Tag: Indian Overseas Bank

Bank officers’ union launches nationwide movement against privatisation, BFSI News, ET BFSI

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New Delhi, Bank officers’ union on Tuesday launched nationwide movement against proposed privatisation of stat-owned lenders. ‘Bank Bachao Desh Bachao Rally’ was held at New Delhi’s Jantar Mantar on Tuesday attended by officers and other stakeholders from various parts of the country, the All India Bank Officers’ Confederation (AIBOC) said in a statement.

Addressing the rally, AIBOC General Secretary Soumya Datta appealed to the government to withdraw the Banking Laws (Amendment) Bill, 2021, which has been listed for introduction and passing in the winter session of Parliament.

“In case the government tables and passes the bill paving the way for the privatisation of the public sector banks, the bank officers will unite all the stakeholders of the banking sector and launch a nationwide agitation,” he said, urging the bankers to draw inspiration from the farmers movement.

Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this year had announced the privatisation of public sector banks (PSBs) as part of disinvestment drive to garner Rs 1.75 lakh crore.

The Banking Laws (Amendment) Bill, 2021, to be introduced during the session is expected to bring down the minimum government holding in the PSBs from 51 per cent to 26 per cent.

In the last concluded session, Parliament passed a bill to allow privatisation of state-run general insurance companies.

The General Insurance Business (Nationalisation) Amendment Bill, 2021, removed the requirement of the central government to hold at least 51 per cent of the equity capital in a specified insurer.

The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to serve better the needs of the economy by securing the development of general insurance business.

Government think-tank NITI Aayog has already suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatisation.

According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for the privatisation.



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Centre to amend banking laws to facilitate privatisation of two PSU banks, BFSI News, ET BFSI

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To facilitate privatisation of two public sector banks (PSBs), the government is all set to introduce a banking laws amendment bill in the upcoming winter session starting Monday. Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this year had announced the privatisation of PSBs as part of disinvestment drive to garner Rs 1.75 lakh crore.

The Banking Laws (Amendment) Bill, 2021, to be introduced during the session is expected to bring down the minimum government holding in the PSBs from 51 percent to 26 percent, sources said.

However, sources said a final call in this respect would be taken by the Union Cabinet when it would vet the proposed legislation.

“To effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two Public Sector Banks,” according to the list of legislative business for the Winter Session.

These Acts led to the nationalisation of banks in two phases and provisions of these laws have to be changed for the privatisation of banks, sources said.

In the last concluded session, Parliament passed a bill to allow privatisation of state-run general insurance companies.

The General Insurance Business (Nationalisation) Amendment Bill, 2021, removed the requirement of the central government to hold at least 51 per cent of the equity capital in a specified insurer.

The Act, which came into force in 1972, provided for the acquisition and transfer of shares of Indian insurance companies and undertakings of other existing insurers in order to better serve the needs of the economy by securing the development of general insurance business.

Government think-tank NITI Aayog has already suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatisation.

According to sources, Central Bank of India and Indian Overseas Bank are likely candidates for the privatisation.

As per the process, the Core Group of Secretaries, headed by the Cabinet Secretary, will send its recommendation to Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.

The members of the Core Group of Secretaries include economic affairs secretary, revenue secretary, expenditure secretary, corporate affairs secretary, legal affairs secretary, Department of Public Enterprises secretary, Department of Investment and Public Asset Management (DIPAM) secretary and an administrative department secretary.



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Paytm up 17%, Central Bank, IOB gain from selloff hopes, BFSI News, ET BFSI

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Mumbai: Indian Overseas Bank and Central Bank were among the top gainers in the stock exchanges on Wednesday after investors speculated that these might be the two banks lined up by the government for divestment. Meanwhile, Paytm shares continued on their road to recovery, gaining 17% on Wednesday to end at Rs 1,753, but still remain 18% below their issue price of Rs 2,150. This was despite the broader sensex falling 323 points to 58,341.

The government on Tuesday released the list of bills that it will seek to pass in the winter session of Parliament. Among them is the Banking Laws (Amendment) Bill 2021. This bill describes the need for amendments in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and 1980. In addition to this, there are some amendments needed in the Banking Regulation Act, 1949.

