Tag: PSBs

AIBOA appeals to President of India against privatisation of two PSBs

Banking & Finance

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The All India Bank Officers’ Association (AIBOA) has appealed to the President of India to advise the Council of Ministers to rescind the proposed moves to privatise two public sector banks (PSBs) and undertake strategic disinvestment in IDBI Bank.

S Nagarajan, General Secretary, AIBOA, in a letter to President Ram Nath Kovind, emphasised that during the past 51 years, the nationalised banks continuously contributed to the growth of the economy and were instrumental in all developmental activities without exception.

Also read: NARCL to further Govt’s agenda of disinvestment of IDBI Bank, privatisation of PSBs

He observed that PSBs wholeheartedly supported the economic development needs of the country, implementing Government schemes and instructions to benefit the citizens at large.

“The Public Sector Banks (PSBs) have stood the test of time….the wealth created in the nation thorough Public Sector Undertakings and also PSBs need to be protected and promoted,” he said.

The Government is reportedly considering privatising Central Bank of India and Indian Overseas Bank.

Nagarajan noted that during the last 25 years, in order to save the savings of the common people, private sector banks, on their failure to fulfil the obligations, were taken over by PSBs.

“The rescue of the private sector banks from the woes of mismanagement and mal-administration was only through merger with PSBs,” he said.

IDBI Bank

IDBI Bank, which has been continuously serving the financing needs of the nation since 1964 (first as a development financial institution and later as a bank), has been weighed down by bad loans to the tune of nearly ₹36,000 crore, and its present state is due to policy paralysis in the matter of recovery of bad loans, opined Nagarajan.

He underscored that after four years of struggle and collective contributions made by the human assets, right from the sub-staff to the institutional head, the bank is out of red and also free from the prompt corrective action (PCA) and released from RBI restrictions.

Nagarajan alleged that, “The recovery mechanism put in place by successive governments at the Centre have facilitated the borrowers not to pay loan availed by them. While the industry has become sick, the industrialists have become healthier and wealthy.”

ends

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Soon, PSBs may appoint specialists to manage NPAs, professionalise boards, BFSI News, ET BFSI

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After the mega mergers, it’s time for an overhaul at public sector banks.

The government is looking to measures to strengthen corporate governance and human resource practices in nationalised

banks. It plans a diversified board structure, strengthening of board-level committees and a robust performance management system for employees.

The government wants to further professionalise the boards of PSBs and bring experts in risk management, information technology and human resource management.

The key proposals include longer tenure for executive directors, hiring of specialists in areas such as NPA management and fast track promotion for high performers.

Leadership plan

These discussions may be further taken up with the Banks Board Bureau to formulate a long-term strategy.

One of the key mandates of BBB is to help banks to develop a robust leadership succession plan for critical positions and advise the government on evolving suitable training and development programmes for management personnel.

BBB will also maintain a database on performance of the officers of PSBs. This will have information regarding postings, placements, promotions and vigilance of senior officers.

Ease 4.0

Banks through Ease 4.0 may also take up these issues at their board level. Launched in January 2018, Enhanced Access and Service Excellence (Ease) is the common reform agenda for all public sector banks aimed at institutionalising clean and smart banking.

State-run banks will focus on co-lending with non-banking firms, digital agriculture financing, synergies and technological resilience for 24×7 banking as part of their reforms agenda for this fiscal.

This year PSBs will focus to introduce and promote new analytics-based offers to existing retail customers like pre-approved car loans, EMI offers on e-commerce purchases and also for existing MSME customers.

Such offers will be based on bank transactions, income tax and GST returns, transactions on e-commerce portals, and other operational data.

As per the reform agenda, banks will leverage partnerships with third parties, including agritech firms and strive to automate processing and sanction of agricultural loans based on field visits, borrower interaction, and risk assessment in states with digitised land records.



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Step-up working capital loans to street vendors: RBI nudges PSBs

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The Reserve Bank of India (RBI) has impressed upon public sector banks (PSBs) the need to step up working capital loans up to ₹10,000 to street vendors, who have taken the brunt of the COVID-19 pandemic and consequent lockdowns.

