inflation wait to examine audited results of banks, and the economy, hinting that the RBI before making a final decision, the might adopt a more growth-friendly source said. The results are due by the monetary framework under his watch, as end of the month but it is unclear when desired by the government. The the next panel meeting will be. The government also wants the RBI to release government has infused capital in some more liquidity to the shadow banking of the banks to help them to adhere to sector and relax its provisioning norms the central bank's capital ratios. for banks. The RBI was open to infusing However, the panel would like to be sure "need-based" liquidity into the financial which of the banks will be able to system, noting that the shadow banking maintain minimum capital ratios under sector was facing a funding crunch scenarios such as a delay in the recovery https://economictimes.indiatimes.com/industr of bad loans in bankruptcy cases. There y/banking/finance/banking/rbi-accountable-

are 21 listed state-run banks in India to-government-says-reserves-panel-chief-

that provide about two-third of the total bimal-jalan/articleshow/67471721.cms

loans in the economy. With nearly half of Dated Jan 10, 2019

them under a PCA plan and the rest


I N D I A

cautious due to a record $150 billion in the appointment of the new MD and CEO

bad debt, the government is keen the of Yes Bank. On receipt of the RBI

curbs be relaxed to boost their ability to approval, the bank shall duly make the

lend. The government is anxious to woo requisite disclosures to the stock

voters especially farmers and small exchanges, in terms of 'Regulation 30 of

businesses that were hit hard by a high- the Listing Regulations'. There has been

value currency note ban in late 2016 and widespread speculation on Shri Rajat

the introduction of a goods and services Monga, Senior Group President -

tax in mid-2017. However, the RBI was Financial Markets, Yes Bank and former

reluctant to ease the curbs, triggering a MD and CEO of Max Life Insurance Shri

bitter public war of words between the Rajesh Sud as being the front-runners

government and the central bank that for the post. An IANS story on had

ended with former governor Shri Urjit incorrectly referred to Shri Rajat Monga

Patel. as the Executive Director of Yes Bank.

https://www.livemint.com/Industry/3jtHiFRPle The SSC was set up to find a successor to XZnJefxw8IXI/RBI-to-eye-December-quarter- the company's MD and CEO Shri Rana results-before-easing-lending-cu.html Dated: Kapoor. It had been mandated to Jan 10, 2019

evaluate both internal and external

candidates and make su i tab le YES BANK SUBMITS

recommendations to the Board of SHORTLISTED NAMES FOR

Directors within stipulated timelines for MD, CEO POST TO RBI the RBI's final approval. In October 2018, Mumbai, Lending major Yes Bank has the RBI had reaffirmed that a successor submitted the names of the potential to Yes Bank's MD and CEO Shri Kapoor candidates for its Managing Director and should be appointed by February 1, Chief Executive post to the Reserve Bank 2019.of India (RBI). According to the bank, the https://economictimes.indiatimes.com/industr

Board has submitted an application to y/banking/f inance/banking/yes-bank-

submits-shortlisted-names-for-md-ceo-post-the RBI to seek its approval for the names to-rbi/articleshow/67472854.cms Dated: Jan of the selected candidates. The bank in a 10, 2019

regulatory filing after its Board meeting

it has finalized the names which it will SYNDICATE BANK HINTS

disclose only after the RBI's approval. THAT LOAN WAIVER MAY According to the bank, the candidates CHALLENGE NPA REDUCTION were finalized on the basis of

EFFORTSrecommendations made by the Search

Syndicate Bank has hinted that the spate and Selection Committee (SSC) and the

of farm loan waivers by several states in Nominat ion and Remunerat ion

the recent times may challenge its Committee (NRC). As mandated under

efforts to reduce NPA. The bank, which is the extant RBI norms, the Bank's Board

hoping to break even at the end of this will submit an application to the RBI on

fiscal year, has taken a series of January 10, 2019, seeking approval for


I N D I A

measures to bring down NPA level. The recommendation on the managing

bank has sizeable NPA exposure in director and chief executive to the

corporate and agriculture sectors. The Reserve Bank of India (RBI) after its board

farm loan waiver is a matter of concern meeting on January 9. Names were

for us and could make recovery difficult. shortlisted by a search and selection

The bank has started seven stress asset committee, which had the mandate to

management branches in the country evaluate both internal and external

with instructions to recover NPA above candidates and make su i tab le

Rs 5 crore. The stress asset management recommendations to the board within

branch usually deals with NPA of Rs 50 the stipulated timelines for RBI's final

crore and above. The bank is expecting a approval. In October, RBI had mentioned

growth of 3 to 5% in the current year. The that a successor to Yes Bank's MD and

bank recently proposed to raise Rs 500 CEO Shri Kapoor be appointed by

crore by issuing stock to its members February 1, 2019. The two estranged

under the ESPS scheme. It is also looking promoters, Ms. Madhu Kapur and Shri

at other avenues like rights and bond Rana Kapoor, have been holding

issues to raise capital. conversations to settle the CEO and

https://economictimes.indiatimes.com/industr chairman selections.y/banking/finance/banking/ syndicate-bank- https://economictimes.indiatimes.com/industrhints-that-loan-waiver-may-challenge-npa- y/banking/finance/banking/rajesh-sud-pulls-reduction-efforts/articleshow/ 67475472.cms out-of-race-for-ceos-post-at-yes-bank/

Dated: Jan 10, 2019 articleshow /67480391.cms Dated Jan 11, 2019

SHRI RAJESH SUD PULLS OUT OF RACE FOR CEO'S POST AT YES BANKnext Chief Executive, has pulled out of

the race for the top job, leaving insider

Shri Rajat Monga as the sole

recommendation for the regulator to

approve. Shri Sud pulled out of the race

after having shown interest earlier. Shri

Sud was reportedly in the reckoning,

along with Yes Bank veteran Shri Monga,

BANDHAN BANK CLEANSED to head the private sector lender. The

central bank has cut short the executive ITSELF OF IL&FS BEFORE GRUH tenure of Shri Rana Kapoor to January 31. MERGERShri Monga has been with the bank since Microlender-turned-universal bank its inception in 2004. He serves as senior Bandhan Bank Ltd seems to have realized group president of financial markets at its folly of venturing too far into non-Yes Bank and also been its chief financial microloans. Its exposure to beleaguered officer. The bank has sent its Infrastructure Leasing and Financial


I N D I A

Services Ltd (IL&FS) has sucked out Rs. rewards. But as this column pointed out

385 crore from its profits in the earlier this week, the acquisition was

December quarter (Q3) by way of expensive, valuing Gruh Finance at

provisions. That amounts to nearly 13% almost 14 times its net worth. Needless

of the bank's trailing 12-months pre-tax to say, Bandhan Bank has to work extra

profit. The lender has provided for all of hard to make the acquisition accretive in

its exposure to IL&FS, even as other terms of earnings per share. The 'banks

banks continue to dither on this. As per stock has lost 11% since the merger

Bandhan Bank's chief Shri Chandra announcement as a result of the high

Shekhar Ghosh he has learnt his lesson share dilution. Despite the Gruh Finance

from believing in AAA-rated paper. merger, Bandhan Bank still has to bring

Indeed, small microloans are where his down promoter stake by another 20% to

strength is. The exposure has worsened meet regulatory requirements, which

the bank's NPA ratio to 2.4% for means investors may be staring at

December from 1.67% a year ago. Had it another large dilution. The stock trades

not been for IL&FS, Bandhan Bank's gross at four times its estimated book value for

bad loan ratio would have been 1.3%, fiscal year 2020. For it to be taken

according to Ghosh. But that is about it seriously by investors, it will have to fix

as far as the bad news for the lender its promoter stake to meet regulatory

goes. Bandhan Bank's third quarter approval.

https://www.livemint.com/Money/xJnBBKO7wZmetrics were encouraging if one ignores j7tq5SJq2zbN/Bandhan-Bank-cleansed-itself-the IL&FS debacle. Credit growth came at of-ILFS-before-Gruh-merger.html Dated: Jan a brisk 46%, led by 27% growth in 11, 2019

microloans and 35% growth in non-

microloans. The robust disbursements RBI SLAPS RS 3 CRORE

led to a core income growth of 54% and a PENALTY ON CITI BANK

net profit growth of 10% for the quarter. INDIAThe Q3 results were impressive enough The Reserve Bank of India (RBI) has for investors to forgive the lender for its imposed a penalty of Rs 3 crore on IL&FS mistake, as was evident from the Citibank India for not complying with 3.8% rise in the stock after the earnings directions regarding the 'fit-and-proper declaration. Now that Bandhan Bank has criteria' for directors of the bank. The RBI put that mistake behind, it would have to in a statement, however, added that the make sure the merger with Gruh Finance action is based on deficiencies in Ltd is smooth. Considering Gruh regulatory compliance and is not Finance's pristine asset quality, Bandhan intended to pronounce upon the validity Bank would not have to worry about toxic of any transaction or agreement entered loans. That Shri Ghosh is aware of the into by the bank with its customers. The bank's strengths in small-ticket loans is Reserve Bank of India (RBI) has, by an what makes investors confident that the order dated January 4, 2019, imposed a entry into affordable housing through monetary penalty of Rs 30 million on the Gruh Finance merger will reap


I N D I A

Citibank NA India (the bank) for founder and chairman of Capital First

deficiencies in compliance with the RBI Ltd, as managing director and chief

instructions on 'Fit and Proper' criteria executive officer of the merged entity.

for directors of banks," it said. In July The combined entity will serve 7.2

2013, the RBI had issued a "cautionary million customers through 203 bank

letter" to Citibank for violations of branches, 129 ATMs and 454 rural

instructions regarding know your business correspondent centers.

customer or anti-money laundering. The https://economictimes.indiatimes.comUS-based Citibank has been operating in /industry/banking/finance/banking/idfIndia for over 115 years. The bank has 35 c - b a n k - r e - n a m e d - i d f c - f i r s t -branches in India and a network of 541 bank/articleshow /67502933.cmsATMs, according to the latest RBI data. Dated Jan 12, 2019https://economictimes.indiatimes.com

/industry/banking/finance/banking/rbi RBI CAUTIONS GOVERNMENT - p e n a l i s e s - c i t i g r o u p s - i n d i a - OVER NPA SPIKE IN MUDRA unit/articleshow/ 67491639.cms LOANS:Dated: Jan 11, 2019

The Reserve Bank of India (RBI) has raised

a red-flag on the spike in non-IDFC BANK RE-NAMED IDFC performing assets (NPAs) under the FIRST BANK government's flagship scheme to The combined entity will serve 7.2 support micro enterprises in the million customers through 203 bank country- the Pradhan Mantri Mudra branches, 129 ATMs and 454 rural Yojana. According to Finance Ministry business correspondent centers. Private sources, RBI has cautioned the ministry sector lender IDFC Bank mentioned its that the scheme might turn-out to be the name has been changed to IDFC First next big source of NPAs, which have Bank Ltd with effect from Saturday. The plagued the banking system. The central name of the Bank has been changed from bank has flagged that bad loans under IDFC Bank Ltd to 'IDFC First Bank Limited' PMMY have risen to Rs 11,000 crore. As with effect from January 12, 2019 by per the annual report of PMMY, 2017-virtue of 'Certificate of Incorporation 18, total disbursements under the pursuant to change of name' issued by scheme stood at Rs 2.46 trillion in FY 18. the Registrar of Companies, Chennai". Out of this, 40 per cent were disbursed IDFC Bank and non-banking financial to women entrepreneurs and 33 per cent company Capital First had announced to social categories. More than 4.81 completion of their merger on December crore micro borrowers have benefited 18, creating a combined loan asset book through PMMY during the year FY2017-of Rs 1.03 lakh crore for the merged 18. The PMMY was launched on April 8, entity. Following the merger, the board 2015. Under the scheme, banks are of IDFC Bank had approved the required to finance micro and small appointment of Shri V Vaidyanathan, entrepreneurs for up to Rs 10 lakh.


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Loans can be granted under three STATE BANK OF MAURITIUS categories - up to Rs 50,000 under FILES COMPLAINT WITH 'Shishu'; Rs 50,001-Rs 5 lakh under SINGAPORE POLICE TO TRACK 'Kishore' and between Rs 5,00,001 and DOWN HACKERSRs 10 lakh under 'Tarun' category. In

The State Bank of Mauritius (SBM) has addition, RBI's caution comes at a time

filed a complaint with the Singapore when the country's financial system in

police to track down unknown hackers reeling under sevier stress due to the

who allegedly withdrew Rs 19 crore from IL&FS crisis which continues to hurt

its branch in Mumbai. A complaint about banks with impairments, the most recent

the hack was first filed with the Mumbai case being IndusInd Bank. On January 9,

police in November 2018. SBM had IndusInd Bank in its latest quarterly

alleged then that its SWIFT payment earnings result statement without

gateway had been hacked on October 2 naming the IL&FS Group mentioned,

in an attempt to transfer Rs 147 crore. Advances granted to various companies

Although the attempt was stopped after and SPVs belonging to a Group in the

one of the four remitting foreign banks infrastructure sector against certain

raised queries about the transaction with identified cash flows and pertaining to

SBM, the bank had lost close to Rs 19 specific assets are 'Standard' as at

crore by then. Bank officials have December 31, 2018 on the basis of the

intimated us about lodging a complaint conduct of the accounts till date. Since

with the Singapore police, mentioned October 1, 2018, certain governance and

police inspector Shri Kishore Parab, who management changes have taken place

is in charge of the bank fraud in the Group and measures to turn it

department of the Economic Offences around through a Resolution Plan are

Wing (EOW), a specialized unit of the underway. The bank mentioned it was

Mumbai Police that probes financial monitoring the developments and

frauds. Since the company in whose implications of the 'Resolution Plan'. In

account the funds were transferred is the interim, as a prudential measure, the

registered in Singapore, the bank has bank has made a contingent provision of

lodged a complaint with them. The FIR Rs 255 crore on these 'Standard' assets

copy of the complaint lodged with the during the quarter ended on December

Mumbai police has been shared with the 31, 2018, in addition to an amount of Rs

Singapore police. Bank has filed 275 crore made during the quarter

complaints with the Singapore Police and ended on September 30, 2018. Total

Mumbai Police, EOW on the cyber provisions attributable to this exposure

hacking incident. The hack at SBM's are Rs 600 crore.

