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RBI removes UCO Bank from Prompt Corrective Action framework

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The Kolkata-based bank came out of the PCA restrictions after more than four years. The RBI had initiated prompt corrective action in May 2017 in view of high non-performing assets and negative return on assets.

The Reserve Bank of India on Wednesday removed UCO Bank from its Prompt Corrective Action Framework (PCAF) subject to certain conditions and continuous monitoring.

The Kolkata-based bank came out of the PCA restrictions after more than four years. The RBI had initiated prompt corrective action in May 2017 in view of high non-performing assets and negative return on assets.

In a release on Wednesday, the RBI said, “The performance of UCO Bank, currently under the Prompt Corrective Action Framework (PCAF) of the

RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in the breach of the PCA parameters.”

The RBI said the lender has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA and leverage ratio on an ongoing basis, and has apprised the regulator of the structural and systemic improvements that it has put in place. These steps will help the bank continue to meet its commitments.

“Taking all the above into consideration, it has been decided that UCO Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring,” the central bank said in the release.

UCO Bank had urged the RBI to consider taking it out of the PCA framework after posting full-year profit for the last fiscal. The bank had reported a net profit in 2020-21 after continuous losses in the previous five financial years. Net profit during the year ended March 2021 was Rs 167.03 crore.

The asset quality improved significantly during the last fiscal. Gross NPA fell to Rs 11,351.97 crore from Rs 19,281.95 crore as on March 31,

2020. Its gross NPA ratio dropped to 9.59% at the end of FY21 from 16.77% at the end of FY20, while net NPA ratio reduced to 3.94% from 5.45%.

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Industry view: Tokenisation circular modifications give banks more control over card data

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The facility of tokenisation shall be offered by TSPs only for the cards issued by them, and the ability to tokenise and de-tokenise card data shall be with the same TSP.

The modifications made on Tuesday to the guidelines on tokenisation of card-based transactions allow banks a greater control over their customers’ data, said industry players.

The Reserve Bank of India (RBI) on Tuesday issued a set of relaxations with respect to its earlier mandate of tokenisation of card transactions. The regulator permitted card issuers to offer tokenisation services and become token service providers (TSPs). The facility of tokenisation shall be offered by TSPs only for the cards issued by them, and the ability to tokenise and de-tokenise card data shall be with the same TSP.

The tokenisation or encryption of card data shall be done with explicit customer consent with an additional factor of authentication (AFA) validation by the card issuer.

This means while card users can still choose to store their card details with a payment aggregator if they choose to, they will not be able to do so by checking a box, as was the case thus far. Instead, they will have to provide their explicit consent through an OTP or some similar instrument. The new rules kick in from January 1, 2022.

Madhusudanan P, co-founder and CEO, YAP by M2P Solutions, said with the latest relaxation, the RBI has given a fresh lease of life to tokenisation by payment aggregators. “The crux of it lies in enabling banks to be in control of the whole tokenisation service, which was earlier limited to third-party intermediaries. Now, if a large bank wants to be in control of their customers’ data because they see it as an important function, they can do the tokenisation themselves,” he said.

Sanjeev Moghe, EVP & head — cards & payments, Axis Bank, said the regulation will help prevent instances of unauthorised usage of customer data, theft and misuse of cards. “With tokenisation, a card-specific token is generated. Going forward, that token can be used for all online transactions. This will ensure an enhanced security. In case of any data breach or hacking attempt at the merchant’s end, the customer’s card details will still be protected,” Moghe said.

The mandate to tokenise all card information while carrying out transactions had become a sticky point for the payments industry, as they saw the new guidelines to be detrimental to the experience of smooth checkouts. Last month, industry body Payments Council of India had said the industry was working in alignment with the RBI on possible secure card-on-file tokenisation (CoFT) solutions to ensure a smooth customer experience for online purchases while enhancing the security of the storage of card credentials.

“It may be noted that introduction of CoFT, while improving customer data security, will offer customers the same degree of convenience as now,” the RBI said on Tuesday, adding, “Contrary to some concerns expressed in certain sections of the media, there would be no requirement to input card details for every transaction under the tokenisation arrangement.”

“The regulator has expanded the scope of tokenisation to include things like wearables and other devices. Eventually, we could even see tokenisation rules applied to payments for transit systems,” said an expert on condition of anonymity.

