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NEWSLETTER

National Institute of Bank Management

Pune, IndiaNIBMVolume No. 2 Issue No. 3 July 2019

Dear Reader,

It is a great pleasure to present the July 2019 edition of NIBM's Newsletter. In the academic period from April 2019 to June 2019, many events and

programmes have been organized at our Institute. I am happy to share with you the glimpses of these events. NIBM's faculty members discuss some of

the major economic and nancial market developments in India. The newsletter also updates you on NIBM's training activities for the next quarter.

With best wishes,

Dr. K L Dhingra, Director

M EventsNIB

Edited by: Dr Tasneem Chherawala

Celebration of International Day of Yoga 2019

India has given the science of Yoga to the entire world and it has been accepted as the holistic science for the wellbeing of the human mind and body. NIBM arranges Yoga classes on a regular basis for staff, students and p r o g r a m m e p a r t i c i p a n t s . T h e Internat ional Day of Yoga was celebrated at NIBM on June 21, 2019 and it was attended by the faculty, staff, students and many bank executives who were participants in various training programmes.

Health Check Up Camp to Celebrate Labour Day

A Health Check Camp was organised in NIBM Campus on April 27, 2019 from 9:30 am to 5:30 pm to observe Labour Day celebration on May 1, 2019. The camp was organised with support from Inamdar Multispecialty Hospital, Pune and Lawrence and

Mayo. Specialists from these organizations and NIBM's resident doctor Dr. Mini Chitkara conducted various medical tests. Low cost frames were provided by Lawrence and Mayo and Inamdar hospital gave discount coupons for blood tests and OPD consultation.

The camp was graced by Dr. K L Dhingra (Director) and few other faculty & staff. Approximately 75 members, along with few of the campus families attended the camp.

NIBM Recognized as a Premier Education InstituteThe ABP NEWS National Education Awards recognize i n s t i t u t i o n s t h a t a r e i n n o v a t i v e a n d h a v e contributed in enhancing the level of education in the country. At the 10th ABP NEWS National Education Awards Ceremony which was conducted in Mumbai on July 4, 2019, National I n s t i t u t e o f B a n k

Management was conferred with the Education Leadership Award in recognition of its leadership, development, marketing and industry interface in the Education space.

NIBM’s National Conference

NIBM's National Conference on Indian Banking System: Way Forward on the Current Crisis

(July 5 – 6, 2019)

NIBM organized a two-day National Conference on Indian Banking System: Way Forward on the Current Crisis. The theme of the Conference was chosen so as to stimulate discussion on the current crisis in the Indian banking sector and discover the appropriate direction for building a robust Indian banking sector in times to come. The conference was sponsored by State Bank of India, Union Bank of India, and EXIM Bank.

The Keynote Address was delivered by Prof Errol Dsouza, Director, I IM Ahmedabad. The Inaugural Session had addresses by Chief Guest, Shri Kewal Handa, Non-Exe. Chairman, Union Bank

of India and Special Guest, Shri Debashish Mallick, DMD, EXIM Bank. On the second day, stalwart academicians, policy makers and bankers deliberated upon different aspects of banking in the panel discussion on “Moving ahead: Challenges and opportunities”. The Panel members comprised Shri Anand Sinha, Former Deputy Governor, Reserve Bank of India, Shri Hemant G Contractor, Former Chairman, Pension Fund Regulatory and Development Authority (PFRDA), Shri VG Kannan, CEO, Indian Banks' Association (IBA), and Prof MS Sriram, IIM Bangalore.

Research papers were presented by practitioners and academicians in parallel sessions on the four major tracks of the Conference: Regulatory Environment, Corporate Governance Aspects and Strategies, Operational efciencies in the banking sector and the Functional aspects impacting the banking sector. Senior bankers and academicians who provided their focused inputs in these tracks included Shri Mridul Saggar, Head, International Department, RBI; Shri B V Chaubal, Professor NIBM & Former DMD, SBI; Dr. Vikas Shrivastava, Associate Prof, IIM Lucknow; Shri Samuel Joseph, CGM, Exim Bank; Shri Sriram Ramnarayan, Director, Market Development, Renitiv– South Asia; Shri Kajal Ghose, Independent Director , Utkarsh Small Finance Bank & Former CGM, SBI, and Ms Brinda Jagirdar, Independent Director at IDFC First Bank Ltd.& former Chief Economist, SBI.

