Tag: uco bank

Government extends tenure of UCO Bank’s MD & CEO for 2 years, BFSI News, ET BFSI

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State-owned UCO Bank on Saturday said the government has extended the term of its MD and CEO Atul Kumar Goel for two years.

The central government, through a notification dated August 26, extended the term of office of Atul Kumar Goel as UCO Bank’s managing director and chief executive officer (MD & CEO), for a period of two years or until further orders, whichever is earlier, the bank said in a regulatory filing.

Goel’s current term was to expire on November 1, 2021.

On Friday, Punjab National Bank and Bank of Maharashtra had also informed about extensions given to their MD & CEOs.

The government has also extended the terms of two executive directors each in Punjab National Bank and Union Bank of India, and one executive director of Central Bank of India.

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RBI panel, BFSI News, ET BFSI

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Well governed large urban cooperative banks (UCBs) which meet parameters should be allowed to function along the lines of small finance banks (SFBs) and universal banks, a Reserve Bank of India (RBI)-appointed expert panel has suggested.

The four-tiered structure

A Reserve Bank-appointed committee has suggested a four-tier structure for UCBs depending upon the deposits and prescribed different capital adequacy and regulatory norms for them based on their sizes.

The RBI committee said that UCBs can be split into four categories — Tier-1 with deposits up to Rs 100 crore; Tier-2 with deposits between Rs 100-Rs 1,000 crore, Tier-3 with deposits between Rs 1,000 crore to Rs 10,000 and Tier-4 with deposits of over Rs 10,000 crore.

It suggested that the minimum Capital to Risk-Weighted Assets Ratio (CRAR) for them could vary from 9 per cent to 15 per cent and for Tier-4 UCBs the Basel III prescribed norms.

The panel said tier-3 urban cooperative banks with deposits of Rs 1,000 crore to Rs 10,000 crore must function like SFBs if they meet a capital adequacy ratio of 15%. The loan portfolio of tier-3 urban cooperative banks shall conform to the stipulations made for SFBs, it added.

Tier-4 UCBs with deposits of over Rs 10,000 crore should be allowed to function like universal banks if they meet the 9% capital adequacy ratio requirement, leverage ratio and has a fit and proper board and chief executive. Such UCBs can be given operational freedom for branch expansion and authorized dealer licence on a par with universal banks.

Smaller UCBs with deposits of up to ₹100 crore will be categorized as tier-1 UCBs and those with deposits of ₹100-1,000 crore will be categorized as tier-2 UCBs.

The RBI panel has also prescribed separate ceilings for home loans, loan against gold ornaments and unsecured loans for different categories of UCBs.

In February, the RBI had the constitution of the Expert Committee on Primary (Urban) Co-operative Banks under the chairmanship of N S Vishwanathan, former RBI Deputy Governor.

Mergers of UCBs

The committee emphasised that all-inclusive directions (AID) should be treated on a par with moratorium under Section 45 of the Banking Regulation Act.

If AID is imposed, a bank should not continue thereunder beyond the time permitted to keep a bank under moratorium — three months extendable by a maximum of another three months.

Currently about 50 UCBs are under AID, causing lot of hardship to depositors as deposit withdrawals are capped.

On consolidation of UCBs, the panel said that RBI should be largely neutral to voluntary consolidation except where it is suggested as a supervisory action.

“However, the RBI should not hesitate to use the route of mandatory merger to resolve UCBs that do not meet the prudential requirements after giving them an opportunity to come up with voluntary solutions,” it said.

The minimum capital stipulation provides an embedded size to a UCB.

The committee said that under the Banking Regulation (BR) Act, the RBI can prepare scheme of compulsory amalgamation or reconstruction of UCBs, like banking companies.

This may be resorted to when the required voluntary actions are not forthcoming or leading to desired results.

