Tag: psu banks

Govt to infuse Rs 14,500 crore in 4 PSU banks through recapitalisation bonds

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The step completes the government’s capital infusion of Rs 20,000 crore in public sector banks for the current financial year. Government had earlier infused Rs 5,500 crore in Punjab and Sind Bank in December 2020.

The Finance Ministry on Wednesday notified that government will infuse Rs 14,500 crore through recapitalisation bonds in four public sector banks. The notification issued by the finance ministry said that government would infuse capital by issuing non-interest-bearing bonds to banks.

The step completes the government’s capital infusion of Rs 20,000 crore in public sector banks for the current financial year. Government had earlier infused Rs 5,500 crore in Punjab and Sind Bank in December 2020.

The four lenders in which government will infuse capital include Central Bank of India, Indian Overseas Bank, Bank of India and UCO Bank. Central Bank of India will receive highest capital infusion of Rs 4,800 crore, followed by Rs 4,100 crore by Indian Overseas Bank. Similarly, government will infuse Rs 3,000 crore in Bank of India and Rs 2,600 crore in UCO Bank. The notification by finance ministry also says that recapitalisation bonds will be issued with six different maturities.

Out of four lenders chosen by the government for capital infusion, three banks are under prompt corrective action (PCA) framework of Reserve Bank of India (RBI). Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework that puts several restrictions on them, including on lending, management compensation and directors’ fees. Experts believe capital infusion from government will help these three banks to come out of PCA restrictions in 2021-22 (FY22).

Anil Gupta, vice president, financial sector ratings, Icra said that with government of India (GoI) deciding to infuse substantial capital in all the three public banks which were in PCA framework, Icra expects these banks to come out of PCA in FY22. “However, given the capital infusion is through zero coupon recapitalisation bonds, the earning profile of these banks may not improve on account of this transaction as their capital position improves,” he added.

Earlier this month, IDBI Bank was removed from the RBI’s PCA framework after a gap of nearly four years on improved financial performance. The central bank had placed IDBI Bank under the PCA framework in May 2017, after it had breached the thresholds for capital adequacy, asset quality, return on assets and the leverage ratio.

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All you need to know about the impact of PSU bank merger on the customers, BFSI News, ET BFSI

Banking & Finance

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Eight PSU Banks namely Vijaya Bank, Corporation Bank, Andhra Bank, Syndicate Bank, Oriental Bank of Commerce, United Bank of India,Allahabad Bank and Dena Bank will see merger coming into effect from April 1, 2021. Customers of any of the above listed banks should know about the following changes and the steps they will have to take for the same.

1. Account number:
In case of the past bank mergers there was no change in the account number for the bank customers say for in the case of Union Bank of India, only the IFSC code changed. Also, there have been known instances where the bank has checked with the entity with which you have set the electronic clearing settlement (ECS) such as for SIP, utility bill payment etc. for change in the ECS i.e. matched their ECS for the old ECS.

The transition in the case of Bank of Baroda has resulted in a change in the account number for customers. What you need to do in respect of bank account number, IFSC and MICR: Here the onus shall be on the bank customer to modify or update previously given ECS mandates and also update such details with various entities including tax department, EPFO, insurers or brokers for that matter.

2. Cheque books:
From 1 April, the cheque books of the banks getting merged will not be valid. New cheque books from the anchor banks will be provided. For example, the cheque books of Oriental Bank of Commerce and United Bank of India will be valid only until 31 March. The two banks are merged with Punjab National Bank.

Some banks could also offer more time to customers as the RBI has allowed some banks to continue with the old cheque books for another quarter or two. For example, Syndicate Bank customers can use their cheque books until 30 June. Customers will need to track their banks’ developments to know when they can continue using the cheque books.

3. Fixed Deposits & Loans:
These deposits are in fact contracts for some predefined period and any change in structure of the bank will not result in any interest change for you. Likewise, you can continue with the deposit until maturity at the same rate, irrespective of whether the deposit rate at the merged entity is lower or higher.