The privatisation of two public sector banks was announced in the Union Budget for 2021-22 by finance minister Nirmala Sitharaman. The banks’ disinvestment, along with that of the Life Insurance Corporation of India, was expected to fetch Rs 1.75 lakh crore for the government.

Shares of Indian Overseas Bank opened at Rs 22 and touched the day’s high of Rs 23.8 before closing 13% higher at Rs 22.5. At the current price, the bank’s market capitalisation is Rs 42,436 crore. Shares of Central Bank opened at just under Rs 23 and touched a high of Rs 23.7 before closing over 10% up at Rs 22.7. The bank currently has an mcap of Rs 19,706 crore.

Paytm shares saw reduced volatility on Wednesday on the back of what appeared to be buying interest from institutional investors. Shares had fallen 35% in the first two days of trade, but found support at lower levels later. At the current price, the payment giant is valued at nearly Rs 1.14 lakh crore — more than Nykaa (Rs 1.06 lakh crore) but still behind Zomato (Rs 1.22 lakh crore).



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Govt to soon clear list of independent directors for various banks, BFSI News, ET BFSI

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The government is expected soon to clear a list of independent directors to be appointed on various public sector banks and financial institutions to meet regulatory norms of corporate governance. There have been vacancies at the independent director level across the public sector space, leading to regulatory non-compliance, sources said.

A list of eligible persons to be appointed as independent directors has gone to the Prime Minister’s Office and it will take a final call soon, the sources said.

Appointments Committee of the Cabinet headed by Prime Minister Narendra Modi makes all high-level appointments, including that of independent directors.

As per the Companies Act 2013, every listed public company shall have at least one-third of the total number of directors as independent directors.

Since many listed public sector banks (PSBs) and some financial institutions (FIs) are short of the mandated number of directors, it is in violation of the Companies Act as well as listing norms of market regulator Securities and Exchange Board of India, the sources said.

For example, some of the banks like Indian Overseas Bank, Indian Bank and UCO Bank are not compliant with independent director norms.

Except for State Bank of India (SBI) and Bank of Baroda, the position of chairman in most of the state-owned banks is vacant. The posts of workman director and officer director, representing the employees and officers of the banks, respectively, have been vacant for the past 7 years.

There are 12 public sector banks, four public sector general insurance companies, and one life insurance firm. Besides, there are some specialised insurance players like Agriculture Insurance Company of India Ltd.

In addition, there are state-owned financial institutions like IFCI, IIFCL, ECGC Ltd and EXIM Bank.

The Boards of Directors of nationalised banks are guided by the provisions of Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Nationalised Banks (Management and Miscellaneous Provisions ) Scheme, 1970. PTI DP ANZ BAL BAL



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After 6 years, we are in for fresh start, says Partha Pratim Sengupta, MD & CEO of Indian Overseas Bank| INTERVIEW

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Indian Overseas Bank (IOB), which recently came out of the prompt corrective action (PCA) by the RBI, says it will chalk out strategies to accelerate growth. Partha Pratim Sengupta, MD & CEO, says since some earlier curbs have been done away with, the bank will be looking at expanding branches or restructuring some of them. Excerpts from his virtual interaction with the media:

What are the bank’s plans post exiting the PCA?

After being in PCA for almost six years, we are now looking for a fresh start to grow more in the coming quarters and definitely the bank would be much stronger in future. Since the restrictions on branch opening, recruitment of human resources and CSR activities have been removed, we will look at taking actions on those fronts. There has been no recruitment in the past six years, and the bank’s staff strength came down to around 22,000 from 28,000. In a couple of months, we will be revamping our branch expansion and recruitment policies.

What were the factors that contributed to the good performance in the second quarter?

It has been an overall growth, I won’t say a particular segment has given growth. It has been equitably distributed among retail, agri, MSME and corporate segments. If you  look at the performances of the past quarters, we have been steadily growing. Due to the Covid-19 impact, the economic growth of the country got muted and hence there was no scope for credit growth on the bank side. But post the vaccination drive, we are seeing positive outlook on the economic front.
Your net interest margin (NIM) declined during this quarter.

