Tag: public sector banks

Interest rates on education loans see a decline, BFSI News, ET BFSI

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The Covid-19 pandemic and rising fee structure of education has made it difficult for parents to fund their children’s higher studies.

As the Reserve Bank of India (RBI) slashed repo rates by 75 basis points in March and 40 basis points in May last year, the banks have cut down on loan rates across categories.

Public sector banks contribute over 70% of total education loans along with NBFCs. Public sector banks including Union Bank of India are offering the cheapest loans, with rates starting at as low as 6.80% for a Rs 20-lakh loan with a tenure of seven years.

Central Bank of India, Bank of India, Bank of Baroda, State bank of India offer education loan at 6.85%. Whereas, Punjab National Bank, IDBI bank, Canara Bank charge 6.85% Interest on Education Loan.

Bank of Maharashtra and Indian Bank charge 7.05% and 7.15% interest respectively on education loans.

State Bank of India’s (SBI) rates have dropped marginally by 5 basis points over the last two months.

In the recent announcement the Union government informed Parliament that Nearly 9.55% of education loans extended by public sector banks were categorized as non-performing assets (NPAs) as on 31 December.

Out of total education loans disbursed, 366,260 accounts worth ₹8,587 crore have turned bad, the govt said.



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2 crore cheques stuck for clearance, BFSI News, ET BFSI

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Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 had announced the privatisation of Public Sector Banks (PSBs) as part of a disinvestment drive to garner Rs 1.75 lakh crore.

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

C.H. Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA) said to IANS, “On an average, about 2 crore cheques/instruments worth about Rs 16,500 crore are held up for clearance. Government treasury operations and all normal banking transactions have been affected.”

He added, “About 10 lakh bank employees struck work signalling their negation of the government’s decision to privatise its banks. As per reports reaching us from various states, banking operations have been affected and paralysed in all centres. Most of the Branches could not be opened. Clearing of cheques could happen since branches are not accepting cheques for clearance as branches are closed.”

Venkatachalam said, “the strike would continue on Tuesday to save the banks from being taken over by private vested interests. The strike to save the savings of our people. The strike is to ensure more loans to priority and weaker sections.”

He said the banks are making operational profits and they are showing net loss owing to provisions because the corporate borrower’s defaults, during 2019-20 the operating profits of government banks were Rs 1,74,336 crore, provision for doubtful debts Rs 2,00,352 crore and the net loss stood at Rs 26,016 crore.

(With Inputs from IANS)



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Bank employees strike on March 15, 16

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Banking operations could grind to a halt in public sector banks (PSBs), old generation private sector banks and regional rural banks across the country on March 15 and March 16.

About 10 lakh employees of these banks are expected to participate in a strike to protest the Government’s decision to privatise two PSBs.

The two-day strike has been called by the United Forum of Bank Unions (UFBU), the umbrella body of nine bank unions.

With the strike coming on the heels of a two-day (weekend) bank holiday, ATM operations too could be impacted as bank branches supplying cash to cash logistics companies may not function. This may affect the replenishment of cash in ATMs.

“Public Sector Banks are nation building instruments. They have to be preserved, protected and promoted,” four officers’ unions, which are constituents of UFBU, said in a recent joint statement.

CH Venkatachalam, General Secretary, All India Bank Employees’ Association, observed that privatisation of PSBs is a negative step in a developing economy like India.

“PSBs protect the hard-earned savings of the people. Privatisation of banks would risk their savings as many private banks in the past have collapsed and people lost their savings.

“Private banks’ only aim to earn more profits. Service charges are more in private banks and the public will be affected. Rural branches may be closed in the name of non-viability,” he said.

Sanjay A Manjrekar, Adviser, All India Nationalised Bank Officers’ Federation, said, “If PSBs are privatised, will the new promoter/ management make good any shortfall in pension? They will not. So, the issue of serving as well as retired employees is involved in this.”

Referring to the public perception that privatisation of PSBs is only going to affect Bank employees, Nilesh Pawar, State Secretary (Maharashtra), All India Bank Officers’ Confederation, emphasised that customers too will be affected as banking services may become unaffordable.

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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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Is the worst yet to over for Indian Banks?, BFSI News, ET BFSI

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Fitch Ratings expects a moderately worse sector outlook for Indian banks for the next fiscal based on muted expectations for new business and revenue generation, and deteriorating asset quality.