The panel further said Supervisory Action Framework (SAF) should follow a twin-indicator approach — it should consider only asset quality and capital measured through NNPA and CRAR — instead of triple indicators at present. The objective of the SAF should be to find a time-bound remedy to the financial stress of a bank.

If a UCB remains under more stringent stages of SAF for a prolonged period, it may have an adverse effect on its operations and may further erode its financial position, it said.

The RBI may also consider superseding the board if the bank fails to submit a merger/conversion proposal within the prescribed timeframe and take steps to avoid undue flight of deposits once the news becomes public. A Stage III UCB is one where its capital to risk-weighted assets ratio/CRAR is less than 4.5 per cent and/or net non-performing assets/NNPAs is greater than 12 per cent.

Housing loans

On housing loans, the panel said the maximum limit on housing loans may be prescribed as a percentage of Tier 1 capital, subject to RBI-prescribed monetary ceiling for Tier 1 UCBs (but higher than the present ceiling) and respective board of directors-approved ceiling for Tier 2 UCBs.

For Tier 2 UCBs, the risk weight on housing loans may be prescribed based on size of the loan and loan-to-value (LTV) ratio, in line with SCBs.

The panel has also made recommendations regarding loan against gold ornaments with bullet repayment option.

It also said that umbrella organisation (UO) is expected to play a crucial role in the strengthening of the sector.

For that, it must be a financially strong organisation with adequate capital and a viable business plan. The minimum capital for the UO should be Rs 300 crore with CRAR and regulatory framework akin to the largest segment of NBFCs, the panel said.

Alos, in the long run, the UO may take up the role of a Self-Regulatory Organisation (SRO) for smaller UCBs.

The report said there were two broad sources of constraints because of which the sector has underperformed.

The first set of factors are internal to the sector. Many UCBs are small and do not have either the capability – financial or human resources – and/or possibly inclination to provide technology enabled financial services.

The second set of constraints are external to the banks. These emanate from the rather restrictive regulatory environment under which they have had to operate.

There were suggestions that licensing of new UCBs should be immediately opened up. There are over 1,500 UCBs already. The committee has suggested that the existing UCBs may be allowed to expand their footprint.



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RBI to HC, BFSI News, ET BFSI

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In a revelation, the Reserve Bank of India (RBI) has clarified that banks all over the country are witnessing increasing incidents of fraud due to their failure to adhere to its directives issued from time to time. In an affidavit submitted to the Nagpur bench of Bombay high court, the apex bank further disclosed that it doesn’t have the power to conduct investigations in banking frauds, nor does it have the machinery to do it.

The affidavit was filed while hearing a suo moto PIL for Rs25 crore losses caused to UCO Bank. Rajnish Vyas has been appointed as amicus curiae in the PIL. The embezzlement had taken place due to alleged forgery committed by a bank officer at its Wardha and Hinganghat branches. A division bench comprising justices Vinay Deshpande and Amit Borkar adjourned the hearing by six weeks.

Filed by RBI’s counsel SN Kumar, the affidavit added that as a regulator of the banking system in the country, it issued ‘Master Circular of Frauds’ to sensitize banks against scams and to have deterrent systems. “In spite of guidelines issued from time to time, it was observed that the frauds perpetrated in banks showed an increasing trend, mainly on account of non-adherence or improper implementation of circular directives issued by us. To enable the banks to have all current instructions in one place, a master circular incorporating all guidelines, instructions and directives on the subject was issued on August 1, 2001,” the affidavit mentioned.

Moreover, to enable the Government of India to have the required information on frauds, a suitable reporting system was introduced. Though the circular of March 22, 2002, has prescribed the period of reporting of frauds, it was realized that the banks aren’t following it scrupulously, the apex bank said.

At the RBI governor’s instance, the Central Vigilance Commission (CVC) has set up a high-level group to study incidents of fraud and suggest measures to prevent them. “This group observed that banks are not adhering to the time frame stipulated by RBI for reporting fraud cases. It has suggested that suitable penal action should be taken against defaulting banks. The banks are supposed to report frauds within a week of their detection and then a detailed report needs to be submitted in the prescribed format in the next three weeks,” the affidavit said.

