Tag: uco bank

Will profitable PSUs need capital support from govt this year?, BFSI News, ET BFSI

Banking & Finance

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The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet regulatory requirements.

The government in Budget 2021-22 made an allocation of Rs 20,000 crore for capital infusion in the state-owned banks.The capital position of banks would be reviewed in the next quarter, and depending on the requirement, infusion will be made to meet the regulatory needs.

In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks.

Going forward, the rise in stressed assets would determine capital requirement. If numbers are anything to go by, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.

What Icra says

As per Icra’s estimates, public sector banks (PSBs) may not need the capital budgeted by the government for FY22, even with enhanced capital requirements.

However, banks are advised to keep provisions for any unforeseen events as it would provide confidence to banks, investors and credit growth. Icra said that large private sector banks (PVBs) also remain well-capitalised though few mid-sized ones could need to raise capital.

“We continue to maintain our credit growth estimate of 7.3-8.3 per cent for banks for FY2022 compared to 5.5 per cent for FY2021,” Icra said.

Despite expectations of moderation in gains on bond portfolios because of expectations of rising bond yields in FY22, the return on equity for banks is likely to remain steady at 4.4-7.6 per cent for PSBs (5.1 per cent in FY21) and 9.5-9.9 per cent for PVBs (10.5 per cent in FY2021), the report said.

PCA framework

Will profitable PSUs need capital support from govt this year?

Last month, the Reserve Bank of India removed UCO Bank and Indian Overseas Bank from its prompt corrective action framework, following improvement in various parameters and written commitment from them that would comply with the minimum capital norms.

The only public sector lender left under the PCA framework is Central Bank of India.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset. These restrictions disable the bank in several ways to lend freely and force it to operate under a restrictive environment that turns out to be a hurdle to growth.

Last financial year, the government infused Rs 20,000 crore in the five public sector banks. Out of this, Rs 11,500 crore had gone to three banks under PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India.

The government infused Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank and Kolkata-based UCO Bank got Rs 2,600 crore. The government has infused over Rs 3.15 lakh crore into public sector banks (PSBs) in the 11 years through 2018-19.

In 2019-20, the government infused a capital of Rs 70,000 crore into PSBs to boost credit for a strong impetus to the economy.



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PSU banks likely to get capital support in Q4 to meet regulatory requirements, BFSI News, ET BFSI

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New Delhi, The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet the regulatory requirements. The government in the Budget 2021-22 has made an allocation of Rs 20,000 crore for the capital infusion in the state-owned banks.

bank

In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks, sources said.

Going forward, they said, the rise in stressed assets would determine capital requirement.

If numbers are anything to go by, the sources said, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.

Last month, the Reserve Bank removed UCO Bank and Indian Overseas Bank from prompt corrective action framework (PCAF), following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

However, the only public sector lender left under the PCA framework is Central Bank of India. PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital, and quantum of the non-performing asset.

PCA restrictions disable the bank in several ways to lend freely and force it to operate under a restrictive environment that turns out to be a hurdle to growth.

Last financial year, the government infused Rs 20,000 crore in the five public sector banks. Out of this, Rs 11,500 crore had gone to three banks under the PCA — UCO Bank, Indian Overseas Bank, and Central Bank of India.

The government infused Rs 4,800 crore in Central Bank of India, Rs 4,100 crore in Indian Overseas Bank and Kolkata-based UCO Bank got Rs 2,600 crore.

The government has infused over Rs 3.15 lakh crore into public sector banks (PSBs) in the 11 years through 2018-19. In 2019-20, the government infused Rs 70,000 crore capital into PSBs to boost credit for a strong impetus to the economy.



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Cabinet committee OKs seven appointments of executive directors at six PSBs, BFSI News, ET BFSI

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The Appointments Committee of the Cabinet (ACC) today approved seven appointments of executive directors at six public sector banks, the government said in a release accessed by ETBFSI. All appointments are likely to come into affect from the date of assumption of office.

The appointments will be effective provided that the officials are eligible for extension of the term of office, after a review of their performance by two years, or until further orders, whichever is earlier.