The disproportionate shock to India’s informal economy and small businesses, coupled with high unemployment and declining private consumption, have yet to fully manifest on bank balance sheets, it said.

The impact of the Covid-19 pandemic is likely to pose challenges to Indian banks‘ improving financial performance once asset-quality risks manifest in the financial year ending March 2022.

Forbearance help

Indian banks reported lower impaired loans and improved profitability for the nine months ended December 2020 due to various forbearance measures and continued large write-offs. Indian banks – particularly state banks – remained more risk-averse than in prior years, which was reflected in their weak credit growth.

The state’s less-than-adequate recapitalisation plans for its banks further underscores the risk, which will likely keep risk aversion high among banks amid continuing uncertainty about asset quality and an uneven economic recovery.

As the forbearance measures unwind, Fitch expects Indian banks to reverse the improvements in asset quality and profitability, with state banks more vulnerable to higher stress than private banks, which have better profitability and higher contingent reserves and capitalisation.

PSB hit

Public sector banks also have limited core capital buffers in the event of further asset stress, which is unlikely to be remediated solely via the state’s planned capital injections of USD 5.5 billion.

The plan is well below Fitch’s estimated capital requirement of USD 15 billion to USD 58 billion under varying stress scenarios.

“The strategy to either not lend or lend only to capital-efficient sectors is likely to continue as low market valuations leave state banks with limited scope to access fresh equity on their own,” Fitch added.

Shallow growth

It projects India’s GDP growth at 11 per cent in the next fiscal. The faster-than-expected GDP rebound in the December quarter is positive, but many sectors continue to operate well below capacity.

Besides, the decline in private consumption, and reports of rising urban utility-bill defaults and social security withdrawals point towards stress among retail customers.

“Fitch believes that the SME sector faces a litmus test in FY22 as short-term credit support extended in FY21, which, in our view, deferred the recognition of stress, comes up for refinancing,” Fitch added.



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Govt to earn more from deposits by opening business to pvt banks

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There is already a bidding system in place, but it has so far been restricted to PSBs.

The government is set to earn more from its deposits as it enters into business with a larger set of private banks that can offer higher interest rates, industry experts said. At the same time, public sector banks (PSBs) may be forced to shell out more than they historically have for government deposits.

Mrutyunjay Mahapatra, former MD & CEO, Syndicate Bank, said that the cost of deposits for the banking system as a whole is likely to rise because the private sector banks will now compete for government deposits. There is already a bidding system in place, but it has so far been restricted to PSBs.

“Public sector banks used to get away with a slightly lower rate because they have a larger savings account and rural fund base, whereas the private banks are very hungry for deposits. So, they might create an enhanced interest rate regime to garner these funds because there has to be transparency for government funds,” Mahapatra said, adding that the government will benefit from the process.

He also pointed out that there may have been an understanding between the government and private banks that in exchange for the embargo being lifted, private banks will have to participate in social sector activities like PSBs. The participation of private banks in financial inclusion projects, rural banking and agri lending would help ensure a level playing field between the two sets of banks.

There could also be other teething pains for private banks entering government business, analysts said. A report by Kotak Institutional Equities (KIE) said that PSBs will try to defend their turf. Further, adding a bank to the government payment system is likely to be time-consuming and would require continuous interaction with the government. “Fee income streams have a higher probability of declining in the event of higher competition.

However, it remains to be seen if the float income would offset any pressure that is likely to come on account of lower fee margins,” analysts at KIE said. They expect government deposits to be an important funding source when liquidity is tight or rates are high.

A Nomura report on Thursday said that while the top three private banks have been undertaking government agency business for the last 20 years, Axis Bank and ICICI Bank have managed to step ahead of HDFC Bank in obtaining authorisation for undertaking pension payments for the defence sector.

“Railways’ pension is a potential area which is still lying with SOE (state-owned) banks. Incidentally, in tax collections, HDFC Bank almost had a 15% market share as of FY19/20,” the report said.

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NPA hive-off, staff transfers being considered, BFSI News, ET BFSI

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The government could hive off the non-performing loans of the two public sector banks that are to be selected for privatisation and transfer some of their employees to other state-run lenders in a bid to make them attractive for buyers.

The government is likely to consider only banks that were not part of the recent consolidation, which would exclude Punjab National Bank, Bank of Baroda, Canara Bank and State Bank of India from the privatisation process. “We could clean up the balance sheet and then offer the bank for sale, if it would get better valuations… All options are open,” a senior government official said.