Nariman Point branch was stopped after https://economictimes.indiatimes.com/industr

a London bank got suspicious when y/banking/finance/banking/rbi-cautions-

multiple remittance requests were raised government-over-npa-spike-in-mudra-

within the span of a few hours on an loans/articleshow/67511045.cms Dated:

Jan 13, 2019 Indian bank holiday. The requests


I N D I A

exceeded the amount typically raised on salary, performance bonus and stock

a single working day and that prompted options to the senior most executive.

the London bank to immediately raise a The regulatory guidance that exists

query with SBM, after which the process today is a general directive on the

was stopped. The bank found that the remuneration of senior officials in broad

email requests to release the amounts functions like 'business', 'control' and

were sent from an email ID similar to the 'risk'. What is being considered is one

one used by the in-charge of SWIFT that specifically relates to CEO

transactions at its Nariman Point branch. compensation. Even today RBI clears the

The bank managed to stop most of the remuneration of a bank CEO and has the

transactions. The Mumbai Police found powers to claw back a slice of it in case of

that the amount of Rs 19 crore was non-performance or governance lapses.

routed to an account in a Hong Kong However, a framework would ensure that

based bank in the name of a Singapore the board does not have to shoot in the

company. The Hong Kong bank had also dark while approving the package for the

figured in a case involving Pune-based CEO and referring it to RBI for its

Cosmos Bank, which had been hacked in clearance. Though such a framework

a similar manner in August 2018. would be significant for private banks, it

According to sources, the amount was would also hold relevance for PSU banks

further transferred from the Hong Kong which are considering incentives and

bank to several other accounts, some of ESOPs for employees. Central bank

them in Nigeria. The EOW now plans to officials have shared the idea with senior

send Letters Rogatory (LRs) to tie up the bankers in the course of conversation. In

investigation. the wake of instances of large non-

performing assets, sharp practices like https://economictimes.indiatimes.cominadequate provisioning of sticky loans, /industry/banking/finance/banking/stair-brushing financials to prop up a t e - b a n k - o f - m a u r i t i u s - f i l e s -profitability, and evidence of fiduciary complaint-with-singapore-police-to-negligence by board of directors, the track-down-hackers/articleshow/ regulator is bringing about finer changes 67519597.cms Dated: Jan 14, 2018in its supervision style some of which are

aimed at assessing the performance of RBI TO FRAME RULES FOR bank boards. For instance, RBI BANK CEOS' PAYinspectors are beginning to ask banks The Reserve Bank of India (RBI) is whether any of the independent working on a set of rules that would link directors have given a dissent on certain remuneration of banks CEOs to proposals which a board and the parameters like balance sheet size of a management may have eventually bank, loan delinquency, profits and passed; whether such dissent notes have governance record. The proposed been properly recorded. Also, in some framework is expected to provide a RBI has insisted that the non-executive broad template to the board of directors chairman and the head of bank audit of banks while approving increase in


I N D I A

committee are present in the meeting by inducting specialists from the private

that follows the completion of the annual sector. The government is looking at

inspection of a bank by the regulator. RBI how the bank boards can be empowered

wants to know whether these external to rate the performance of the MDs and

directors have been kept in the loop on EDs, which will require KRAs to be

certain decisions and what they think reworked on the basis of EASE, or

about these decisions. More than ever, Enhanced Access & Service Excellence

the regulator is keen to know about the the road map for re-orienting banks that

quality of debate within bank boards, was implemented last year. The

and the involvement of independent department of financial services is in the

directors. In other words, a non- process of rating banks on the basis of

executive chairman or other outside compliance of the 60 parameters listed

directors cannot get way easily. under EASE. While the government has

https://economictimes.indiatimes.com/industr undertaken consolidation in PSBs by y/banking/finance/banking/rbi-to-frame- merging SBI associates with the parent, rules-for-bank-ceos-pay/ articleshow/ and Bank of Baroda, Vijaya Bank and 67519638.cms Dated: Jan 14, 2018

Dena Bank, Kumar indicated that further

steps will have to wait as the government GOVERNMENT TO REWARD

is also pushing other banks to focus on TOP PERFORMERS IN PSBS

niches. Over the last few years, the The government is readying steps to

government has been focusing on reward top-performing employees of

revamping state-run lenders that have Public Sector Banks (PSBs), apart from a

been weighed down by non-performing board-driven appraisal of the top

assets, which Shri Kumar mentioned is management and governance reforms,

now fully recognized and loan recoveries while identifying lenders such as Indian

have been impressive so far this year. Overseas Bank and Punjab & Sind Bank

https://economictimes.indiatimes.com/industrfor focus on niche banking. The y/banking/finance/banking/ government-to-

government will slowly reduce its stake reward-top-performers-in-psbs/articleshow/

67521854.cms Dated:Jan 14, 2019in PSBs to 52% in the coming months

after a series of recapitalization pushed

STAGE SET FOR RBI RATE up its shareholding. While the next

round of capital will be given after the CUT AS RETAIL INFLATION parliamentary sanction for disbursal of FALLS TO 2.19%additional funds is received, the sale of India's retail inflation and wholesale non-core business and closing down of inflation fell to multi-month lows in overseas operations of some of the December amid signs of weakening banks will help them meet funding economic recovery, creating wiggle requirements. As per financial services room for the Reserve Bank of India's (RBI) secretary Shri Rajiv Kumar, banks are monetary policy committee to cut being asked to bolster treasury, risk interest rates at its meeting on 7 management and technology functions February. Data released by the Central


I N D I A

Statistics Office (CSO) showed consumer Bank, expects the RBI's monetary policy

price index (CPI) based inflation at an committee to change the stance to

18-month low of 2.19% in December neutral in the February policy and remain

against 2.33% a month ago, as food on an extended pause on policy rates.

prices continued to slide. The wholesale Despite the sharp fall in petrol and diesel

price index (WPI) data released earlier by prices in December, the core inflation

the Department of Industrial Policy and (CPI) was elevated. This was due to the

Promotion showed that wholesale price high sequential inflation seen in health

inflation decelerated to an eight-month and education sub-groups. CPI

low of 3.8% from 4.64% the previous trajectory is likely to remain benign till

month, on the back of softening inflation H1 FY20, after which it may show an

for fuel as well as manufactured items. uptick. Ms. Shubhada Rao, chief

With crude oil prices falling 40% in past economist at Yes Bank, going forward,

three months, higher oil production in she expects further downside in her

the US and weakening oil demand, average inflation projection of 4% in

analysts do not expect oil prices to rise FY19, closer to the 3.5-3.7% band. This

further. While the Indian crude basket paves way for the MPC to not just change

declined to $57.8 billion per barrel in its stance to neutral but also mull over a

December from $65 billion per barrel a possible rate cut. However, Shri Sunil

month ago, the rupee appreciated to Kumar Sinha, principal economist at

70.72 per dollar in December from 71.79 India Ratings, mentioned RBI may watch

per dollar in the previous month, slowing out for the fiscal deficit target of 3.3% of

fuel inflation. Slower-than-expected GDP in 2018-19 which may be missed.

economic growth projection and a Finance minister Shri Arun Jaitley will

benign inflation scenario may force RBI present his Interim Budget on 1 February

under its new governor Shri Shaktikanta ahead of the general elections due in

Das to change its stance and cut rates to April-May. The government has already

support growth. India's factory output exhausted 112% of the full-year fiscal

growth measured by an index and deficit target in the first eight months

industrial production (IIP) crashed to its (April-November) of the fiscal year.

lowest in 17 months at 0.5% in Subdued collections in goods and

November, the outcome of an services tax (GST) and slow progress in

unfavorable base effect as well as its disinvestment programme have put

contraction in manufacturing, data pressure on the government's fiscal

released by CSO on Friday showed. The math for the current year. RBI governor

CSO's full-year growth estimate Shri Shaktikanta Das, who took charge

suggests that in the second half last month, mentioned at his first press

(October-March) of 2018-19, the conference that inflation remained

economy may slow down to grow at within RBI's target and its outlook was

6.75% compared to 7.65% in the first half benign. Principal economic adviser in the

(April-September). Shri B. Prasanna, finance ministry Shri Sanjeev Sanyal had

head, global markets group at ICICI in an interview mentioned that RBI needs


I N D I A

to structurally reduce interest rates as denied another three-year term in

the government has anchored inflation September last year by the RBI. The bank

to a lower level. has until January 31 to find a

https://www.livemint.com/Politics/U4w4XXdot replacement, according to a timeline set 4oaF9lVmEgzPK/Indias-retail-inflation-falls- by the banking regulator. Executive to-219-in-December-2018.html Dated: Jan 14, search firm Korn Ferry was appointed to 2018

help the search panel, which included DEUTSCHE BANK'S SHRI

former Insurance Regulatory and RAVNEET GILL LEADS INSIDER Development Authority chairman Shri TS SHRI RAJAT MONGA IN RACE Vijayan and three members of the

FOR YES BANK CEO board's nomination and remuneration

Deutsche Bank's India CEO Shri Ravneet committee- Brahm Dutt, Mukesh

Singh Gill is the frontrunner in a two- Sabharwal and Subhash Kalia. The panel

horse race for the chief executive's post had initially shortlisted eight names

at Yes Bank. Shri Gill and Yes Bank CFO including a CEO from an insurance

Shri Rajat Monga were the two company, present and former executives

recommended by the board of the bank from HDFC Bank and also some Indian

for the position to the Reserve Bank of expat CEOs from abroad. Many of them

India (RBI). These two names have gone declined any interest in the bank and

to the RBI and Shri Gill, by virtue of being these two names have finally made the

an outsider along with his experience as cut. Among the people who were

CEO of a bank, is the frontrunner. Yes approached but mentioned they weren't

Bank has been on the hunt for a new CEO interested were Shri Rajesh Sud, Vice

since founder Shri Rana Kapoor was Chairman at Max Life Insurance. Another


I N D I A

https://economictimes.indiatimes.com/industrDubai-based foreign banker of Indian y/banking/finance/banking/ deutsche-banks-origin also confirmed that he had ravneet-gill-leads-insider-rajat-monga-in-

declined an offer. With Shri Gill and Shri r a c e - f o r - y e s - b a n k - c e o / a r t i c l e s h o w /

Monga in the fray, the bank board thinks 67534587.cms Dated: Jan 15, 2019

they have two strong candidates. Shri CENTRAL BANK OF INDIA CEO Monga has been with the bank almost MOVES TO TURN AROUND since inception and is ready to take over

LENDERfrom tomorrow. Shri Gill has been

Shri Pallav Mohapatra, the new managing Deutsche India CEO since 2012 and has

director and chief executive officer at been granted an all-clear by RBI just in

loss-making Central Bank of India, July 2018. His experience and pedigree

prefers to take a hands-on approach in cannot be ignored. Shri Gill has spent his

running the bank. His 10am meeting 32-year banking career at the German

with the bank's executive directors and lender and taking over as India chief

general managers for risk and treasury executive in July 2012. Shri Gill has

sets the tone for the day. Shri Mohapatra, handled capital markets, treasury,

who was at State Bank of India (SBI) till structured finance, foreign exchange,

September, has initiated steps to turn transaction banking, risk management

around Central Bank, which has been and private banking.

reporting losses for the last 12 quarters

since December 2015. One of the

changes is to take a bullish approach

toward the commercial paper market

(CP), instead of letting excess liquidity

idle away in Statutory Liquidity Ratio

(SLR) holdings. The bank is trying to

lower its SLR holdings from the current

29% to around 23% gradually, by moving

the excess liquidity to the commercial

paper market. The bank has been under

the Reserve Bank of India's (RBI) prompt

corrective action framework since 14

June 2017 which curtails its lending

power in favour of conserving capital.

Every day, for the treasury operations, he

devote half-an-hour to my treasury

team. He looked at how things are

moving and he tells them from which

sources they should pull out and where

should they invest in. He added that by

doing so, the bank is attempting to

reduce the volatility associated with the


I N D I A

bond market. Instead of this, if he sees a not worsen any further. At the end of

better yield in a CP, he would like to September quarter of FY19, the bank's

reduce the excess SLR investment. Since gross bad loans stood at Rs. 37,411

there is a risk associated with CPs, he crore and slippages stood at Rs. 2,611

have done a risk assessment to decide in crore. Their plan for the current year is to

which CPs he should invest in, in case of not have more than Rs. 1,500-2,000

lack of good CPs to invest in, the bank crore in slippages every quarter of FY19.

will go into high-yielding treasury bills Next year, he want to contain slippage to

or in the state development loans (SDLs) less than Rs. 1,000 crore per year, this

rather than the overnight market. That will restrict the interest reversal on

apart, Shri Mohapatra is putting in place account of slippages.

https://www.livemint.com/Companies/avLjE7ca structure where a couple of corporate EgwQgXkkLNyJvhK/Central-Bank-of-India-loan branches will be created to handle CEO-moves-to-turn-around-lender.htmlloans of Rs. 50 crore and above. These Dated: Jan 15, 2019

branches will directly report to the

general manager for credit at the head MUDRA NPAS NO ISSUE,

office. Similarly, the bank is creating a FINANCIAL SERVICES vertical for stressed assets and has SECRETARY SHRI RAJIV received board approval for it. In the

KUMARearlier structure, branch managers

The government is not worried over reported to regional managers, who

delinquencies in Mudra Yojana, its reported to field managers, who

flagship scheme for promoting reported to vertical heads and who in

entrepreneurship and small businesses turn, reported to executive directors.

as most of the loans are securitized. Now, when the credit and stressed assets

Financial Services Secretary Shri Rajiv are taken out from the field, the focus of

Kumar mentioned that small borrowers the field GMs will be on retail deposits

are far more responsible and responsive and loans. As of today bank has around

than large corporate borrowers. Mudra 13 zonal offices and we will be

loans are a transformative and a consolidating them, although they have

directional shift in the entire Indian not decided into how many, this

banking system which will strengthen streamlining would cut down the

the Medium and Small Enterprises turnaround time. The bank is also

(MSEs). As per Shri Kumar, there is a case planning to shut 20 branches in metro

for relaxation of capital norms and for and semi-urban areas and has also

them aligning with the international identified some currency chests to

Basel III norms, considering the steps the surrender to the RBI. It has also identified

government has taken to adequately some high-rental metro and urban

capitalize lenders. According to reports, branches from where it wants to exit.

around Rs 11,000 crore of lending under With more than 21% of its loans having

Mudra has gone bad. But as per Shri turned bad, the bank wants to contain

Kumar, most of the loans below Rs 1 slippages so that the asset quality does


I N D I A


crore are securitized. In corporate loans, separate vertical comprising around

however, in many cases, it is secured 1,200 of its existing staffers to recover

against the future earnings. If you look at its Non-Performing Assets (NPAs)

the cases in Debt Recovery Tribunals, amounting to around Rs 27,000 crore.

most loans below Rs 1 crore are The 'Stressed Asset Management (SAM)'

securitized,such loans are also the way vertical would comprise legal as well as

forward, given the economy is getting credit experts who would help branch

formalized and you want the youth and managers to device plans to recover

unfunded to get out of money lenders' dues from NPAs , including large

clutches. As on December 2018, there corporates, mentioned executive

are 29.972 million loan accounts with Rs director of the PSU bank Shri Ajay K

1.51 lakh crore disbursed under the Khurana. Out of Rs 27,000 crore which

Pradhan Mantri Mudra Yojana (PMMY). have been declared as NPAs, the share of

Around 74% of the beneficiaries under large corporates is around Rs 14,000

the scheme are women. Mudra has given crore. The team members of SAM have

support to these smaller entrepreneurs been given training regarding the

which are a necessity for social security functioning of National Company Law

and social inclusiveness. The Medium Tribunal(NCLT) and various aspects of

and Small Enterprises (MSEs) form the insolvency, and will be deployed in all the

'missing middle' which needs to be regions depending on the number of

strengthened if India Inc. needs to gain NPA accounts. The PSU bank is now

momentum. Around 11 crore people are focusing more on giving loans to MSME

dependent on self-enterprises or in the and retail sector rather than large

MSME space as per the latest surveys. An corporates. Syndicate Bank aims to give

entire digital pipeline has been created loans worth Rs 10,000 crore to MSMEs

through opening of accounts, linking during the next two months. In coming

them with the GeM portal, with financial months, Syndicate Bank is planning to

institutions on the other end. A borrower introduce a system of giving in-principle

at the lower end is far more responsive, approval for MSME loans up to Rs 5 crore

responsible and concerned about his within just 15 minutes.

https://www.livemint.com/Politics/3FEsadlozreputation in the society and therefore,

does not want to deliberately default.

https://economictimes.indiatimes.com/industr LARGE BORROWERS FALL IN y/banking/finance/banking/mudra-npas-no- LINE AFTER RBI'S ONE-DAY issue-financial-services-secretary-rajiv-

DEFAULT NORMkumar/articleshow/67532207.cms

A central bank rule mandating disclosure Dated: Jan 15, 2019

of loan default even if it is just by a day is

putting the fear of god in big borrowers. SYNDICATE BANK CREATES Borrowers, who owe more than Rs. 5 VERTICAL TO RECOVER RS crore, are gradually regularizing 27,000 CRORE NPASrepayments following the 'Reserve Bank

The Syndicate Bank has created a

I N D I A


of Indias (RBI) 12 February circular longer want any stressed asset on their

asking banks to disclose any payment books and, subsequently, the amount of

default. Responding to a Right to loans under special mention accounts

Information (RTI) query from Mint, RBI (SMA) has also dropped. To some extent,

mentioned the total outstanding loans of the introduction of the Insolvency and

borrowers, who defaulted on bank loans Bankruptcy Code (IBC) had also helped,

(under the one-day default norm), has he added. Asset quality of banks

declined more than 60% to Rs. 55,070 improved in Q2 FY19, with gross NPAs as

crore on 30 September 2018 from Rs. a percentage of total loans declining

1.53 trillion on 30 June. To be sure, these from 11.5% in March 2018 to 10.8% in

are not soured assets, but loans where September 2018. The one-day default

borrowers did not pay instalments on norms were initially not received well by

time. However, the data also shows that the industry and a section of lenders. So

one-day defaults dipped to a low of Rs. much so that in April last year, RBI

50,306 crore on 31 August from Rs. deputy governor Shri N.S. Vishwanathan

91,280 crore on 31 July and rose 9% in explained in a speech that the revised

September. There is a clear change in framework tries to reduce the arbitrage

borrowers' behavior and banks are also borrowers are currently enjoying while

more alert in taking up these incidents. A raising funds through borrowing from

message has been sent to errant banks, as against raising funds from the

borrowers that defaults would not be capital markets. If a borrower delays

tolerated. Large borrowers, experts coupon or principal payment on a

mentioned having started paying up on corporate bond even for a day, the

time due to fears of their companies market would penalize the borrower

being referred to the bankruptcy court heavily, but defaults in bank borrowings

and eventually losing control of their have not led to a similar reaction. There

assets. In its circular, the central bank is a need to change this and restore the

asked lenders to institute a board- sanctity of the debt contract, lest bank

approved policy for resolution of debt becomes subordinate even to

stressed assets. Banks were told to start equity. According to RBI data, the top

the resolution process as soon as a 100 large borrowers accounted for 16%

borrower defaults on a term loan and of gross loans and 21.2% of gross NPAs

were given 180 days to cure it, failing of banks at the end of the September

which the account would have to be quarter of FY19. For large borrowers, the

referred to the National Company Law proportion of outstanding loans with any

Tribunal (NCLT). Under previous signs of stress (including SMA 0, 1, 2,

guidelines, lenders had the freedom to restructured loans and NPAs) has come

initiate the resolution process after 60 down from 30.4% in March 2018 to

days of default. Earlier, only the NPA 25.4% in September 2018. Some experts

(non-performing asset) classification say the one-day default norms are hard

was taken seriously by borrowers, not on some borrowers, who default due to

defaults. That has changed as banks no genuine business concerns. Former RBI

I N D I A


sZYsMBsQPLtlK/Large-borrowers-fall-in-line-deputy governor Shri S.S. Mundra after-RBI-one-day-default-norm.htmlmentioned that while it is critical to keep Dated: Jan 16, 2018

strict timelines for monitoring credit

quality, it has burdened bankers who are BANKS SEEK QUICK RELEASE already pressed for time. In some cases, OF VIJAY MALLYA ASSETS FOR where the defaults occur owing to

