Tag: Department of Financial Services

To spur lending, finance ministry pushes to ease fears of bankers, BFSI News, ET BFSI

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To protect the people taking bona fide business decisions, the finance ministry issued a uniform staff accountability framework for NPA accounts up to Rs 50 crore.

These guidelines shall be implemented with effect from April 1, 2022, for accounts turning non-performing assets (NPAs) beginning next financial year.

The Department of Financial Services (DFS), under the finance ministry, “vide its order dated October 29 advised broad guidelines to be adopted by all public sector banks (PSBs) on ‘Staff Accountability Framework for NPA Accounts up to Rs 50 crore’ (Other than Fraud Cases)”, the Indian Banks’ Association (IBA) said in a statement.

Banks have been advised to revise their staff accountability policies based on these broad guidelines and frame the procedures with approval of the respective boards, it said.

The IBA, being a key stakeholder of the framework, was involved in the process right from the beginning.

These guidelines will help quell apprehension that bankers could be hauled up for their bonafide commercial decision to go wrong. It will also help bankers to take credit decisions faster and help support the economy.

Stressing that the new guidelines will surely boost the morale of the PSBs employees immensely, it said banks will have to complete staff accountability exercises within six months from the date of classification of the account as NPA.

Further, it said that depending on the business size of the banks, threshold limits have been advised for scrutiny of the accountability by the chief vigilance officer (CVO).

Past track record

Past track record of the officials in appraisal or sanction/ monitoring will also be given due weightage, it added.

“At present, different banks are following different procedures for conducting staff accountability exercises. Also, staff accountability exercise is being carried out in respect of all accounts which turn into NPA. This approach not only adversely affects staff morale but also puts a huge strain on the bank’s resources,” it said.

Punitive measures

While punitive action needs to be taken against the officers having malafide intent/involvement, it is essential to ensure that bonafide mistakes are dealt with compassion, IBA said.

It added that there is a need to protect the people taking bonafide business decisions in this competitive environment.

Moreover, IBA said that at a time when the country is in need of an economic boost, slow credit delivery to industries due to the fear of implication is a matter of concern and needs urgent attention.

Banks with the approval of their board may decide on a threshold of Rs 10 lakh or Rs 20 lakh depending on their business size for the need of examining the aspect of staff accountability, it said.



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Govt may block Chinese investment in LIC IPO as company a ‘strategic asset’, BFSI News, ET BFSI

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The government wants to block Chinese investors from buying shares in Life Insurance Corp (LIC), underscoring tensions between the two nations.

State-owned LIC is considered a strategic asset, commanding more than 60% of India’s life insurance market with assets of more than $500 billion.

India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports of Chinese goods to extra scrutiny.

“With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed),” a government official said, adding that Chinese investment in companies like LIC could pose risks, according to a report.

FDI in IPO

Meanwhile, the government is mulling allowing foreign direct investment (FDI) in LIC, a move that would help overseas investors take part in the company’s proposed mega IPO, sources said.

The proposal is under discussion between the Department of Financial Services and the Department of Investment and Public Asset Management (DIPAM).

According to the current FDI policy, 74 per cent foreign investment is permitted under the automatic route in the insurance sector. However, these rules do not apply to the Life Insurance Corporation of India (LIC), which is administered through a separate LIC Act.

Change of rules

Govt may block Chinese investment in LIC IPO as company a 'strategic asset'

As per Sebi rules, both FPI and FDI are permitted under public offer. However, sources said since LIC Act has no provision for foreign investments, there is a need to align the proposed LIC IPO with Sebi norms regarding foreign investor participation.

The Cabinet had in July approved the initial public offering (IPO) of LIC.

The DIPAM had in January appointed actuarial firm Milliman Advisors LLP India to assess the embedded value of LIC ahead of the IPO, which is touted to be the biggest public issue in Indian corporate history.

The government expects to come out with the LIC IPO by the end of the current fiscal. Up to 10 per cent of the issue size would be reserved for policyholders.

The government has already brought in the required legislative amendments in the LIC Act for the proposed IPO.

Deloitte and SBI Caps have been appointed as pre-IPO transaction advisors.



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Govt extends Uday Kotak’s term as IL&FS chairman by 6 months, BFSI News, ET BFSI

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NEW DELHI: The government on Wednesday extended the term of Uday Kotak as non-executive chairman of debt-ridden IL&FS group by another six months.