Rajneesh Karnatak has been appointed as the executive director of Union Bank of India for a period of three years. Karnatak is currently the chief general manager of Punjab National Bank.

Roy Joydeep Dutta has been appointed as the executive director of Bank of Baroda for three years, and is currently the chief general manager of the bank.

Nidhu Saxena has been appointed as the executive director of Union Bank of India for three years. Currently, Saxena is the general manager of UCO Bank. Saxena’s appointment can also come into force after February 1, 2022, or until further orders, whichever is earlier.

Kalyan Kumar has been appointed as the executive director of Punjab National Bank for three years. Kumar is currently the chief general manager of Union Bank of India.

Ashwani Kumar, currently the chief general manager of Punjab National Bank, has been appointed as the executive director of Indian Bank for three years.

Yadav Ramjass, currently the chief general manager of Bank of Baroda, has been appointed as the executive director of Punjab & Sind Bank. Ramjass’ appointment will be effective up to his date of attaining superannuation – April 30, 2024 – or until further orders, whichever is earlier.

Asheesh Pandey, currently the chief general manager of Union Bank of India, has been appointed as the executive director of Bank of Maharashtra for a period of three years, with effect from the date of assumption of office on or after December 31, or until further orders.



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Here’s a recap of key managerial announcements in top public sector banks so far, BFSI News, ET BFSI

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Public sector banks have been witnessing many changes in their top management, be it extension of tenure or appointment of new key managerial personnel.

The finance ministry had in July asked the Department of Personnel and Training (DoPT) to extend the tenure of a number of managing directors and executive directors to ensure stability and continuity at state-owned lenders.

The Appointments Committee of the Cabinet (ACC), headed by Prime Minister Narendra Modi, has extended the tenure for three managing directors and chief executive officers, and 10 executive directors of public sector banks.

Only one bank, Indian Bank, has appointed its new MD and CEO so far..

Here’s a quick recap of all the noteworthy movements, recommendations and tenure extensions of top PSB officials:

Indian Bank

Shanti Lal Jain was appointed the Managing Director and Chief Executive Officer of Indian Bank for a period of three years. His tenure started from September 1, 2021, and is extendable for two years or until attaining the age of retirement, whichever is earlier.

He replaced Padmaja Chunduru, whose term with the bank ended on August 31. Jain was previously working as the Executive Director of Bank of Baroda.

Meanwhile, the ACC extended the term of Shenoy Vishwanath Vittal, executive director, till the age of superannuation.

PNB

BBB last month recommended Atul Kumar Goel as the MD & CEO of Punjab National Bank, after interviewing 11 candidates.

Apart from this, BBB has kept Ajay Kumar Shrivastava on the reserve list for the post.

Currently, Goel is serving as the MD & CEO of Kolkata-based UCO Bank. He is also on the boards of Star Union Dai-ichi Life Insurance and The New India Assurance.

The government in August extended the term of S S Mallikarjuna Rao, the existing MD & CEO of PNB chief till January 31, 2022. Rao’s term was supposed to end on September 18, 2021.

Further, terms of Sanjay Kumar and Vijay Dube, executive directors, have been extended until their age of superannuation.

UCO Bank

The government may appoint Soma Sankara Prasad, currently the deputy managing director of State Bank of India, as managing director of UCO Bank.

According to PTI, since Prasad was in the reserve list for the post of managing director at Indian Bank, he has been recommended to head UCO Bank. The final decision will be taken by the ACC.

The government had extended the tenure of Atul Kumar Goel for two years. His term was scheduled to end on November 1, 2021.

Bank of Maharashtra

The government extended the tenure of AS Rajeev, MD and CEO of Bank of Maharashtra, for a two years beyond the notified term, expiring on December 1, 2021.

Bank of Baroda

The tenure of Ajay Khurana as executive director has been extended by two years. He is also on the reserve list for PNB’s MD and CEO post. Meanwhile, the tenure of Vikramaditya Singh Khichi, another ED, has been extended until his age of superannuation.

Canara Bank

The tenure of A Manimekhalai, executive director, has been extended by two years.

Bank of India

The tenure of P R Rajagopal, executive director, has been extended by two years. .