The top bank added that to minimize incidents of fraud in the banking system, it has been making continuous efforts and regularly issuing circulars directing the banks to initiate appropriate action to contain them. “The Banking Regulation Act doesn’t empower RBI to conduct any investigations. The action may be initiated only after the offence is established by the law enforcement agencies. It’s mandatory for the banks to lodge a complaint of frauds with the police,” Kumar said.



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UCO Bank posts four-fold rise in Q1 profit at ₹102 crore

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Riding on the back of a higher net interest income and other income UCO Bank saw over four-fold rise in net profit at ₹102 crore for the quarter ended June 30, 2021, as against ₹21 crore same period last year.

Net interest income increased by 15 per cent at ₹1,460 crore from ₹1,267 crore same period last year.

“There has been an improvement across all parameters including net interest income, other income, treasury income and recovery from written off accounts. This has given a boost to our operating profit and net profit,” Atul Kumar Goel, MD and CEO, UCO Bank, said at a virtual press conference here on Tuesday.

Other income rises

Other income during the period under review increased by around 25 per cent to ₹970 crore from ₹774 crore same period last year.

On a sequential basis, net profit was up by around 28 per cent as compared to ₹80 crore during the quarter ended March 31, 2021.

The bank’s advances during the quarter under review grew by around five per cent at ₹1,20,849 crore against ₹1,15,236 crore same period last year. Goel expects credit offtake to pick up during the subsequent quarters backed by a steady demand.

“We have recovered from the Covid induced slowdown witnessed in April and May. And things are expected to improve. There is a lot of demand (for credit) from corporates, NBFCs, MSME etc. We are hoping for a growth of around 10 per cent in credit this year,” he said.

Total deposits grew by around nine per cent at ₹2,12,097 crore as on June 30, 2021, as against ₹ 1,95,119 crore same period last year.

NPAs decline

Gross non-performing assets (NPA) reduced to ₹11,322 crore as on June 30, 2021 from ₹16,576 crore last year. Gross NPA as a percentage to advances also came down to 9.37 per cent as against 14.38 per cent last year.

Net NPA also reduced to 3.85 per cent (4.95 per cent).

The bank’s provision coverage ratio increased to 88.53 per cent as on June 2021, up from 86.50 per cent same period last year.

Total provisions increased by 21 per cent to ₹1,127 crore (₹932 crore). Provision for NPA increased by nearly 50 per cent at ₹845 crore (₹565 crore).

Capital adequacy ratio stood at 14.24 per cent and CET-I ratio at 11.32 per cent as June 30.

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Govt set to extend tenures of MDs of PNB, UCO, Bank of Maha, BFSI News, ET BFSI

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The finance ministry has moved a file for extension of tenure of three public sector banks’ managing directors, including Punjab National Bank (PNB), according to sources.

Besides, the ministry has also recommended the Department of Personnel and Training (DoPT) for extension of 10 executive directors (EDs) of various public sector banks.

Tenure extension

The three-year term of S S Mallikarjuna Rao, MD and CEO of PNB, is coming to an end on September 18 but the finance ministry has recommended for extension for four months till January 31, 2022, when Rao attains his superannuation age of 60 years.

Atul Kumar Goel’s term as MD and CEO of UCO Bank has been recommended for a two-year extension beyond November 1 this year. A S Rajeev, MD and CEO of Bank of Maharashtra, has been suggested for an extension of two years beyond December 1.

The finance ministry has simultaneously forwarded the name of S L Jain for the appointment of MD and CEO of Indian Bank. The BBB, the headhunter for state-owned banks and financial institutions, had recommended the name of Jain in May after the interview, according to reports.

With regard to EDs, the ministry has recommended names of 10 for extension of their term till their superannuation age or two years, whichever is earlier.