Edited by: Dr Tasneem Chherawala

PGDM Events

The 15th Convocation Ceremony was organized by NIBM on June 8, 2019 to award the diplomas to the graduating students of PGDM (B&FS) 2017-19 batch. Shri Shaktikanta Das, Governor RBI who is also the Chairman of NIBM's Governing Board, presided over the function and conferred the diplomas to 88 students.

Dignitaries from various Banks who attended the Convocation Ceremony included Shri Pallav Mohapatra, MD & CEO of Central Bank of India, Smt. P V Bharathi, MD & CEO of Corporation Bank, Shri A S Rajeev, MD & CEO of Bank of Maharashtra, Dr. M S Sriram, and other members of the PGDM Executive Council.

15h PGDM Convocation

120 students of PGDM (B&FS) 2019-21 batch arrived at the campus on June 25, 2019. The three-day Induction Programme started on June 26 and a series of activities were arranged for the students as part of the induction. Formal inauguration of the batch took place on June 27, 2019. Dr Charan Singh, Non-Executive Chairman of Punjab and Sind Bank del ivered the

Inauguration of PGDM 2019-21

Inaugural Address at the formal Inauguration ceremony on June 27, 2019. Shri V G Kannan, Chief Executive of Indian Banks' Association and Dr Rajeev Uberoi, Senior Group President, Governance, Compliances and Controls of YES BANK Limited also addressed the students on the occasion.

Five toppers of the batch, namely, Amrit Tayal, Aparna Kothari, Aparna Lakshmy, Komal Bapna and Jayshree Dutta were also awarded with the gold medals sponsored by Bank of Baroda, Canara Bank, Union Bank of India, Indian Bank and Bank of Maharashtra.

As per tradition, the Honorable Governor Shri Shaktikanta Das released the Compendium of Published Papers and Articles written by Faculty Members of NIBM, during the Academic Year 2018-19

Edited by: Dr Tasneem Chherawala

NIBM's Executive Training Programmes

In the rst quarter of Academic Year 2019 NIBM organized 34 programmes and workshops attended by a total of 532 participants. A number of high prole programmes and workshops were conducted for both domestic and international banks.

Workshop on Roles and Functioning of the Audit Committee of the Board

(April 25 – 26, 2019)

NIBM conducted a two-day workshop for members of the Audit Committee of the Boards (ACB) of Banks and Financial Institutions on 25th and 26th April, 2019. The workshop objective was to help existing and aspiring Audit Committee Members to understand the complexities of their role and equip them with the knowledge base in the area of audit p rocess , nanc ia l repo r t i ng , r i sk management, corporate governance and internal controls. The workshop was attended by 23 participants and majority of them were holding Board level positions in Public Sector/Private Sector/Payment Banks.

International Programme on Digital Payments in collaboration with NITI Aayog, Government of India

(May 15-18, 2019)

T h e e m e r g e n c e o f d i g i t a l transactions has disrupted the payments market in India. The growth in smartphones, mobile internet and 'enabling' regulations are accelerating the new payment capabilities in Indian markets. Many developing countries are looking up to India for the massive progress made by them in digital payment landscape. Considering this, an International Training Programme on Digital Payments was organised by NIBM in collaboration with the NITI Aayog, Government of India at NIBM, Pune.

The programme was designed to discuss India's emerging digital landscape, the new market participants, the products that have disrupted the markets and the regulatory payment framework. It was attended by 36 domestic and international participants. The Keynote Address of the programme was delivered by Mr.Ratan P. Watal, Member Secretary EAC to PM & Principal Adviser NITI Aayog and Mr. Ganesh Kumar, Executive Director, RBI delivered the Inaugural Address.

Edited by: Dr Tasneem Chherawala

NIBM’s Executive Training Programmes

Customized Programme on Credit Appraisal for Ofcials of Bhutan Development Bank Limited

(May 27 – June 08, 2019)

Management Development Programme for Top Executives of Abay Bank S.C., Ethiopia

(May 6 – 10, 2019)

Management Development Programme on Risk Management, Internal Audit, Compliance and Quality Control for Afghanistan International Bank

(June 17 – 29, 2019)

Edited by: Dr Tasneem Chherawala

Performance of Indian Public Sector Banks

The June 2019 quarterly results have shown marked improvement in net prots of a few public sector banks, which were in the red for the year end March 2019.

