Tag: psu banks

Restored normalcy in PSU banks hamstrung by sticky bad assets: Finance minister Nirmala Sitharaman

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She said there are lot of changes happening in the banking sector at a fast pace through digitisation. (File)

Union finance minister Nirmala Sitharaman on Sunday said the government was able to bring back normalcy with regards to mounting non-performing assets (NPAs) in most of the public sector banks that have been a cause of concern since 2014.

The Centre, apart from infusing required capital, monitored  the PSU banks with regular assessment and reviews while taking prompt corrective actions.

Inaugurating the centenary celebrations of Tamilnad Mercantile Bank (TMB) at Tuticorin, Sitharaman said the problems in banking sector are major problems that concern the entire country which also made everyone feel concerned about the sector.

“Post 2014, we had witnessed major NPA problems in the PSU banks, it took five to six years to reverse the trend and bring back normalcy in most of the banks. While the banks spent energy in the recovery process, even as trying to grow their businesses,” she said.

While speaking on bringing about the efficiency in the banking system, she said the way forward for any bank was to adopt complete technology-enabled solutions.

“Today financial technology is the biggest area and using that we could cross-populate data into forms. Auto-populating data of a consumer has been very useful and it can be done only through digitisation and the management of TMB should think of greater use of digitisation. Digitisation cannot be avoided for your own good and for the sake of customers,” she said.

She said there are lot of changes happening in the banking sector at a fast pace through digitisation. “There is no necessity to open a branch in a place which does not have a  bank. To reach a customer’s bank account of the people who live there, all kind of technologies are available today. Even sitting from Tuticorin one can serve the banking requirements of people living in small villages through technology”, she said.

Sitharaman said even during Covid-19 pandemic with the use of digitisation through banking correspondents, the government’s financial disbursements were distributed to the needy after verifying their details.

“Prime Minister Narendra Modi was clearly aware that banking is important and did not hesitate that there can be zero balance accounts if they were opened under the Jandhan Yojana scheme, launched in 2014. He ensured that every one must hold a bank account and be able to transact,” she said.

K V Rama Moorthy, MD & CEO, TMB, said, “To help borrowers to overcome the adverse impact of Covid-19, till date, the bank has covered 13,753 beneficiaries and the exposure to the tune of Rs 1,567.62 crore. In the era of digital banking, we were the first bank to introduce robotics in currency chest to sort and bundling of currencies in order to provide quality service to the customers. Disbursement of loans to pharma and health care units will be at the heart of a year- long series of events and initiatives from us.”

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Mudra loan ratio trebles to 20% during pandemic as stress hits small businesses, BFSI News, ET BFSI

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A man displays new 2000 Indian rupee banknotes after withdrawing them from a State Bank of India (SBI) branch in Kolkata, India, November 10, 2016. REUTERS/Rupak De Chowdhuri/Files

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

As the stress builds up in the economy due to pandemic, lenders are seeing a sharp uptick in NPAs in Mudra loans, which have trebled in June 2021 over the pre-Covid fiscal of 2019-20.

Gross NPAs in the Mudra loan book is estimated to have reached around 20 per cent at June-end 2021, from around 6 per cent at March-end 2020.

In Maharashtra, public sector banks’ Mudra loan NPAs have risen to 32 per cent at June-end 2021, from 26 per cent at June-end 2020.

SBI’s NPA on Mudra loans in the state is at 59 per cent as on June-end 2021 followed by Punjab National Bank at 44 per cent, Indian Bank at 33 per cent and Bank of Maharashtra at 31 per cent at June-end 2021.

In Jharkahnd, Canara Bank Mudra NPAs as high as 114.35 per cent as bad loans were Rs 183.63 crore against the outstanding amount of loans at Rs 160.58 crore.

Among private sector banks, HDFC Bank’s Mudra loan NPA in Jharkhand was at 26.21 per cent, followed by IDFC First Bank at 24.93 per cent.

The Credit Guarantee Fund for Micro Units (CGFMU) provides guarantee against loan losses in Mudra loans, but 75 per cent of NPAs in Mudra loans, while the rest of losses have to be borne by the banks.

Loan losses

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 scheme

Under the scheme, credit up to Rs 10 lakh is provided by banks and non-banking financial companies to small and new businesses.

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

The government has sanctioned loans of Rs 15.5 lakh crore under PMMY since its inception in April 2015.

Till March 31, 2021, the Government had sanctioned 29.55 crore loans under the scheme. Of this more than 6.8 crore loans worth Rs 5.2 lakh crores have been given to new entrepreneurs.

For FY22, loans worth Rs 3,804 crore have been sanctioned by 13 public sector banks (PSBs) as on June 25.