Similar to FD contracts, home loan is also an agreement between the borrower and lender and in the event of bank merger there shall be no change on the previously stipulated terms. Over the past one year, the rates of the merging bank and the anchor bank have converged to a common ‘external benchmark lending rate’ (EBLR). In case there is a review clause in loan term then the rate of interest of the acquiring or anchor bank may apply.

4. Money transfer:
The Indian Financial System Code (IFSC) and Magnetic Ink Character Recognition Code (MICR) will change for some banks and will remain the same for others. For instance, Union Bank of India, the account number has not changed Only the IFSC code has changed. Every bank migration is different.

Customers will again need to check with their bank on what has changed and what has not. Accordingly, they will need to change their ECS instructions for loans and other payments such as life insurance and mutual fund investments



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PSU banks NPAs drop Rs 1 lakh crore amid loan classification freeze, BFSI News, ET BFSI

Banking & Finance

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With banks not allowed to classify stressed assets as bad during the Covid pandemic period, non-performing assets (NPAs) of public sector banks fell by over Rs 1 lakh crore during the first nine months of the current fiscal to Rs 5,77,137 crore from Rs 6,78,317 crore.

According to the data, UCO Bank has seen the sharpest reduction of 40.7% in its NPA numbers in December 2020 from March 2020. This was followed by Bank of Maharashtra (33.6%), State Bank of India (21.4%) and Canara Bank (18.6%).

UCO Bank is under the stringent prompt corrective action framework of the Reserve Bank of India.

The government said that the reduction was due to its strategy of “recognition, resolution, recapitalisation and reforms”. The government said that its policy of transparent recognition of NPAs resulted in bad loans rising to a high of Rs 8,95,601 crore in FY18 from Rs 2,79,016 crore in FY15.

IBC approvals

Until September 2020, the Insolvency and Bankruptcy Code had led to the approval of 277 resolution plans with Rs 1.9 lakh crore of the realisable amount by financial creditors, it said in its response to the parliament.

The government has infused Rs 3.2 lakh crore in public sector banks in the last six years, with the banks themselves raising Rs 2.8 lakh crore through equity and bonds. Banks also raised an additional Rs 36,226 crore by selling non-core assets.

Future stress

On the projection in the Reserve Bank of India’s financial stability report that bank NPAs could rise to 13.5% by September 2021, the finance ministry said that according to the central bank, the numbers do not factor in the policy measures. These include RBI’s resolution framework for Covid-related stress and one-time restructuring of loans. In response to another query, the government said that 127 cases of fraud were assigned to the Serious Fraud Investigation Office. These pertained to 1,161 companies. Of these, 26 cases pertaining to 326 companies were reported in FY20. There were also 3,431 convictions and Rs 17.3-crore fine imposed during the last five years



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Banking services to be hit as over 10 lakh employees to go on strike on March 15, 16, BFSI News, ET BFSI

Banking & Finance

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The United Forum of Bank Union (UFBU), an umbrella body of nine bank unions, has called for a two-day nationwide strike on March 15 and 16 against the privatisation of Public Sector Banks and retrograde banking reforms.

Over 10 lakh bank employees and officers will participate in the strike.

All nine banks unions – All India Bank Officers’ Confederation (AIBOC), All India Bank Employees Association (AIBEA), National Confederation of Bank Employees (NCBE), All India Bank Officers’ Confederation (AIBOC), Bank Employees Federation of India (BEFI), Indian National Bank Employees Federation (INBEF), Indian National Bank Officers’ Congress (INBOC) and National Organisation of Bank Officers (NOBO) and the National Organisation of Bank Workers (NOBW) will take part in the strike called by the UFBU.

Services such as deposits and withdrawal at branches, cheque clearance, and loan approvals would be affected due to the strike. However, ATMs are likely to remain functional.

Banks were already closed on March 13 (second Saturday) and March 14 (Sunday), leading to a four-day break in regular banking operations. Services such as deposits and withdrawal at branches, cheque clearance and loan approvals would be affected due to the strike.