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Reserve Bank of India – Press Releases

Press Releases

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The performance of the UCO Bank, currently under the Prompt Corrective Action Framework (PCAF) of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in the breach of the PCA parameters. The bank has provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements that it has put in place which would help the bank in continuing to meet these commitments.

Taking all the above into consideration, it has been decided that UCO Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/833

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Reserve Bank of India – Press Releases

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The Reserve Bank of India issued Directions to The Adoor Co-operative Urban Bank Ltd, Adoor, Kerala under Section 35 A read with Section 56 of the BR Act 1949 (AACS), vide Directive DCBS.CO.PCC D-4/12.26.004/2018-19 dated November 02, 2018, from close of business on November 09, 2018 for a period of six months, which were extended from time to time, last being up to September 09, 2021 vide the Directive DOR.MON/ D-14/12.26.004/2021-22 dated June 08, 2021.

The Reserve Bank of India is satisfied that in the public interest, it is necessary to extend the period of operation of the aforesaid Directions. Accordingly, vide the Directive DOR.MON/D-33/12.26.004/2021-22 dated September 07, 2021 in exercise of powers vested in it under sub-section (1) of Section 35 A read with section 56 of the Banking Regulation Act, 1949, the Reserve Bank of India hereby directs that the Directive DCBS.CO. PCC. D-4/12.26.004/2018-19 dated November 02, 2018, issued to The Adoor Co-operative Urban Bank Limited, Adoor, Kerala, the validity of which was last extended up to September 09, 2021 shall continue to apply to the bank for a further period of three months, from September 10, 2021 to December 09, 2021, subject to review. Other terms and conditions of the Directive under reference, as modified from time to time, shall remain unchanged.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/832

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BBB recommends Atul Kumar Goel for PNB MD & CEO’s position

Banking & Finance

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The Banks Board Bureau (BBB) has recommended the candidature of Atul Kumar Goel for the position of Managing Director and Chief Executive Officer (MD & CEO) in Punjab National Bank (PNB).

Currently, Goel is the MD & CEO of UCO Bank. He has been at the helm of the Kolkata-headquartered public sector bank since November 2018.

The top position at PNB will become vacant once Ch.S.S. Mallikarjuna Rao completes his tenure on January 31, 2022. Rao has been MD & CEO of PNB since October 2019.

The Board also recommended the candidature of Ajay Kumar Srivastava (currently Executive Director, Indian Overseas Bank) as the candidate on the Reserve List for the MD & CEO vacancy in PNB.

The Board, in a statement, said it interfaced with 11 candidates on September 8, 2021 for the forthcoming position of MD & CEO of PNB.

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Reserve Bank of India – Notifications

Notifications

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RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001

Notification No. FEMA 23(R)/(5)/2021-RB

September 08, 2021

Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021

In exercise of the powers conferred by sub-section (1) and sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 [Notification No. FEMA 23(R)/2015- RB dated January 12, 2016] (hereinafter referred to as ‘the Principal Regulations’), namely:

1. Short title and commencement: –

  1. These Regulations may be called the Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021.

  2. They shall come into force from the date of their publication in the Official Gazette.

2. In the Principal Regulations, in Regulation 15, in sub-regulation 1, for clause (ii), the following shall be substituted, namely: –

“ii) the rate of interest, if any, payable on the advance payment shall not exceed 100 basis points above the London Inter-Bank Offered Rate (LIBOR) or other applicable benchmark as may be directed by the Reserve Bank, as the case may be; and”.

(R. S. Amar)
Chief General Manager

Foot Note: – The Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 [Notification No. FEMA 23(R)/2015-RB dated January 12, 2016] were published in the Official Gazette vide G.S.R.No.19 (E) dated January 12, 2016 in Part II, Section 3, Sub-Section (i) and subsequently amended as under:

  1. Notification No. FEMA 23(R)/(1)/2017-RB dated June 23, 2017 published in the Official Gazette vide G.S.R. No. 635(E) dated June 23, 2017

  2. Notification No. FEMA 23(R)/(2)/2019-RB dated December 03, 2019 published in the Official Gazette on December 09, 2019

