Directorate of Enforcement (ED), has provisionally attached assets worth Rs 20.25 crores in the form of immovable properties in possession of one of the accused Raj Kumar Gupta, an industrialist in Jammu and Kashmir in Bank of India loan case.
The case involves siphoning off of funds to the tune of Rs 91.63 crores (through companies/firm namely Jhelum Infra Projects India Private Limited- Rs 39.70 crore, M/s Jhelum Industries – Rs 33.83 crores and I. D SoodIspat Private Limited- Rs 18.10 crores).
“The loan accounts were classified as non-performing assets (NPA) on December 31, 2014,” stated the press release by ED on Thursday.
ED initiated an investigation on the basis of FIRs registered by Central Bureau of Investigation, Jammu under section 120-B read with section 420 and 409 of Ranbir Penal Code, 1989 (pari-materia sections under IPC).
The investigation so far has revealed that huge amount of cash of Rs 20.87 crore was withdrawn from the loan accounts and accounts of various sister concerns. Further, funds to the tune of Rs 18.47 crores were siphoned off through accounts owned and controlled by Raj Kumar Gupta and his family members and through bogus accounts in the name of his employees opened specifically for the purpose of siphoning off of funds of loan accounts. The remaining funds were utilised for making payments to different individuals for a non-business purpose.
The attached properties include land admeasuring 44 kanals 10 marlas at village Kartholi, district Samba of worth Rs 7.59 crores and land admeasuring 491 kanals 16 marlas in tehsil Pampore, district Pulwama of worth Rs 12.66 crores.
Further investigation, in this case, is under progress. (ANI)
State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year.
Risk of a sharp deterioration in the asset quality of five of the largest PSU banks now seems to be abating with the economic recovery picking up pace, said Moody’s Investors Service in a recent note. However, despite this, the rating agency cautioned that such public sector lenders are likely to remain starved of sufficient capital to absorb unexpected shocks and support credit growth. Banks were expected to see a sharp rise in NPAs last year when the pandemic slowed the Indian economy down but despite the economic slump, the asset quality of banks has seen mild improvement.
Risks reducing for banks
State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year. “The gross NPL ratios of the five banks declined by an average of around 100 basis point as of the end of 2020 from a year earlier,” Moody’s said. The estimates even account for loans that have not yet been declared NPAs owing to the Supreme Court order. Lenders are also drawing comfort from the provisions made by them against the expected jump in NPAs.
During the pandemic, various measures were undertaken to support borrowers. This, according to Moody’s has largely helped limited impact of the pandemic on the banks’ asset quality. These measures included loan repayment moratorium, loan restructuring, monetary easing, liquidity infusion, Capital infusion into public sector banks, lowering LCR, among others. “As of the end of December 2020, the five banks restructured 0.7%-2.6% of gross loans, less than our expectations, as the impact of the pandemic on borrowers was not as severe as we had anticipated,” the report said.
Dearth of capital to result in uneven recovery
Despite the green shoots, capital shortage remains a risk. “The banks will continue to face shortages of capital to both absorb any unexpected stress and support credit growth, with high credit costs continuing to suppress profitability,” they added. This shortage in the capital could result in an uneven recovery for the Indian economy with various vulnerable industries facing a setback. The banks’ asset quality can also deteriorate more than anticipated, with exposures to the MSMEs, in particular, posing risks, Moody’s said.
The government planned to infuse Rs 20,000 crore into public sector banks this fiscal year and another Rs 20,000 in the next financial year. While the capital infusions will help the banks meet Basel capital requirements, it will not boost credit growth, according to the report. This would result in some banks turning to the market. Canara Bank and PNB have already raised some capital from equity markets.
On the other hand, in an earlier note, Moody’s said that private sector banks have raised sufficient capital buffers to tide through any hiccups going forward. Asset quality of private lenders remains supported by the same measures that have aided their public sector peers.
The interest income (NII) fell 9% on a y-o-y as well as sequential basis to Rs 3,739 crore.
