Category: Banking & Finance

The All India Bank Employees’ Association (AIBEA) wants bank managements, the Indian Banks’ Association (IBA) and the government to bring back measures relating to relaxation in attendance, reduced business hours, work from home, among others, in view of the second wave of the Covid-19 pandemic.

“In the recent weeks we have observed that there is a second wave of virus infection and this time, the spread of the infection is much faster.

“The problem is getting repeated and many people are getting infected now. In some branches, all the employees got infected. In some Head Offices, Zonal offices, most of the staff have been infected,” said CH Venkatachalam, General Secretary, AIBEA, in a statement.

He said the Association will take up with bank managements, IBA and the government the importance of restoring the relaxation in work-related norms (brought out when the first nationwide lockdown was imposed from March 25 till May-end 2020), so that there is some relief for the employees.

In view of the second wave of the pandemic, Venkatachalam said bank employees should take precaution and care while attending offices.

In fact, when the nationwide pandemic-related lockdown was announced in March 2020, the IBA had appealed to bank customers to visit the branch premises only in case of absolute necessity.

“Our employees are also facing the same challenges that you all are and so, we are asking for your help too. Most of the services the banks offer are available online.

“Our sincere request to you is, for non-essential services, avail them through the mobile and online banking channels,” IBA then said.

Potential buyers will need clarity vis-a-vis the pension liabilities of the two public sector banks (PSBs) the government intends to privatise as they may not be willing to take over these liabilities.

To attract investors, industry experts say the government may have to hive off the pension funds of the two yet-to-be-identified PSBs that will be put on the block.

A huge burden

CVR Rajendran, MD and CEO, CSB Bank, underscored that pension is a huge burden for PSBs.

While the Thrissur-headquartered private sector bank has made an internal assessment of 3-4 PSBs for possibly acquiring one of them, Rajendran said the bank is now redoing the calculations vis-a-vis the pension liability.

“Out of our bank’s wage bill, more than one-third goes towards pension….the outgo on account of pension alone amounts to almost ₹100 crore a year. This liability is very high in the case of PSBs. For example, a mid-sized PSB is having about 32,000 retired employees.

“So, we are redoing the calculations as to whether it is worth bidding for PSBs. We may not show much interest (in bidding),” said the CSB Bank chief.

Rajendran said the bank is confident of growing its business organically by minimum 25 per cent every year.

Actuarial valuation

Banking expert V Viswanathan observed that before the government sets the ball rolling on the privatisation of two PSBs, actuarial valuation of their pension funds should be done and, shortfall, if any, in respect of retired and serving employees, should be provided beforehand.

Further, the pension fund should be hived off so that it is independently managed by agencies such as the Life Insurance Corporation of India or other pension fund managers, who will guarantee monthly pension payments, commutation of pension on retirement, among others.

“The acquiring bank should continue to remit 10 per cent of pay as hitherto in respect of serving employees. It should also undertake to pay additional obligations arising out of promotions…

“The government should guarantee continuation of the pension scheme, its implementation and all payments due to employees covered under the scheme till the final payment is made (they were absorbed as PSB employees and the government has the obligation),” said Viswanathan

In her Budget speech on February 1, Union Finance Minister Nirmala Sitharaman said that besides IDBI Bank, the government propose to take up the privatisation of two PSBs and one general insurance company in the year 2021-22.

CARE Ratings, in a report in February, said the government could raise between ₹6,400 crore and ₹12,800 crore if it cuts its stake to 51 per cent in two of the four PSBs – Indian Overseas Bank (IOB), Bank of Maharashtra (BoM), Bank of India (BoI) and Central Bank of India (CBoI) – said to be the candidates for disinvestment.

General and standalone health insurers are facing rising health insurance claims amid the second wave of Covid-19 infections, and at least some are now thinking of increasing the premium.

“The number of claims are increasing very rapidly as Covid infections rise. Claims are very high and are affecting the industry badly,” said MN Sarma, Secretary General, General Insurance Council, adding that some hospitals continue to charge high treatments costs.

Claims settled

According to data with the GIC, by April 12, as many as 10.26 lakh Covid- related health claims worth ₹1,484.95 crore were filed. Of this, 8.81 lakh claims, amounting to ₹802.93 crore, have already been settled.

“Claims are increasing. We are getting similar numbers like in August and September last year. The important thing is that there are more defined protocols for home isolation and hospitalisation,” said Anand Roy, Managing Director, Star Health and Allied Insurance.

The insurer has been getting 600-700 Covid-specific claims a day of late, which had gone down to 100 to 150 per day in December and January, he said. It paid out 1.31 lakh Covid claims last year, amounting to ₹1,326 crore.

Repricing of premium

Roy said Star Health is evaluating and may go for repricing premium depending on how the second wave pans out. The insurer did not go for re-pricing last year when a number of insurers increased premiums for health cover.

“There is a likelihood that insurance premiums may go up in the future. Covid is here to stay. Chances of hospitalisation post-vaccination will come down,” he noted.

Bhabatosh Mishra, Director, Underwriting, Claims and Product, Max Bupa Health Insurance, said Covid claims harmed the insurer’s loss ratios in the first wave itself, and the question is how long it can sustain as there are now higher incidents in the second wave.

“At Max Bupa, we have observed that in the last seven days Covid claims coming in the form of cashless claims have more than doubled and are rising at a very fast pace. Initially, in the second wave, the number of Covid claims did not match the number of cases. But now, the pace at which the cases are increasing is fast catching up with the trends seen in the first wave,” he said.

KR Srivats

The Centre will subscribe to equity shares worth ₹4,100 crore in state-owned Indian Overseas Bank (IOB). The equity shares are proposed to be issued to the Centre on a preferential basis for the capital infusion of ₹4,100 crore received by the bank in FY21, sources said.

The transaction should be seen as one where the Centre was enabling regulatory capital for the public sector bank as of March-end 2021. To enable this, government issues bonds to be subscribed by the bank and, the Centre, in turn, makes equity capital contribution in the bank for the same amount. This will be a cash-neutral exercise with no outgo for the Centre, while at the same time beefing up the capital of the public sector bank, sources added. There is no benefit for the bank except the colour of the capital and the fact that bank will be in conformance to regulatory requirements.

The Centre has done a similar exercise to support a few other weak banks such as Bank of India and UCO Bank, it is learnt. Currently, the Centre holds little over 95 per cent stake in IOB.

EGM on May 12

An extraordinary general meeting of the shareholders has been convened on May 12 through VC/OAVM mode to approve the preferential allotment of equity shares to the Centre, sources said.

For the preferential allotment, IOB proposes to allot 246.54 equity shares of face value of ₹10 each at issue price of ₹16.63 per equity share (including premium of ₹6.63 per equity share) to the Central government.

Similarly, the Centre proposes to subscribe to 42.14 crore equity shares worth ₹3,000 crore in Bank of India through preferential allotment route at a price of ₹71.23 per equity share. The virtual EGM of shareholders has been convened for May 5, sources said. Currently, the Centre has 89.10 per cent shareholding in Bank of India.

In the case of UCO Bank, the Centre will subscribe through preferential allotment as many as 203.76 crore equity shares worth ₹2,600 crore at a price of ₹12.76 per share, sources said. The virtual EGM of shareholders has been convened for May 7. The Centre currently holds 94.44 per cent stake in UCO Bank.

The capital raised by these banks through this route would be utilised for the purpose of shoring up of common equity and Tier-I capital of the bank, sources said.