Given that the livelihood of street vendors (SVs) has been adversely affected in the two waves of the pandemic, the central bank is keen that Banks mount a larger outreach under the PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) scheme, said a top banker.

As on June 14, 2021, lenders (including Banks, non-banking finance companies, and microfinance institutions) received a total of 42,27,999 applications under the PM SVANidhi scheme, which was launched last year.

However, the ratio of the number of loans sanctioned and disbursed as a percentage of the total applications was only 58 per cent, as per Ministry of Housing and Urban Affairs (MoHUA) data.

The ratio of the number of loans disbursed to loans sanctioned stood at 84.41 per cent. As a result, total loans approved and disbursed by lenders stood at ₹2,457.85 crore and ₹2,059.46 crore, respectively.

According to MoHUA data, the average days to sanction a loan to SVs was 20 days. About 60 per cent of loans disbursed were to male SVs, with the remaining disbursed to female SVs. The average age of the loan applicant was 41 years.

The banker quoted above said the scheme could be tweaked to ensure more coverage of SVs.

The number of SVs accepting digital payments stood at 19,31,272. These vendors received a cashback of ₹50.53 lakh

Street vendors selling vegetables, fruits, ready-to-eat street food, tea, cloth & handloom, beauty & fashion accessories, footwear, artisan products, etc., and barber shops, cobblers, paan shops, laundry services have suffered untold misery in the pandemic.

Covid-19 related lockdowns forced the aforementioned entities to shutter business either temporarily or permanently.

As per the PM SVANidhi scheme, the individual lending institution can form Joint Liability Groups (JLGs) of eligible vendors. The Common Interest Groups (CIGs) of street vendors, already formed by States, can be converted into JLGs by lending institutions.

The scheme has been designed to help formalise the street vendors and open up new opportunities to move up the economic ladder.

Total Applications

Sanctioned

Disbursed

42,27,999

24,63,301

20,79,392

AMOUNT

₹2,457.85 cr

₹2,059.46 cr

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Private sector banks increased share in deposits, credit at the cost of PSBs in FY21: RBI

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Bank credit growth decelerated while aggregate deposit growth accelerated in March even as the share of private sector banks in total deposits and credit of scheduled commercial banks (SCBs) increased during 2020-21 at the cost of public sector banks, according to the Reserve Bank of India (RBI).

Bank credit growth decelerated to 5.6 per cent year-on-year (yoy) in March from 6.4 per cent a year ago, according to RBI’s ‘Quarterly Statistics on Deposits and Credit of SCBs: March 2021’.

Public sector and private sector banks credit growth slowed to 3.6 per cent (4.2 per cent in March 2020) and 9.1 per cent (9.3 per cent), respectively, during 2020-21. Lending by foreign banks contracted 3.3 per cent vs 7.2 per cent growth

Combined credit by bank branches in top six centres (Greater Mumbai, Delhi, Bengaluru, Chennai, Hyderabad and Kolkata, which together accounted for over 46 per cent of total bank credit) declined marginally during 2020-21, the RBI said.

Deposit growth picks up

According to RBI data, credit by bank branches in metropolitan areas (includes all centres with population of 10 lakh and above) declined to 1.7 per cent in March 2021 from 4.8 per cent in March 2020. Bank branches in urban, semi-urban and rural areas, on the other hand, recorded 9.4 per cent (8.8 per cent in March 2020), 14.3 per cent (8.4 per cent) and 14.5 per cent (11.5 per cent) credit growth, respectively, during the year.

Aggregate deposits growth accelerated to 12.3 per cent yoy in March 2021 from 9.5 per cent a year ago.

Metropolitan branches, which account for over half of total deposits, recorded nearly 15 per cent growth during 2020-21 from 6.9 per cent a year ago. However, aggregate deposits of branches in rural and semi-urban areas declined to 6.9 per cent (15.5 per cent) and 9.3 per cent (12.3 per cent), respectively.

Aggregate deposits of branches in urban areas increased to 11.4 per cent (10.5 per cent).