LIQUIDATIONgenuine cash flow issues, banks A 12-bank consortium led by State Bank nonetheless have to start the resolution of India (SBI) has moved a Mumbai court process, arrange meetings and look for seeking the release of Vijay Mallya's revival plans. This has to be done each assets that the Enforcement Directorate time a borrower defaults and it has to be (ED) has attached so that these can be stopped as soon as they repay, leading sold “immediately” to realize the best to an exercise that could have been value. The banks urged the court hearing avoided had there been a buffer period. the Prevention of Money Laundering Act However, the former RBI deputy (PMLA) case that the assets be restored governor added that not only has IBC to them so that they can “appropriate the changed the way a borrower looks at the proceeds” without delay. The banks system, but bankers also have begun contended that the attached assets were timely stress assessment exercises.“amenable to market fluctuations and

any delay in liquidating those assets may

reduce their value”. Hence, there is a

“need for immediate and speedy

disposal of the assets to realize their

best value”. The lenders urged the court

to allow their request “in the interest of

economy and the banking system, which

face dire circumstances due to

unrecovered NPAs (Non-Performing

Assets). They added that the “rights of

the banks, which are second creditors to

recover their dues, would take

precedence over the state's right to

attach the assets of Mallya after being

declared a proclaimed offender”. The

application mentioned if the court lifts

the attachment order, banks will be able

to liquidate the assets through the Debt

Recovery Tribunal (DRT), Bengaluru, and

recover their money. The “amounts

sought to be recovered is public money”

and in initiating this action, the banks https://www.livemint.com/Industry/4qEIqln9Q

I N D I A


are “only safeguarding public interest”. December 21, 2010. They have already

The court had attached the assets on sought to assert their rights but are

November 11, 2016, at ED's request. unable to proceed due to the court's

Banks have claimed a “legitimate attachment order of November 2016,

interest” in all properties belonging to they said. Apart from SBI, the parties to

Kingfisher Airlines (KAL), United the case are Bank of Baroda, Corporation

Breweries Holdings (UBHL), Mallya, and Bank, Federal Bank, IDBI Bank, Indian

Kingfisher Finvest India (KFIL), including Overseas Bank, Jammu & Kashmir Bank,

movable and immovable properties. Punjab & Sind Bank, Punjab National

Banks claim Mallya owes them over Rs Bank, UCO Bank, United Bank of India

6,230 crore with an interest of 11.50%, and JM Financial Asset Reconstruction.

as held by DRT in February 2017. The lenders provided both fund and

Inclusive of interest and other penalties, non-fund based working capital

the banks have said Mallya owes Rs facilities and rupee term loan facilities

9,000 crore as repayments for loans to including short-term loans to KAL

Kingfisher Airlines. Mallya, who is starting 2005. However, KAL failed to

fighting extradition from the UK, adhere to the terms of the loan pacts,

recently became the first person to be they said. ED had passed an attachment

declared a fugitive economic offender in order on September 3, 2016, attaching

India under the provisions of the Fugitive several of Mallya's assets. The court's

Economic Offenders Act, which came November order followed this.

into effect in August last year. Wanted

fo r ques t ion ing about money

laundering, criminal conspiracy and

fraud charges over Kingfisher Airlines'

loan defaults, Mallya has denied

accusations of wrongdoing and

mentioned he wants to settle with the

banks. The ED plans to auction Mallya's

equity holdings attached by the agency

once the PMLA court passes its order on

confiscating his assets, likely in the

second week of February. The PMLA

court will decide next month if the

attached properties are free of

encumbrances. If the court does not

detach the properties allowing the banks

to liquidate them and recover their dues,

the rights of banks will “suffer

irreparable loss and injury. The banks

have staked their claim by virtue of

https://economictimes.indiatimes.com/industrMallya's personal guarantee dated

I N D I A


y/banking/finance/banking/banks-seek- 2,000 crore. The society registered quick-release-of-vijay-mallya-assets-for- under the Multistate Co-operative liquidation/articleshow/67549955.cms

Soc ie t ies (MSCS) Ac t 2002 i s Dated: Jan 16, 2019

headquartered in Ahmednagar, RS 2,000 CR. HAWALA SCAM,

Maharashtra. The society got the license ENFORCEMENT to extend its area of operation to DIRECTORATE TO SEEK Gujarat, Madhya Pradesh, Andhra

DETAILS FROM AXIS BANK Pradesh, Karnataka and Delhi in

The bank has been working closely with December 2012. Sources said the

the authorities concerned on this issue society flouted MSCS norms.

and shall fully cooperate with them in https://economictimes.indiatimes.com/industr

y/banking/finance/banking/rs-2000-cr-this regard. The Mumbai wing of the hawala-scam-enforcement-directorate-to-Enforcement Directorate (ED) will soon seek-details-from-axis-bank/articleshow

seek details from Axis Bank as part of the /67550093 .cms Dated: Jan 16, 2019

probe into a Rs 2,000-crore hawala scam

centered on an Ahmednagar-based SPEED UP 59-MINUTE LOAN urban credit cooperative society. The

SANCTION, GOVERNMENT society had its account with the private

TELLS PSU BANKSbank. The central agency will seek to Amid criticism of its promised 59-know if the bank verified KYC details of minute loan scheme for micro, small and the credit society, if there were any medium enterprises (MSMEs), the transaction of suspicious nature, and finance ministry is pushing state-run whether any alerts were raised and the banks to bridge the gap between accounts into which monies were proposals that receive preliminary credited were checked. The case approval and final sanction. Since its pertains to the predicate offence formal launch by PM a little over two registered by the Mumbai Police against months ago, around 60% of the Yogeshwar Diamonds Pvt Ltd, Charbhuja preliminary approvals done online have Diamonds Pvt Ltd and Kanika Gems Pvt been converted into formal sanctions, Ltd for allegedly routing Rs 2,000 crore with the total loan amount adding up to overseas through shell companies by over Rs 24,000 crore. This has raised submitting forged bills with IndusInd questions over the effectiveness of the Bank (Opera House branch). Following scheme, where loans up to Rs 1 crore are this, the ED registered an Enforcement available to MSMEs that have a credit Case Information Report (ECIR) and last history, pay income tax and are part of week arrested Machindra Khade, a the GST network. The quick loan-former manager with the Nagpur branch sanction scheme was part of the o f the Renukamata Mul t i s ta te government's outreach to the MSME Cooperative Urban Credit Society on the sector, which was complaining about allegations of laundering Rs 120 crores. liquidity shortage due to RBI's policies The scam involving the Mumbai and adverse impact of demonetization companies is estimated to be worth Rs and GST on a segment that is a

I N D I A


significant contributor to GDP, jobs and But, the government appears satisfied

exports. Officials said part of the reason with the initial response, with some

for the conversion rate hovering around officials saying that some of the private

the 60% mark is the absence of lenders too wanted to join the 59-

documents. While basic documents are minute loan-sanction scheme, since it

available, banks do undertake due was meant for those with a prior credit

diligence since everyone is answerable in and tax history.

https://economictimes.indiatimes.com/industrcase something goes wrong. The y/banking/finance/banking/speed-up-59-exercise requires things like the cash minute-loan-sanction-government-tells-psu-flow statement. Often the loan applicant banks/articleshow/67551962.cms Dated:

takes time to furnish papers. Banks have Jan 16, 2018

also been advised to be proactive and

reach out to those who do not come SBI PUTS ON SALE ESSAR back. Besides, the lenders have been told

STEEL LOAN OF RS 15,431 that there has to be a valid reason for

CRORErejecting a loan proposal and it cannot

With last minute-litigation delaying be whimsical. This will also require a

recovery of Essar Steelloan, State Bank change in the mindset, which will not

of India (SBI) has put on sale its Rs happen overnight. The government had

15,431-crore exposure to the

steelmaker on a full-cash basis. In the

sale notice on its website, the aggregate

reserve price for the bidding has been

set at Rs 9,588 crore. These include

categories like working capital, term

l o a n , c o r p o r a t e l o a n , e x p o r t

performance bank guarantee (EPBG) and

standby letter of credit (SBLC). The bank

mentioned that the loans may be

assigned in whole or in part to buyers

and all the security in relation to that will

be transferred and shared pari-passu to

the extent of the amount sold. As per SBI

the loan could be sold to asset

reconstruction companies (ARCs), other

banks and non-banking financial

companies (NBFCs). This is SBI's second

attempt to sell its Essar Steel exposure

after it withdrew from the process in

September last year. Other lenders like promised to process the loan application

HDFC Bank, Axis Bank, ICICI Bank and using technology in a time-bound

Federal Bank have sold their exposures, fashion but did not guarantee a loan.

I N D I A


either partly or in full, over the last few about Rs 54,389 crore. In October last

years. Essar Steel owes more than Rs year, the Supreme Court allowed

49,000 crore to over two dozen banks ArcelorMittal and Numetal Mauritius to

led by State Bank of India. It runs a 10- bid for Essar Steel, provided they paid

million-tonne steel mill at Hazira in the dues of defaulters connected to them

Gujarat, which is involved in ore within two weeks. At Ahmedabad NCLT,

beneficiation, pellet-making, iron- CoC and the resolution professional

making, steel-making, and downstream have opposed ESAHL's debt recast plan

facilities. The committee of creditors claiming it was against the apex court's

(CoC) of Essar Steel, on 25 October, order and was also against the

2018, voted in favour of handing over insolvency law and that such proposals

the debt-laden company to ArcelorMittal by Essar Steel shareholders have been

after it cleared pending dues of Uttam rejected by them in the past. While

Galva and KSS Petron. ArcelorMittal's ArcelorMittal and the lenders have been

resolution plan envisages an upfront seeking nod of the tribunal for

payment of Rs 42,000 crore to lenders completion of the debt resolution

and an additional Rs 8,000 crore towards process, Essar Steel Asia Holdings,

capital expenditure. SBI mentioned that Standard Chartered Plc and several

the resolution plan has been approved operational creditors have objected to

and filed in NCLT Ahmedabad. As per the ArcelorMittal's proposal.

https://www.livemint.com/Companies/aPnvjLpa p p r o v e d r e s o l u t i o n p l a n o f Z1VDkBT5vv22esI/SBI-puts-on-sale-Essar-ArcelorMittal, minimum recovery to SBI Steel-loan-of-Rs-15431-crore.html Dated: Jan is Rs 11,313.42 crore and the reserve 16, 2019

price of Rs 9588 crore is on the basis of

net present value (NPV) of minimum RBI GOVERNOR SHRI

recovery discounted at 18%. Earlier this SHAKTIKANTA DAS TO MEET

month, the Ahmedabad bench of the INDUSTRY CHAMBERS National Company Law Tribunal (NCLT) TOMORROWsaid it will pronounce before 31 January Reserve Bank of India (RBI) Governor Shri its order on a petition filed by Essar Steel Shaktikanta Das will meet industry shareholders for submission of its chambers to understand their issues and proposal to settle dues worth Rs 54,389 concerns. After his taking over as 25th crore. The pronouncement came after Governor of the RBI last month, he has observations made by the National been holding consultations with various Company Law Appellate Tribunal stakeholders including banks, non-(NCLAT), which had asked NCLT banking financial companies and micro, Ahmedabad to expedite the insolvency small and medium enterprises. Will meet case filed against Essar Steel (India) Ltd. the apex chambers/associations of Essar Steel Asia Holdings Ltd (ESAHL), industry and commerce tomorrow (17th which holds 72% of shares in Essar Steel, January). The meeting comes ahead of has submitted to NCLT Ahmedabad a the sixth bi-monthly monetary policy proposal for settling the entire debt for

I N D I A


statement for 2018-19 scheduled to be and is not intended to pronounce upon

announced on February 7. Industry has the validity of any transaction or

been pitching for the rate cut amid agreement entered into by the bank with

falling inflation and factory output. its customers. Last year, the RBI had

Continued decline in food prices pulled imposed a penalty of Rs 1 crore on BoM

down retail inflation to an 18-month low on account of delay on the part of the

of 2.19 per cent in December 2018. bank to detect and report fraud in an

Another set of official data showed that account

https://economictimes.indiatimes.com/industrthe wholesale inflation also eased to an y/banking/finance/banking/rbi-slaps-rs-1-eight-month low of 3.80 per cent in c r o r e - f i n e - o n - b a n k - o f -December on softening fuel and food maharashtra/articleshow/67560312.cms

prices. The inflation based on the Dated: Jan 16, 2019

Consumer Price Index was 2.33 per cent

in November and 5.21 per cent in BOMBAY HIGH COURT GIVES December 2017. The RBI, which mainly

A LEEWAY TO HSBC BANK factors in retail inflation, has been

(MAURITIUS) IN tasked by the government to maintain

REASSESSMENT DISPUTE the inflation near 4 per cent. The factory WITH INCOME TAXoutput based on movement in the Index In what could benefit several companies of Industrial Production (IIP) slumped to tackling disputes with the income tax a 17-month low of 0.5 per cent in department, the Bombay High Court has November on account of contraction in said that re-assessment cannot be the manufacturing sector, particularly carried out beyond four years. The court consumer and capital goods.was ruling in the case of HSBC Bank https://www.livemint.com/Politics/Wx4(Mauritius) and the income tax 8OlzNQJ1dzPkn6Yr40H/RBI-governor-department. The bank was assessed for Shaktikanta-Das-to-meet-industry-2011/12. In the original scrutiny the tax chambers-tomor.html Dated: Jan 16, officer had allowed the bank to claim 2019interest income on external commercial

borrowings (ECB) of Rs 143 crore. RBI SLAPS RS 1 CRORE FINE ON However, the tax officer at a later stage

BANK OF MAHARASHTRA scrutinized the transaction and said this

The Reserve Bank of India(RBI) has transaction would not be allowed. The

imposed a Rs 1-crore penalty on state-tax officer claimed that the bank had

owned Bank of Maharashtra (BoM) for failed to satisfy some criteria and hence

non-compliance of Know Your Customer the transaction would not be allowed.

guidelines and fraud-classification The court rejected the tax officer's action

norms. This penalty has been imposed of disallowing the ECB transaction in re-

taking into account the failure of the assessment proceedings. The bank had

bank to adhere to directions issued by claimed that it should get benefits of

the RBI. This action is based on India-Mauritius tax treaty and the

deficiencies in regulatory compliance

I N D I A


transaction should not be taxed trillion over two fiscal years to its

domestically. The court ruled that even struggling lenders under the PSU bank

during the original scrutiny the tax recapitalization plan. In December, it

officer had examined the transaction upsized its commitment by another Rs.

and allowed it. The court observed that 41,000 crore, considering PSU banks

the tax officer's stance in the weren't able to raise money from the

reassessment was a “change of opinion.” markets. One may argue that the centre

Tax experts mentioned that the ruling can't be blamed, considering it did its job

would impact several companies where of helping the banks as the largest

the tax officers have changed opinions in shareholder by infusing money. But from

the reassessment. The ruling would also a minority shareholders' perspective, the

impact on the time period in which the equity dilution has been immense in

reassessment can be carried out by the these banks, with the government

income tax officers. having waited far too long to act on bank

https://economictimes.indiatimes.com/industr recapitalization. While the government y/banking/finance/banking/bombay-high- dragged its feet over recapitalization, cour t-g i ves-a- leeway- to-hsbc-bank- there was an erosion of market value and mauritius-in-reassessment-dispute-with-

net worth of these banks. It too suffered income-tax/articleshow/67574474.cms

as a shareholder due to the erosion. Dated: Jan 17, 2019

Now, it also finds itself in a situation

where coming down to the desired 52% FORGET PRIVATIZATION, stake looks like a pipe dream. Another GOVT HAS HUGGED ITS fallout of the increase in government

BANKS TIGHTERownership is that these banks are now

A stitch in time saves nine. The flouting minimum public shareholding

government has, over the years, received norms set by the capital market

advice from numerous quarters to regulator. This, in turn, has led to a slew

reduce its stake in Public Sector Banks of announcements by public sector

(PSU banks) to below 51%, so that these banks to make large issuances under the

lenders have sufficient capital for employee stock option mode, with a view

growth. While the government has to meet these norms. Syndicate Bank, for

rejected this line of thought, it had itself instance, will issue as many as 300

talked of reducing its stake from existing million shares to employees, on an

levels to around 52% by allowing banks equity base of 1.6 billion shares. Part of

to raise equity capital from other the capital infusion in FY18 was done

sources. But things have gone in the through recapitalization bonds. In this

opposite direction, as the chart below route, the government issues bonds to

shows, with the government's stake banks and uses the proceeds to buy their

rising above 95% in one case. This is a shares to infuse capital. This route was

direct outcome of the unprecedented frowned upon since the banks ended up

capital infusion the government has shifting money from their investment

done after it committed to give Rs. 2.11 book to their capital base. The

I N D I A


government in its rescue mission has constant growth witnessed in the

increased its hold on banks in direct economy, RBI Governor Shri Shaktikanta

contrast to what it had promised in Das mentioned that India's growth story

2014. Recall that when the current is backed by strong domestic

government was formed a slew of fundamentals. efforts are being made to

banking reforms were promised, one of strengthen corporate governance in the

which was to bring down the center's public sector banks to effectively check

stake in the banks it owns. incidence of financial frauds. In his first

public speech after assuming the charge

as RBI Governor in December, Shri Das

also flagged challenges that Indian

companies may face on account of

developments around the Brexit.