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RBI lifts Prompt Corrective Action restrictions on UCO Bank, BFSI News, ET BFSI

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FILE PHOTO: The Reserve Bank of India seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui

The Reserve Bank of India today lifted Prompt Corrective Action (PCA) restrictions on UCO Bank, after the Board of Financial Supervision reviewed the financials of the bank, the central bank said in a statement.

The central bank said UCO Bank provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net Non Performing Assets and Leverage ratio on an ongoing basis.

UCO Bank will, however, be continuously monitored by the RBI.

Earlier in June, UCO Bank Managing Director Chief Executive Officer AK Goel said that he was hopeful that the central bank would lift PCA restrictions on the bank.

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

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How PSU banks are catching up in the digital world, BFSI News, ET BFSI

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– By Amol Dethe & Ishwari Chavan

The banking sector in India, in response to evolving forces of consumer behaviour shift, demographics and technology, has gone through some significant changes in the past decades.

Almost every sector in the economy reflects the massive impact technology has had on them. But the banking sector, in particular, has been aggressively adapting and transforming in the face of constantly evolving technology.

The notion holds that the Public sector banks (PSBs) have lagged their private counterparts in adapting to these changes. But the PSBs have geared up and banking experts believe the future does look good for PSBs.

PSBs adopting tech

The PSBs have already started investing heavily in technology. Artificial Intelligence, blockchain technology, and robotic process automation are the key innovations that are likely to impact the banking scenario in India in a transformative way.

The field of artificial intelligence has produced several cognitive technologies. Individual technologies are getting better at performing specific tasks that only humans could do. It is these technologies that PSBs may focus their attention on. Analytics can improve customer understanding and personalisation. PSBs are in the process of aggressively adopting these technologies that enhance bank and customer engagement.

Speaking at the ETBFSI session on Digital future of PSU Banks, Raj Kiran Rai, MD & CEO, Union Bank of India and V G Kannan, former CEO, Indian Banks’ Association shared their insights and experience on how PSBs are transforming.

Rai said, “Based on the transactions of a customer, these models can predict if he/she can be a potential housing loan customer, a potential vehicle loan customer, or a personal loan customer. So it helps to do targeted marketing. We are still in the initial phases of using it. But we are investing a lot in this.”

Developing skills

PSBs are heavily recruiting the young population while skilling and reskilling them. Rai mentioned that the average age of employees has come down to 38. He added that the “tech-savvy” young can be easily skilled and reskilled through the e-learning modules that are being introduced. Prioritising the employees who can read and analyse large data over traditional number-crunching can be increasingly seen as a pattern.

Among other skills, marketing is one of the most valuable skills for the digital future of PSBs. According to Rai, marketing skills are where public sector employees are lacking. He said things will take off very fast once the digital products are marketed, pushed to customers, and made comfortable to use.

Fast Moving Consumers & FinTechs

VG Kannan, Former Chief Executive, Indian Banks’ Association, said, “The more and more the customers can use these things, the load on the bankers will come down and they can make it more efficient, provide higher interest rate and provide better services at a lower cost. So it’s going to be a win-win for everyone.”
While a large section of the population in India will be comfortable using digital products, banks will still have to maintain a physical presence, especially in rural areas where the customers are more inclined towards it.

Financial Literacy Centres (FLCs) can play an important role in promoting financial literacy by creating awareness about banking services. Thus, integrating the informal and formal financial sectors can further make digital banking services more accessible to a large chunk of the population that otherwise prefers the physical branches.

Furthermore, to stay relevant in an ever-evolving customer pool, PSBs need to make the most out of the dynamic changes in the BFSI sector in the country. The success of these banks will largely depend on the alliances they form. Thus creating innovative partnerships will ensure the growth of PSBs.

It is no more about banks versus FinTech. Partnerships between banks and FinTech companies will allow banks early access to innovative technologies while the FinTechs would benefit from the vast experience and infrastructure of the PSBs. Both Kannan and Rai believe that a lot of such partnerships may be witnessed over the coming years.

The very technologies that drive revolutionary transformations also invite security risks with them. Technologies are getting sophisticated, and so are the cyber risks. Thus, for PSBs to ensure a secure infrastructure may be very crucial.

Rai and Kannan concurred that growth through innovation is where the PSBs are headed.



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Niti Aayog submits names of PSU banks to be privatised, BFSI News, ET BFSI

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The names of two state-run banks and one general insurance company that can be privatised have been submitted by NITI Aayog to the Core Group of Secretaries on Disinvestment as was announced in the Union Budget for 2021-22.

Finance minister Nirmala Sitharaman has assured that the “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”.

Along with these two state-run banks and one general insurer, the government wants to conclude the privatisation process for Air India, BPCL and Shipping Corporation in this fiscal.

The government has budgeted Rs 1.75 lakh crore from disinvestment during the current financial year.