RBI said the share of current account and savings account (CASA) deposits in total deposits increased to 44.1 per cent in March from 42.1 per cent a year ago.

Lower growth in credit vis-à-vis deposits led to decline in the all-India credit-deposit (C-D) ratio to 71.5 per cent in March from 76.0 per cent a year ago.

The central bank did not specify the market share gained by private sector banks in deposits and credit.

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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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NITI Aayog to finalise names of 2 public sector banks for privatisation soon, BFSI News, ET BFSI

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Government think-tank NITI Aayog, in consultation with the Finance Ministry, has started deliberations to finalise the names of two public sector banks that will be privatised in the current fiscal as part of the disinvestment process. NITI Aayog has been entrusted with the task of selection of names of two public sector banks and one general insurance company for the privatisation as announced in the Budget 2021-22.

The work in this respect is going on, sources said, adding, a couple of meetings have been convened by the NITI Aayog on the subject.

There are various aspects that have to be looked into including regulatory issues, HR management, financial health etc before reaching a conclusion, sources added.

Once NITI Aayog makes its recommendations, it will be vetted by the Core Group of Secretaries on Disinvestment headed by Cabinet Secretary.

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 Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.

Changes on the regulatory side to facilitate privatisation would start after the Cabinet approval.

Last month, Finance Minister Nirmala Sitharaman had said “interests of workers of banks which are likely to be privatised will absolutely be protected whether their salaries or scale or pension all will be taken care of.”

Explaining the rationale behind the privatisation, Sitharaman had said that banks in the country needed to be bigger, just like the State Bank of India (SBI).

“We need banks which are going to be able to scale up… We want banks that are going to be able to meet the aspirational needs of this country,” Sitharaman had said, adding that a lot of thought had gone behind the intention to privatise some public sector banks.

Meanwhile, banking sector regulator RBI also said it is in discussion with the government over the privatisation of public sector banks.

The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, during the current financial year. The amount is lower than the record budgeted Rs 2.10 lakh crore to be raised from CPSE disinvestment in the last fiscal.



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How government business will help private banks, BFSI News, ET BFSI

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The central government has allowed permission to new private banks for conducting government-related business will be given under the RBI guidelines. The government has indicated the RBI to allow other private banks to perform government-related business to ensure there is a level playing field.

The potential

With deposits of at over Rs 11 lakh crore, the government sector, both Central and states combined, business is very lucrative for the private sector banks. It is a source of bulk deposits, which gives them ‘float’ money that can be deployed in the overnight market. It helps get low-cost and stable deposits and customer acquisition with scores of government employees opening accounts.

It generates commission income, which though is falling, forms a substantial chunk.

How can private banks benefit

Private banks are more aggressive in marketing and technology savvy than PSBs. However, they do not have a branch network that rivals PSBs which are spread to the village levels. Private banks will find it tough to give competition to PSBs in the hinterland.

Also, private banks, with their sparse branch networks, will find the small value pension business unviable, which the PSBs with their vast manpower strength can serve. Also, shifting the pension account business would be cumbersome for many

What should the private banks do?

Experts say private banks should focus on garnering new government business, which will help them acquire new customers.

With the growing number of taxpayers and development programmes such as Jan Dhan, the government business remains lucrative for the private banks. However, it may be still some time they catch up with the PSB peers.

What the Finance Minister says

“Now, following the existing norms based on which several banks have been given permission to do the business. So, those rules as per the RBI guidelines be applied on newer banks and new private banks which approach the RBI,” finance minister Nirmala Sitharama said while giving permission to new private banks.

“Some customers are already benefiting from private banks from such services. The attempt now is to bring a level playing eld. Some private banks are already doing, all public sector banks are doing, why not extend to all private sector banks so that everybody gets an equal opportunity,” she explained.

This is being done because the business is growing and many more citizens are approaching the banks. As it was highlighted, the ease of doing business will have to be extended to all customers, she said.



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Large Public Sector Banks speed up digitisation in the post-merger new normal

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For PSBs, the need to change has become even more relevant as the mergers have expanded their scale and competition from tech-oriented players has only intensified.

