Tag: Central government

Depositors of stressed banks to get up to Rs five lakh back from November 30, BFSI News, ET BFSI

Banking & Finance

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Depositors of stressed banks like Punjab & Maharashtra Cooperative (PMC) Bank are now set to get up to Rs 5 lakh back from November 30 as the government has notified the amendment to the DICGC Act. Parliament earlier this month passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill, 2021 ensuring that account holders get up to Rs 5 lakh within 90 days of the RBI imposing moratorium on the banks.

The amount of Rs 5 lakh would be provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

The government has notified September 1, 2021 as the date on which the provisions of the Act shall come into force, according to a gazette notification dated August 27, 2021.

“In exercise of the powers conferred by sub-section (2) of section 1 of the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, 2021 (30 of 2021), the Central Government hereby appoints the 1st day of September, 2021, as the date on which the provisions of the said Act shall come into force,” it said.

Consequently, 90 days from the effective date is November 30, 2021 for depositors to get their funds back.

The first 45 days are meant for the bank, which has come under stress, to collect all the details of the accounts where the claims will have to be made. This will then be forwarded to the insurance company, which in real-time will check it all up, and nearer the 90th day, depositors will get the money, Finance Minister Nirmala Sitharaman had said.

The benefit will also accrue to the depositors of 23 cooperative banks which are in financial stress and on which the Reserve Bank of India (RBI) has imposed certain restrictions.

DICGC, a wholly-owned subsidiary of the RBI, provides insurance cover on bank deposits.

At present, it takes 8-10 years for the depositors of a stressed bank to get their insured money and other claims.

Though the RBI and the Centre keep monitoring the health of all banks, there have been numerous recent cases of lenders, especially cooperative banks, being unable to fulfil their obligations towards the depositors due to the imposition of a moratorium by the RBI.

Last year, the government increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.

Every bank used to pay 10 paise as an insurance premium per Rs 100 of deposit.



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SEBI in talks with Centre on setting up of Repo Clearing Corporation

Banking & Finance

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Capital Markets regulator SEBI is in talks with the Central government on setting up of a Repo Clearing Corporation as part of efforts to develop a vibrant corporate bond market in the country, G Mahalingam, Whole-Time Member, has said.

Talks on with AMCs

Addressing an e-conclave on ‘Roadmap for economic Rebound’, organised by the industry body Assocham, Mahalingam said SEBI recognises that Repo market is one of the important pillars for having a vibrant corporate bond market. He highlighted that SEBI has been in talks with various asset management companies who are willing to bring the initial funding for Repo Clearing Corporation.

Also read: Why bonds have become attractive to large firms

“Once you have a good Repo Clearing Corporation, the repo market will gain lot of traction as credit risk vanishes out of the horizon and there will be a central counter party settlement,” he said. “SEBI is also in active discussion with the government on the budget announcement of introducing a new backstop facility for government purchase of corporate bonds that may fail,” he added.

Behind US, Korea, Brazil

Mahalingam noted that corporate bond outstanding in India was ₹36-lakh crore, which was about 18 per cent of the country’s GDP. “While this 18 per cent looks healthy, India is actually lagging far behind the US which has ratio of 124 per cent or South Korea where it is far excess of 50 per cent or Brazil where it it is close to 70 per cent,” he added. The development of our corporate bond market is therefore critical and has to play an important role for the rebound of the economy in a big way, he said.

Also read:A segmented banking system can boost credit

Mahalingam highlighted that there is a section of people who contend that development financial institutions (DFIs) are bound to come in a big way to help in economic recovery. “I am not sure if DFIs will come back but what needs to be developed in the country is the corporate bond market. We have been talking for some time on this. But I see flurry of activity in the last nine months where government has been playing a very proactive role with RBI and SEBI taking a good number of measures,” he said.

He stressed the need for both insurance companies and provident funds have to be a little forthcoming when it came to investing in corporate bonds. Most insurers are not prone to taking extra risk although there has been regulatory relaxations. “Insurance companies are well positioned to take risk. But they generally stick to AAA bonds and don’t go below that,” Mahalingam noted.

