Tag: punjab national bank

Wilful defaults near Rs 2.5 lakh crore mark during pandemic, BFSI News, ET BFSI

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Banks have tagged 662 borrowers with loans of Rs 38,976 crore as wilful defaults during the last calendar year.

With this, the total wilful defaults have reached Rs 244,602 crore from 12,917 accounts as of December 2020, from Rs 205,606 crore from 12,255 accounts in December 2019, according to a report.

While wilful defaults have doubled since 2017, the recovery from top borrowers remains negligible.

The country’s top 100 wilful defaulters owe Rs 84,632 crore to banks as of March 2020, with the top 10 including Winsome Diamonds & Jewellery and accounting for 32% of it, data from the Reserve Bank of India shows. While banks wrote o nearly three-fourth of it to clean their balance sheet and get tax benefits, the default borrowers continue to appear in RBI‘s internal CRILC database till they clear the default.

Top 100 wilful defaulters

The total size of the top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019.

Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters’ list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as on March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

Write-offs

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing o the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-offs are accounting entries for shifting NPAs from active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.

RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs.

The reduction in NPAs during FY20 was largely driven by write-os, RBI had said in its report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.



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Bandhan, Yes Bank shine as FPIs lap up stakes in private lenders, BFSI News, ET BFSI

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Foreign portfolio investors have tanked up on stakes in Bandhan Bank and YES Bank as they invested heavily in Indian private sectors lenders but eschewed the public sector ones.

FPI holdings in Bandhan grew over 2.5 times to 34.91 per cent in March 2021 from 13.05 per cent in March 2020.

Bandhan Bank’s promoter company Bandhan Financial Holdings had to dilute a 21% stake to be compliant with RBI’s licensing condition. The promoters bought down their stake from 60.95 per cent in March 2020 to 40 per cent, which was mostly bought by the FPIs.

PSU and other lenders, led by State Bank of India, had bailed out YES Bank by buying its stake in early 2020. Many banks involved in the rescue act offloaded their part stake in Yes Bank via a follow-on public offer, which was bought by FPIs.

Yes Bank

The second-highest increase of FPI stake was in Yes Bank at 13.77 per cent in March 2021 (1.86 per cent).

According to experts, Yes Bank’s solution of legacy issues, known stress levels and non-performing assets, strong management give confidence to investors, who are expecting the lender to turn around in the medium term.

Also, equity mutual funds that have huge holdings in these banks offloaded their stakes due to redemption pressure, which were bought by FPIs.

Strong growth prospects, lower-than-expected NPAs, return ratios, operational efficiencies, decent earnings are attracting FPIs to private banks.

Among other private banks, FPIs increased stake in Axis Bank (5.94%), ICICI Bank (4.08%), Kotak Mahindra Bank (5.06%), RBL Bank (6.32 per cent), HDFC Bank (3.11 per cent), while they have cut stake in Federal Bank (-8.0 per cent), IndusIndBank (-2.67 per cent) and IDFC First Bank (-1.68 per cent).

PSU banks

However, FPI stakes in public sector banks were static during the last fiscal. The FPI stake in Bank of Baroda and Canara Bank rose 2.32 per cent and 1.28 per cent respectively, while it went up just 0.35% in State Bank of India, the country’s largest lender.

They have cut stake in Indian Overseas Bank (-0.11 per cent), Union Bank of India(-0.63 per cent) and Indian Bank (-1.33 per cent) while increased it by (0.76 per cent) in Punjab National Bank,

Experts say PSBs were hamstrung by wobbly balance sheets and inadequate capital. Also, the likely stress due to the pandemic is keeping foreign investor away.



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RBI to conduct customer satisfaction survey on bank mergers, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) has decided to conduct a customer satisfaction survey to find out the impact of the recent mergers of state-owned banks on banking services being availed by individuals.

Among other things, the respondents will be asked whether the merger was positive from the point of customer services. The choice before the customer will be to tick one of the following options — strongly agree; agree; neutral; disagree; or strongly disagree.

The proposed survey will cover a total of 20,000 respondents from 21 states, including Uttar Pradesh, Maharashtra, West Bengal, Tamil Nadu, Bihar, Karnataka, Madhya Pradesh, and Gujarat. In all, there will be 22 questions.