As the second wave of the coronavirus threatens to disrupt the projected economic growth in the current fiscal, the government is banking on meeting its non-tax revenue targets.

The government is aiming at creation of bigger banks.

“We brought together banks with completely different capacities and we wanted to have the synergies of both so that the bank which has extensive network in a particular area comes in also, but that bank which is sitting over mounds of deposits but doesn’t have that many branches (is) also able to benefit,” the FM had said in an interview to this paper.

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.



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Bank holidays in June 2021: Banks to remain closed for up to 9 days next month; check full list here

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According to the Reserve Bank of India (RBI), banks in a few states will be closed for different occasions, other than weekly holidays

Bank holidays: Banks in India will remain closed for up to nine days in June, including second and fourth Saturdays, and Sundays. According to the Reserve Bank of India (RBI), banks in a few states will be closed for different occasions next month in June 2021, other than weekly holidays. Banks will not be closed for all nine days for all states as holidays vary from state to state. Only the gazetted holidays are observed by banks all over the country. The Reserve Bank of India has categorised holidays under three categories — Holiday under Negotiable Instruments Act; Holiday under Negotiable Instruments Act and Real-Time Gross Settlement Holiday; and Banks’ Closing of Accounts. The list of holidays given below has been notified by RBI.

Bank Holidays in June 2021

Festivals in June 2021

15 June 2021 – Y.M.A. Day/Raja Sankranti
25 June 2021 – Guru Hargobind Ji’s Birthday
30 June 2021 – Remna Ni

Banks across Mizoram’s Aizawl and Odisha’s Bhubaneswar will observe a holiday on June 15, on account of Y.M.A. Day and Raja Sankranti. On June 25, 2021, only banks in Jammu and Srinagar will remain shut to observe Guru Hargobind Ji’s Birthday. Similarly, on June 30 (Remna Ni) only banks in Aizawl will remain closed.

Also read: Banks move Supreme Court against RTI disclosure, seek direction to RBI

Weekend holidays in June 2021

06 June 2021 – Weekly off (Sunday)
12 June 2021 – Second Saturday
13 June 2021 – Weekly off (Sunday)
20 June 2021 – Weekly off (Sunday)
26 June 2021 – Fourth Saturday
27 June 2021 – Weekly off (Sunday)

Also read: SBI should be able to build a book of Rs 2,000 crore through expanded ECLGS: Dinesh Khara

All the private and public sector banks across the country remain shut on the second and fourth Saturdays of every month, along with a weekly holiday on Sunday. Even as banks will remain shut on the above-mentioned days, customers can avail online services. Moreover, mobile and internet banking will remain operational. Further, for the next three months (July-September quarter), banks will be closed for 24 days, other than Sundays and second and fourth Saturdays.

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Bank of Baroda mulls hiring digital marketing agencies to strengthen brand, customer outreach, BFSI News, ET BFSI

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Bank of Baroda is looking to hire three digital marketing agencies to strengthen its brand, aiming to be a preferred choice of customers with innovative banking models.

Bank of Baroda requires services of marketing agencies for overall digital marketing strategy, improving effectiveness of digital eco system, suggesting ideas as per requirement of the bank and well as doing analytics in the digital space among others, the bank said.

“Bank proposes to empanel three digital marketing agencies and these digital marketing agencies shall be responsible for digital marketing communication across various media,” the lender said in a tender document inviting bids from eligible agencies.

Bank of Baroda is one the largest PSU banks with over 8,400 branches and 12,000 plus ATM network across the country.

With presence in 21 countries across the globe, Bank of Baroda said it is forging ahead with cutting edge technologies and innovative new banking models.

Noting that it is an “iconic” and a “hugely trusted” brand, Bank of Baroda said in the recent past it has innovated a slew of digital offerings targeted not just at the youth, but across the demographic spectrum, both in rural and urban India.

“With such innovations and improvements, bank aspires to give an impetus to its marketing efforts to develop a highly favourable brand perception from what it is today, in the process, endeavour to become the preferred choice of customers when it comes to fulfilling their needs,” said the lender.

To that end, the bank now seeks to appoint a highly regarded and well recognized digital agency. The bank said the agency should have a minimum experience of at least 5 years and for start-ups, the minimum experience is of at least 3 years.

Among others, the agency should currently be a Google/Facebook partner in India and have a full-fledged office in Mumbai and shall allocate a dedicated team for the bank.

Bank of Baroda also aspires to be visible digitally through means such as YouTube, influencer tie-ups, content syndications as well as new age media opportunities. The digital marketing firm will also be required to create content through campaigns, mobile first based content, blog–articles, infographics, gifs and videos.

The bank said it will hire the agency for a period of three years which may be extendable further for a period of two years.

The interested agencies can submit their bids by 3PM on June 4. The bank said it will shorty inform about the date of commencement of the bid opening.