Bank of India registered a fivefold increase in net profit to Rs 541 crore during the December quarter (Q3FY21) compared to the corresponding quarter last year. Provisions declined 51% year on year (YoY) and 14% quarter on quarter (QoQ) to Rs 1,980 crore. Its operating profit declined 31% YoY and 8% QoQ to Rs 2,836 crore. The interest income (NII) fell 9% on a y-o-y as well as sequential basis to Rs 3,739 crore.
Explaining the reason behind lower provisions, BoI MD and CEO Atanu Kumar Das said provisioning was high during the December quarter last year (Q3FY20) as the lender had provided for Dewan Housing Finance Corporation (DHFL) during that period. This year, too, we have made a lot of proactive and preemptive provisions from Q1FY21 itself, he added. The provision coverage ratio (PCR), which was 77.15% in Q3FY20 and touched 87.91% in Q2FY21, has moved up further to 89.32% in Q3FY21.
“We feel as the economy revives post March in a much significant manner, we will be able to see our credit growth at faster pace around 10-12%,” he added. The lender has been able to register impressive credit growth during the quarter under review. Advances grew 9.6% YoY and 1.8% QoQ to Rs 4.14 lakh crore. Deposits grew 17% YoY to Rs 6.1 lakh crore, but remained flat sequentially. Current account savings account (CASA) ratio remained at 40.61%, compared to 39.49% in the September quarter. Credit cost remained at 0.68%, compared to 2.33% in Q2FY21.
The lender’s net interest margins (NIMs) contracted by 8 basis points (bps) sequentially and 49 bps YoY to 2.58%. “By March end this year, we aim at NIM of 2.75% on the back of volume- led growth.” Das said.
The lender’s asset quality showed an improvement during the December quarter. Gross non-performing assets (NPAs) ratio improved 54 bps to 13.25%, compared to 13.79% in the previous quarter. Similarly, net NPAs ratio came down 86 bps to 3.27% from 4.13% in the September quarter. The lender has not classified any NPAs since August 31, 2020, due to the interim order of the Supreme Court. “On a pro forma basis, gross NPAs stood at 14.59% and net NPAs at 3.73%,” Das said. About the asset quality in the coming quarters, he said that gross NPAs can maximum go up to 14.25%.
The capital adequacy ratio stood at 12.51% at the end of the December quarter, compared to 12.8% in the previous quarter.
Lack of interest among potential buyers remains a key concern given the structure of these banks.
The market is betting on Punjab & Sind Bank, Bank of Maharashtra and Bank of India as the likely candidates for the finance minister’s ambitious bank privatisation plan. In her Budget speech, finance minister Nirmala Sitharaman said the government planned to privatise two sate-run banks, other than IDBI Bank. Analysts believe that the likely candidates will be from the pool of banks which were not part of the merger process. The government had earlier allowed merger of 13 banks into five banks.
Anil Gupta – vice-president and sector head, financial sector ratings, ICRA, said Punjab and Sind Bank and Bank of Maharashtra looked probable candidates for privitisation. Of the six banks kept out of merger, Indian Overseas Bank, Central Bank and UCO Bank are under PCA (prompt-corrective action), he explained. The Reserve Bank of India had kept the three banks in the PCA framework after a massive asset quality deterioration, losses in the books and lower capital levels. Gupta said PCA banks were unlikely to be offered for privatisation due to poor investor demand.
Leaving State Bank of India and five merged banks, there are six public sector banks in the banking system. The six banks include Bank of India, Punjab and Sind Bank, Bank of Maharashtra, Indian Overseas Bank (IoB), Central Bank of India and Uco Bank. Gupta also said the government was unlikely to consider privitisation of Bank of India due its large size. “The government may want to test the water with smaller banks first,” he added.
According to JM Financial, “While the details are awaited, we believe the most likely candidates will be from the pool of banks which were not part of consolidation. While these candidates are small and are not expected to provide any material resources to the government, we believe that this is a step in the right direction and can act as a test case for privatisation of other major public sector banks in future.”
In a note to its clients, Kotak Institutional Equities said the task of privatising two PSU banks may be difficult to achieve but could result in more privatisations, if successful. Lack of interest among potential buyers remains a key concern given the structure of these banks, Kotak said.