Of the 22, a set of four questions has been drafted separately for assessing customer service and grievance redress issues of customers of branches of banks that have been merged with other banks in the year 2019 and 2020.

Among public sector banks, Dena Bank and Vijaya Bank were merged with Bank of Baroda; Oriental Bank of Commerce and United Bank of India with Punjab National Bank; Syndicate Bank with Canara Bank; Allahabad Bank with Indian Bank; Andhra Bank and Corporation Bank with Union Bank of India.

Also, Lakshmi Vilas Bank was merged with DBS Bank.

The questions related to mergers are: ‘I did not face any problem in availing services after the merger’; ‘I faced problems in the following product(s)/service(s)/area(s)’; and ‘The nature of problem I faced in the product(s)/service(s)/area(s)’.

The participants will also be asked: “overall, the merger has been positive from customer service perspective”; and options against this are ‘strongly agree’; ‘agree’; ‘neutral’; ‘disagree’; and ‘strongly disagree’.

While inviting quotations for conducting the ‘Bank Customers’ Satisfaction Survey’ from survey agencies, the central bank said the approved vendor will be required to conduct interview over phone with recording of customers of bank branches falling in identified states.

The RBI will provide the contact number of the customers of bank branches selected from the 21 states. The selected agency will have to complete the survey work and submit the report to the RBI by June 22, 2021.

Request for quotations (RFQ) document said the questions have been framed to capture the customer’s experience and perception of the grievance redress mechanism of his/her bank. It is also for awareness about the grievance redressal mechanism of the bank and the banking ombudsman.



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Indian banks back in British court to pursue Vijay Mallya bankruptcy order, BFSI News, ET BFSI

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A consortium of Indian banks led by the State Bank of India (SBI) was back for a High Court hearing in London on Friday in pursuit of a bankruptcy order against embattled liquor tycoon Vijay Mallya, as they attempt recovery of debt from loans paid out to his now-defunct Kingfisher Airlines.

At a virtual hearing before Chief Insolvencies and Companies Court (ICC) Judge Michael Briggs, both sides presented closing arguments in the case being heard following an amendment to a bankruptcy petition filed last year.

While the Indian banks argue a right to waive their security over the Indian assets involved in the case in order to recover their debt in the UK, lawyers for the 65-year-old businessman counter that the funds in question involved public money held by state-owned banks in India which precludes them from such a security waiver.

They also point to ongoing interest rate legal challenges in India that impact upon the applicability of a UK bankruptcy order.

“We can’t second guess what’s going to happen in India,” said barrister Marcia Shekerdemian, arguing on behalf of SBI and others.

Mallya‘s barrister, Philip Marshall, referred to witness statements of retired Indian judges in previous hearings to reiterate that there is “public interest under Indian law” by virtue of the banks being nationalised.

“Any security cannot be unilaterally waived,” he said.

Judge Briggs said he would now deliberate on the details and deliver a judgement in a timely manner, expected in the coming weeks.

The SBI-led consortium of 13 Indian banks, which also includes Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd, had initiated the proceedings against Mallya in December 2018.

There have been a series of hearings in the case since then as part of their efforts to recoup around 1.145 billion pounds in unpaid loans. There have also been separate but related hearings to allow the release of court-held funds for Mallya to meet his legal and living expenses.

The businessman, meanwhile, remains on bail as the UK Home Office deals with a “confidential” legal issue in the unrelated extradition matter.

The High Court was informed earlier this year that the businessman had applied for “another route” to stay in the UK, which most likely refers to asylum and such an application would have to be addressed confidentially before UK Home Secretary Priti Patel can sign off on the court’s extradition order, on charges of fraud and money laundering related to loans acquired for Kingfisher Airlines.



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Government infuses Rs 14,500 crore capital into four public sector banks, BFSI News, ET BFSI

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NEW DELHI: The government has infused Rs 14,500 crore, mainly into banks that are under the RBI’s prompt corrective action framework to improve their financial health.

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.

Of the total infusion, Rs 11,500 crore has gone to these three banks while the remaining Rs 3,000 crore has been infused into Bank of India.

According to a government notification, Rs 4,800 crore has been provided to Central Bank of India, Rs 4,100 crore to Indian Overseas Bank and Kolkata-based UCO Bank has got Rs 2,600 crore.