The MD and CEO of a public sector undertaking is given a maximum tenure of five years as a government guidelines.

The ministry sought extension of the executives from the Appointments Committee of Cabinet (ACC). The proposal has been sent to the Dof Personnel and Training for the same after consultation with BBB. The final call for extension will be taken by the ACC.

Board seats vacant

Ten of the 12 public-sector banks, except State Bank of India (SBI) and Bank of Baroda do not have a chairman.

Also, most non-official director posts, which are occupied by professionals from other fields, remain vacant. There are no employee representatives on PSB boards at present.

A large bank can have four executive directors, six non-official directors (of whom up to three could be shareholder directors), a workman director, and an employee director, in addition to a nominee each of government and the RBI, the non-executive chairman and MD & CEO.

With posts vacant, banks are finding it difficult to fill the quorum of their board sub-committee meetings such as risk management, capital raising, audit and even management committee meetings.



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FinMin moves file for extension of 3 MDs, 10 EDs of govt-owned banks, BFSI News, ET BFSI

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New Delhi, Jul 25 () The finance ministry has moved a file for extension of tenure of three public sector banks’ managing directors, including Punjab National Bank (PNB), according to sources. Besides, the sources said the ministry has also recommended the Department of Personnel and Training (DoPT) for extension of 10 executive directors (EDs) of various public sector banks.

The three-year term of S S Mallikarjuna Rao, MD and CEO of PNB, is coming to an end on September 18 but the finance ministry has recommended for extension for four months till January 31, 2022, when Rao attains his superannuation age of 60 years.

Atul Kumar Goel’s term as MD and CEO of UCO Bank has been recommended for a two-year extension beyond November 1 this year. A S Rajeev, MD and CEO of Bank of Maharashtra, has been suggested for an extension of two years beyond December 1.

The finance ministry has simultaneously forwarded the name of S L Jain for the appointment of MD and CEO of Indian Bank. The BBB, the headhunter for state-owned banks and financial institutions, had recommended the name of Jain in May after the interview.

With regard to EDs, the ministry has recommended names of 10 for extension of their term till their superannuation age or two years, whichever is earlier.

The MD and CEO of a public sector undertaking is given a maximum tenure of five years as a government guidelines.

According to sources, the ministry sought extension of the executives from the Appointments Committee of Cabinet (ACC). The proposal has been sent to the Dof Personnel and Training for the same after consultation with BBB. The final call for extension will be taken by the ACC.

Interestingly, the Banks Board Bureau (BBB) has also invited applications for appointment of new MDs of PNB.

For PNB, the BBB on June 16, had sought public application for the MD and CEO post. The eligibility criteria as announced in public notice is that the applicant should be in the age group of 45 to 57 years in mainstream banking, of which, at least one year has to be at the board level.

The compensation offered is in line with the MD and CEO of a large public sector bank, it said. DP ANZ HRS hrs



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SBI, HDFC Bank want RBI inspection reports kept under wraps, BFSI News, ET BFSI

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State Bank of India and HDFC Bank have opposed the Supreme Court order that had said the Reserve Bank of India can divulge inspection reports of commercial banks through Right To Information applications. The court has kept the hearing for Thursday. The RBI had allowed making such reports public following a Supreme Court order in 2015. Then, it was agreed that the entire report would not be made public, but the relevant portions on bad debts, and borrowers etc.

However, even such information can disclose much information about the borrowers, which violates various client confidentiality clauses of banks, the lenders argue.

The SC verdict in April

In a major blow to banks, the Supreme Court in April this year had refused to recall its 2015 judgment, which had held that the RBI will have to provide information about the banks and financial institutions (FIs) regulated by it under the transparency law.

Several FIs and banks, including the Canara Bank, the Bank of Baroda, the UCO Bank and the Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.

The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.

“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” a bench of justices L Nageswara Rao and Vineet Saran said.