Speaking at the 9th Vibrant Gujarat

Global Summit 2019, the RBI chief

mentioned that the central bank is

committed to play its role as the

monetary authority for maintaining

mandated price stability objective while

keeping in mind the objective of growth.

As the regulator and supervisor of the

banking sector as also payment systems,

the Reserve Bank "will take necessary

steps to maintain financial stability and

facilitate enabling conditions for

sustainable and robust growth. The RBI

governor further mentioned that the

growing size and complexity of the

Indian financial system warrants

strengthening of corporate governance

systems in banks. Citing incidence of https://www.livemint.com/Money/86BDC9r6zq

financial frauds in recent times, he gl995QQ7qJiL/Forget-privatisation-govt-has-

hugged-its-banks-tighter.html Dated: Jan 18, mentioned that such cases further 2019 underscore the significance of sound

corporate governance standards in COMPLEXITY OF INDIAN banks. The government, the Banks Board FINANCIAL SYSTEM Bureau and the Reserve Bank are

WARRANTS ROBUST CORP currently engaged in developing an

objective framework for performance GOVERNANCE IN BANKS, evaluation and this should redefine the SHRI SHAKTIKANTA DAScontours of corporate governance in the Commenting on the reasons behind the Public Sector Banks (PSBs) with a focus

I N D I A


on transparency, accountability and economies are on the path of monetary

skills. The PSBs have been hit by a series policy normalization, there has been

of frauds in the recent past, including the global portfolio rebalancing away from

much-talked about Rs 14,000 crore emerging market economies, including

fraud at Punjab National Bank. Referring India. Another factor that has

to the problems being faced by the non- repercussions for India's external sector

banking financial sector, the RBI chief is the recent developments around

mentioned that the debt default of a Brexit, there are consequential policy

systemically important NBFC highlighted challenges for India which enjoys strong

the vulnerabil ity and need for trade and investment relations with the

strengthening regulatory vigil on the UK and the EU. RBI will carefully weigh

sector in general and on asset liability the challenges and opportunities that lie

management (ALM) framework in ahead and undertake appropriate policy

particular. The Reserve Bank intends to responses. Indian companies may face

strengthen the ALM framework for pertains to developments around Brexit,

NBFCs and harmonies it across different Indian companies and policy makers

categories of NBFCs with the objective of need to suitably weigh all opportunities

enabling the NBFCs to play a vital role in and challenges, and accordingly re-

our economy. In order to allow additional strategise to respond appropriately. On

access to funding for the NBFC sector in his appointment as RBI Governor, Shri

the wake of the recent crisis, the Reserve Das mentioned that he had no clue that

Bank has relaxed the norms for NBFCs to he would get the job at the central bank.

securities their loan books, he added. On Months before his appointment, he had

challenges before the economy, Shri Das in October tweeted 'central banks across

mentioned that the foremost priority is countries have a very critical role at the

to preserve domestic macroeconomic current juncture. The challenge is to try

and financial stability, especially in a and read the situation and take decisive

global environment that is clouded by steps in pursuit of their multiple

high uncertainty. Not only downward responsibilities'.

https://economictimes.indiatimes.com/industrrisks to global growth, trade and y/banking/finance/banking/indias-banking-investment have risen, but also the system-is-on-the-cusp-of-a-transformation-spillover effects on emerging markets shaktikanta-das/articleshow/67591553.cms

due to increase in global interest rates Dated: Jan 18, 2019

could be profound. RBI therefore, need

to brace ourselves for any sudden bout GOVERNMENT SACKS TWO of global financial market turbulence

PUNJAB NATIONAL BANK that domestic economy and financial

EXECUTIVES FOR ALLEGED markets may face in the period ahead. In LAPSES IN $2 BILLION FRAUDsuch a milieu, domestic macroeconomic India has sacked two senior executives policy framework needs to be supported of state-run Punjab National Bank (PNB) by sound financial supervision and for allegedly failing to prevent a $2 regulation. As a few advanced

I N D I A


billion fraud, nearly a year after the MD, DMDScountry's biggest bank scam came to IDBI Bank, which has becomes a

light. The firing of the two executive subsidiary of LIC, has decided to

directors, whom the federal police have continue with the existing top

accused of breaching central bank management, including Shri Rakesh

guidelines, is the first instance of Sharma as the managing director of the

sacking of the bank's employees since it bank. Insurance giant LIC has completed

mentioned that billionaire diamond acquisition of 51 per cent controlling in

jeweller Shri Nirav Modi and his uncle the bank. However, the bank's board also

had for years fraudulently raised billions approved the appointment of Shri Rajesh

of dollars in foreign credit by conspiring Kandwal as an additional director and

with staff at the bank. Shri Modi and his LIC's nominee director on the board of

uncle Shri Mehul Choksi, who left India IDBI Bank. Shri Kandwal is the director

before the fraud was discovered, have and the chief executive officer of LICHFL

denied the accusations. In a stock Care Homes Ltd. The board of IDBI Bank

exchange filing late on Friday, the has in its meeting held on January 21

country's second-biggest state bank approved continuation of office of Shri

mentioned that the government had Rakesh Sharma, Shri K P Nair and Shri G

removed Shri K. Veera Brahmaji Rao and M Yadwadkar as directors and as MD &

Shri Sanjiv Sharan "from the office of CEO and DMDs (Deputy Managing

executive director" with immediate Director), respectively, of the bank till

effect. The filing did not give a reason. such time as the board approves

The government then fired them appointment of" new management

because "they failed to use global following the due process". Consequent

payments network SWIFT to detect the to the allotment of shares under final

fraud", declining to be identified Tranche II to LIC, amendment in the

because the reasons for the sacking have bank's Articles of Association has come

not been made public. They were not into effect.

able to supervise and there was https://economictimes.indiatimes.comdereliction of duty on their part. Phone /industry/banking/finance/banking/idcalls to PNB Chief Executive Shri Sunil bi-bank-decides-to-continue-with-Mehta as well as to Shri Rao and Shri ex ist ing-md-dmds/art ic leshow/ Sharan went unanswered. 67622499.cms Dated: Jan 21, 2019https://economictimes.indiatimes.com/industr

y / b a n k i n g / f i n a n c e / b a n k i n g / i n d i a n - CBI REGISTERS CRIMINAL government-sacks-two-punjab-national-

CASE AGAINST MS. CHANDA bank-executives-for-alleged-lapses-in-2-

b i l l i o n - f r a u d - s o u r c e s / a r t i c l e s h o w / KOCHHAR67610035.cms Dated: Jan 20, 2019 In a move that spells trouble for former

ICICI Bank Chief Executive Officer (CEO) IDBI BANK DECIDES TO Ms. Chanda Kochhar, the Central Bureau

CONTINUE WITH EXISTING of Investigation registered a criminal case

I N D I A


against her along with her husband and owned by Shri Deepak Kochhar for Rs. 9

NuPower Renewables founder Deepak lakh, six months after receiving the loan

Kochhar and Videocon group managing from ICICI Bank an allegation that

director (MD) Shri Venugopal Dhoot. With Kochhar had earlier denied to Mint.

https://www.livemint.com/companies/news/cbthe probe agency naming Kochhar as an i-registers-fir-in-icici-bank-videocon-loan-accused in a loan fraud case at a time case-1548309939916.html Dated: Jan 24, 2019when she was at the helm of affairs at the

bank, the case brings back the spotlight PNB'S $45 MILLION FRAUD on financial crimes involving the top

CLAIM DISMISSED BY ENGLISH brass of the banking sector. Punjab

National Bank MD and CEO Ms. Usha COURTAnanthasubraman ian i s under The High Court of England and Wales

investigation by the CBI for her alleged dismissed a USD 45-million deceit claim

involvement in the Rs. 14,356 crore brought by the UK subsidiary of Punjab

scam. Earlier in the day, the CBI carried National Bank (PNB) against seven

out searches at four locations in Mumbai individuals and two companies, based in

including the Mumbai offices of Videocon India and the US. London-based Punjab

and NuPower. The FIR and the raids are in National Bank International Limited's

connection with the ICICI-Videocon loan (PNBIL) claim concerned eight loans it

case, an alleged case of quid-pro-quo. made between March 29, 2011, and

While Shri Deepak Kochhar declined December 1, 2014, for oil re-refining

comment on the matter, calls and and wind energy generating projects in

messages to Shri Venugopal Dhoot the US. PNBIL had accused the

remained unanswered. In March, the CBI individuals and companies in question of

registered a preliminary enquiry against breach of contract, misrepresentation

Shri Deepak Kochhar and Shri Venugopal and deceit. In his judgment at the High

Dhoot, chairman of Videocon group, to Court's Chancery Division, Chief Master

investigate irregularities in the Rs. Marsh concluded that the bank had

40,000 crore loan made by a consortium failed to make an "arguable case in

of lenders. It pointed to an alleged deceit against the defendants". "The core

conflict of interest in a Rs. 3,250-crore components of a claim in deceit are

loan grant to Videocon group by ICICI absent; or if they are present, they are

Bank. The amount was granted as part of provided as such a high level of

a Rs. 40,000-crore loan by a consortium abstraction as to be totally inadequate,"

of 20 banks in 2012. Dhoot allegedly he notes. Referring to the case as having

gave Rs. 64 crore in 2010 through a fully "an unfortunate history", the judge also

owned entity to NuPower Renewables Pvt pulls up PNBIL for a lack of "frankness"

Ltd, which he had set up with Shri Deepak with the court. "It is disturbing that the

Kochhar and two of his relatives. It was US claim was not brought to the

al leged that Dhoot transferred attention of the court in a plain and

proprietorship of the company to a trust direct manner from the outset. It is

I N D I A


equally disturbing that the claimant's actions of the defendants following the

intention to bring proceedings in granting of loans amounting to USD 45

Chennai was not investigated and details million to companies in the US and India

of the claim was not revealed to the controlled by the individual defendants.

court," the judgment order states. The The bank also alleged that money had

judge further observed that the failure to been siphoned off and payments due

draw to the attention of the court the had not been made under the loan

existence of the foreign claims was a facilities and guarantees. All the

"serious breach" of the claimant's duty to defendants, except one who is US-

the court. UK-based law firm Zaiwalla & based, are resident in India and PNBIL,

Co represented eight of the defendants represented by UK-based Cubism Law,

against PNBIL – Ravi Srinivasan, Trishe had served the proceedings by email on

Resources INC (USA), Vathsala the defendants in India and the US. PNBIL

R a n g a n a t h a n , P e s c o B e a m is the wholly-owned subsidiary of

Environmental Solutions INC (USA), Punjab National Bank (PNB) in India,

Pesco Beam Environmental Solutions which started its UK operations in 2007

Private Limited, Anantharaman Shankar, and operates through seven branches

Luke Staengl and Anantharam around the country. It is yet to officially

Subramamium. The court noted that it comment on the ruling.

https://economictimes.indiatimes.com/industrwas common ground that none of the y/banking/finance/banking/pnbs-45-million-defendants have any connection with fraud-claim-dismissed-by-english-court England. However, the contracts were /articleshow/67676191.cmsDated: Jan 24, 2019

executed in England, the loans were

negotiated here and the loan accounts CBI BOOKS FORMER ICICI

are all held and operated in London. BANK CHIEF MS. CHANDA

PNBIL had relied on these facts and the KOCHHAR FOR CRIMINAL willingness of the borrowers and their CONSPIRACYdirectors to travel to London for the

purposes of arranging the loans as part The CBI has booked former ICICI Bank

of its case. The decision serves as a head Ms. Chanda Kochhar on charges of

reminder that serious allegations of criminal conspiracy, cheating and abuse

fraud have to be supported by cogent

facts and evidence: speculative claims

will not be permitted to proceed to trial.

The decision of the court has saved

everyone concerned a great deal of time

and money by being dismissed at an

early stage, although the bank will still

face claims for substantial costs as well

as having to pay its own costs. PNB

International Ltd had claimed that it had

been misled and defrauded by the

I N D I A


of official position for “dishonestly which the CBI is expected to soon

sanctioning loans to the Videocon summon Chanda and Deepak Kochhar as

Group”. Ms. Kochhar, who was the MD of well as Dhoot for further questioning.

ICICI Bank until last October, is accused Sources added that Shri Dhoot was in his

in the CBI FIR of allegedly receiving Mumbai office when the searches took

“illegal gratification through her place. He was quizzed by the CBI sleuths.

husband, Shri Deepak Kochhar, from This was just preliminary questioning.

Videocon MD Shri VN Dhoot for He will be summoned on a later date to

sanctioning a term loan of Rs 300 crore be confronted with the seized items. An

to Videocon International Electronics individual close to Ms. Chanda Kochhar,

Ltd”. This apart, her alleged role in however, claimed the FIR is technically

influencing disbursal decisions in flawed. Eight ICICI Bank executives

relevant committees of the bank has also besides Ms. Chanda Kochhar have been

been brought under the scanner. The CBI named in the FIR. If this is a case of quid

has also registered a case against Shri pro quo, then how do you prove that for

Deepak Kochhar and Shri VN Dhoot. It these executives? This is a basic flaw in

has also mentioned unknown public the FIR and while we will cooperate with

servants in the FIR. The agency is the authorities, we will also fight this

probing allegations of 'quid pro quo' in FIR.” According to the FIR, ICICI Bank

the loans granted to Videocon by ICICI disbursed six “high-value loans”

Bank. As per the FIR, role of senior bank between June 2009 and October 2011.

officials, including former chairman Shri “On August 26, 2009, a rupee term loan

KV Kamath (currently president of New of Rs 300 crore was sanctioned to

Development Bank, formerly BRICS Videocon International Electronics Ltd

Bank), current ICICI Bank MD Sandeep (VIEL) in contravention of rules and

Bakhshi, K Ramkumar, Sonjoy Chatterjee policy by the sanctioning committee. Ms.

(CEO, Goldman Sachs India), NS Kannan, Kochhar was one of the members of the

Zarin Daruwala (CEO, Standard sanctioning committee, who in criminal

Chartered India), Rajiv Sabharwal (CEO, conspiracydishonestly by abusing her

Tata Capital) and Homi Khusrokhan, official position sanctioned this loan in

might also be probed. These individuals favour of VIEL,” the FIR mentioned. On

were part of the sanctioning committee September 7, 2009, this loan was

that cleared loans amounting to Rs transferred to VIEL, On September 8,

1,575 crore. The CBI conducted searches 2009, Dhoot transferred Rs 64 crore to

at the Nariman Point offices of Shri NuPower Renewables, managed by Shri

Deepak Kochhar's company NuPower Deepak Kochharthis was the first major

Renewables Limited (NRL), the Videocon capital received by NRL to acquire its first

Group and Supreme Energy Pvt Ltd power plant. The allegation against Ms.