The capital infusion will help these banks to come out of the Reserve Bank of India‘s prompt corrective action framework.

The fund infusion has been done through non-interest bearing recapitalisation bonds with maturity varying between March 31, 2031 and March 31, 2036.

The investment in the special securities by public sector banks would not be considered as an eligible investment which is required to made in government securities in pursuance of any statutory provisions or directions applicable to the investing bank, it said.

Most of the large state-owned lenders — including State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, and Indian Bank — have already raised money from various market sources, including share sale on a private placement basis.

For the current financial year, the government had allocated Rs 20,000 crore for capital infusion into the public sector banks for meeting regulatory requirements.

Punjab & Sind Bank was given Rs 5,500 crore in November last year.

Separately, Central Bank of India and Bank of India informed stock exchanges about the fund infusion by the government.



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

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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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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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PNB sets-up subsidiary to manage credit card business, BFSI News, ET BFSI

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State-run Punjab National Bank (PNB) has set up a wholly-owned subsidiary to manage its credit card business, the bank said on Wednesday. A wholly-owned subsidiary of the bank namely PNB Cards & Services Ltd has been incorporated on March 16, 2021, by the Registrar of Companies, Delhi, it said in a regulatory filing. The subsidiary will undertake the non-financial support services related to credit card business of the bank.

The authorised capital of the company is Rs 25 crore and the paid-up capital is Rs 15 crore, PNB said.

The number of outstanding credit cards at the end of December 2020 of PNB stood at over 4.3 crore (43,402,879), according to the RBI data.

The value of transactions through credit cards was Rs 137.55 crore (Rs 13,755 lakh) at the point of sale (PoS) and Rs 1.17 crore (Rs 117 lakh) at the ATMs during the month.

The number of transactions at PoS were 5,79,244 while at the ATMs the number of transactions through credit cards were 3,871 in December 2020.



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Gautam Guha elected as PNB’s second shareholder director

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Delhi-based Gautam Guha has been elected as the second shareholder director of Punjab National Bank, the country’s second largest public sector bank.

Guha polled the maximum votes at the Extraordinary General Meeting (EGM) of shareholders held on Wednesday, filings made by the bank with stock exchanges revealed.

Three persons (all aged 66 years) — Gautam Guha, Padmanabhan AA (from Chennai) and Ramesh Chandra Agrawal (from Prayagraj) — were in the fray for being elected as the second shareholder director at the EGM.

PNB already has a shareholder director in Asha Bhandarker, who was elected on September 12, 2018 for a period of three years.

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Bad bank may be led by private lenders for greater flexibility, BFSI News, ET BFSI

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Private sector banks and entities are being tipped for taking 51% stake in the proposed bad bank with public sector lenders taking the rest, according to reports.

However, the lenders with links with bad assets housed in the bad bank will not be allowed to invest in it.

How will a private sector-led bad bank help?

With the majority ownership vested in the private sector, it would lead to flexibility in decision making.

The chief economic advisor had pitched for a private sector-led bad bank earlier.

“The bad bank will certainly help in consolidating some of the non-performing assets. It’s important to also think about implementing the bad bank in the private sector that enables (faster) decision making,” he had said.

The move would keep the organisation out of the purview of government scrutiny of Central Central Bureau of Investigation (CBI), Comptroller and Auditor General of India (CAG), Central Vigilance Commission (CVC).

How does the private sector benefit?

There are about Rs 2 lakh crore of toxic assets that can come under the bad bank which the private sector can manage for fees.

The current plan

Nine banks including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) and two non-bank lenders are likely to put in Rs 7,000 crore jointly as initial capital in the proposed bad bank that aims to help extract funds stuck in non-performing loans.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank along with two state-run financiers of power projects-Power Finance Corp (PFC) and Rural Electrification Corp (REC). All these 11 entities will own an equal stake in the proposed bad bank with little over 9% equity each.

ICICI Bank, Axis Bank and Life Insurance Corp of India (LIC)-owned IDBI Bank are also among the shareholders.

Assets

Lenders have identified about Rs 2 lakh crore of bad loans for which they expect Rs 40,000-50,000 crore. These assets will be transferred to the new ARC at 15% upfront cash, about the level of capital being infused into the company.



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