The order, written by Justice Rao, said in the instant case, the dispute relates to information to be provided by the Reserve Bank of India (RBI) under the Right to Information Act (RTI) and though the information pertained to banks, it was the decision of the RBI that was in challenge and decided by this court.

The RBI stance

The RBI in 2019 has declined to share details of banks inspection reports citing a section of the transparency law that exempts public authority from disclosing information that may prejudicially affect sovereignty, security or economic interests of the country.

Replying to an RTI query, the central bank also said furnishing the requested information will disproportionately divert the resources of the public authority.

The Reserve Bank of India (RBI) was asked to provide copies of all the annual financial inspection reports, concurrent audit or inspection reports carried out between 2007 and 2015 on foreign currency derivative contracts sold by the 19 banks that were earlier penalised by it.

“The requested information pertains to inspection reports of 19 banks for a period of eight years from April 1, 2007 to March 31, 2015. Therefore the total number of reports would be 152 (one report per bank for 19 banks for eight years i.e. 152).

“Furnishing the requested information will disproportionately divert the resources of the public authority,” the RBI said in reply to the RTI query filed by S Dhananjayan.



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SC seeks response of Centre, RBI on plea of PNB against disclosure of info under RTI, BFSI News, ET BFSI

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NEW DELHI: The Supreme Court has refused to grant interim stay on the RBI‘s notice asking Punjab National Bank to disclose information such as defaulters list and its inspection reports under the RTI Act, and sought responses from the Centre, federal bank and its central public information officer.

The apex court tagged the plea of the Punjab National Bank (PNB), which is a public sector unit bank, with a similar pending case filed by HDFC Bank against the RBI’s direction.

“Issue notice. Tag with writ petition (Civil) No.1159 of 2019 (HDFC plea),” a bench comprising justices S Abdul Nazeer and Krishna Murari said, and fixed the plea for hearing on July 19.

Banks are aggrieved by the notices issued by the RBI to them under Section 11(1) of the Right to Information (RTI) Act asking them to part with information pertaining to their inspection reports and risk assessment.

The RTI Act empowers the RBI’s central public information officer (CPIO) to seek information from banks for information seekers.

Earlier on April 28, the top court, on legal grounds, had refused to recall its famous 2015 judgment in the Jayantilal N Mistry case, which had held that the RBI will have to provide information about banks and financial institutions (FIs) regulated by it under the transparency law.

Several FIs and banks, including Canara Bank, Bank of Baroda, UCO Bank and Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.

The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.

“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” the apex court had held.

While dismissing the pleas, the bench, however, had made it clear that it was not dealing with any of the submissions made by the banks on the correctness of the 2015 judgment.

Now, the apex court is seized of several pleas of banks like HDFC and Punjab National Bank against the RBI’s direction to disclose information under RTI.



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Centre may front load capital provisioning for PSBs this year, BFSI News, ET BFSI

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New Delhi, As the Central government draws a plan to privatise at least two public sector banks (PSB) this fiscal, it has also decided to front load capitalisation of state-owned banks so that the balance sheets of some of these entities are strengthened ahead of possible sale.

Sources said that PSBs may be provided this year just after their first quarter results before October. This would be a departure from the practice of previous year when bank capitalisation was undertaken late in the year and towards the end of fiscal.

Even in FY21, a substantial portion of capital was released right at end of the fiscal year in March.

“Front loading of capital will help PSBs to strengthen their financials that may again get impacted this year with weak lending and stress coming back on a lot of their credit assets with Covid pandemic continuing to disrupt businesses. This could also help in taking out weak banks out of the PCA (prompt corrective action) framework that would be helpful in their possible privatisation this year,” said an official source on the condition of anonymity.

The Budget 2021-22 has allocated Rs 20,000 crore towards recapitalisation of PSBs to help them consolidate their financial capacity.

Source said that more than two-third of this capital may be provided by the second quarter.