Public sector banks (PSBs) have historically lagged their private peers in terms of their adoption of technology and digital systems. That might be changing as a pandemic that refuses to die is forcing every financier to take a hard look at the way they have been doing business.

For PSBs, the need to change has become even more relevant as the mergers have expanded their scale and competition from tech-oriented players has only intensified.

Several large PSBs have in recent months set in motion the process of digitising various functions. Most of these projects are focused on redeploying staff from the more mundane, workflow-driven processes to sales and other productive divisions. In March, State Bank of India (SBI) floated a request-for-proposal (RFP) for redesigning its operating model and implementing new strategies with the use of digital tools in its micro, small and medium enterprises (MSME) segment.

Punjab National Bank (PNB) is looking to develop an end-to-end system for ATM reconciliation and redressal of customer complaints. Union Bank of India (UBI) wants to smoothen out the entire recovery function with a software-based solution that will automate the workflow for recovery proceedings, including those which involve tribunals

Bank of Baroda (BoB) was among the first PSBs to envisage a wholly revamped and digitally-driven operational model last year. It has appointed consulting firm McKinsey to develop the model, which even includes a permanent work-from-home (WFH) adjustment. Sameer Narang, chief economist, BoB, said that banks have a huge customer base and can build sophisticated models based on demographic and transactional data of customers. The analytical model-driven approach typically offers the customer a better deal than would be available otherwise. “Another way to look at it is as a retention strategy wherein banks offer their customers pre-approved limits on certain financial products or services such as personal loans or vehicle loans which will otherwise be offered by competition,” he said.

PSBs are now more cognisant of the need to increase efficiency as a strategy. Nitesh Ranjan, executive director, UBI, said that the bank has a large number of accounts in the retail and MSME categories, where managing recovery in the physical mode is very difficult, especially things like keeping track of Sarfaesi proceedings and DRT hearings. “We have also developed an internal recovery app, where there is geo-tagging of properties attached to a particular loan,” Ranjan said, adding that the pandemic has pushed the digital drive which UBI was already considering. “This is a part of the overall digital strategy of the bank that includes straight-through processing of retail and MSME loans,” Ranjan observed.

In a note dated April 9, ICICI Securities said that the digitisation drive at Indian banks is in line with global trends. It cited a global study that shows that retail banks which digitise their customer journey see a 520% boost in revenues, 15-35% cost reduction, and a 10-15% rise in customer satisfaction.

PSBs had a large customer base even before the mergers took place over the last few years, but the expansion in that base helps justify the cost of digitisation. The fixed cost of digitisation can be spread over an even larger number of customers thus bringing down per unit cost. There are economies of scale in such investments, BoB’s Narang said.

PSBs are recognising the challenge from their competitors, which now includes not just private lenders, but also payment companies, fintechs and even global technology majors. “We are competing with players which are highly tech-oriented, so there’s no reason why banks shouldn’t be more technology oriented themselves,” Narang added.

Avisha Gupta, partner, L&L Partners, said that PSBs are now entering the next phase of digitisation (after payments) through implementation of artificial intelligence (AI) and machine learning in credit assessment and operations monitoring. “As part of this phase, on-scale adoption of the digital regulatory initiatives like the account aggregator framework, will provide significant impetus to MSME lending outreach of PSBs by enabling access to consented alternative data,” she said.

The correct use of data and digitisation increases not only better access to funds by borrowers but also facilitates better lending decisions and profitability for lenders. As MSME lending is a priority sector, digitisation of systems and processes will in the long run facilitate profitable lending, said Vidisha Krishan, partner, MV Kini Law Firm.

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14 CGMs/GMs elevated as Executive Directors in various public sector banks

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The Appointments Committee of the Cabinet (ACC) on Tuesday approved the elevation of 14 Chief General Managers/ General Managers to the post of Executive Director in various public sector banks (PSBs).

This move comes nearly six months after the Banks Board Bureau recommended 13 names to be appointed as EDs in various banks.