(SEPL). Videocon's offices in Aurangabad Chanda Kochhar is that she received

were also searched. Sources told ET the “illegal gratification through her

raids have led to seizure of what they husband from Dhoot for sanctioning the

described as key documents based on Rs 300 crore loan”. The FIR further

I N D I A


mentioned that ICICI Bank also which was incorporated in December

sanctioned loans in violation of its credit 2008. Dhoot al legedly al lotted

policy to the Videocon Group to help it 1,997,500 warrants to Deepak Kochhar

repay unsecured loans. Loans to at the rate of 10 per warrant, on an initial

Videocon Industries Ltd (VIL) and its payment of Re 1 per warrant. In June

group of companies were declared non- 2009, shares of NRL held by Dhoot and

performing assets (NPAs) on June 30, Kochhar's Pacific Capital Services Pvt Ltd

2017. On the role of other senior were transferred to Supreme Energy Pvt

officials, most of whom have left ICICI Ltd, which became a 95% shareholder of

Bank, the agency mentioned that NRL. Dhoot resigned from the

between June 2009 and October 2011, directorship of SEPL in January 2009 and

loans amounting to Rs 1,575 crore were subsequently transferred control of the

sanctioned by various committees company to Deepak Kochhar by

having senior officials of the bank as selling/transferring his shares to

members. These loans included: Rs 175 Pinnacle Energy Trust managed by

crore to MillenniumAppliance India Ltd Kochhar. All these entities- VIEL, VIL,

on June 30, 2009; Rs 240 crore to Sky NRL and SEPL have been identified as

Appliances Ltd and Rs 110 crore to accused in the FIR. Amid these

Techno Electronics Ltd on November 17, allegations and probes by multiple

2010; Rs 300 crore to Applicomp India agencies, ICICI Bank appointed a

Ltd on May 30, 2011; and Rs 750 crore to committee under former Supreme Court

VIL on October 31, 2011.These loans Justice BN Srikrishna to investigate

have turned NPAs resulting in wrongful allegations of conflict of interest and

loss to ICICI Bank and wrongful gain to quid pro quo against Ms. Chanda

the borrowers and accused persons. The Kochhar. She stepped down last

role of these senior officials may also be October.

https://economictimes.indiatimes.com/industrinvestigated,” the FIR mentioned. The y/banking/finance/banking/cbi-files-case-CBI's case is that Ms. Chanda Kochhar, against-former-icici-bank-chief-chanda-who took over as MD of ICICI Bank in May kochhar/articleshow/67671367.cms Dated Jan

2009, was one of the key committee 25, 2019

members. Credit limits to the above-

mentioned group companies were INDIA POST PAYMENTS BANK sanctioned after she took over the

CROSSES 1.25 LAKH charge of the bank as MD, these loans

BRANCHES, SOON TO HIT 1.5 were sanctioned by different sanctioning

LAKHScommittees. Ms. Kochhar was one of the As per communications minister Shri committee members which sanctioned Manoj Sinha, the government has RTL of Rs 300 crore to VIEL and Rs 750 opened around 1.25 lakh branches of crore to VIL,” the FIR mentioned. On the India Post Payments Bank and soon, it alleged role of her husband, the FIR will have operations across over 1.5 lakh mentioned Deepak Kochhar, Dhoot and locations. Department of Posts (DoP) has Saurabh Dhoot were directors of NRL,

I N D I A


opened India Post Payments Bank for meet the CEOs of public sector banks to

unbanked and underbanked people. take a stock of the banking sector, and

There are lump sum 1.25 lakh branches. discuss ways to improve their financial

Shortly, it will have 1.5 lakh branches. hea l th . The meet ing assumes

Prime Minister has launched IPPB on significance as it comes just three days

September 1 last year with an aim to take ahead of the Budget 2019-20, the last

banking services to the doorstep of every from this government before the general

citizen by arming three lakh postmen elections expected to be held in April-

and 'Grameen Dak Sewaks' with digital May. The full-day meeting is likely to be

aids to deliver financial services. The attended by Reserve Bank of India

payments bank can accept deposits of Governor Shri Shaktikanta Das, who is

up to Rs 1 lakh, offer remittance going to announce his first monetary

services, mobile payments/transfers/ policy review on February 7. Shri Goyal,

purchases and other banking services who was given additional charge of the

such as ATM/debit cards, net banking finance ministry as Shri Arun Jaitley is

and third-party fund transfers. However, away to the US for a treatment, is his

it cannot offer loans directly, or issue expected to discuss a host of issues

credit cards. "Since the time of including credit offtake and bad loan

independence, there were around 1.3 position of lenders. Among the key

lakh bank branches, we are going to issues, sources mentioned that the

provide more bank branches than that. meeting will review progress of various

Talking about the stamp launch, the schemes of the government being

minister mentioned that earlier, it was a implemented through the government.

trend in this country that post stamps of It will also review the credit flow to

only special people from prime families MSMEs, agriculture and retail sectors.

were issued.After 2014, under the Besides, the meeting will also review

direction of Prime Minister, Department financial performance of the banks for

of Posts had a mandate to issue post the nine months ended December 2018.

stamps of people of eminence who made Non-performing assets (NPAs) would

special contribution at national and also come up for deliberation, they

international level. added. Public sector banks (PSBs) have

https://economictimes.indiatimes.com/industr seen decline in bad loans by over Rs y/banking/finance/banking/india-post- 23,000 crore from a peak of Rs 9.62 lakh payments-bank-crosses-1-25-lakh-branches- crore in March 2018 due to various s o o n - t o - h i t - 1 - 5 - l a k h - m a n o j - s i n h a /

initiatives taken by the government. At articleshow/ 67689557.cms Dated: Jan 25, 2019

the same time, PSBs have also made a

record in recovery of Rs 60,726 crore in FINANCE MINISTER SHRI the first half of the current financial year,

PIYUSH GOYAL TO MEET which is more than double the amount

HEADS OF PSU BANKS ON recovered in the corresponding period MONDAY last year. According to the latest finance Finance Minister Shri Piyush Goyal will ministry data, non-NPA accounts

I N D I A


overdue by 31 to 90 days (Special or fraudster if they think the person may

flee the country. The CMDs and CEOs of Mention Accounts 1 & 2) of PSBs have

PSU banks can now ask the Home declined by 61 per cent over five

Ministry, Ministry of External Affairs, successive quarters - from Rs 2.25 lakh

Customs and Income Tax Departments, crore as of June 2017 to Rs 0.87 lakh Directorate of Revenue Intelligence, CBI, crore in September 2018. In his first stint regional passport officers and police to as finance minister for 100 days last issue an LOC to alert immigration check year, Shri Goyal was instrumental in posts to stop anyone leaving India. The setting up a committee headed by non-SFIO and PSU banks can initiate the executive chairman of Punjab National process if they suspect that the defaulter Bank Shri Sunil Mehta to examine may leave the country to escape the law. whether c reat ion of an asset Earlier, investigating agencies would reconstruction company or asset request LOCs in cognizable offences management company to help in faster under the IPC or other laws in case the resolution of stressed assets.accused evaded arrest or did not appear

https://economictimes.indiatimes.com/industrbefore court despite issuance of non-y/banking/finance/banking/finance-minister-

bailable warrants and other coercive piyush-goyal-to-meet-heads-of-psu-banks-

on-monday/articleshow/67707986.cms measures and there was a likelihood of Dated: Jan 27, 2019 the accused leaving the country to

escape arrest. An LOC is valid for a year GOVERNMENT EMPOWERS unless its duration is specified. The

govt's fresh move came after three high-PSU BANKS TO SEEK profile escapes involving liquor baron LOOKOUT CIRCULARS Shri Vijay Mallya and diamantaires Shri AGAINST WILFUL Nirav Modi and Shri Mehul Choksi rocked

DEFAULTERSthe country, inviting embarrassment for

In a bid to prevent big economic the government. Shri Mallya left India on

offenders like Shri Vijay Mallyaand Shri March 2, 2016 after defaulting on loan

Nirav Modi from fleeing the country, the amounting to Rs 9,000 crore he had

government has empowered PSU banks taken for his now-defunct Kingfisher

to request lookout circulars (LOCs) Airlines. Jewellery designer Shri Modi

against wilful defaulters and fraudsters. and his uncle Shri Choksi, managing

The Home Ministry has also authorized director of Gitanjali Gems Ltd, fled the

the Serious Fraud Investigation Office country in January 2018. They are

(SFIO), a statutory corporate fraud accused of cheating the state-run

investigation agency, to request LOCs if Punjab National Bank to the tune of Rs

it feels the suspect may escape from 13,000 crore. The government had last

India. The ministry issued two circulars year brought the Fugitive Economic

recently, authorizing chairman-cum-Offenders Act, empowering the

managing directors or chief executive authorities to attach and confiscate the

officers of public sector banks and the proceeds of crime and properties of

SFIO to request designated authorities to economic offenders, l ike bank

issue LOCs against any wilful defaulter

I N D I A


fraudsters or loan defaulters who fled new rule came into effect. The idea is to

the country. The law is aimed at quickly place the facts before everyone at a time

recovering losses to the exchequer or when the industry associations are

PSBs in cases of frauds. putting forward their views against the

https://economictimes.indiatimes.com/industr February 12 circular before the new y/banking/finance/banking/ government- governor. Mint Street memos, released empowers-psu-banks-to-seek-lookout-

by RBI from time to time, are brief c i r c u l a r s - a g a i n s t - w i l f u l - d e f a u l t e r s /

reports and analyses on contemporary articleshow/67711663.cms Dated: Jan 28, 2019

topics. The documents are prepared by

the staff of RBI and Centre for Advanced RBI HAS A MEMO THAT Financial Research & Learning (CAFRAL),

COULD PERMANENTLY an independent body set up by the

SILENCE DOUBTERS OF ITS central bank. Among other things, RBI's

NPA MOVE February 12 notification directed banks The Reserve Bank of India (RBI) is to classify loans as 'special mention weighing a plan to release data that accounts' immediately on default, and would demonstrate that the number of file insolvency application (in case of corporates defaulting on bank loans borrowers having outstanding debt of Rs have dipped following the central bank's 2,000 crore or more) if the debt stern directive on February 12 last year resolution plan to revive the company is that had rattled large, influential not implemented within 180 days from borrowers and irked many within the the date of default. The notification has government . The regu la tor i s been legally challenged with several understood to have sounded out the borrowers taking a stand that the government on the proposed move that decision to invoke the 'Insolvency and could counter arguments of industry Bankruptcy Code 2016' should be left to lobbies and defend the directive at a time lenders and not directed by the banking it has been challenged in the court of regulator. “Even though the subject is law. There is a proposal to come out with sub judice (with the petitions against the a 'Mint Street Memo' that will show circular lying before the Supreme Court), improvement in default data since the the regulator can always come out with

I N D I A


reports based on facts which are not itself. However, of close to 250 operators

classified. Indeed, according to data employed with these agencies, nearly

compiled by India's largest credit rating half were penalized in the last two

agency Crisil, the number of defaults is months and were either deactivated or

the lowest in the first half of 2018-19 blacklisted. This brought SBI's Aadhaar

compared with the corresponding enrolments to a halt at many branches,

period of FY14, FY15, FY16, FY17 and causing the bank to fail to meet targets

FY18. It is a common knowledge that and face penalties. One of those

there was a time when some of the senior penalised was 40-year-old Vikram, who

government functionaries were against worked for a monthly salary of Rs 10,000

the February 12 circular and former as an Aadhaar operator at the SBI branch

governor Shri Urjit Patel had faced the in a small village called Uchana in

pressure. The message sent out by the Haryana's Jind district. On December 26,

February 12 circular is that the outcome 2018, UIDAI fined him more than Rs 33

of default should be automatic, lakh. According to UIDAI, Vikram had

immediate, and transparent. The used his operator ID to generate Aadhaar

directive, say people in banking circles, cards using fraudulent documents

comes across as harsh because it marks between November 9 and November 17,

a shift to an inflexible, rule based system 2018. It was done using “multiple station

in dealing with NPAs and recovery.

https://www.livemint.com/Politics/3FEsadloz

SBI ALLEGES AADHAAR DATA MISUSE, UIDAI RUBBISHES CHARGEOfficials ofSBI have alleged that data of

the Unique Identification Authority of

India (UIDAI) has been misused. Logins

and biometrics of their Aadhaar

operators have been misused to

generate unauthorised Aadhaar cards,

bank off ic ials informed UIDAI.

Countering the charge, UIDAI mentioned

that Aadhaar database is fully secured

and no security breach, biometric or

otherwise. SBI, like other banks, was

given an Aadhaar enrolment target for

which i t selected vendors FIA

Technology Services Pvt Ltd and Sanjivini

Consultants Pvt Ltd in the Chandigarh

region which covers Haryana, Punjab,

Himachal, J&K and the UT of Chandigarh

I N D I A


IDs” in Vikram's name, which allowed January 9, the authority finally

Aadhaar cards to be made from multiple introduced an additional step in the

devices 143, to be precise. Every device, registration of Aadhaar operators as an

like a laptop, desktop or tablet, used for extra security measure. Also, some

Aadhaar enrolment is registered with unscrupulous elements have been

UIDAI and identified by the “station ID”. attempting to register multiple

SBI officials pointed out that as machines but UIDAI has an inherent

“registrar” (as all banks entrusted with system in place to detect any such

Aadhaar enrolment are), only they could attempt and appropriate action is taken

have approved multiple station IDs but on a daily basis on operators who err.

they had not done so. The bank's UIDAI imposes financial disincentives

officials in Chandigarh wrote to their and blacklists errant operators.

corporate office in Mumbai to raise the However, it relooks into the issue if

issue with UIDAI, saying they did not someone is wrongly penalised. It would

create these multiple station IDs and be pertinent to mention here that

there must have been lacunae in UIDAI's divulging details of any specific case

security system that allowed “someone under inquiry would not be appropriate

to hack the system and generate in the interest of the case.

https://economictimes.indiatimes.com/industrmultiple station IDs” in Vikram's name. y/banking/finance/banking/sbi-alleges-Even more baffling was the misuse of aadhaar-data-misuse-uidai-rubbishes-V i k r a m ' s p e r s o n a l b i o m e t r i c s charge/articleshow/67734688.cms

(fingerprints in this case) to generate Dated: Jan 29, 2019

Aadhaar cards, carry out unexplained

transactions at places like the I-T YES BANK CO-PROMOTERS department, Maharashtra government,

AGREE TO NOMINATE ONE MP government, National Informatics

DIRECTOR EACH ON BOARDCentre and various banks, and even Yes Bank promoters Shri Rana Kapoor withdraw money from his personal and Ms. Madhu Kapur have agreed to accounts. All this time, UIDAI did not act nominate one representative director against any bank official, which would each on the bank's board as part of truce have been the case had there been a under the works. The bank in November lapse or wrongdoing by SBI officials. SBI had said that efforts were underway for deputy general manager Shri B Rajendra mutual resolution and truce between Kumar confirmed that he was aware of Shri Rana Kapoor group and Ms. Madhu the “misuse of the biometrics” of Vikram Kapur and her family, the two co-and problems facing their sub-promoters groups of the private sector vendors.In its reply, sent January 18, lender. Yes Bank recently selected senior UIDAI refused to share the details of the board of directors of the bank had case but admitted that an inquiry was on. interacted with Ms. Kapur and her family. Meanwhile, almost all the operators, Shri Madhu Kapur Group and Ms. Rana except Vikram, were cleared by UIDAI Kapoor Group have agreed to nominate and allowed to return to work. On

I N D I A


one representative director each on the sister of Shri Rana Kapoor's wife Ms.

bank's board, subject to the completion Bindu and the two co-promoters of the

of the necessary documentation. The bank have been working towards

two new directors will be announced at reaching a settlement.

https://economictimes.indiatimes.com/industrthe next scheduled board meeting in y/banking/finance/banking/yes-bank-co-April 2019. This is intended to ensure promoters-agree-to-nominate-one-director-better coordination and support by the each-on-board/articleshow/67742675.cms

two promoter groups with the new MD & Dated: Jan 29, 2019

CEO and the board of directors of the

bank. Yes Bank also mentioned that its TAXMAN TARGETS BANKS board approved and recommended the