The government had earlier indicated that banks under prompt corrective action (PCA) framework or weaker banks would be kept out of privatisation as it would be difficult to find buyers for them. This would have left three PSBs, Indian Overseas Bank, Central Bank and UCO Bank, out of the government’s disinvestment plan.

But now the thinking is that they could be brought out of PCA as there are visible signs of improvement in some of the key parameters such as profitability and asset quality (in net NPA terms as they have stepped up provisioning) in the last 3-4 quarters. This could allow them to be considered for privatisation.

Provision of capital earlier in the year will give the necessary boost to them.

Finance Minister Nirmala Sitharaman had announced in her Budget speech this year that two state-run banks along with IDBI Bank would be privatised in FY22.

She also said that one general insurance company would be sold off in the current fiscal.

The recapitalisation roadmap is being redrawn for the PSBs in the current fiscal as the institutions are expected to face stress from the pandemic disruptions with fears that asset quality may further weaken like last year.

Also, the changes in valuation norms AT1 bonds has made the instrument less attractive for banks to raise their capital.

SEBI, though has amended the valuation rule of perpetual bonds in line with objections raised by the finance ministry, it still has said that from April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond. This will make the most used route of raising capital by banks less attractive.

Sources said that the Finance Ministry has already started a preliminary exercise to determine the capital requirement of banks in wake of limitations on fund raising norms and expected rise in bad assets during the time of the pandemic. Based on the inputs received by banks, additional capital may be provided to them from budgetary resources at the earliest.

On its part, government is strengthening the banking segment by merger and amalgamation of PSBs.

Since 2017, this exercise has resulted in seven large and five smaller PSBs.

The measures (based on bad loans and regional factors) were intended to help manage capital more efficiently. But emerging regulatory needs and pandemic affected businesses continue to pose challenges for banking segment.



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PSU banks headed for privatisation may get a major makeover, BFSI News, ET BFSI

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The government plans to spruce up public sector banks’ balance sheets through capital support and sale of non-core assets and trim their workforce before putting them on block.

It may also look at transferring bad loans of these lenders to the upcoming bad bank.

On the radar

The NITI Aayog, which has been entrusted with the job of identifyng suitable candidates for the privatisation, has recommended names to a high-level panel headed by Cabinet Secretary Rajiv Gauba.

Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are some of the names that may be considered for privatisation by the Core Group of Secretaries on Disinvestment.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to the Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by Prime Minister Narendra Modi for the final nod.

VRS scheme

Two state-owned banks being picked up for privatisation by the government are likely to come out with an attractive voluntary retirement scheme (VRS) to get rid of the extra flab.

An attractive VRS will make them lean and fit for takeover by the private sector entities that are keen to enter the banking space, the sources said.

VRS is not forced exit but an option for those who would like to take early retirement with a good financial package, the sources said adding that it has been done in the past before the consolidation of some of the PSBs.

Out of PCA?

State-owned UCO Bank is hopeful of coming out of the Prompt Corrective Action (PCA) framework very soon.

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

The bank had also met the other major criteria including net NPA norm, Goel said. Net NPA was at 3.4 per cent in March quarter against requirement of below six per cent. Return on Asset is also positive at Rs 167 crore and latest leverage ratio stood at 4.53 against a requirement of four per cent.

The government in the last round had infused Rs 14,500 crore of equity in Central Bank of India, Indian Overseas Bank, Bank of India, and UCO Bank by issuing non-interest-bearing, non-transferable bonds to these state-owned lenders.

Central Bank had narrowed its loss to Rs 888 crore in FY21, from Rs 1,121 crore in FY20. IOB, which is yet to declare its results for Q4 of FY21, posted a profit of Rs 482 crore for the nine months to December 2020, as against a loss of Rs 8,527 crore for FY20. gross non-performing asset (NPA) for Central Bank are 16.55 percent while for IOB they are 12.19 percent.



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