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Govt seeks Parliament nod for Rs 1.87 lakh crore supplementary demands for this fiscal, BFSI News, ET BFSI

Personal Finance

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The government sought approval for additional expenditure of Rs 1.87 lakh crore from Lok Sabha, as part of the first batch of supplementary demand for grants for FY22.

Finance minister Nirmala Sitharaman laid a statement of the demands in the lower House, which amounted to a net additional cash outgo of Rs 23,675 crore, on Tuesday.

The remaining Rs 1.63 lakh crore came from savings of the various ministries and departments and through enhanced receipts and recoveries, the statement said.

The single largest demand came from the finance ministry for Rs 1.59 lakh crore as transfer to states in the form of back-to-back loans as goods and services tax (GST) compensation shortfall.

The GST compensation shortfall would not affect the central government’s fiscal deficit, making the net outgo quite modest, said Aditi Nayar, chief economist at ICRA.

Further, the additional outgo of Rs 90,000 crore for the free foodgrain provision in May-November was being absorbed by the cushion created in this year’s budget on account of the prepayment of the Food Corporation of India’s loans in FY21, according to Nayar.

“With healthy revenues amid only a modest increase in the expenditure outlay, the cash flow position of the government of India does appear to be quite comfortable, which allowed the release of the Rs. 75,000 crore of GST compensation loans from the Central Government’s own borrowings raised so far,” she said.

The department of health and family welfare which sought Rs 10,727 crore Covid-19 emergency response and health system preparedness.

The finance ministry also raised a demand for Rs 1,750 crore as compound interest support to lending institutions in relation to the loan moratorium.

The list of demands also included Rs 1,872 crore sought for loans and advances to Air India by the civil aviation ministry.



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Three in the race to become PNB’s second shareholder director

Banking & Finance

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Three persons are in the race to being elected as a shareholder director in Punjab National Bank (PNB), the country’s second largest public sector bank, at the upcoming extraordinary general meeting (EGM) of shareholders on March 17.

The Board of Directors of PNB had, at its meeting held on Friday, found three candidates — out of total nominations of four persons received by the bank as of March 2 — as “fit and proper” for being elected as a shareholder director of the bank, sources said.

PNB convenes EGM to elect a 2nd shareholder director to its Board

The three persons, all aged 66 years, who are in the fray are Gautam Guha (from New Delhi), Padmanabhan A A (from Chennai) and Ramesh Chandra Agrawal (from Prayagraj), they added. All the three have experience in the area of banking.

PNB is now looking to rope in its second shareholder director on the strength of a recent Finance Ministry decision empowering Public Sector Bank (PSB) boards to act on the decisions that remained held up at various board-level committees due to lack of quorum arising from vacancies or recusal by existing directors.

PNB to raise ₹2,500 cr via AT-1 bonds by March 15: CEO

A shareholder director is one who is elected from among shareholders other than the Central government. A public sector bank has two main categories of shareholders — Central government and ‘other shareholders’ (public shareholders). In India, all the public sector banks are listed entities although none of them are registered as companies under the Companies Act. There is separate legislation to govern the Board composition of such PSBs.

The elected shareholder director is finally appointed by the Nomination and Remuneration Committee (NRC) of the bank Board concerned. PNB currently does not have the requisite NRC strength and is therefore looking to get another shareholder director through Board approval route after election of such a director by the shareholders of the bank at an EGM.

Recent QIP

PNB has moved to get another shareholder director after its recent nearly ₹3,788-crore qualified institutional placement (QIP), which saw the Centre’s shareholding in the bank drop from 85.59 per cent to 76.87 per cent. With the Centre’s shareholding coming down, PNB became technically eligible to have two shareholder directors.

Having an additional shareholder director on a Board is useful for banks like PNB as all shareholder directors are counted as independent directors for the purpose of compliance with SEBI regulations for listed entities.

In public sector banks, there are executive directors appointed by Central government, there is government nominee director (official of Central government), there is an RBI nominee director, two employee directors (representing workmen and officers) and other directors (shareholder directors).

This will be the second shareholder director for PNB besides Asha Bhandarker, who was elected on September 12, 2018, for a period of three years.

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