In an interview with CNN News 18, Niramala Sitharaman said the government wanted more public sector banks which are functionally strong, professionally managed and can meet the demands of growing aspirational India. “If I am going to be sitting around with such public sector banks which are just not in a mood or a position to stand up, is it right to pour tax-payers money into such banks? When there may be buyers who can buy and run it efficiently,” she said.
The government has proposed to introduce required legislative amendments for privatisation of two PSBs in the Budget session itself.
Life Insurance Corp of India (LIC) controlled IDBI Bank expects to come out of Reserve Bank of India‘s (RBI) stringent prompt corrective action (PCA) directions at the end of this fiscal year after meeting the central bank’s last remaining parameter, CEO Rakesh Sharma said.
RBI’s PCA framework imposed on banks wih high NPAs and modest capital position, restricts banks from certain lending activities and curbs expenses to conserve funds.
IDBI has been under PCA since May 2017. The bank reported its fourth consecutive quarter of net profit in December 2020 after 13 straight quarters of losses. Sharma expressed confidence that the bank will move out of RBI’s restrictive directions after it records a positve return on assets in the end of the current fiscal.
“We are above all indicators put forth by RBI and next quarter we expect to record a positive return on assets for the fiscal year which will help us exit PCA very soon. Against a requirement of 8% core equity capital we are currently at 12.2% and against a requirement of 6% net NPA we are at 2.74% including loans which are yet to be classified as NPAs. The RoA is reported at the end of the fiscal and we are confident that we will move out of PCA after we record a positive number in March,” Sharma said.
Results released today showed that the bank reported its fourth consecutive quarter of net profit riding on higher net interest income (NII) mainly as cost of funds fell. The bank reported a net profit of Rs 378 crore in the quarter ended December 2020 from a loss of Rs 5,763 crore a year earlier.
NII or the difference between income earned on loans and that paid on deposits increased 18% to Rs 1810 crore from Rs1,532 crore a year earlier. Net interest margin (NIM) or the difference between the yield earned on loans and that paid on deposits improved by 60 basis points to 2.87% from 2.27% a year ago. One basis point is 0.01 percentage point.
With 23.52% gross NPAs, the bank has among the highest stressed loans in the industry though down from 28.72% a year ago. However with a provision coverage of 97.08% it has covered for most of its stress.
“There was some apprehension that the loans under moratorium will be high post Covid with about 5 to 6% restructured but we have been able to keep it at 2.5% of our book. Similarly, loans that are not classified as NPAs due to the Supreme Court (SC) order are less than 2% of standard advances,” Sharma said.
If not for the SC order the bank’s gross NPAs would have been 24.33% of its loans.
The bank’s income rose despite a 7% year on year fall in loan book to Rs 1.59 lakh crore from Rs 1.72 lakh crore a year ago mainly because cost of funds fell 99 basis points to 4.39% from 5.38% last year.
IDBI has made a total of Rs 436 crore of Covid 19 related provisions and separately made Rs 340 crore for restructure loans under the RBI framework. Another Rs 369 crore has been made for accounts not classified as NPAs due to the SC stay including Rs 84 crore for reversal of interest.
“We have already restructured Rs 704 crore of loans and another Rs 2256 crore is in the pipeline. So the total restructured loans are at Rs 2960 crore or 2.42% of standard assets much lower than the 5% to 6% which was expected,” Sharma said.
Going forward the bank expects a recovery in retail loans led by mortgages. Sharma said he expects retail loans to grow at 10% to 12% in the next fiscal year up from the 4% to 5% growth likely this year.
Private sector lender CSB Bank on Tuesday said SBI Mutual Fund has increased its stake in the bank to over 5 per cent.
According to a regulatory filing by CSB Bank, the stake of the fund house rose from 4.96 per cent to 5.01 per cent following the acquisition of an additional 86,993 shares.
The acquisition was through open market purchase on January 1, 2021.
Last year, the Reserve Bank of India (RBI) gave its nod to SBI Funds Management to acquire up to 10 per cent stake in the Kerala-based lender.
The RBI approval will stand valid for one year till July 21, 2021. The investment will be through various schemes of SBI Mutual Fund.
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