FOR FREE LOGO USE BY name of a senior board member of the

SUBSIDIARIESbank to the Reserve Bank to temporarily The tax department has started issuing hold the office of the MD&CEO as an notices to banks that allow subsidiaries, interim special duty officer. The senior such as mutual fund and insurance units, official will hold the position as "Board to use their logos for free. The tax Director on Interim Special Duty (MD & department wants the banks to pay 18% CEO's responsibilities)' from Feb 1, 2019 GST on the “deemed” value of such till such date Shri Ravneet Gill assumes transactions and has even calculated office in March, 2019," it said. Last week, how much these are worth. State Bank of Yes Bank had appointed Deutsche Bank India, Citibank, ICICI Bank, Bank of India head Shri Ravneet Singh Gilll as its Baroda, Kotak Mahindra Bank and others Managing Director & Chief Executive have received show-cause notices or are Officer (MD&CEO) as incumbent Shri being scrutinized and could soon be Rana Kapoor is required to step down on getting them. Subsidiaries use logos for January 31. The bank has named Shri the promotion of related products with Ajai Kumar, the non-executive non-the understanding sometimes included independent director on its board to be in a contract that no fees have to be paid. acting an interim MD&CEO for the RBI's The tax department says these are recommendation. In September, the “related party transactions” and hence Reserve Bank had asked Kapoor to find a should be subjected to valuation replacement for himself. Shri Kapoor had regulations as per the GST framework. co-founded the bank in 2004 along with This follows banks being asked last year his late brother-in-law Shri Ashok to cough up taxes on services provided Kapur, who died in the 2008 Mumbai free to customers. The department has terror attacks, post which his wife Ms. arrived at a value for such transactions Madhu Kapur became the co-promoter and imposed GST on that. As per Tax of the bank. Shri Kapoor and Ms. Kapur experts nothing under the GST have been caught-up in a legal battle f ramework is considered free. since 2015 on some issues including Everything has a value and hence tax has nominating members of their choice on to be paid on the amount. Under GST, a the board of the bank. Ms. Madhu is

I N D I A


“supply of brand” is deemed to have and interest on free services offered to

taken place from the bank to the c u s t o m e r s . T h e d e m a n d w a s

subsidiaries, which are related parties. retrospective with a 12% service tax

Logos and trademarks are licensed by claimed since 2012, 18% interest on the

the bank that holds them to its amount and a 100% penalty. This issue

subsidiaries. This didn't attract attention could also come to haunt the banks

previously because there were no again under the GST regime.

https://economictimes.indiatimes.com/industrregulations that dealt with free supply of y/banking/finance/banking/taxman-targets-services between related parties. The b a n k s - f o r - f r e e - l o g o - u s e - b y -critical aspect to be considered is subsidiaries/articleshow/67748885.cms

whether there is a supply and if there is a Dated: Jan 30, 2019

supply only then consider the valuation

of the supply. It needs to be appreciated JUSTICE SRIKRISHNA PANEL that neither service tax legislation or

INDICTS CHANDA KOCHHAR, state VAT (value added tax) legislation

ICICI BANK SACKS HERcontained conditions that mandated an The Srikrishna committee that was arm's length pricing of supplies between tasked to probe the quid-pro-quo related parties this was on account of the transactions in ICICI Bank submitted its extreme difficulty in complying with report, mentioning that Ms. Chanda such provisions as also administrating Kochhar violated the banks code of the same. The incremental revenue on conduct. Post these findings, the bank this count would be nominal in the mentioned that it would treat Kochhar's overall scheme of things, he said, adding exit as 'Termination for Cause' under the that the government should consider Bank's internal policies. This essentially simplifying the valuation rules. As means revocation of all her existing and receipt of consideration was a future entitlements such as any unpaid prerequisite for an activity to qualify as a a m o u n t s , u n p a i d b o n u s e s o r service, taxability of free-of-cost increments, unvested and vested & services was not an issue in the erstwhile unexercised stock options, and medical service tax regime. However, the GST benefits), and require the claw back of all regime contemplates tax on free bonuses paid from April 2009 to March supplies between related parties. Banks 2018. Responding to the findings of may not be able to claim input tax credit Srikrishna committee, Chanda Kochhar on this count.Where the GST paid is mentioned that she is utter ly available as a pass-through, there are no disappointed, hurt and shocked by the concerns. However, this may create decision. Certain that truth will disruptions where credit cannot be ultimately prevail, mentioned Ms. offset in its entirety by the recipient. This Chanda Kochhar. The enquiry report also is the second big issue banks are facing concluded that she failed to discharge with the indirect tax department. In her fiduciary functions to rescue herself notices served in April last year, all banks to avoid any conflict of interest. The were asked to pay service tax, penalties

I N D I A


Central Bureau of Investigation has respect to annual disclosures as required

already named Ms. Chanda Kochhar her by the Bank in terms of its internal

husband Shri Deepak Kochhar and policies, the ICICI Bank Code of Conduct

Videocon group managing director Shri and applicable Indian laws, rules and

Venugopal Dhoot for criminal conspiracy regulations on her interests (direct or

and cheating. Ms. Chanda Kochhar was indirect) towards avoidance of conflict of

on the bank's credit committee that interest, when considered that the

sanctioned a loan of Rs 3,250 crore to Bank's processes were dependent solely

the Videocon Group in 2012. Videocon's on the directors discharging their

promoter Shri Venugopal Dhoot was one fiduciary duty to recuse themselves and

of the first investors in NuPower avoid conflict, implies that the Bank's

Renewables promoted by Shri Deepak processes were rendered ineffective by

Kochhar, Ms. Chanda Kochhar's her approach to such disclosures and

husband, in 2008. The Audit Committee avoidance of conflict. The Bank notes

of the Bank had on June 6, 2018 that there are no implications of the

appointed former Supreme Court judge, Enquiry Report on its published financial

Hon'ble Mr. Justice (Retd.) B. N. statements (Indian or US GAAP) for the

Srikrishna as the Head of Enquiry (HOE) relevant periods. Following the receipt of

to undertake a comprehensive enquiry the Enqu i r y Repor t , and due

on allegations against Ms. Chanda consideration of the Enquiry Report and

Kochhar. The HOE was assisted by a law the conclusions thereat, after due

firm, and a forensic and investigative deliberations, the Board of Directors

services firm for the conduct of the decided to treat the separation of Ms

enquiry. The Bank has received the Chanda Kochhar from the Bank as a

Enquiry Report from HOE, and the Board 'Termination for Cause' under the Bank's

of Directors considered the same at the internal policies, schemes and the Code

Board Meeting held on January 30, 2019. of Conduct, with all attendant

The Enquiry Report, with the scope consequences (including revocation of

period of April 1, 2009 to March 31, all her existing and future entitlements

2018 (unless specific information such as any unpaid amounts, unpaid

required enquiry into transactions or bonuses or increments, unvested and

facts of an earlier period), concluded, vested & unexercised stock options, and

primarily on account of ineffectively medical benefits), and require the

dealing with conflict of interest and due clawback of all bonuses paid from April

disclosure or recusal requirements, that 2009 until March 2018, and to take such

Ms Chanda Kochhar was in violation of further actions as may be warranted in

the ICICI Bank Code of Conduct, its the matter. Certain statements in this

framework for dealing with conflict of release relating to a future period of time

interest and fiduciary duties, and in (including inter alia concerning our

terms of applicable Indian laws, rules future business plans or growth

and regulations. The Enquiry Report also prospects) are forward-looking

concluded that her lack of diligence with statements intended to qualify for the

'safe harbor' under applicable securities is possibly trying to align itself to the

laws including the US Private Securities new generation and positioning the

Litigation Reform Act of 1995. Such organization for the next 5-6 years.

forward-looking statements involve a Organizations move to role-based

number of risks and uncertainties that designations from level/grade- based

could cause actual results to differ designations when they want to move

materially from those in such forward- away from hierarchical thinking to

looking statements. functional thinking focusing on the

https://economictimes.indiatimes.com/industr accountability of the role. HR experts y/banking/finance/banking/justice-srikrishna- mentioned that the challenge is to have report-indicts-chanda-kochhar-says-she- the culture to pull it off. That could be violated-banks-policies/articleshow/67758632

the conceptual anchor for such a move .cms Dated Jan 31, 2019

but the question is whether you have the

culture to pull it off and that is the SENIOR MANAGEMENT AT challenge.My guess is ICICI will manage

ICICI BANK TO HAVE NO to make it work.

TITLEShttps://economictimes.indiatimes.com/industr

India's second largest private lender y / b a n k i n g / f i n a n c e / b a n k i n g / s e n i o r -

ICICI Bank has decided to scrap management-at-icici-bank-to-have-no-

titles/articleshow/67765816.cms Dated: Jan 31, designations at senior management 2019level to inspire more efficient teamwork

by making the processes less

hierarchical. Designations at the bank

will now be indicative of the function or India's overall exports (Merchandise and the job that a person is expected to Services combined) in April-December perform. Executives at the senior 2018-19* are estimated to be USD management level will have the job title 396.73Billion, exhibiting a positive of 'head' followed by their function or growth of 13.79per cent over the same department, they said. Grades such as period last year. Overall imports in April-assistant general manager, deputy December2018-19* are estimated to be general manager, senior general USD 479.46Billion, exhibiting a positive manager, and general manager will be growth of 14.63per cent over the same removed from the title and will be used period last year.only for internal annual appraisals for

increase in salary and allowances. These *Note: Services data pertains to April-

role-based designations are being November 2018-19 as November 2018

aligned with appropriate decision- is the latest data available as per RBI's

making powers so that we can respond Press Release dated 15th January 2019.

to market opportunities in a faster It is arrived at by adding Month-wise QE

manner. Shri K. Ramkumar, former dataof RBI's press release for April to

executive director and head of human November 2018-19. This data is

resources at ICICI Bank mentioned, ICICI provisional and subject to revision by

INDIA'S FOREIGN TRADE: DECEMBER 2018

I N D I A


I N D I A


RBI. In addition, it may be noted that data Imports: Imports in December 2018

for December 2018 is estimated and were US $ 41.01 Billion (Rs. 2,90,032.95

added to the April-November 2018-19 Crore), which was 2.44 per cent lower in

data of RBI to calculate the Overall Trade Dollar terms and 7.41 per cent higher in

Deficit for April-December 2018-19. It Rupee terms over imports of US $ 42.03

will be revised based on RBI's next press Bil l ion (Rs.2,70,015.44Crore) in

release for December 2018. December 2017. Cumulative value of

imports for the period April-December

2018-19 was US $ 386.65 Billion Merchandise Trade(Rs.26,97,306.82 Crore), as against US $ o xports (Including Re-Exports):343.34 Billion (Rs.22,14,370.92 Crore) Exports inDecember 2018 were US $ during the period April-December 27.93 Billion, as compared to US $ 27.83 2017-18, registering a positive growth Billion in December 2017, exhibiting a of 12.61 per cent in Dollar terms (21.81 positive growth of 0.34per cent. In per cent in Rupee terms). Major Rupee terms, exports were Rs. commodity groups of import showing 1,97,535.86 Crore in December 2018, high growth in December 2018 over the as compared to Rs. 1,78,802.77 Crore in corresponding month of last year are:December 2017, registering a positive

growth of 10.48 per cent. In December o Crude Oil And Non-Oil Imports:Oil 2018, major commodity groups of imports inDecember 2018 were US $ export showing positive growth over the 10.67 Billion (Rs. 75,486.52 Crore), corresponding month of last year arewhich was 3.16 percent higher in Dollar Cumulative value of exports for the terms (13.58 percent higher in Rupee period April-December 2018-19 was US terms), compared to US $ 10.35 Billion $ 245.44 Billion (Rs.17,11,905.60 Crore) (Rs. 66,458.79 Crore) in December as against US $ 222.77 Billion 2017. Oil imports in April-December (Rs.14,36,614.25 Crore) during the 2018-19 were US $ 108.10 Billion (Rs. period April-December 2017-18, 7,55,255.78 Crore) which was 42.85 per registering a positive growth of 10.18 cent higher in Dollar terms (54.73 per cent in Dollar terms (19.16 per cent percent higher in Rupee terms) in Rupee terms). Non-petroleum and compared to US $ 75.67 Billion (Rs. Non Gems and Jewellery exports in 4,88,125.91 Crore), over the same December 2018 were US $ 21.11 Billion, period last year. In this connection it is as compared to US $ 20.88 Billion in mentioned that the global Brent price December 2017, exhibiting a positive ($/bbl) has decreased by 12.07 % in growth of 1.08 per cent. Non-petroleum December 2018 vis-à-vis December and Non Gems and Jewellery exports in 2017 as per data available from World April-December 2018-19 were US $ Bank (Pink Sheet). Non-oil imports 177.66 Billion, as compared to US $ inDecember 2018 were estimated at US $ 164.66 Billion for the corresponding 30.33 Billion (Rs.2,14,546.43 Crore) period in 2017-18, an increase of 7.90 which was 4.27 per cent lower in Dollar per cent.

I N D I A


terms (5.40percent higher in Rupee Trade Balanceterms), compared to US $ 31.69Billion o Merchandise: T h e t r a d e

(Rs. 2,03,556.65 Crore) in December deficit for December 2018 was

2017. Non-oil imports in April- estimated at US $ 13.08Billion as against

December 2018-19 were US $ 278.54 the deficit of US $ 14.20Billion

Billion (Rs.19,42,051.04 Crore) which inDecember 2017.

was 4.06per cent higher in Dollar terms o Services: As per RBI's Press (12.50percent higher in Rupee terms), Release dated 15th January 2019, the compared to US $ 267.66 Billion (Rs. trade balance in Services (i.e. Net 17,26,245.01 Crore) in Apr i l- Services export) for November, 2018 is December2017-18. Non-Oil and Non- estimated at US $ 6.57Billion.Gold imports were US $ 27.76 billion in o Overall Trade Balance: T a k i n g December 2018, recording a negative merchandise and services together, growth of 1.86per cent, as compared to overall trade deficit for April-December Non-Oil and Non-Gold imports in 2018-19* is estimated at US $ 82.72 December 2017. Non-Oil and Non-Gold Billion as compared to US $ 69.63Billion imports were US $ 253.89 billion in in April-December 2017-18.April-December 2018-19, recording a

*Note: Services data pertains to April-positive growth of 5.32per cent, as

November 2018-19 as November 2018 compared to Non-Oil and Non-Gold

is the latest data available as per RBI's imports in April-December 2017-18.

Press Release dated 15th January 2019. Trade In Services It is arrived at by adding Month-wise QE o Exports (Receipts):E x p o r t s i n data of RBI's press release for April to November 2018 were US $ 16.68 Billion November 2018-19. This data is (Rs.1,19,831.25 Crore) registering a provisional and subject to revision by negative growth of 0.82per cent in dollar RBI. In addition, it may be noted that data terms, vis-à-vis October 2018. (as per for December 2018 is estimated and RBI's Press Release for the respective added to the April-November 2018-19 months). data of RBI to calculate the Overall Trade

o Imports (Payments): Imports Deficit for April-December 2018-19. It

inNovember2018 were US $ 10.11Billion will be revised based on RBI's next press

(Rs.72,637.41Crore) registering a release for December 2018.

positive growth of 0.10per cent in dollar

terms, vis-à-vis October 2018. (as per

RBI's Press Release for the respective

months).

I N D I A


Merchandise Trade

Services Trade

Note: Services data pertains to April-November 2018-19 as November

2018 is the latest data available as per RBI's Press Release dated

15thJanuary 2019. April-November 2018-19 data is arrived at by adding

Month-wise QE data. This has been used along with the estimate of

service exports and imports for December 2018, as explained in page-1

for the purpose of this Press note.