Ý Punjab National Bank reported a net prot of Rs. 1018.63 crores, as compared to the net loss of Rs. 4749.64 in the preceding March quarter.

Ý Bank of Baroda posted a net prot of Rs. 709.87 crores, after its merger with Vijaya Bank and Dena Bank, whereas it had incurred losses of Rs. 991.37 crores in March 2019

Ý Canara Bank's net prots increased by 17% year-on-year, to Rs. 329.07 crores in the June quarter, versus a loss of Rs. 551.53 crores in March 2019.

Ý Allahabad Bank reported a net prot of Rs 128 crore for the June quarter against Rs 3,834.07 crore loss in the preceding March quarter.

Ý United Bank of India booked a net prot of Rs 104.99 crore for the quarter ended June 2019 against a net loss of Rs 388.68 crore in the same period a year ago, backed by a 2.4 times year-on-year jump in its operating prot and a 40.6% y-o-y fall in provision for non-performing loans

Turnaround in Net Prots of Select Public Sector Banks

The Economic survey 2018-2019 shows a continuous decline in the investment-to-GDP ratio (i.e. the investment rate), from around 40% in 2011-12 to 32% in 2018-19. In standard macroeconomic theory, the investment rate depends, inter alia, on (i) the expected GDP growth rate (which creates a demand for capital goods) and (ii) the savings-to-GDP rate (which provides the resources for xed capital formation). The survey also depicts that the savings rate has fallen from around 35% in 2011-12 to 31% in 2017-18. Hence, coupled with the moderation in GDP growth rate, from 8% in 2015-16 to 6.8% in 2018-19, the decline in the investment rate can be attributed to both demand and supply shocks.

Against this backdrop of a steady erosion in savings and investment rates, the Union Budget 2019-20 aspires that India should be a US $ 5 tn. economy, over the next decade. To this end, massive private investment has been encouraged, with special focus on

infrastructure sector. A Credit Guarantee Enhancement Corporation will be set up in 2019-20. Measures to deepen the corporate bond market, like introduction of credit default swaps, allowance of AA-rated bonds as tri-party repo collateral and sale/transfer of FII/FPI securities (issued by Infrastructure Debt Funds-NBFCs) to domestic investors within the lock-in period, have been proposed. Further recapitalization of PSBs, worth Rs. 70K Cr., has been recommended to boost credit ow to the corporate sector. One-time partial credit guarantees (up to 10%) to PSBs, for purchase of high-rated pooled assets from NBFCs up to 1 lakh Cr., have been mooted. A dedicated online portal will be created for provision of MSME loans up to Rs. 1 Cr., within 59 minutes. Rs. 350 Cr. has also been allotted in FY 2019-20, for a 2% interest subvention applicable to all GST-registered MSMEs. A separate payment platform will be set up for MSME units.

These are indeed commendable supply-side incentives to corporate investment. On the demand side, an additional Rs. 1.5 lakh tax relief for new houses up to Rs. 45 lakh, has been announced. This will boost construction and allied sectors to a limited extent. However, the biggest llip to private investment comes from higher government expenditure, which generates more income and consumption demand. In this respect, budgetary allocation for FY 2019-20 is not well-dened. For instance, though the ve-year budget for Pradhan Mantri Gram Sadak Yojana is estimated at Rs. 80, 250 Cr., the outlay for the current nancial year is not specied. Likewise, the quantum of public investment in railroad development, rural housing scheme, Bharatmala 2 and Jal Marg Vikas (inland waterways connectivity), in FY 2019-20, is not indicated. As discussed, these initiatives have a strong multiplier effect on national income, consumption demand and private investment. They also remove key infrastructural bottlenecks, which delay project implementation. Had the government spelt out the estimated expenditure on each item, during the current nancial year, the private corporate sector would have been in a better position to formulate its own investment plans.

Is this ambiguity indicative of the government's scepticism about reaching its scal decit target (around 3.3% of GDP)? Are the direct and indirect tax goals too ambitious? Let us wait and see – only time will tell!