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Banks to remain closed for up to 12 days in various states in May 2021; check full list here

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According to the Reserve Bank of India (RBI), banks in most of the states will remain closed on May 14, 2021, on account of Eid-UI-Fitra. Image: Reuters

Banks in India will remain shut for up to 12 days in May 2021, including weekends and festivals. Only the gazetted holidays are observed by banks all over the country. According to the Reserve Bank of India (RBI), banks in most of the states will remain closed on May 14, 2021, on account of Eid-UI-Fitra. In May, banks including the public sector, private sector, foreign banks, cooperative banks and regional banks, will observe holidays on May 1, May 7, May 13, May 14 and May 26 on account of Labour Day, Jumat-ul-Vida, Id-Ul-Fitr, Akshaya Tritiya and Buddha Pournima, respectively. Banks will not be closed for all 5 days for all states as holidays vary from state to state. The list of holidays given below has been notified by RBI under the Negotiable Instruments Act.

Festivals in May 2021

1 May 2021- Maharashtra Din/May Day (Labour Day)
7 May 2021- Jumat-ul-Vida
13 May 2021- Ramzan-Id (Id-Ul-Fitr) (Shawal-1)
14 May 2021- Bhagvan Shree Parshuram Jayanti/Ramjan-Eid (Eid-UI-Fitra)/Basava Jayanti/Akshaya Tritiya
26 May 2021- Buddha Pournima

Weekend holidays in May 2021

2 May 2021- Weekly off (Sunday)
8 May 2021- Second Saturday
9 May 2021- Weekly off (Sunday)
16 May 2021- Weekly off (Sunday)
22 May 2021- Fourth Saturday
23 May 2021- Weekly off (Sunday)
30 May 2021- Weekly off (Sunday)

Banks to remain open on May 1,7,13,14 and 26 in these states

Banks across Agartala, Ahmedabad, Aizwal, Bhopal, Bhubaneshwar, Chandigarh, Dehradun, Gangtok, Jaipur, Jammu, Kanpur, Lucknow, New Delhi, Raipur, Ranchi, Shillong, Shimla, and Srinagar will remain functional on May 1. Except for banks in Jammu and Shimla, banks in all the states will remain open. On May 13, only banks in Belapur, Jammu, Kochi, Mumbai, Nagpur, Srinagar and Thiruvananthapuram will observe a holiday. While on May 14, banks in most of the states will remain closed, barring states such as Belapur, Jammu, Kochi, Mumbai, Nagpur, Srinagar and Thiruvananthapuram. Similarly, on Buddha Pournima (May 26), banks in Ahmedabad, Aizwal, Bengaluru, Bhubaneshwar, Chennai, Gangtok, Guwahati, Hyderabad, Imphal, Jaipur, Kochi, Panaji, Patna, Shillong and Thiruvananthapuram will remain functional.

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Interest waiver: PSU banks may have to take Rs 2,000 crore-hit

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Public sector banks may have to bear a burden of Rs 1,800-2,000 crore arising due to a recent Supreme Court judgement on the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020, sources said.

The judgement covers loans above Rs 2 crore as loans below this got blanket interest on interest waiver in November last year. Compound interest support scheme for loan moratorium cost the government Rs 5,500 crore during 2020-21 and the scheme covered all borrowers including the prompt one who did not avail moratorium.

According to banking sources, initially 60 per cent of borrowers availed moratorium and gradually the percentage came down to 40 per cent and even less as collection improved with ease in lockdown. In case of corporate, this was as low as 25 per cent as far as public sector banks were concerned.

They further said, banks would provide compound interest waiver for the period a borrower had availed moratorium. For example, if a borrower availed moratorium of three months, the waiver would be for that period.

The Reserve Bank of India (RBI) on March 27 last year announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic, later the same was extended to August 31.

The apex court order this time is only limited to those who availed moratorium so the liability of the public sector bank should be less than Rs 2,000 crore as per rough calculations, sources added.

Besides, they said, the order does not specify a timeframe for the settlement of compound interest unlike last time so banks can devise a mechanism of adjusting or settling it in staggered manner.

Meanwhile, Indian Banks’ Association (IBA) has written to the government to compensate lenders for interest on interest waiver.

The government would take a call depending on various considerations.

The Supreme Court last month directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period, which was announced last year amid the Covid-19 pandemic, and the amount already charged shall be refunded, credited or adjusted.

The apex court refused to interfere with the Centre and RBI’s decision to not extend the loan moratorium beyond August 31 last year, saying it is a policy decision.

Rejecting pleas for a complete waiver on interest the court opined that such a move would have consequences on the economy. The bench also said that interest waiver would affect depositors. Along with this, the court also rejected pleas for further relief in the matter.

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