Union Bank of India

The government has extended the terms of Gopal Singh Gusain and Manas Ranjan Biswal as executive directors until their age of retirement.

Central Bank of India

The tenure of Alok Srivastava has been extended until his age of superannuation.



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Srei lenders face Rs 5,000 cr provisioning for Srei loans, eroding DHFL recovery, BFSI News, ET BFSI

Banking & Finance

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Lenders which were preparing to add the big DHFL recovery of over Rs 35,000 crore to their profits, may have to temper their celebrations. They will have to make provisioning for loans of Srei group firms, on which RBI has put an administrator.

Bankers will have to make an immediate provision of over Rs 5,000 crore, according to the rules.

According to the Reserve Bank of India’s (RBI’s) norms, Srei exposure will be treated as substandard asset, which is the first stage of non-performing asset (NPA). Banks will now have to set aside around 15 per cent provision for secured loans while it would be higher for unsecured credit.

Srei loans were stressed for many quarters, but lenders could not classify them as NPAs due to restrictions by the tribunals. However, they have made provisions for the Srei loans under general and Covid provisions.

Based on the results of a forensic audit, banks may have to even make 100 per cent provisions if the accounts are treated as fraud.

Promoters move court

Meanwhile, Srei Group promoters have moved the Bombay High Court challenging Reserve Bank of India’s decision to supersede the board of two group companies, in preparation for sending them to bankruptcy courts.

Srei group promoters are seeking stay on any insolvency proceedings at group companies Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd, whose board the regulator sacked and appointed an administrator.

The promoters are also seeking stay on the appointment of the administrator. On October 4, the banking regulator superseded the board of directors of Kolkata-based Srei Infrastructure Finance and Srei Equipment Finance and said that it will initiate insolvency proceedings with the National Company Law Tribunal (NCLT). The RBI move makes Srei the second non-bank lender to be referred to the bankruptcy courts after DHFL.

The RBI cited governance concerns and defaults by the company and appointed Rajneesh Sharma, former chief general manager, Bank of Baroda as an administrator of the company.

In June 2021, Srei companies reported to the exchanges that the RBI inspection had flagged loans worth Rs 8,576 crore as related party loans. These accounted for nearly 30% of the group’s consolidated debt.

The loans

Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of Rs 30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than Rs 2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than Rs 2,000 crore.

The bank loans have turned non-performing assets after the end of the September quarter.

The company had earlier announced that Arena Investors, Makara Capital and others had evinced interest to invest in the company to the tune of Rs 2,200 crore. The company had formed a strategic coordination committee to coordinate, negotiate and conclude discussions with the investors.



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Will Srei firms head for bankruptcy after RBI supersedes boards?, BFSI News, ET BFSI

Personal Finance

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The Reserve Bank of India‘s move to supersede the boards of Srei group firms may see the companies head for the National Company Law Tribunal for corporate insolvency resolution under the IBC.

Most banks favour DHFL-type resolution for the group. However, the move may be opposed by Srei promoters, who have submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act 2013 in October 2020.

What Srei says

“We are shocked by the RBI’s move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020. Moreover, we have not received any communications from banks on any defaults,” Srei group said.

“The question of IBC does not arise because we have already submitted a debt realignment plan which has been accepted by some creditors. The plan involves paying every creditor their entire dues in a structured manner over time. in the past 10 months, the banks have collected Rs 3,000 crore through the TRA account. Hence, we are already repaying our loans. So the question of default does not arise. As banks had control over the company’s cash flow, we could not pay any other creditors. Nevertheless, the matter is sub-judice since it is with the tribunals and counts,” Srei had said. according to a report.

Srei Group was in talks for a debt realignment and lenders were waiting for the outcome of an ongoing forensic audit to take a call on debt realignment.

Related party lending?

In FY2020, RBI audit had flagged Rs 8,576 crore of probable related-party lending by Srei group.

“We had submitted a proposal to pay the full amount to banks under a scheme filed under Section 230 of the Companies Act 2013 in October 2020. However, they have neither accepted the scheme nor proposed a payment schedule acceptable to them. Banks have been controlling the company’s cash flow since November 2020. Almost Rs 3000 crore has been collected by them, out of which they have been disbursing to themselves, Srei said.