Exports & Imports: (US $ Billion)

December April-December

Exports (Including Re-Exports)

2017-18 27.83 222.77

2018-19 27.93 245.44

%Growth 2018-19/ 2017-18 0.34 10.18

Imports

2017-18 42.03 343.34

2018-19 41.01 386.65

%Growth 2018-19/ 2017-18 -2.44 12.61

Trade Balance

2017-18 -14.2 -120.57

2018-19 -13.08 -141.2

Exports & Imports (Rs. Crore)

December April- December

Exports(Including Re-Exports)

2017-18 178802.77 1436614.25

2018-19 197535.86 1711905.6

% Growth 2018-19/ 2017-18 10.48 19.16

Imports

2017-18 270015.44 2214370.92

2018-19 290032.95 2697306.82

% Growth 2018-19/ 2017-18 7.41 21.81

Trade Balance

2017-18 -91212.68 -777756.67

2018-19 -92497.09 -985401.22

Exports & Imports (Services) (US $ Billion)

Nov-18 April-November 2018-19

Exports (Receipts) 16.68 134.56

Imports (Payments) 10.11 82.78

TRADE BALANCE 6.57 51.78

Exports & Imports (Services) (Rs. Crore)

Nov-18 April-November 2018-19

Exports (Receipts) 1,19,831.25 9,36,338.94

Imports (Payments) 72,637.41 5,75,771.15

Trade Balance 47,193.84 3,60,567.79

I N D I A


Quick Estimates For Selected Major Commodities For December 2018 Trade: Export

Note 1: Grand total is inclusive of component 'Other'.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and

subject to change

S. No. Commodities (Values in Rs. crores) % Change

Dec'17 Dec'18 Dec'18

1 Tea 584.82 572.82 -2.05

2 Coffee 486.79 346.55 -28.81

3 Rice 4089.11 4562.55 11.58

4 Other Cereals 106.37 170.75 60.53

5 Tobacco 543.08 630.83 16.16

6 Spices 1780.06 1874.5 5.31

7 Cashew 535.06 506.48 -5.34

8 Oil Meals 914.87 1367.62 49.49

9 Oil Seeds 918.11 737.86 -19.63

10 Fruits & Vegetables 1342.91 1285.9 -4.25

11 Cereal Preparations & Miscellaneous

Processed Items

850.43 904.81 6.39

12 Marine Products 4214.13 4294.81 1.91

13 Meat, Dairy & Poultry Products 3251.48 2698.63 -17

14 Iron Ore 926.95 862.12 -6.99

15 Mica, Coal & Other Ores, Minerals

Including Processed Minerals

2097.52 2479.73 18.22

16 Leather & Leather Products 3032.97 3092.13 1.95

17 Ceramic Products & Glassware 1229.89 1940.3 57.76

18 Gems & Jewellery 20761.8 18467.2 -11.05

19 Drugs & Pharmaceuticals 10735.1 11739.7 9.36

20 Organic & Inorganic Chemicals 12229.1 14205.1 16.16

21 Engineering Goods 47493.5 50658.4 6.66

22 Electronic Goods 3555.42 5903.51 66.04

23 Cotton Yarn/ Fabs./ Made-Ups,

Handloom Products etc.

6055.88 6301.07 4.05

24 Man-made Yarn/Fabs./ Made-Ups etc. 2682.88 2915.4 8.67

25 RMG Of All Textiles 8590.47 9720.59 13.16

26 Jute Mfg. including Floor Covering 200.83 217.57 8.33

27 Carpet 807.08 944.11 16.98

28 Handicrafts Excl. Handmade Carpet 946.49 1071 13.15

29 Petroleum Products 23883.9 29762.1 24.61

30 Plastic & Linoleum 4035.19 5339.28 32.32

Sub Total 168882 185573 9.88

Grand Total 178803 197536 10.48

I N D I A


Note 1: Grand total is inclusive of component 'Other'.Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and subject to change

Quick Estimates For Selected Major Commodities For December 2018Trade: Export

S.

No

.

Commodities (Values In Million

USD)

%

Chang

e


1 Tea 91.03 80.99 -11.03

2 Coffee 75.77 49 -35.33

3 Rice 636.51 645.06 1.34

4 Other cereals 16.56 24.14 45.77

5 Tobacco 84.54 89.19 5.5

6 Spices 277.09 265.02 -4.36

7 Cashew 83.29 71.61 -14.02

8 Oil Meals 142.41 193.35 35.77

9 Oil seeds 142.91 104.32 -27

10 Fruits & Vegetables 209.04 181.8 -13.03

11 Cereal preparations & miscellaneous processed

items

132.38 127.92 -3.37

12 Marine Products 655.97 607.2 -7.43

13 Meat, dairy & poultry products 506.13 381.53 -24.62

14 Iron Ore 144.29 121.89 -15.52

15 Mica, Coal & Other Ores, Minerals including

processed minerals

326.5 350.59 7.38

16 Leather & leather products 472.11 437.17 -7.4

17 Ceramic products & glassware 191.44 274.32 43.29

18 Gems & Jewellery 3231.8 2610.9 -19.21

19 Drugs & Pharmaceuticals 1671.04 1659.76 -0.68


21 Engineering Goods 7392.87 7162.11 -3.12

22 Electronic Goods 553.44 834.64 50.81

23 Cotton Yarn/ Fabs./ Made-Ups, Handloom

Products Etc.

942.66 890.85 -5.5

24 Man-made Yarn/ Fabs./ Made-Ups Etc. 417.62 412.18 -1.3

25 RMG of all Textiles 1337.2 1374.3 2.77

26 Jute Mfg. including Floor Covering 31.26 30.76 -1.6

27 Carpet 125.63 133.48 6.25

28 Handicrafts excl. handmade carpet 147.33 151.42 2.78

29 Petroleum Products 3717.79 4207.78 13.18

30 Plastic & Linoleum 628.12 754.87 20.18

Sub Total 26288.3 26236.5 -0.2

Grand Total 27832.6 27927.7 0.34

Note 1: Exports include Re-Exports.

I N D I A


Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and subject to changeNote 3: Grand total is inclusive of component 'Other'.

Quick Estimates For Selected Major Commodities For December 2018 Trade: Import

S.

No

.

Commodities (Values In Rs. Crores) %

Change

DEC'17 DEC'18 DEC'18

1 Cotton Raw & Waste 158.51 181.16 14.29

2 Vegetable Oil 5432.96 5103.64 -6.06

3 Pulses 1357.44 976.37 -28.07

4 Fruits & vegetables 1329.03 1309.25 -1.49

5 Pulp and Waste paper 616.16 744.19 20.78

6 Textile yarn Fabric, made-up articles 1061.83 1094.1 3.04

7 Fertilisers, Crude & manufactured 2642.42 5234.35 98.09

8 Sulphur & Unroasted Iron Pyrites 143.43 123.39 -13.97

9 Metalliferous ores & other minerals 4992.61 5069.53 1.54

10 Coal, Coke & Briquettes, etc. 13046.1 15999.9 22.64

11 Petroleum, Crude & products 66458.8 75486.5 13.58

12 Wood & Wood products 3164.15 3517.68 11.17

13 Leather & leather products 548.25 597.03 8.9

14 Organic & Inorganic Chemicals 11218.5 12688 13.1

15 Dyeing/tanning/colouringmtrls. 1604.94 1725.01 7.48

16 Artificial resins, plastic materials, etc. 7363.96 8546.31 16.06

17 Chemical material & products 4057.29 4665.07 14.98

18 Newsprint 357.8 620.22 73.34

19 Pearls, precious & Semi-precious stones 22564.5 17868.4 -20.81

20 Iron & Steel 7935.85 10101.6 27.29

21 Non-ferrous metals 7097.44 8806.02 24.07

22 Machine tools 2081.96 2878.08 38.24

23 Machinery, electrical & non-electrical 18264.2 21793.8 19.33

24 Transport equipment 14271.5 13405.8 -6.07

25 Project goods 1222.74 2041.82 66.99

26 Professional instrument, Optical goods, etc. 2765.41 3385.6 22.43

27 Electronic goods 30022.7 30062.5 0.13

28 Medicinal. & Pharmaceutical products 3496.63 3797.87 8.62

29 Gold 21805.7 18166 -16.69

30 Silver 1267.33 2078.42 64

Sub Total 258350 278068 7.63

Grand Total 270015 290033 7.41

Note 1: Grand total is inclusive of component 'Other'.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and

subject to change

I N D I A


Quick Estimates For Selected Major Commodities For December 2018 Trade: Import

Note 1: Imports include Re-Imports.Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and subject to change.Note 3: Grand total is inclusive of component 'Other'.

S.

No

.

Commodities (Values in Million USD) %

Chang

e


1 Cotton Raw & Waste 24.67 25.61 3.81

2 Vegetable Oil 845.7 721.56 -14.68

3 Pulses 211.3 138.04 -34.67

4 Fruits & vegetables 206.88 185.1 -10.53

5 Pulp and Waste paper 95.91 105.21 9.7

6 Textile yarn Fabric, made-up articles 165.28 154.68 -6.41

7 Fertilisers, Crude & manufactured 411.32 740.04 79.92

8 Sulphur & Unroasted Iron Pyrites 22.33 17.44 -21.9

9 Metalliferous ores & other minerals 777.15 716.73 -7.77

10 Coal, Coke & Briquettes, etc. 2030.77 2262.07 11.39

11 Petroleum, Crude & products 10345 10672.3 3.16

12 Wood & Wood products 492.53 497.33 0.97

13 Leather & leather products 85.34 84.41 -1.09


15 Dyeing/tanning/ colouring mtrls. 249.83 243.88 -2.38

16 Artificial resins, plastic materials, etc. 1146.28 1208.28 5.41

17 Chemical material & products 631.56 659.55 4.43

18 Newsprint 55.69 87.69 57.46

19 Pearls, precious & Semi-precious stones 3512.41 2526.25 -28.08

20 Iron & Steel 1235.3 1428.17 15.61

21 Non-ferrous metals 1104.79 1245 12.69

22 Machine tools 324.08 406.9 25.56

23 Machinery, electrical & non-electrical 2843.02 3081.22 8.38

24 Transport equipment 2221.51 1895.31 -14.68

25 Project goods 190.33 288.67 51.67

26 Professional instrument, Optical goods, etc. 430.47 478.66 11.19

27 Electronic goods 4673.36 4250.25 -9.05

28 Medicinal. & Pharmaceutical products 544.29 536.94 -1.35

29 Gold 3394.28 2568.32 -24.33

30 Silver 197.27 293.85 48.96

Sub Total 40215 39313.3 -2.24

Grand Total 42030.8 41005 -2.44

I N D I A


part-time chairman of Yes Bank's board RBL BANK APPOINTS SHRI up till July 4, 2020 as Shri Dutt attains the PANKAJ SHARMA AS ITS age of 70 years. Shri Dutt has been on CHIEF OPERATIONS OFFICERthe board of the bank since July 2013 as Private sector lender RBL Bank has an independent director, and has appointed Shri Pankaj Sharma as its chief contributed to almost all the sub-operations officer to mainly overlook the committees of the board over the past corporate services function and the 5.5 years, Yes Bank mentioned in a bank's overall operations. Shri Sharma regulatory filing. He is currently also the who was previously with Axis Bank where Cha i r o f the Nominat ion and he was heading retail operations. He had Remuneration Committee. During his spearheaded the ATM channel, phone career in the IAS for 37 years, he held banking and branch automation and several posts in Karnataka government digital initiatives at Axis Bank. He as well as in the Central Government. previously worked with GE countrywide, Before retirement from the service, he ICICI Bank and ICICI Prudential Life worked as Secretary in the Cabinet InsuranceSecretariat and in the Ministry of Road https://economictimes.indiatimes.com/industr

Transport and Highways for over three y/banking/f inance/banking/rb l-bank-

appoints-pankaj-sharma-as-its-chief- and half years. Yes Bank's board also operations-officer/articleshow/67347137.cms includes Mukesh Sabharwal, Subhash Dated: Jan 02, 2019

Kalia, Ajai Kumar, Pratima Sheorey,

Uttam Prakash Agarwal, TS Vijayan, and YES BANK APPOINTS SHRI

Rana Kapoor (Managing Director and BRAHM DUTT AS NON- CEO). Meanwhile, Yes Bank executive EXECUTIVE PART-TIME Rajat Monga and a CEO of a foreign bank

CHAIRMAN have been shortlisted to succeed long-

Yes Bank's board also includes Mukesh serving Managing Director and Chief

Sabharwal, Subhash Kalia, Ajai Kumar, Executive Officer Rana Kapoor at the

Pratima Sheorey, Uttam Prakash bank, sources had said Friday. Earlier

Agarwal, TS Vijayan, and Rana Kapoor this week, the bank informed stock

(Managing Director and CEO). Yes Bank, exchanges that it has shortlisted the

India's fourth largest private sector names of potential candidates to

bank, has appointed Shri Brahm Dutt as succeed Kapoor, who is to demit office

non-executive part-time chairman to by month-end.

the board. In a statement, Yes Bank https://economictimes.indiatimes.com/industr

y/banking/f inance/banking/yes-bank-mentioned, "Vide its letter dated January appoints-brahm-dutt-as-non-executive-part-11, 2019, the Reserve Bank of India, time-chairman/articleshow/67499732.cms

pursuant to the provisions of the Dated Jan 12, 2019

Banking Regulation Act, 1949has

approved his (Dutt's) appointment as

TOP BANKING APPOINTMENTS

I N D I A


was the founder and chairman of Capital ICICI BANK APPOINTS SHRI B FirstSRIRAM, SHRI RAMA https://economictimes.indiatimes.com/industrBIJAPURKAR INDEPENDENT y/banking/finance/banking/rbi-approves-

DIRECTORS appointment-of-v-vaidyanathan-as-md-ceo-

Private sector ICICI Bank has inducted of-idfc-first-bank/articleshow/67591410.cms

Dated Jan 18, 2019former SBI Managing Director Shri B

Sriram on its board as independent

SHRI RAVNEET GILL TO director . Besides, management

consultant Shri Rama Bijapurkar was also REPLACE RANA KAPOOR AS appointed director. Both were appointed YES BANK CEOfor 5 years, subject to the approval of Yes Bank has appointed veteran banker shareholders. Shri Sriram retired as the Shri Ravneet Singh Gill as its new MD & managing director of IDBI Bank in CEO and the lender has also received the September 2018. Prior to IDBI Bank, he RBI's approval. Shri Gill, currently the was the managing director of SBI. chief of Deutsche Bank's India https://economictimes.indiatimes.com/industr operations, will replace Shri Rana y/banking/finance/banking/icici-bank-

Kapoor. In September last year, RBI had appo in t s-b-s r i r am-rama-b i j apu rka r-

asked Shri Rana Kapoor, Managing i n d e p e n d e n t - d i r e c t o r s / a r t i c l e s h o w /

Director & CEO of Yes Bank, to step down 67530915.cms Dated Jan 14, 2019

by the end of January, sending its stock

p lung ing and caus ing severa l RBI APPROVES resignations from its board. The central APPOINTMENT OF SHRI V bank had asked the lender to find a new VAIDYANATHAN AS MD, CEO CEO by February 1. The Bank has

OF IDFC FIRST BANK received RBI approval for its new MD &

Prior to this, Shri V Vaidyanathan was the CEO, Shri Ravneet Singh Gill for him to

founder and chairman of Capital First. join on or before March 1, 2019. Shri Gill

The Reserve Bank has approved the joined Deutsche Bank in 1991 and has

appointment of Shri V Vaidyanathan as worked across different businesses

MD and CEO of IDFC First Bank for a including corporate banking, capital

period of three years, according to a markets and wealth management. The

regulatory filing. His tenure is effective private sector bank posted a 7% fall in

from December 19, 2018. Last month, third-quarter net profit as it set aside

IDFC Bank and non-banking financial higher provisions. Net profit fell to Rs.

company Capital First completed their 1,002 crore in the three months to

merger, creating a combined loan asset December 31 from Rs. 1,077 crore a year

book of Rs 1.03 lakh crore for the earlier. That missed analysts' average

merged entity IDFC First Bank. Following estimate of Rs. 1,060 crore according to

the merger, the board of IDFC First Bank Reuters estimate. Commenting on the

approved the appointment of Shri results and financial performance, Shri

Vaidyanathan as MD and CEO of the new Rana Kapoor mentioned that Yes Bank

entity. Prior to this, Shri Vaidyanathan

I N D I A


has once again delivered satisfactory Systems), bill payments recharges and

performance across income growth, even undertake remittance activities

margins, profitability and capital across different bank branches.The

accretion, despite the recognition and pioneering ePDS digital initiative has

provision impact from a stressed helped us eliminate more than 10 lakh

Infrastructure conglomerate. Retail bogus ration cards in Maharashtra and

Assets growth momentum continues, made the inventory management for

while growth in Corporate business government and shop owners fully

segments has been rebalanced after digital. ePDS initiative will also

witnessing strong market share driven significantly boost the livelihood of shop

growth over the last few preceding owners by giving them additional

quarters. revenue through the various services

https://www.livemint.com/companies/people/ they can now offer to the citizens.The yes-bank-ceo-ravneet-gill-appointment-rana- government is hoping to get Jan Dhan kapoor-managing-director-md-1548323 account holders to use this service for all 047040.html Dated: Jan 24, 2019

their financial requirements. The Bank

remains committed to improving last

mile inclusion and translating financial

access into enhanced convenience &

usage for smoother delivery of YES BANK PARTNERS WITH

Government to Citizen (G2C) services MAHARASHTRA

through simple digital solutions. GOVERNMENT FOR https://economictimes.indiatimes.com/industrELECTRONIC PDSy/banking/f inance/banking/yes-bank-