The government through a gazette notification extended the term of Kotak, who is also the managing director and chief executive officer of Kotak Mahindra Bank, till April 2, 2022.

The notification was issued by the department of financial services in the ministry of finance dated September 21, 2021.

Last year, the government had extended his term by 12 months till October 2, 2021. The extended six-month term will commence from October 3, 2021.

Under the Banking Regulation Act, 1949, a bank cannot be managed by any person who is a director of any other company. He or she can be given a temporary exception for three months or nine months with the concurrence of the RBI.

The statutes will “not apply to Kotak Mahindra Bank in so far as it relates to its managing director and chief executive officer Uday Kotak being on Board of Infrastructure Leasing and Financial Services Limited as its non-executive director for a further period up to the 2nd day of April, 2022,” the notification said.

Kotak was appointed by the government as the head of the lender’s board in 2018 to help the troubled company come out of difficulties, after the state took over the board.

The Uday Kotak-led board has discovered that there was a complex web of over 250 companies which were part of the overall IL&FS group that has an outstanding of over Rs 94,000 crore to lenders. Over 90 per cent of the flagship company’s assets are classified as dud.

The board is trying to keep the company as a going concern by focusing on asset sales and has appointed a resolution professional to steer the way.



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Govt appoints Lalit K Chandel on Bank of Maharashtra board, BFSI News, ET BFSI

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The government has appointed Lalit Kumar Chandel, Economic Adviser, Department of Financial Services, on the board of Bank of Maharashtra. He is appointed as Government of India nominee director on the board with effect from August 18, Bank of Maharashtra said in a statement on Thursday.

Chandel replaced Hrisheekesh Arvind Modak.

Chandel has served at various levels in different departments of Government of India, including banking, insurance, capital markets, external assistance, rural development, power, irrigation and health, it said.

He has held key positions of Director (Insurance), Department of Financial Services, Ministry of Finance; Executive Director, CVO and Financial Adviser, Insurance Regulatory and Development Authority of India, and Whole Time Director Finance, Telangana State Power Generation Corporation. PTI DP



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PM Narendra Modi launches e-RUPI, BFSI News, ET BFSI

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“India has moved forward with a futuristic innovation today. e-RUPI vouchers will play a big role in strengthening Direct Benefit Transfer (DBT) and raise digital penetration in the country. Targeted, transparent and leakage-free delivery via e-RUPI will be beneficial to all.”

e-RUPI, this real-time and paperless service was launched today at 4:30 p.m. by PM Narendra Modi via video conferencing. Developed by the National Payments Corporation of India (NPCI) on its UPI platform, e-RUPI is a QR code or SMS string-based e-Voucher, which is delivered to the mobile of the beneficiaries.

“e-RUPI is a person and purpose-specific digital payment solution.” said PM Modi at the conference.

Launched in collaboration with the Department of Financial Services, Ministry of Health & Family Welfare and National Health Authority, the users of this seamless one-time payment mechanism will be able to redeem the voucher without a card, digital payments app or internet banking access, at the service provider. The e-RUPI vouchers can also be used to make the payment for COVID-19 vaccine shots.

e-RUPI connects the sponsors of the services with the beneficiaries and service providers in a digital manner without the requirement of any physical interface. It also ensures that the payment to the service provider is made only after the transaction is completed. Being pre-paid in nature, it assures timely payment to the service provider without the involvement of any intermediary.

Digital payments recorded a growth of 30.19 per cent during the year ended March 2021, reflecting the adoption and deepening of cashless transactions in the country, RBI data showed. India has grown copiously in the digital arena after the introduction of the Unified Payments Interface (UPI) in 2016. UPI transaction volumes surged 43.2% in the first quarter of the last fiscal, 98.5% in the second quarter, 104.6% in the third and 112.5% in the fourth quarter.



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RBI to transfer Rs 99,122 crore to government as surplus, BFSI News, ET BFSI

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The Reserve Bank of India on Friday approved for a transfer of Rs 99,122 crore as surplus to the government for the accounting period of nine months ended March 31.

The central board of directors of RBI in a virtual meeting took the call and decided for surplus transfer.

The board has also reviewed the current economic situation, global and domestic challenges and recent policy measures taken by the Reserve Bank around the impact of second wave of Covid-19 on the economy.

The change in RBI’s accounting year to April-March from earlier June-July the board also discussed the working of the RBI during the transition period of nine months.