Finance minister Nirmala Sitharaman said in the budget for FY22 that the government intends to privatise two public sector banks and one state-run general insurer in the next financial year.

The finance ministry is likely to hold discussions with Niti Aayog over the next 10 days to identify the candidates for privatisation.

The government will then begin the groundwork for the process, which will include legal changes and discussions with the Reserve Bank of India on the criteria for potential buyers.

An RBI working group had suggested in November that large corporate houses should be allowed to own banks by amending the Banking Regulation Act.

Workers’ Interest
The interests of employees will also be considered and they could be offered the option to shift to another PSB before privatisation.

Sitharaman told ET in an interview published on February 13 that the interests of all sections including workers would be safeguarded. “We obviously have to negotiate with those bidders to see that the workers’ interests are safeguarded, not just for today but also if the commitment is to ensure that their pensions will be paid, it will be definitely something which I will have to keep in mind… We will have to talk with everybody,” she had said.

Non-consolidation candidates preferred
Banks that were part of the consolidation exercise will be likely be excluded from the privatisation process as they are still managing integration issues and privatising them would add to complexity.

“Consolidation exercise is carried out at various levels including branches, ATMs, people, business, software,” the official said, adding that the process was not complete in some cases because of the disruption caused by Covid-19.

The government announced the merger of 10 public sector banks into four big ones in August 2019, bringing down the number of PSBs in the country to 12 from 27.

Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank; Syndicate Bank was merged with Canara Bank; Indian Bank with Allahabad Bank, and Union Bank of India with Andhra Bank and Corporation Bank.

Of the 12 PSBS, Indian Overseas Bank, Central Bank of India and UCO Bank are under the RBI’s Prompt Corrective Action framework, a set of guidelines for lenders that become undercapitalised due to poor asset quality or turned vulnerable due to loss of profitability.



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Govt. to disinvest two public sector banks & one public general insurance company, BFSI News, ET BFSI

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Finance Minister, Nirmala Sitharaman in her Budget 2021 speech has announced the disinvestment of two public sector banks and one general insurance company.

She said, “In spite of COVID-19, we have kept working towards strategic disinvestment. A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22. Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself.”

PNB’s MD & CEO, CH S. S. Mallikarjuna Rao is also of the opinion that divestment of 2 PSU Banks and 1 public insurer is in the right direction. He said, “The move to strategically divest 2 Public Sector Banks and 1 general insurance company, are steps in the right direction.”

Padmaja Chunduru, MD & CEO of Indian Bank said, “Stake sale by government in public sector companies and financial institutions, including 2 PSBs and one insurance company, in the next fiscal year is a welcome move.”



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Govt to infuse ₹20,000-cr in PSBs in 2021-22

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Finance Minister Nirmala Sitharaman on Monday said the government will infuse ₹20,000 crore into public sector banks (PSBs) in 2021-22 to meet the regulatory norms.

 

For the current financial year also, the government had made a provision of ₹20,000 crore for recapitalisation.

“To further consolidate the financial capacity of PSBs, further recapitalization of ₹20,000 crore is proposed in 2021-22,” she said while presenting the Budget 2021-22 in the Lok Sabha.

During 2019-20, the government had proposed to make a ₹70,000-crore capital infusion into the PSBs to boost credit for a strong impetus to the economy.

However, the government refrained from committing any capital for the PSBs in the Budget 2020-21, hoping that the lenders will raise funds from the market depending on the requirements.

In September 2020, Parliament approved ₹20,000 crore capital infusion for PSBs as part of the first batch of Supplementary Demands for Grants for 2020-21.

Of this, the government provided ₹5,500 crore to Punjab & Sind Bank in November 2020, to meet the regulatory capital requirement.

 

The Finance Minister further said the government had approved an increase in the Deposit Insurance cover from ₹1 lakh to ₹5 lakhs for bank customers last year.

“I shall be moving amendments to the DICGC Act, 1961 in this Session itself to streamline the provisions, so that if a bank is temporarily unable to fulfil its obligations, the depositors of such a bank can get easy and time-bound access to their deposits to the extent of the deposit insurance cover,” she said.

This would help the depositors of banks that are currently under stress, she added.

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Government to tackle stressed assets through ARC-AMC, BFSI News, ET BFSI

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