Private sector lender Yes Bank has partners-with-govt-of-maharashtra-for-

partnered with Government of electronic-pds/articleshow/67644049.cms

Maharashtra to onboardPDSshops which Dated: Jan 22, 2019

are popularly referred to as ration shops

onto the electronic PDS initiative through

which they can become agents of the

bank. Under the partnership, Yes Bank PAYMENTS BANKS SEE will empower more than 20,000 ration SECOND STRAIGHT YEAR OF shops which can offer last mile basic LOSSES (RESERVE BANK OF

INDIA)banking services to more than seven

According to RBI's trends and progress lakh beneficiaries. The bank will cover

report, Payments banks, launched to almost 40% of all the PDS shops across

make the country more financially locations like Palghar, thane, Kolhapur,

inclusive, seems to be giving the Latur, Pune and others. Customers at

regulators and investors a cause for these shops will be able to make

concern as they continue with their payments using Aadhaar Pay, small

second straight year of losses with little value cash deposit or withdraw cash

signs of turning the corner. The using AePS (Aadhaar enabled Payment

TOP EXPERT REPORTS

TOP BANKING DEVELOPMENTS

I N D I A


consolidated balance sheets for the These include Aditya Birla Payments

operational payments banks showed net Bank, Airtel Payments Bank, India Post

losses of Rs 516.5 crore for the fiscal Payments Bank, Fino Payments Bank, Jio

year 2018, almost double that of the Payments Bank and Paytm Payments

fiscal year 2017 when they lost Rs 242.2 Bank.

https://www.livemint.com/Companies/rgl4JNpcrore,. The losses of payments banks are nGsE7rKerrpaNJJ/RBI-issues-norms-for-attributed to high operating expenses as restructuring-loans-to-MSMEs.htmllarge capital expenditure had to be Dated: Jan 02, 2019

incurred in se t t ing up in i t ia l

infrastructure. It may take some time for BANKS EXPECTED TO

payment banks to break even as they REPORT HIGHER CREDIT expand their customer base by offering GROWTH, MARKET SHARE their unique banking products.The

(RESERVE BANK OF INDIA)operating profits of these banks also

Citing Reserve Bank of India (RBI) data, remained negative with a loss of Rs

the report mentioned systemic credit 522.1 crore for fiscal 2018, up from Rs

growth in November was highest since 240.7 crore a year before. High

March 2014, mainly led by services at o p e r a t i o n a l c o s t s d u e t o

28.1 per cent (YoY) and personal loans at infrastructuresetup required by these

17.2 per cent (YoY). Given the upturn in banks to tap the underpenetrated

non-food and industrial credit as markets in the country are the prime

reported by the RBI, banks are expected reason for their financial weakness.

to report higher credit growth and Things are showing no signs of

market share at the cost of non-banking improvement with even the regular

finance companies (NBFCs) and housing banks ramping up their technology

finance firms. Centrum Broking initiatives. In the first half of this fiscal

mentioned in a report that with the they were making losses and it may well

current slowdown in the NBFC segment continue for many quarters. While

and non-performing assets (NPAs or bad financial metrics remained weak, there

loans) issues stabilizing for banks, the was hope in other with the share

latter are expected to report higher deposits of these banks marginally

credit growth, resulting in a further rising from 5.7% to 9% during this

boost to overall credit growth. According period. The net interest income also

to the RBI credit data on sectoral improved from Rs 151.1 crore to Rs 30.7

deployment for November 2018, overall crore and the total liabilities/assets rose

non-food credit grew 13.8 per cent YoY to Rs 4,891.6 crore from Rs 1,193.9

(year-on-year) to Rs 80.9 trillion (80 crore. About 81% of the business the

lakh crore), the highest since March payments bank made was on account of

2014. This growth was again led by inward and outward transactions

services and personal loans, mentioned through mobile and ewallets, according

the report titled "RBI sectoral credit - to the central bank. The RBI as of date

trajectory intact for November 2018", has given licences to 11 payments bank

authored by Shri Aalok Shah and Shri of which six are currently operational.

I N D I A


Gaurav Jani. The uptrend in industrial CIBIL)credit continues, reporting the highest A study by credit bureau Trans Union

level since February 16. On a MoM CIBIL notes that millennial and

(month-on-month) basis, NBFC credit Generation X consumers are driving

growth faced headwinds and credit to much of this growth and comprise well

housing inched up. The momentum in over half of all retail accounts and

agriculture credit continues. Citing balances. In 1985, a survey by the

Reserve Bank of India (RBI) data, the government supported think tank

report mentioned systemic credit growth NCAER estimated that the size of the

in November was highest since March Indian middle class, which had a

2014, mainly led by services at 28.1 per promising potential to spend on

cent (YoY) and personal loans at 17.2 per consumer goods, was bigger than the US

cent (YoY). Given the slowdown in the economy then. This report attracted the

NBFC segment and the NPA cycle attention of global consumer goods

peaking, we expect overall credit growth companies. With the progressive

to remain high. In contrast to NBFC opening of the economy, India's growth

credit, banks' housing credit has risen story has become consumption-driven

MoM. and more than 25 years since the

https://economictimes.indiatimes.com/industr liberalization in 1991, the Indian y/banking/finance/banking/banks-expected- consumer has gone a step further and to-report-higher-credit-growth-market-

does not hesitate to borrow to meet its share-report/articleshow/67542408.cms

consumption aspirations. This trend in Dated Jan 15, 2019

consumer behavior has resulted in an

opportunity for banks to lend outside NPA-HIT BANKS FIND NEW their traditional constituency businesses

LOVE IN MIDDLE CLASS AND and large corporates. In the last four

IT MAY REVIVE INDIAN years, with corporate lending becoming ECONOMY (TRANSUNION

I N D I A


unviable due to the rise in defaults and somewhat safer as banks are heavily

losses, the push toward retail lending relying on credit bureaus that help them

has become even stronger. An with the credit history of borrowers and

international comparison shows that also help assess default risks. Another

India's retaliation of bank credit is the factor that has brought about a growth in

lowest among peers. Household credit the retail loan book is that more people,

as a percentage of GDP was 11.2% as of especially those below 40, are now

June '18, compared with the average of coming to banks and shifting from

36% in emerging economies and 72% for informal channels, particularly in the

advanced markets. But India may have to hinterland. A study by credit bureau

look internally to justify the surge in Trans Union Cibil notes that millennial

retail loans. Any loan by an individual and Generation X consumers are driving

impacts his savings and, hence, local much of this growth and comprise well

money available for investments. Over over half of all retail accounts and

the 10 years since the global crisis, fresh balances. It is (also) more to do with the

financial savings of Indian households fact that financial inclusion has

have more than doubled. But their net expanded with Jan Dhan accounts, etc,

financial liabilities have risen at double and BoB is are going to see more of that.

that pace, leaving less for investments. Also, semi-urban and rural India's GDP

This means India may have to rely on distribution has changed over the last 8-

overseas money to fund growth. India's 10 years. There is tremendous amount

current account deficit, which is of self-employment. There is a change,

vulnerable to global oil prices, is at 2.9% which HDFC is betting on. The use of

of GDP. Still, even corporate-focused technology has also helped deepen the

banks are keen on retail loans. Over the customer reach for banks. HDFC Bank is

past few years, there has been a using virtual robots to substitute

structural shift in banks' loan books. The repetitive functions and save time. HDFC

share of the retail portfolio has risen will distribute digitally. It is giving loans

from 18.3% in 2013 to 24.8% in March in 10 seconds. It delights customers and

2018 and the latest data for October put changes my cost dynamics. The bank's

this share at 25.5%. For the country's personal loans are done in 10 seconds

three largest lenders State Bank of India, and 50-60% credit cards are done within

HDFC Bank and ICICI Bank retail accounts 10 seconds. In semi-urban and rural

for more than half of their loan books. areas, all its products are available in

Even for some private banks like Axis feature phone in 11 languages. Most

Bank and Kotak Mahindra Bank, retail retail loan products, excluding home

accounts for almost half of their loan loans, earn banks a wider margin

books. What is driving the retail push in compared to corporate loans. The rate of

the last four years is a combination of interest on unsecured loans will be more

factors. Banks have turned cautious on than what you lend to Levers (Hindustan

their traditional constituency. Also, Levers). Besides, bad loans are also now

lending to retail has now become lower than 3%, which has given banks

I N D I A


more confidence to focus on retail. SBI (WWF) report released mentioned water

expects retail portfolio to constitute 60% risks could pose further "liquidity

of loans by the end of this fiscal because constraints" on the strained balance

the corporate demand is still very-very sheets of banks. Launched with the

muted. But it is not picture perfect for Indian Banks' Association(IBA), the WWF-

banks. Delinquency rates increased India report 'Hidden Risks and Untapped

year-over year for both home loans and Opportunities: Water and the Indian

credit cards by 22 and 28 basis points, Banking Sector' provides evidence for

respectively, to 1.73% and 1.78%, why water presents a material risk for

according to a study by credit bureau banks in India, particularly how water

TransUnionCibil. In case of loans against risks could lead to stranded assets in the

property, it increased 73 bps year-over- power and agriculture sectors, two

years to 3.03% in CYQ3 2018. Lenders sectors that account for the highest

must judiciously monitor their risk gross credit exposure of Indian banks.

management processes. For example According to the report, close to 40 per

the loan against property, at the same cent of the gross credit exposure of

time, delinquency rates for these loans Indian banks is in sectors where water

have now crossed 3% for the first time in risks are significant. Reeling under a

several years. Lenders must now crisis of non-performing loans with

determine if the rapid demand for these close to 10 per cent of gross-advances

loans, which are an excellent revenue of the Indian banks facing a risk of non-

generator, outweighs the recent payment from debtors, these risks can

delinquency increases. place further liquidity constraints on the

https://economictimes.indiatimes.com/industr already stressed balance sheets of banks y/banking/finance/banking/retail-loans-may- in India. Citing NITI Aayog's observation, revive-indian-economy-banks/articleshow it mentioned that the current water crisis /67550031.cms Dated: Jan 16, 2019

in the country is its worst ever. With

water being a shared resource, what the WATER CRISIS IN INDIA

country requires is a comprehensive and COULD FURTHER WORSEN

sustainable water management plan by BANK NPA PROBLEM (WORLD various stakeholders. While banks are WILDLIFE FUND) exposed to the risks of water as lenders With water being a shared resource, what to businesses, it also places them in a the country requires is a comprehensive unique position to influence businesses and sustainable water management plan to proactively handle various water by various stakeholders. Water problems related risks, including using WWF's could push the non-performing assets Water Risk Filter and enabling flow of of banks higher as many lenders have capital towards solutions which address loan exposure in sectors where there are such risks.risks to water resources. At a time when https://economictimes.indiatimes.com/industr

y/banking/finance/banking/water-crisis-in-the banking sector is grappling with india-could-further-worsen-bank-npa-mounting NPAs, the World Wildlife Fund

I N D I A


Circular

Number

Date Of

Issue

Department Meant For

RBI/2018-

2019/111

Ref.No.IDMD/2

050/08.02.032/2

018-19

28.1.2019 Internal Debt

Management

Department

All Scheduled Commercial Banks All

State Co-operative Banks/All Scheduled

Primary (Urban) Co-operative Banks

/All Financial Institutions/ All Primary

Dealers.

RBI/2018-

2019/110

Ref.No.IDMD/1

958/08.02.032/2

018-19


Management

Department





Dealers

RBI/2018-

2019/109

A.P. (DIR

Series) Circular

No. 17

16.1.2019 Foreign

Exchange

Department

All Category-I Authorised Dealer Banks

RBI/2018-

2019/108

Ref.No.IDMD/1

824/08.02.032/2

018-19


Management

Department





Dealers

RBI/2018-

2019/107

DBR.Dir.BC.No

.22/04.02.001/2

018-19

11.1.2019 Department of

Banking

Regulation

All Scheduled Commercial Banks

(excluding RRBs) Small Finance Banks

and Primary (Urban) Cooperative Banks

RBI/2018-

2019/106

DBR.BP.BC.No

.20/21.06.201/2

018-19


Banking

Regulation


(Excluding RRBs and LABs)

RBI/2018-

2019/105

DBR.No.Ret.BC

.21/12.16.091/2

018-19


Banking

Regulation


RBI/2018-

2019/104

DBR.IBD.BC.1

9/23.67.001/201

8-19


Banking

Regulation


(excluding RRBs)

RBI/2018-

2019/103

DPSS.CO.PD

No.1463/02.14.0


Payment and

Settlement

Systems

The Chief Executive Officer / President

All authorised card payment networks

TOP RBI CIRCULARS

I N D I A


Circular Number

Date Of

Issue

Department

Meant For

RBI/2018 -2019/99

Ref.No.IDMD/1669/08

.02.032/2018 -19


Management

Department

All Scheduled Commercial Banks All State

Co-operative Banks/All Scheduled Primary

(Urban) Co-operative Banks /All Financial

Institutions/ All Primary Dealers.

RBI/2018 -2019/98

DBR.BP.BC.No.17/21.

04.098/2018 -19


Banking

Regulation

All Scheduled Commercial Banks (Excluding

RRBs) & Small Finance Banks (SFBs)

RBI/2018 -2019/97

DBR.No.Ret.BC.16/12

.06.152/2018 -19


Banking

Regulation


RBI/2018 -2019/96

DBR.Leg.No.BC.15/0

9.08.020/2018 -19


Banking

Regulation

All Scheduled Commercial Banks ( Including

RRBs), Small Finance Banks, Local Area

Banks, All Co -operative Banks, All NBFCs

and All India Financial Institutions

RBI/2018 -2019/95

IDMD.CDD.No.1637/

13.01.299/2018 -19


Management

Department

The Chairman & Managing Director State

Bank of India & 18 Nationalised Banks Axis

Bank Ltd., ICICI Bank Ltd., HDFC Bank Ltd.,

Stock Holding Corporation of India Ltd.

(SHCIL)

RBI/2018 -2019/94

Ref.No.IDMD/1631/08

.02.032/2018 -19


Management

Departm ent



(Urban) Co -operative Banks/All Financial

Institutions/ All Primary Dealers.

RBI/2018 -2019/93

Ref.No.IDMD/1548/08

.02.032/2018 -19


Management

Depar tment



(Urban) Co -operative Banks /All Financial

Institutions/ All Primary Dealers

RBI/2018 -2019/92

A.P. (DIR Series)

Circular No.16

06.12.2018 Foreign Exchange

Department

All Category – I Authorised Dealer Banks

RBI/2018 -2019/91

DBR.No.Ret.BC.14/12

.16.006/2018 -19


Banking

Regulation


RBI/2018 -2019/90

DBR.No.Ret.BC.13/12

.06.071/2018 -19


Banking

Regulation


RBI/2018 -2019/89

FIDD.GSSD.CO.BC.N

o.11/09.16.03/2018 -19

06.12.2018 Financial

Inclusion and

Development

Department

The Chairman/ Managing Director & CEO All

Scheduled Commercial Banks & Small

Finance banks

RBI/2018 -2019/88

DGBA.GBD.No.1397/


Government and

The Chairman/Managing Director/Chief

Executive Officer/ Agency Banks Handling the

I N D I A


RBI/2018 -2019/88

DGBA.GBD.No.1397

/15.01.001/2018 -19


Government and

Bank Accounts

The Chairman/Managing Director/Chief

Executive Officer/ Agency Banks Handling

the Special Deposit Scheme 1975

RBI/2018 -2019/87

DBR.BP.BC.No.12/2

1.04.048/2018 -19


Banking

Regulation

All Scheduled Commercial Banks Small

Finance Banks

RBI/2018 -2019/86

DBR.No.Ret.BC.10/1

2.02.001/2018 -19


Banking

Regulation

All Scheduled Commercial Banks (including

Regional Rural Banks) Local Area Banks,

Small Finance Banks, Payments Banks

Primary (Urban) Co -operative Banks (UCBs)

State and Central Co -operative Banks (StCBs

/ CCBs)

RBI/2018 -2019/85

Ref.No.IDMD/1359/0

8.02.032/2018 -19

03.12.2018 Internal D ebt

Management

Department



(Urban) Co -operative Banks/All Financial

Institutions/ All Primary Dealers

I N D I A


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