The strike comes after Union Finance Minister Nirmala Sitharaman‘s Budget announcement where she announced the privatisation of two public sector banks (apart from IDBI Bank) as part of the government’s disinvestment drive to generate Rs 1.75 lakh crore.

Apart from bank unions, all the unions in four General Insurance Companies will be on strike on March 17. All the unions in LIC are on strike on March 18, while unions of four insurance companies have called for a strike against the privatisation of public companies.



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Bank branches closed for next 4 days; SBI, other PSU banks may get hit as unions strike on March 15-16

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About 10 lakh bank employees and officers of the banks will participate in this two-day strike

Bank branches may remain closed for the next four days, including a two-day weekend holiday, and a two-day planned strike beginning Monday. The United Forum of Bank Unions (UFBU), an umbrella body of nine unions, will go on a two-day strike on March 15 and 16, 2021, to protest against the proposed privatisation of two state-owned banks. Starting tomorrow, banks are scheduled to be closed on March 13, 2021 (second Saturday) and March 14, 2021 (Sunday). Due to this, bank services are likely to be impacted for the next four days. However, ATM, mobile and internet banking will remain functional. Customers are advised to plan bank-related work accordingly today, in order to avoid any last-minute trouble.

Finance Minister Nirmala Sitharaman in her Union Budget 2021 speech announced the privatisation of two public sector banks (PSBs) as part of a disinvestment plan to generate Rs 1.75 lakh crore. In 2019, the government has already privatised IDBI Bank by selling its majority stake to LIC. Moreover, so far in the last four years, the government has merged 14 public sector banks. Conciliation meetings – before the Additional Chief Labour Commissioner on March 4, 9 and 10 – did not yield any positive result, PTI quoted All India Bank Employees Association (AIBEA) general secretary C H Venkatachalam as saying.

10 lakh employees to participate in strike

About 10 lakh bank employees and officers of the banks will participate in this two-day strike. Along with AIBEA the bank unions of All India Bank Officers’ Confederation (AIBOC), National Confederation of Bank Employees (NCBE), All India Bank Officers Association (AIBOA) and Bank Employees Confederation of India (BEFI), National Bank Employees Federation (INBEF), Indian National Bank Officers Congress (INBOC), National Organisation of Bank Workers (NOBW) and National Organisation of Bank Officers (NOBO), among others have given a call for a strike.

Work in SBI may be impacted

State Bank of India (SBI) has made all arrangements to ensure normal functioning in its branches and offices. However, in a BSE filing, SBI has informed that work in the bank may be impacted by the strike. “We have been advised by the lndian Banks Association (lBA) that United Forum of Bank Unions (UFBU) which comprises 9 major Unions….has given a call for all-lndia strike by Bank Employees on 15th & 16th March 2021,” it said in an exchange filing.

Canara Bank: Bank branches functioning may be hit

Earlier this month, Canara Bank also said that it has been informed by the Indian Banks’ Association (IBA) that the United Forum of Bank Unions (UFBU) has given a call for strike in the banking industry on 15 March and 16 March for the issues relating to industry level and not for any bank-level issues. It assured that the Bank has taken necessary steps for the smooth functioning of Bank’s branches/offices on the days of proposed strike. “However, in the event of strike materializing, the functioning of the branches/offices may be impacted,” it added.

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PSU bank fundraising plans set for revival as bull-run lifts fortunes, BFSI News, ET BFSI

Banking & Finance

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With the markets on the upswing, public sector banks that struggled to raise funds in December are making hay in the market.

Banks are looking to raise funds to meet regulatory and provisioning requirements and to be ready for the opportunities that a likely boom in the economy may throw up in the coming months.

Bank of Baroda

State-owned Bank of Baroda has raised Rs 4,500 crore equity capital through qualified institutional placement (QIP) on Wednesday.

It allotted 55,07,95,593 equity shares to eligible qualified institutional buyers at an issue price of Rs 81.70 per share against the floor price of Rs 85.98 apiece.

Public sector banks (PSBs) are planning to raise about Rs 10,000 crore through a mix of equity and debt in the remaining two months of the current fiscal ending March to support credit pick up and meet regulatory requirements, the government had said last month.