“The Board also approved the transfer of Rs 99,122 crore as surplus to the central government for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021), while deciding to maintain the Contingency Risk Buffer at 5.50 per cent.”

Deputy governors Mahesh Kumar Jain, Michael Debabrata Patra, M Rajeshwar Rao, T Rabi Sankar attended the meeting.

Other directors of the Central Board, N Chandrasekaran, Satish K Marathe, S Gurumurthy, Revathy Iyer and Sachin Chaturvedi attended the meeting.

Debasish Panda Secretary, Department of Financial Services and Ajay Seth, Secretary, Department of Economic Affairs were also a part of the meeting.



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Govt appoints Vandita Kaul as nominee director on board of Bank of India, BFSI News, ET BFSI

Banking & Finance

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State-owned Bank of India (BOI) on Friday said the government has appointed Vandita Kaul, additional secretary in the Finance Ministry, to its board as nominee director.

The bank said it has received the communication from the Finance Ministry about Kaul’s nomination on May 13, 2021.

The government has nominated Vandita Kaul, Additional Secretary, Ministry of Finance, Department of Financial Services as government nominee director on the board of directors of Bank of India with immediate effect, the lender said in a regulatory filing.

Bank of India has a total of eight members on its board, including the MD and CEO Atanu Kumar Das, its four executive directors, one nominee director each from the government and the RBI and one shareholder director.



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Finance ministry advises PSU banks to hold promotions, transfers, BFSI News, ET BFSI

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The annual promotions and transfers at banks that kick off in April will have to wait.

Due to the Covid pandemic, the finance ministry has asked public sector banks (PSBs) to consider postponing the annual exercise of promoting and transferring their employees.

The Department of Financial Services (DFS) in an advisory has asked all public sector financial intermediaries to take cognisance of the prevailing Covid-19 pandemic situation and take appropriate steps to ensure that the promotion process factors in the constraints likely to be faced by their officers and staff.

Rising hospitalisations

It said the promotion process has coincided with a spike in Covid-19 cases across the country along with localised lockdowns and an increase in micro-containment zones. As there are cases of bank employees or their family members being hospitalised due to Covid-19, bank, insurance companies and financial institutions must take cognizance of the issue, it said.

Promotions and transfers take place in the summer months just before schools open for the new academic session.

The situation was similar last year too, and the staff transferred joined new positions only after the Covid situation eased. While banks have completed the promotion process, they have kept transfers on hold.

Unions want restrictions

With Cpvid cases surging across the country, bank unions have requested industry body IBA for restriction in services and reduction in public dealing time to around 3 hours per day till the situation improves to protect bank employees from the coronavirus infection.

The United Forum of Bank Unions (UFBU), an umbrella body of nine unions, in a representation to Indian Banks’ Association (IBA) said branches with continued footfalls and across-the-counter connect with customers are potential hubs of infections. ‘We are deeply distressed to constantly receive news about infections, hospitalizations and deaths of bank employees round the clock every day,’ it said.

In the light of the grim situation, this is an urgent appeal on behalf of the entire banking fraternity to take up the issue immediately, it said.

The unions have demanded the restriction of services only to basic, essential banking till improvement of the situation and realignment of banking hours to 3-4 hours a day.

Cluster banking

UFBU also made a case for the introduction of cluster or hub banking, identifying few branches of each bank in each locality so as to enable bank employees to work on rotation.

‘We are sure that the above measures will reduce the exposure faced by employees and break the chain of infections to a great extent.

‘We are continuously getting information from the grass-root level about the non-availability of beds/ infrastructure in hospital, dearth of life-saving drugs, oxygen which has triggered panic across the nation,’ it said.



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Pay scale for bank CGMs made almost equal to EDs, executives say its against natural justice, BFSI News, ET BFSI

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Pay hikes, especially steep ones, should make executives smile, but not so in the case of public sector banks. A recent government note allowing banks to raise pay scales for chief general managers by as much as 62% has not gone down well with a section of bank executives.

This makes their remuneration almost at par with that of executive directors. The new pay scale structure, several top bank executives say, is against principles of natural justice.

The new pay scale for bank CGMs has been fixed at Rs 166350-183950 from Rs 103,000-113900 and this would be effective retrospectively from the date when they assumed charge in their respective banks, the Department of Financial Services said in a letter to chief executives of nationalised banks. This is in line with CGM pay scale in State Bank of India, the DFS note said.