  3. Notification No. FEMA 23(R)/(3)/ 2020-RB dated March 31, 2020 published in the Official Gazette on March 31, 2020

  4. Notification No. FEMA 23(R)/(4)/2021-RB dated January 08, 2021 published in the Official Gazette on January 11, 2021

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has imposed, by an order dated September 08, 2021, a monetary penalty of ₹5.00 lakh (Rupees five lakh only) on The Swasakthi Mercantile Cooperative Urban Bank Ltd., Vijayawada (the bank) for contravention of / non-compliance with certain provisions of the directions issued by RBI contained in the Master Circular on Board of Directors – UCBs dated July 1, 2015. This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949 taking into account, the failure of the bank to adhere to the aforesaid directions.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The Inspection report of the bank based on its financial position as on March 31, 2019 revealed, inter alia contravention of / non-compliance with the directions issued by RBI on “Board of Directors – UCBs”. Based on the same, a Notice was issued to the bank advising it to show cause as to why penalty should not be imposed for non-compliance with the directions.

After considering the bank’s written reply and oral submissions made during the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/831

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Banks Board Bureau recommends Atul Kumar Goel for PNB chief post

Banking & Finance

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The Banks Board Bureau (BBB) has recommended the name of Atul Kumar Goel for the position of Managing Director & CEO of Punjab National Bank, the country’s second largest public sector bank.

Goel is currently the Managing Director & CEO of UCO Bank.

At PNB, Goel is expected to succeed Ch SS Mallikarjuna Rao, who is due to demit office in end-January.

On Wednesday, BBB interfaced with 11 candidates for the forthcoming position of PNB chief executive, sources in the banking industry said.

Last month, the Centre had extended the tenure of three MD and CEOs and 10 Executive Directors in various public sector banks. The three MD & CEOs who got an extension in tenures included Ch SS Mallikarjuna Rao and Atul Kumar Goel.

While Mallikarjuna Rao’s term got extended till January 31, the term of office of Goel was extended for two years till November 1,2023.

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Reserve Bank of India – Press Releases

Press Releases

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The Reserve Bank of India (RBI) has, by an order dated September 08, 2021, imposed a monetary penalty of ₹40,000 (Rupees Forty Thousand only) on Shikshak Sahakari Bank Ltd., Nagpur, Maharashtra (the bank) for non-compliance with regulatory directions issued by RBI contained in its directive on “Membership of Credit Information Companies (CICs)” and the provisions of Credit Information Companies Rules, 2006 (CIC Rules). This penalty has been imposed in exercise of powers vested in RBI under clause (iii) of sub-section (1) of section 25 read with sub-section (4) of section 23 of the Credit Information Companies (Regulation) Act, 2005 (CIC Act).

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019 and the Inspection Report pertaining thereto, and examination of all related correspondence revealed, non-compliance inter alia with the aforesaid directions issued by RBI and the provisions of CIC Rules on reporting of data to Credit Information Companies and failure to take appropriate and necessary steps for ensuring accuracy of data. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the statutory directions and the provisions of CIC Rules, as stated therein. After considering the bank’s reply to the notice, additional submissions and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid directions & the CIC Rules.

(Yogesh Dayal)     
Chief General Manager

Press Release: 2021-2022/830

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RBI takes UCO Bank out of PCA framework

Banking & Finance

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The Reserve Bank of India (RBI) has decided to take UCO Bank out of the prompt corrective action (PCA) restrictions.

This is subject to certain conditions and continuous monitoring.

With this, only two public sector banks – Central Bank of India and Indian Overseas Bank – remain under RBI’s PCA framework.

High NPA and negative ROA

The Kolkata-headquartered public sector bank was put under PCA framework in May 2017 on account of high net non-performing assets and a negative return on assets.

Also see: RBI tweaks guidelines for card-tokenisation services

The RBI, in a statement, said the performance of the UCO Bank currently under the PCA framework of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended March 31, 2021, the bank is not in breach of PCA parameters.

“The bank has provided a written commitment that it would comply with the norms of minimum regulatory capital, net NPA, and leverage ratio on an ongoing basis and has apprised the RBI of the structural and systemic improvements it has put in place which would help the bank in continuing to meet these commitments,” the central bank said.

Early intervention

PCA is a structured early intervention and resolution initiated by RBI for banks that become undercapitalised due to poor asset quality or vulnerable due to loss of profitability.

PCA entails restrictions on dividend distribution or remittance of profits, requirement on promoters to bring in more capital, restrictions on branch expansion, higher provisioning requirement, and restrictions on management compensation.

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