Developments in The Indian Financial Markets

Prof Sanjay Basu & Dr Tasneem Chherawala

Improving Performance of Commercial Banks Undermined by NBFC Risks in the Indian Financial System

RBI's Financial Stability Report (FSR), published in June 2019, carries both good news and bad news pertaining to the Indian Financial Markets. On the one hand, it highlights the improving performance of the Indian commercial banks and on the other, it raises concerns about the contagion losses that may arise due to NBFC failures.

Subsequent to government recapitalization of public sector banks, improving capital adequacy has enhanced the lending capacity of the Indian banking sector and pushed credit growth to near double digit numbers in the quarter ending March 2019. The NPA growth cycle also shows a turnaround, with macro stress tests indicating a potential decline in Gross NPA ratio from 9.3 percent in March 2019 to 9.0 percent in March 2020. The Provisions coverage ratio also has increased from 52.4 percent in September 2018 to 60.6 per cent in March 2019. The combined effect of these parameters has boosted the long-term resilience of the Indian banking sector.

However, recent developments in the NBFC sector (including Housing Finance Companies or HFCs) have shifted focus on the increasing liquidity stress and worsening asset quality

prole of this sector. The IL&FS asco, followed by the default of Dewan Housing Finance Corporation Ltd. (DHFL) on its short term commercial paper in June 2019, appear to be idiosyncratic NBFC failures. Yet, they are actually early warning signals of the systemic liquidity risk faced by the entire sector. More importantly, as a consequence of increasing bank exposure to the NBFC sector, there is a possibility of the loss contagion transmitting to the banking system. This has underscored the need for greater regulatory surveillance over large HFCs/NBFCs.

RBI has been proactively taking necessary regulatory and supervisory steps, to ensure the nancial resilience and robustness of the NBFC sector. On 16th May 2019, the RBI issued instructions for appointment of a Chief Risk Ofcer (CRO) for all NBFCs with asset size of INR 50 billion and above. The CRO would function independently to ensure the highest standards of risk management within the organization and would have a direct reporting line to the MD&CEO / Risk Management Committee of the Board. On 24th May 2019, the RBI published a draft circular on Liquidity Risk Management applicable to all NBFCs with asset size of INR 1 billion and above. It further proposes to introduce liquidity coverage ratio (LCR) in a phased manner starting from April 2019 to March 2024 for the large NBFCs.

Edited by: Dr Tasneem Chherawala

–

Perspectives on the Economic Survey and Union Budget 2019-20

Insolvency and Bankruptcy Code (Amendment) Act 2019 – A Swift Action for Maintaining Sanctity of IBC-2016

Prof Harish Kant Kaushik

Govt of India has taken swift and effective steps towards maintaining sanctity of Insolvency and Bankruptcy Code-2016 by amending certain provisions / adding clarications with an aim to remove any ambiguity and to give clear legislative directions to the most effective law pertaining to resolution of stressed assets.

Both the Houses of Parliament passed the bill related to Insolvency and Bankruptcy Code (Amendment) Act 2019 within a few days of its introduction in Parliament and President of India has also accorded his assent to the Bill, which has now become law. Some of key issues are addressed through the above Law as under:

Edited by: Dr Tasneem Chherawala

Issue New provisions As per IBC-2016 (Code), Adjudicating Authority (AA) shall admit or reject an application within 14 days of filing of Application while ascertaining existence of default. Usually, such admission / rejection of CIRP Application is taking inordinate delay even beyond 2 months in majority cases.

If an application under IBC has not been admitted or rejected within fourteen days by the Adjudicating Authority (NCLT), it shall provide the reasons in writing for the same. This provision is expected to partly address delay in taking time at NCLT level for admission / rejection of CIRP Application.

IBC focuses on resolution of stressed assets through a workable, feasible and viable resolution plan put across in compliance of IBC ambit.

It is clarified that such proposed resolution plan may also include any scheme of merger or amalgamation subject to compliance of Code. This shall help perspective resolution applicant to structure any resolution plan purely in the interest of practicality of plan and to ensure value maximisation.

Code core focus is on timely completion of Corporate Insolvency Resolution Process (CIRP), which stipulates timelines of 180 days extendable only by one-time for maximum 90 days i.e. outer limit of 270 days. Presently, majority of CIRPs have taken more than the stipulated time, primarily due to protracted legal proceedings and thus not only impacting timely resolution but also not serving other core purpose of Code i.e. preservation / maximisation of value of stressed asset. Adjudicating Authority (AA) has in most of cases allowed exclusion of the period taken for legal proceedings from stipulated CIRP period.