While Swarup Kumar Saha, Chief General Manager, Punjab National Bank, has been appointed as Executive Director in Punjab National Bank for a period of three years, Debadatta Chand, who is currently Chief General Manager, Punjab National Bank has been appointed as Executive Director in Bank of Baroda for a period of three years.

K. Satyanarayana Raju, who is currently Chief General Manager, Bank of Baroda, has been appointed as Executive Director in Canara Bank. Nitesh Ranjan, Chief General Manager, Union Bank of India has been appointed as Executive Director in Union Bank of India for a period of three years.

The ACC has also approved the appointment of Monika Kalia, Chief General Manager, Union Bank of India, as Executive Director in Bank of India for a period of three years. Swarup Dasgupta , who is currently General Manager, Bank of India, has been appointed as Executive Director in Bank of India for a period of three years.

Also, M. Karthikeyan, who is currently General Manager, Indian Bank has been appointed as Executive Director in Bank of India for a period of three years. lshraq All Khan, Chief General Manager, Union Bank of India has been appointed as Executive Director in UCO Bank.

Vivek Wahi, who is now General Manager, Bank of India has been appointed as Executive Director in Central Bank of India for a period of three years.

While S. Srimathy, who is now Chief General Manager, Canara Bank, has been appointed as Executive Director in Indian Overseas Bank for a period of three years, B. Vijaykumar, who is now General Manager, Bank of India, has been appointed as Executive Director in Bank of Maharashtra.

Raghavendra Venkatasheshan Kollegal, who is currently General Manager, Bank of India has been appointed as Executive Director in Punjab and Sind Bank. While Rajeev Puri, who is now Chief General Manager, Punjab National Bank has been appointed as Executive Director, Central Bank of India, Imran Amin Siddiqui, who is now General Manager, Indian Bank has been elevated as Executive Director, Indian Bank for a period of three years

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Customers stand to gain as private banks can now take up govt business

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Surabhi

The lifting of the embargo on granting government business to private banks will not only enable them get a greater share of government business, but will also benefit their customers, say experts.

“Customers of new private sector banks will be very happy, there will be a marginal change for old private banks and public sector banks may lose some ground,” said a former banker.

At present, apart from public sector banks, only a few large private sector banks are allowed to do government business.

Now, all private banks will be able to take up activities such as small savings schemes such as public provident fund and Sukanya Samriddhi accounts, and tax payments and pension payments, among other initiatives.

Customers with existing accounts in a private bank will not have to approach a public sector bank for these activities.

“It will be a gain to the customer as well as to the bank. Apart from the three large private sector banks, other private banks can also now serve customers for services such as tax payments, pensions and small saving scheme,” said Prashant Kumar, Managing Director and CEO, YES Bank, adding that private banks can also offer solutions to the government for payment of subsidies and direct benefit transfers through their strong focus on technology.

Tech advantage

Most private bankers believe that in terms of technology, they are much better positioned to serve customers.

Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, in a tweet said: “It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India.”

Private banks are also hopeful of higher fee income and float from doing government business.

“Fee income will be a direct advantage to private banks as they will get commission for doing government business. Public sector banks will lose ground on this,” noted a former banker.

Meanwhile, float or the amount parked with banks by customers, is being seen as another big positive by private banks. Government business brings in float money to public sector banks, some of which will now be routed to private banks.

“The float and fee income that can be garnered on tax collections (₹11 trillion budgeted for 2021-22), duties, GST collections (₹11 trillion), payment facilities, Central/state pension plans (₹2 trilion), small savings schemes (₹13 trillion) can add significant delta to revenues,” said a note by ICICI Securities.

Unions unhappy

However, bank unions point out that public sector banks have been at the forefront of opening Jan Dhan accounts, financial inclusion through branch opening in rural areas, as well as giving out Mudra loans while private banks have lagged behind.

“The government is trying to bring a level-playing filed with a different set of guidelines for private banks. They should create the same rules for them and bring them under the ambit of CVC and other regulatory guidelines,” said Soumya Datta, General Secretary, All India Bank Officers’ Confederation.

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