ET has reviewed the DFS letter, dated April 1, 2021.

Pay scale for executive directors has been Rs 176800-224000, which was last revised in December 2016.

Bank managing directors and EDs draw salary following the 7th national pay commission recommendation while CGMs’ salary hike followed the latest bipartite wage settlement like other bank employees.

However, as CGM positions in banks are created with board approval, the revision in their pay scale, allowances and other terms and conditions require government’s approval.

“At present the issue has created a lot of heat among top bank executives. Some more clarity is needed on the matter,” an executive director with a mid-sized bank said. “If the issue is not addressed, there may not be any incentive for people to apply for ED positions,” the person said. Several other senior executives with public sector banks corroborated his views.

“The anguish among bank executives is not surprising. Responsibility of an ED is much larger than a CGM and therefore, they should draw a much higher salary than CGMs,” a former bank chief executive said.

Banks were given the flexibility to create CGM level with separate pay structure in August 2019. Following this, Bank of Baroda, Canara Bank, Punjab National Bank and Union Bank of India created the position in March 2020. Bank of India created the position in October last year.

Some of the banks such as erstwhile United Bank of India had created CGM post earlier but there was no pay scale benefit attached to that.



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Trai urges RBI to direct banks to comply with norms on bulk messages, BFSI News, ET BFSI

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NEW DELHI: The telecom regulator has urged Reserve Bank of India (RBI) to issue directions to banks to comply with Trai’s norms on bulk messages, sources said on Tuesday.

It has also shared with the RBI a list of such banks that have not adhered to Trai’s regulatory requirements, as also relevant data on SMS traffic failures, sources added.

Separately, the Telecom Regulatory Authority of India (Trai) in a statement said that all major banks and big telemarketers sending SMS have failed to fulfil regulatory requirements despite repeated reminders.

Sources privy to the development told PTI that the telecom regulator has approached the Reserve Bank of India to get a direction issued to all banks and financial institutions to comply with stipulated rules aimed at curbing pesky calls and bulk messages. Trai has also written to the Department of Financial Services on the matter.

The regulator informed the RBI that as per the provisions of the Telecom Commercial Communications Customer Preference Regulations, 2018, the telecom operators have activated the content scrubbing from March 17, 2021. However, for the time being, even the traffic which has failed in the content scrubbing is allowed to be delivered, to avoid the inconvenience to the consumers.

Trai has further said that based on the report submitted by the telecom operators, it has been observed that certain banks have still not complied with regulatory requirements.

Noting that telcos are intimating the failure reasons to concerned ‘Principal Entities’, Trai has urged the RBI to direct such banks to fulfil the regulatory requirements immediately, failing which their communication to customers may be disrupted, sources said.

Additionally, the regulator has also reached out to state government departments, chief secretaries, and all major government entities that send out bulk messages on the bulk message issue, sources added.

Meanwhile, Trai said in a statement that it “once again requests all the Entities who are using the telecom resources to send bulk messages to the consumers, to fulfil the regulatory requirements immediately so that there would not be any disruption in the communication to the customers.”

Trai has issued the Telecom Commercial Communications Customer Preference Regulations, 2018 (TCCCPR, 2018) on July 19, 2018, to curb the menace of Unsolicited Commercial Communications (UCC), which put in place a framework for controlling UCC.

The regulations entirely came into force with effect from February 29, 2019.

According to the rules all entries that send one-time password (OTP), transactional messages, service messages or commercial messages are required to fulfil regulatory requirements for sending bulk communication.

“The regulatory provisions not only help in preventing spam but also help in preventing fraudulent messages purporting to originate from banks, financial institutions, or other trusted sources,” Trai said.

Trai said that when telecom operators started filtering out non-compliance messages from the system there was a huge drop in sms sent to people from applications.

“It was observed that some of the principal entities have not fulfilled the requirements as envisaged TCCCPR, 2018 even after two years despite being fully aware of the regulations and the consequences,” Trai said.

The regulator temporarily suspended the scrubbing of SMS for seven days on March 9 to enable principle entities to register the SMS templates to avoid inconvenience faced by the customers.

“Unfortunately, despite repeated communication, all major banks and big telemarketers sending SMS have failed to fulfill regulatory requirements. All are being notified individually also. Trai has called for further reports from telecom service providers,” Trai statement said.



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