The Code has now amended to the extent that that the CIRP shall not extend beyond 330 days from CIRP commencement date, which shall also include the time taken in legal proceedings, in order to prevent undue delays in the completion of the CIRP. All pending CIRPs, wherein 330 days have already passed, shall be completed within 90 days of date of notification of the above Amendment. Any CIRP not completed within stipulated period of 330 days, shall be ordered for liquidation as per stipulations of Code. This shall address to hasten up the resolution process.

As per Code, distribution of proceeds of resolution plan to be distributed as proposed in the Resolution Plan, while a clear well-defined distribution matrix has been stipulated in the Code in case of liquidation process. This has created a sense of confusion among various stakeholders i.e. FCs and OCs and of late attracted numerous references to NCLAT / Supreme Court, which in fact has delayed resolution of some of the largest stressed assets.

The amended provision has clarified that the operational creditor(s) shall receive an amount that is not less than the liquidation value of their debt or the amount that would have been received if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priorities in section 53 of the Code, whichever is higher. Also, the financial creditor(s) who do not vote in favour of the resolution plan shall receive an amount that is not less than the liquidation value of their debt. This shall applicable to all such cases where resolution is pending / subject to legal proceeding is pending against any CIRP.

This shall help to restore normalcy and also the natural law of equitable and justifiable treatment to all stakeholders.

Code has created a precedence of not considering priority of Sovereign dues while dealing with Liquidation of Corporate under IBC.

However, Tax Authorities raised issue of considering priority of any tax dues as Sovereign dues in case of resolution plan.

It is clarified the resolution plan approved by the Adjudicating Authority shall also be binding on the Central / State Government / any local authority including Income Tax to whom a debt in respect of payment of dues such as authorities.

This has put Govt dues at par with dues of Operational Creditor.

NIBM Training ProgrammesAugust 2019 – October 2019

No. Title Duration From To Target Group Coordinators

For more details please visit www.nibmindia.org

m AUGUST

01 Programme on Credit Appraisal & 3 Days 05/08/2019 07/08/2019 Middle & Senior Siddharth K Bajpai & Monitoring Techniques for Officers of Small Finance Banks Management Rakesh Gupta

02 Programme on 6 Days 05/08/2019 10/08/2019 Middle & Senior Arindam Bandyopadhyay Demystifying Statistical Techniques for Risk Management Management

03 International Programme on 13 Days 05/08/2019 17/08/2019 Middle & Senior G Nagaraju & Role and Functioning of Central Bank Management Jiji Mathew

04 Programme on Lead Bank Scheme & SLBC 4 Days 19/08/2019 22/08/2019 Middle & Senior Naveen Kumar Management

05 Programme on Enhancing Efficiency and Effectiveness 4 Days 19/08/2019 22/08/2019 Middle Ateeque Shaikh & for Branch Managers Management Kaushik Mukerjee

06 Programme on Operational Risk Management 4 Days 20/08/2019 23/08/2019 Middle & Senior Richa Verma Bajaj under Basel Regime Management

07 Programme on Domestic Enquiries and 5 Days 20/08/2019 24/08/2019 Middle & Senior Shomi Srivastava Disciplinary Actions Management

08 Intensive Programme in Integrated Treasury Management 10 Days 20/08/2019 29/08/2019 Middle S V Kuvalekar & with one day Bourse Game Management G Nagaraju

09 Programme on Financial Statement Analysis for 5 Days 26/08/2019 30/08/2019 Middle & Senior M Manickaraj & Lending Decisions (Including New Accounting Standards Management Dipali Krishnakumar under IFRS/Ind AS)

10 Programme on Technical Analysis for Dealers 5 Days 26/08/2019 30/08/2019 Middle Smita Roy Trivedi Management

11 Programme on Basel III 5 Days 27/08/2019 31/08/2019 Middle & Senior Tasneem Chherawala & Management Sanjay Basu

12 Programme on Entrepreneurial Finance 3 Days 28/08/2019 30/08/2019 Middle & Senior Dinesh Jain Management

m SEPTEMBER

13 Advanced Programme in Card Payment System with NPCI 3 Days 03/09/2019 05/09/2019 Middle & Senior Deepankar Roy Management