NIM, on a q-o-q basis has gone up, but yes, on a y-o-y basis, it has declined to 2.43% from 2.57. In the June quarter, our NIM was at 2.34%. If you look at the interest rates, almost all the bigger banks have reduced the interest rates.

What were the slippages during the second quarter? Any plans to raise capital?

We had a slippage of Rs 1,400 crore, contributed by two to three companies. Out of it, 60 to 70% was borne out of an NBFC. The bank had made around 80% provisions on these accounts. The bank is not anticipating any major slippages in the coming quarters, whatever slippages had happened were from the watch list. On the capital front, the bank would be raising up to Rs 1,000 crore during Q4 to meet tier-II capital norms.

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Indian Overseas Bank net profit spurts 154%; bad assets decline

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The bank has made required provisioning in advances in specific accounts so as to improve net NPA.

Indian Overseas Bank (IOB) on Wednesday reported a 154% jump in its net profit to Rs 376 crore for the second quarter, compared with Rs 148 crore in the corresponding quarter of the previous fiscal. The bank, which has just exited the prompt corrective action framework, has attributed the good set of numbers to strong performance in all relevant parameters.

Partha Pratim Sengupta, MD & CEO, said there has been a marked reduction in bad assets. Net NPA stood at 2.77% which was within the prescribed RBI guidelines, while gross NPA reduced by Rs 286 crore. The gross NPA ratios improved to 10.66% from 13.64% QoQ. The provision coverage ratio improved to 92%, against 91.56% in the previous quarter. The bank has made required provisioning in advances in specific accounts so as to improve net NPA.

Sengupta said the bank had total cash recovery of Rs 831.77 crore which includes recovery from tech write off of Rs 428.61 crore, against Rs 751.97 crore (including recovery from tech write off of Rs 233.74 crore) in June 2021.

The CASA improved to 42.57% , against 40.26% in the same period last year. Total CASA increased from Rs 92,436 crore to Rs 1, 06,806 crore while savings bank registered a 11.48% Y-o-Y growth.

Interest income stood at Rs 4, 254 crore for the quarter, against Rs 4,363 crore. The bank recorded a lower net interest margin (NIM) of 2.43% as against 2.57% in the corresponding quarter of the last fiscal.

Total business stood at Rs 4,90.408 crore, compared with Rs 4,78,365 crore in the year-ago period. Total deposits stood at Rs 2,50,890 crore, against Rs 2,42,941 crore as on June 30, 2021.

Gross advances stood at Rs 1,46,940 crore during the latest quarter, compared with Rs 1,38,944 crore as on June 30, 2021. The bank increased its exposure to the retail and agri sectors and rebalanced advances by consciously reducing the stressed sector in the corporate segment.

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Will profitable PSUs need capital support from govt this year?, BFSI News, ET BFSI

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The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet regulatory requirements.

The government in Budget 2021-22 made an allocation of Rs 20,000 crore for capital infusion in the state-owned banks.The capital position of banks would be reviewed in the next quarter, and depending on the requirement, infusion will be made to meet the regulatory needs.

In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks.

Going forward, the rise in stressed assets would determine capital requirement. If numbers are anything to go by, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.

What Icra says

As per Icra’s estimates, public sector banks (PSBs) may not need the capital budgeted by the government for FY22, even with enhanced capital requirements.

However, banks are advised to keep provisions for any unforeseen events as it would provide confidence to banks, investors and credit growth. Icra said that large private sector banks (PVBs) also remain well-capitalised though few mid-sized ones could need to raise capital.

“We continue to maintain our credit growth estimate of 7.3-8.3 per cent for banks for FY2022 compared to 5.5 per cent for FY2021,” Icra said.

Despite expectations of moderation in gains on bond portfolios because of expectations of rising bond yields in FY22, the return on equity for banks is likely to remain steady at 4.4-7.6 per cent for PSBs (5.1 per cent in FY21) and 9.5-9.9 per cent for PVBs (10.5 per cent in FY2021), the report said.

