Tag: Govt

IDBI Bank sell-off: Govt floats RFP for appointment of transaction and legal advisor

Banking & Finance

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The government on Tuesday floated a Request for Proposal (RFP) to appoint transaction advisor and legal advisor to assist in the strategic disinvestment of IDBI Bank.

The last date for interested parties to submit their bid is July 13 and the bid will be opened on July 14.

At present, IDBI Bank is classified as a private sector bank by the RBI with government shareholding at 45.48 per cent, Life Insurance Corporation of India shareholding at 49.24 per cent and the non-promoter shareholding at 5.29 per cent. LIC is the promoter while Centre is the co-promoter.

Also read: IDBI Bank has transformed into a retail bank: Samuel Joseph, Dy MD

The government proposes to go for strategic disinvestment along with transfer of management control. However, the extent of shareholding to be divested by the government and LIC will be decided at the time of structuring of transaction in consultation with the RBI.

Divestment target

The government has set a target of ₹1.75-lakh crore to be raised through disinvestment this fiscal, out of which ₹1-lakh crore is intended to be raised through off-loading the government stake in public sector banks and financial institutions. This also includes the stake sale in IDBI Bank. On May 5, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of IDBI Bank.

LIC’s Board has already passed a resolution to the effect that LIC may reduce its shareholding in IDBI Bankthrough divesting its stake along with strategic stake sale envisaged by the government with an intent to relinquish management control and by taking into consideration, price, market outlook, statutory stipulation and interest of policy holders.

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PSBs may face more stress at govt focuses on Mudra loans, BFSI News, ET BFSI

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The government is banking on small borrowers to help lift credit demand and has asked banks to lenders to focus on Mudra loans.

It expects small borrowers to help pick up credit demand once the lockdowns in states are eased.

The government has asked banks to prioritise this segment and ensure timely sanctions and disbursals. Lenders have also been asked to regularly monitor asset quality for small-ticket loans including PMMY loans.

Loans disbursed by banks and microfinance institutions for non-corporate small borrowers and for income-generating activities in the non-farm segment are termed as Mudra loans under the Pradhan Mantri Mudra Yojana (PMMY), which was launched in 2015,

In fiscal 2021, banks had sanctioned loans worth Rs 2.79 lakh crore under the PMMY. Of these, loans of Rs 2.64 lakh crore were disbursed.

Interest subvention

The government is also considering extending the interest subvention of 2% on prompt repayment of Shishu loans sanctioned under the Pradhan Mantri Mudra Yojana (PMMY).

Under the PMMY, loans up to Rs 50,000 are termed Shishu loans. The subvention scheme is being implemented through the Small Industries Development Bank of India.

Last year in June, the government announced the interest subvention under the Atmanirbhar Bharat Abhiyan. It had noted that the move will help support small businesses to continue functioning during these times of crisis and have a positive impact on the economy and support its revival.

Loan losses

However, public sector banks (PSBs) have seen a sharp surge in the amount of Mudra loans turning into non-performing assets (NPAs) over the last three years. NPAs in Mudra loans had jumped to Rs 18,835 crore in 2019-20, from Rs 11,483 crore in 2018-19 and Rs 7,277 in 2017-18, according to the Finance Ministry data.

Mudra loan disbursements by state-owned banks rose to Rs 3.82 lakh crore in 2019-20, from Rs 3.05 lakh crore in 2018-19 and Rs 2.12 lakh crore in 2017-18. The Mudra loan NPAs as a percentage of total loans rose to 4.92 per cent in 2019-20 from 3.42 per cent in 2017-18.

Banks and financial institutions have sanctioned Rs 14.96 lakh crore to over 28.68 crore beneficiaries in the last six years. The average ticket size of the loans is about Rs 52,000, it said.

Under PMMY collateral-free loans of up to ₹10 Lakh are extended by Member Lending Institutions (MLIs) viz Scheduled Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) etc.

The loans are given for income generating activities in manufacturing, trading and services sectors and for activities allied to agriculture.



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

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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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AIBEA opposes govt decision to privatise IDBI Bank, BFSI News, ET BFSI

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All India Bank Employees’ Association (AIBEA) has opposed the government’s move to privatise IDBI Bank, terming the decision as a “retrograde” move. The association said the government should control a minimum of 51 per cent share capital of the bank.

The bank came into trouble as some private corporate houses cheated IDBI Bank by not repaying the loans taken, while the need of the hour is to take action against the defaulters and recover the money, the bank union said in a statement.

The Cabinet on Wednesday gave in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank in line with the Budget announcement earlier this year.

The central government and LIC together own more than 94 per cent equity of IDBI Bank.

“The need is to take action on the defaulters and recover the money. Unfortunately, now the decision has been taken to sell the bank to a private company. IDBI Bank is a national asset and should not be sold away in this fashion. It is a retrograde move,” AIBEA said.

If sold to a private company, the existing reservation in jobs for SC/ST category will be withdrawn, it said, adding this is social injustice to the unemployed youth of this country.

The only major problem of the bank is its huge bad loans of Rs 36,000 crore as of March 31, 2021 (22 per cent). Out of the operating profit of Rs 1,900 crore for the year ended March 2021, Rs 1,500 crore have been set off for provision for bad loans, AIBEA Secretary General C H Venkatachalam said.

“Now to camouflage these ills of the bank, the bank is being sold away. We express our strong protest against this decision and urge upon the government not to proceed with the sale of IDBI Bank,” he said.

AIBEA said bank’s deposits of Rs 2.3 lakh crore is people’s money and it should be used for their welfare and national development, not for the private corporate loot.

IDBI was started as a Development Financial Institution (DFI) in the 1960s. It was later converted as IDBI Bank much against the statute approved by Parliament earlier, it added.

It said the bank played a leading role in financing industrial development in the country.



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Govt appoints Anil Kumar Sharma on central board of SBI with immediate effect, BFSI News, ET BFSI

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New Delhi, Apr 14 () State Bank of India on Wednesday said the government has nominated Anil Kumar Sharma, the executive director of the RBI, on its board with immediate effect. Citing a Department of Financial Services (DFS) notification dated April 13, 2021, SBI said, “..the central government hereby nominates Anil Kumar Sharma, executive director, Reserve Bank of India as director on the central board of State Bank of India with immediate effect… until further orders, vice Chandan Sinha.”

SBI’s central board of directors comprises a total of 13 members, headed by its chairman Dinesh Kumar Khara, as per its website. KPM MKJ MKJ

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