14 Programme on International Investments and Borrowings 3 Days 03/09/2019 05/09/2019 Middle G Nagaraju & Management Jiji Mathew

15 Programme on Digital Marketing in 3 Days 09/09/2019 11/09/2019 Middle Ateeque Shaikh Banking & Financial Services Management

16 Programme on 4 Days 09/09/2019 12/09/2019 Middle & Senior Sarita Bhatnagar Customer Relationship Management in Banking Management

17 Programme on Lending to Services Sector 5 Days 09/09/2019 13/09/2019 Middle Elizabeth James & Management Rakesh Gupta

18 Programme on Financing International Trade 5 Days 09/09/2019 13/09/2019 Middle Smita Roy Trivedi & Management Jayant Keskar

19 Programme on Managing Non-SLR Investments 6 Days 09/09/2019 14/09/2019 Middle & Senior Kedar nath Mukherjee Management

20 Programme on Information Systems Audit 3 Days 16/09/2019 18/09/2019 Middle & Senior Deepankar Roy & Management Alka Vaidya

NIBM Training ProgrammesJuly 2019 – September 2019

No. Title Duration From To Target Group Coordinators

For more details please visit www.nibmindia.org

21 Management of NPAs: Effective Strategies for 4 Days 16/09/2019 19/09/2019 Middle & Senior Richa Verma Bajaj & Prevention and Recovery Management Dipali Krishnakumar

22 Workshop on Internal Credit Risk Modelling 5 Days 16/09/2019 20/09/2019 Middle & Senior Arindam Bandyopadhyay under the Basel III IRB Approach Management

23 Programme on Liquidity Risk Management for NBFCs 3 Days 18/09/2019 20/09/2019 Middle & Senior Sanjay Basu (Focus: Draft RBI Guidelines) Management

24 Programme on Forex Risk Management, 3 Days 23/09/2019 25/09/2019 Middle & Senior G Nagaraju Instruments and Regulations Management

25 Faculty Development Programme for Bank Staff Training 3 Days 25/09/2019 27/09/2019 Faculty Members Kaushik Mukerjee &5 College Faculty: Building Knowledge, Skills, and Attitude for from Staff Training Ateeque Shaikh Conducting Effective Training Colleges and Regional Training Centres of banks

26 International Programme on 13 Days 23/09/2019 05/10/2019 Middle & Senior S V Kuvalekar & Asset Liability Management in Banks and Financial Institutions Management Sanjay Basu

m OCTOBER

27 Programme on Effective Credit Monitoring for 3 Days 14/10/2019 16/10/2019 Middle & Senior Siddharth K Bajpai & Corporate & SME Advances Management Rakesh Gupta

28 Programme on Digital Banking and Fintech: 3 Days 14/10/2019 16/10/2019 Middle & Senior Deepankar Roy Changing Landscape Management

29 Programme on Project Financing to 4 Days 14/10/2019 17/10/2019 Middle & Senior Naveen Kumar High Value Agriculture and Agribusiness Management

30 Programme on New Technologies and 4 Days 14/10/2019 17/10/2019 Middle & Senior Anjan Roy & Process Improvements in Loan Processing Management B V Chaubal

31 Advanced Programme on 5 Days 15/10/2019 19/10/2019 Middle & Senior S V Kuvalekar & Corporate Lending and Financial Services Management Dipali Krishnakumar

32 Workshop on Insolvency and Bankruptcy Code, 2016 2 Days 17/10/2019 18/10/2019 Middle & Senior Dipali Krishnakumar & Management Harish Kant Kaushik

33 Programme on Fair Valuation under IFRS 4 Days 16/10/2019 19/10/2019 Middle & Senior Sanjay Basu & Management Tasneem Chherawala

34 Programme on Trade Based Money Laundering and 2 Days 21/10/2019 22/10/2019 Middle Jayant Keskar & Frauds in International Business Management Smita Roy Trivedi

35 Programme on Ethics and Prevention of Corruption 2 Days 23/10/2019 24/10/2019 Branch Heads and Shomi Srivastava Senior Officers from Controlling Offices

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