PCA framework

Will profitable PSUs need capital support from govt this year?

Last month, the Reserve Bank of India removed UCO Bank and Indian Overseas Bank from its prompt corrective action framework, following improvement in various parameters and written commitment from them that would comply with the minimum capital norms.

The only public sector lender left under the PCA framework is Central Bank of India.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset. These restrictions disable the bank in several ways to lend freely and force it to operate under a restrictive environment that turns out to be a hurdle to growth.

Last financial year, the government infused Rs 20,000 crore in the five public sector banks. Out of this, Rs 11,500 crore had gone to three banks under PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India.

The government infused Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank and Kolkata-based UCO Bank got Rs 2,600 crore. The government has infused over Rs 3.15 lakh crore into public sector banks (PSBs) in the 11 years through 2018-19.

In 2019-20, the government infused a capital of Rs 70,000 crore into PSBs to boost credit for a strong impetus to the economy.



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PSU banks likely to get capital support in Q4 to meet regulatory requirements, BFSI News, ET BFSI

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New Delhi, The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet the regulatory requirements. The government in the Budget 2021-22 has made an allocation of Rs 20,000 crore for the capital infusion in the state-owned banks.

bank

In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks, sources said.

Going forward, they said, the rise in stressed assets would determine capital requirement.

If numbers are anything to go by, the sources said, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.

Last month, the Reserve Bank removed UCO Bank and Indian Overseas Bank from prompt corrective action framework (PCAF), following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

However, the only public sector lender left under the PCA framework is Central Bank of India. PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset.

PCA restrictions disable the bank in several ways to lend freely and force it to operate under a restrictive environment that turns out to be a hurdle to growth.

Last financial year, the government infused Rs 20,000 crore in the five public sector banks. Out of this, Rs 11,500 crore had gone to three banks under the PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India.

The government infused Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank and Kolkata-based UCO Bank got Rs 2,600 crore.

The government has infused over Rs 3.15 lakh crore into public sector banks (PSBs) in the 11 years through 2018-19. In 2019-20, the government infused Rs 70,000 crore capital into PSBs to boost credit for a strong impetus to the economy.



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RBI lifts PCA curbs on Indian Overseas Bank, BFSI News, ET BFSI

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The Reserve Bank of India today lifted Prompt Corrective Action restrictions from the Indian Overseas Bank, the central bank said in a release.

The decision came after the bank reported its earnings for the year ended March 31, 2021, and the RBI observed that IOB was not in breach of the PCA parameters.

IOB has also provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis and has said that it would make structural and systemic improvements, RBI said in the release.

The RBI has said that it will continue monitoring the bank.

PCA is triggered when banks breach regulatory norms such as return on asset, minimum capital, among others.

Earlier this month, RBI had lifted PCA restrictions on UCO Bank. Now, only Central Bank of India remains in the list.



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RBI may screen bidders for bank privatisation at EoI stage, BFSI News, ET BFSI

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The government is set to start consultations with the Reserve Bank of India (RBI) to devise a new security clearance framework for screening potential bidders of public sector banks (PSBs), according to a report.

As potential buyers of IDBI Bank and two other PSBs will need to meet the RBI’s fit and proper criteria, the government is planning to bring the central bank on board to vet candidates in the first step itself.

The RBI will screen bidders as early as when expression of interest is placed and only then the process will move forward.

The RBI considers several factors, including the applicant’s integrity, reputation and track record in financial matters and compliance with tax laws, ongoing proceedings of serious disciplinary or criminal nature, financial misconduct for its ‘fit and proper’ tag.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

IDBI Bank

The government has invited bids from transaction advisors and legal firms for assisting in the strategic sale of IDBI Bank.

The Union Cabinet had in May given in-principle approval for IDBI Bank’s strategic disinvestment along with transfer of management control.

The central government and LIC together own more than 94 per cent equity of IDBI Bank. LIC, currently having management control, has 49.24 per cent stake, while the government holds 45.48 per cent. Non-promoter shareholding stands at 5.29 per cent.



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