The loans

Srei Infrastructure, and its subsidiary Srei Equipment Finance, together owe lenders and debenture holders a total of Rs 30,000 crore. Kolkata-based UCO Bank is the lead lender, with more than Rs 2,000 crore of exposure. State Bank of India (SBI)’s exposure to the group is also more than Rs 2,000 crore.

The bank loans have turned non-performing assets after the end of the September quarter.

The company had earlier announced that Arena Investors, Makara Capital and others had evinced interest to invest in the company to the tune of Rs 2,200 crore. The company had formed a strategic coordination committee to coordinate, negotiate and conclude discussions with the investors.

The suitors

Till date, it received expressions of interest from 11 investors and has signed non-disclosure agreements with nine of them. Two Investors — Makara and Arena — had submitted non-binding term sheets indicating their intent for investment.

Srei Infrastructure, which is a listed entity, reported a net loss of Rs 971 crore in the June quarter as against Rs 23 crore net profit in the year ago period as provisions on loans rose nearly seven times to Rs 439 crore over the same period as repayment collections were hit due to the impact of the Covid 19 pandemic.

“The appointment of the administrator by the RBI paves the way for the corporate resolution process of the two Srei entities. Once the NCLT approves the same, the board of directors of these entities will stand suspended. A moratorium will be imposed on any proceedings against these entities, enforcement of any security or transfer of assets.

The CIRP will enable foreign creditors, including ECB lenders and bond holders to restructure their debts alongside domestic creditors. If a resolution plan is successfully approved under the CIRP, it will allow the companies to start on a clean slate, which is missing under the RBI stressed assets framework. This decision of RBI follows on the heels of a successful resolution process of DHFL,” Aashit Shah, Partner, J Sagar Associates, said.



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Soma Sankara Prasad likely to be next UCO Bank MD, BFSI News, ET BFSI

Banking & Finance

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The government is considering appointing Soma Sankara Prasad, the deputy managing director of State Bank of India, as managing director of Kolkata-based UCO Bank. The Banks Board Bureau (BBB) has suggested the name of UCO Bank Managing Director Atul Kumar Goel for heading Punjab National Bank as MD. The managing director position of PNB will fall vacant after the superannuation of S S Mallikarjuna Rao in January.

According to sources, since Prasad was in the reserve list when the interview for appointment for managing director of Indian Bank took place earlier this year, he has been recommended to head UCO Bank subject to various clearances including vigilance.

The final view in this regard would be taken by the Appointments Committee of the Cabinet (ACC) headed by the Prime Minister, sources said.

The BBB, the headhunter for state-owned banks and financial institutions, in May had conducted interviews for the position of MD of Indian Bank. Post interview, Shanti Lal Jain was recommended for the post while Prasad was the candidate on the reserve list.

Last month, the Reserve Bank removed UCO Bank from its Prompt Corrective Action (PCA) Framework following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

The lender also apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet the financial commitments. The public sector bank plunged under PCA in May 2017.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital and quantum of the non-performing asset.

The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.

UCO Bank had posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter of the fiscal ended June 30, as bad loans fell significantly.

The lender trimmed its gross non-performing assets (NPAs or bad loans) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020.

The net NPAs were down at 3.85 per cent (Rs 4,387.25 crore) from 4.95 per cent (Rs 5,138.18 crore). PTI DP ANZ MR



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Soma Sankara Prasad likely to be next UCO Bank MD, BFSI News, ET BFSI

Banking & Finance

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New Delhi, The government is considering appointing Soma Sankara Prasad, the deputy managing director of State Bank of India, as managing director of Kolkata-based UCO Bank. The Banks Board Bureau (BBB) has suggested the name of UCO Bank Managing Director Atul Kumar Goel for heading Punjab National Bank as MD. The managing director position of PNB will fall vacant after the superannuation of S S Mallikarjuna Rao in January.

According to sources, since Prasad was in the reserve list when the interview for appointment for managing director of Indian Bank took place earlier this year, he has been recommended to head UCO Bank subject to various clearances including vigilance.