Union Bank of India

Union Bank plans to raise between Rs 2,000 crore to Rs 3,000 crore through QIP.

The bank has shareholder permission to raise up to Rs 6,800 crore, but was planning to raise only Rs 3,000 crore as the risk appetite for public sector bank shares is still not the best. UBI plans to restrict its target to Rs 3,000 crore and possibly try another issue next fiscal year.

Private sector banks

A clutch of private sector banks also have plans to tap the market.

IDFC First IDFC First Bank’s board will meet on February 18, 2021 “to consider and approve the proposal for raising of funds by way of issue of equity shares/ other equity-linked securities. The bank sees strong strong upcoming growth opportunities.

YES Bank’s shareholders have approved a proposal for raising Rs 10,000 crore capital with the requisite majority.

December raising

Punjab National Bank raised Rs 3800 crore in December 2020 while IDBI Bank raised Rs 1400 crore in twin issues which were priced on the same day in the middle of December. Canara Bank had raised Rs 2000 crore earlier in the month.

PNB had targeted Rs 7,000 crore while IDBI Bank had aimed to raise Rs 2,000 crore. Both issues were short of their targets.

In the last few months, lenders including State Bank of India, Canara Bank and PNB have raised about Rs 50,000 crore from the market.

Bank stocks to shine?

Bank stocks were underperforming last year due to fears of a spike in non-performing assets and their annual returns were as low as 4%. However, they are recovering now.

According to analysts, the banking and finance sector seems to be the most probable candidate poised to outperform the broader markets as the pharma sector has run its course.

What RBI says

RBI Governor Shaktikanta Das has been advising banks to proactively raise capital and not wait for a difficult situation to arise due to the Covid crisis.

Besides, the government has allocated Rs 20,000 crore for capital infusion into PSBs in the current fiscal. Of this, the Finance Ministry has granted Rs 5,500 crore to Punjab & Sind Bank.

During 2019-20, the government made Rs 70,000 crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.



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PSU banks improve credit growth in September

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The share of large borrowers in the loan portfolios sustained its downward trajectory the central bank’s report showed.

Even as the credit growth of banks declined to 5% in September 2020, public sector banks were able to show an improvement in the loan growth from March to September, 2020. Public sector banks registered a 4.6% year-on-year (y-o-y) credit growth in September 2020, compared to 3% loan growth in March 2020, as per financial stability report (FSR) released by Reserve Bank of India (RBI).

Credit growth for private sector banks, however, declined to 7.1% in September 2020, against the 10.4% growth clocked in March 2020.

Foreign banks reported a negative credit growth of 5.4%, as against 7.2% growth in March 2020. Credit growth of banks remained at 5.7% in March 2020.

“Loans disbursed through new accounts declined by almost one-fourth in the first quarter of the current financial year (Q1 FY21) on an annual basis but subsequently, there has been some recovery,” the report said. “In Q2 FY21 growth in new loans was witnessed primarily in the agriculture sector and in the personal loans segment,” the report further said.

The share of large borrowers in the loan portfolios sustained its downward trajectory the central bank’s report showed. While the share of large borrowers in loans came down to 50.5%, they accounted for 73.5% gross non-performing assets (GNPAs) in September 2020. The share of restructured standard advances increased, indicating that large borrowers have commenced availing restructuring benefits extended for Covid-19 stressed borrower, RBI said.

The central bank had earlier allowed restructuring of personal and corporate loans impacted by Covid-19.

RBI highlighted that by contrast, the deposit growth of banks remained robust at 10.3% (y-o-y), driven by precautionary savings. Public sector banks were able to record the highest deposit growth in five years at 9.6%. The deposit growth for private lenders remained 10.4% in September, 2020, without any change from March 2020.

On the earnings front, net interest income (NII) of banks grew at a much higher clip of 16.2% in September 2020, compared to 13% in March 2020. However, growth in other operating income (OOI) plummeted to 1.2% from 29.2% in March 2020.

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