The final view in this regard would be taken by the Appointments Committee of the Cabinet (ACC) headed by the Prime Minister, sources said.

The BBB, the headhunter for state-owned banks and financial institutions, in May had conducted interviews for the position of MD of Indian Bank. Post interview, Shanti Lal Jain was recommended for the post while Prasad was the candidate on the reserve list.

Last month, the Reserve Bank removed UCO Bank from its Prompt Corrective Action (PCA) Framework following improvement in various parameters and a written commitment that the state-owned lender will comply with the minimum capital norms.

The lender also apprised the RBI of the structural and systemic improvements that it has put in place, which would help the bank in continuing to meet the financial commitments. The public sector bank plunged under PCA in May 2017.

PCA is triggered when banks breach certain regulatory requirements such as return on asset, minimum capital and quantum of the non-performing asset.

The restrictions disable banks in several ways to lend freely and force them to operate under a restrictive environment that turns out to be a hurdle to growth.

UCO Bank had posted over a four-fold jump in its net profit to Rs 101.81 crore for the first quarter of the fiscal ended June 30, as bad loans fell significantly.

The lender trimmed its gross non-performing assets (NPAs or bad loans) significantly to 9.37 per cent of the gross advances as of June 30, 2021, as against 14.38 per cent at June-end 2020.

The net NPAs were down at 3.85 per cent (Rs 4,387.25 crore) from 4.95 per cent (Rs 5,138.18 crore). PTI DP ANZ MR



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RBI lifts PCA curbs on Indian Overseas Bank, BFSI News, ET BFSI

Banking & Finance

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The Reserve Bank of India today lifted Prompt Corrective Action restrictions from the Indian Overseas Bank, the central bank said in a release.

The decision came after the bank reported its earnings for the year ended March 31, 2021, and the RBI observed that IOB was not in breach of the PCA parameters.

IOB has also provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis and has said that it would make structural and systemic improvements, RBI said in the release.

The RBI has said that it will continue monitoring the bank.

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

Earlier this month, RBI had lifted PCA restrictions on UCO Bank. Now, only Central Bank of India remains in the list.



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CBI books firm, CMD for Rs 1.5K cr bank fraud, BFSI News, ET BFSI

Banking & Finance

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Shimla: The Central Bureau of Investigation (CBI) has registered a case against a Delhi-based private company, which has its industrial unit in Himachal Pradesh, and others including its promoter & CMD; director/guarantor & two corporate guarantors; unknown public servant(s)/unknown others, for allegedly conspiring with each other to defraud banks, while causing a loss of around Rs 1,528.05 crore to the consortium of 16 banks led by Bank of India.

The consortium banks were – Bank of India, Union Bank of India, Andhra Bank, Punjab & Sind Bank, Indian Overseas Bank, State Bank of Hyderabad, Central Bank of India, Corporation Bank, HDFC Bank Limited, Oriental Bank of Commerce, Saraswat Co-operative Bank, State Bank of Patiala, UCO Bank, Allahabad Bank, Standard Chartered Bank & DBS.

The case has been registered against Indian Technomach Company Limited, its promoter & CMD Rakesh Kumar Sharma, director/guarantor Vinay Kumar Sharma, Gurupath Merchandise Limited (corporate guarantor), Kolkata, and Thunder Traders Limited (Corporate Guarantor), Kolkata, and unknown public servants/others.

CBI officials said searches were conducted on Wednesday at various premises, including at Kangra and Paonta Sahib in Sirmaur district, Himachal Pradesh.

It was alleged that the private company, engaged in manufacturing of ferrous and non-ferrous metal, obtained credit facilities/loans from the consortium of 16 nationalised/private banks from 2008 to 2013 with Bank of India as lead bank.

The accused had allegedly conspired with an intention to defraud the banks through said acts and diverted funds from the loan account, thus causing a loss of Rs 1528.05 crore to the said consortium of the banks.

The account was classified as NPA in the books of accounts of Bank of India with effect from March 31, 2014 due to overdue status of the account in line with IRAC guidelines. The account was red-flagged by Bank of India, as advised by RBI in May 2015 and was declared a fraud in February 2016.



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