2015-03-24

PSU banks turn to LIC for lifeline-FE

By: Pallavi Ail

Life Insurance Corporation of India (LIC) continues to add to its already substantial stake in several public sector banks as lenders look to the insurer to raise capital, reports Pallavi Ail in Mumbai. On Friday, Bank of India (BOI) said it was issuing 2 crore shares to the state-owned insurer and more than 26 lakh shares to New India Assurance at R283.50 per share to raise about R642 crore. The sale price represents a 31% premium to BOI’s closing share price on Thursday of 215.90.

LIC has almost doubled its stake in at least four banks in FY15 — United Bank, Punjab and Sind Bank, Central Bank of India and Bank of Maharashtra — investing almost R1,500 crore. It raised its stake in nine banks data till end December 2014, compared with its shareholding at the end of FY14.

With the government infusing capital into only nine banks that reported a return on assets above a certain threshold in FY15, several lenders were left out of the allocation process. In CY15, PSBs have raised almost R6,000 crore through perpetual bonds to supplement their tier I capital. The nine banks that together received capital of R6,990 crore are State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Syndicate Bank, Allahabad Bank, Indian Bank, Dena Bank and Andhra Bank

In the Budget for 2015-16, the ministry has allocated R7,940 crore for recapitalisation of banks. “Capital is now required not only for growth but also for solvency in our view,” Macquarie Capital Securities India analysts wrote in a note dated March 11. The report points out that public sector banks remain heavily under-capitalised with a tier 1 capital of approximately 8% and stressed assets at 13% of loans and just around 20% of provision coverage.

With the Reserve Bank of India (RBI) pulling back forbearance on restructured assets from April 1, it would imply higher provisioning — which in turn would reduce tier I capital. The analysts estimate under such a scenario, tier 1 capital under Basel III norms is likely to be around 9.5% to 10%. “Over the next four years, going by government estimates, PSU banks need to raise $35-40 billion. We believe the government will have no choice but to either recapitalise them or force large PSU banks to acquire the smaller banks either which way not reducing capital requirements,” the analysts added.



My Observation On Pathetic Position Of Public Sector Banks Is Submitted below

I have been writing on pathetic position of Bank's Asset for last five years and more . Assets of bank are not good but it is shown as good by using tools of restructuring of loans, rephasing of loan or by writing off of loans or by sacrificing huge amount in compromise settlement with bad borrowers .But such unethical ways are boon for all.

Latest position on this front is that banks are moving from bad to worse. Now there is immense pressure from Ministry of Finance on Chiefs of each public sector bank to reduce Non Performing Assets and stressed assets , to increase profitability of bank and to arrange for required capital at their own.

Unfortunately banks due to many avoidable or unavoidable reasons cannot recover the money from bad borrowers or from ill-motivated wilful defaulters . I do not want to discuss the same every now and then . The reasons are well known to all regulating agencies as well as to bank officials.

It is the need of bankers to restructure stressed loan so that none from MOF or from RBI or from media can point out accusing fingers towards Bank's quality of performance and investors continue to invest in bank's share.

It is not important for bankers or for clever, selfish and corrupt politicians ruling the country that money is to be recovered from bad borrowers, the important for bankers as well as politicians is to save skin from MOF and investors who trusted banks. And the most important and key reason behind large scale restructure and writing off of loans is that bank officers want safe exit from bank and early promotion to higher position by hook or by crook.

And the automatic benefit which is likely to accrue to top officials by way of such manipulation is large incentive top officials will get in cash from the government for charming balance sheet and for attractive dividend they give to government. There is proverb in Marwari group"hing lage na phitkari, rang choukho aye"

This is why companies like Bhusan Steel has not to do much exercise for rephrasing and restructure of their bad accounts, it is bankers who want not to consider advance to the tune of Rs.40000 crore as NPA and not to damage their future.

There are thousands of accounts like that of Bhusan Steel which are likely to be restructured in the current quarter to artificially improve the health of sick banks. It is more needed for bad bankers and less needed for bad borrowers. It is a win -win position for all concerned , if by hook or by crook, by legal or illegal methods , bad loans are considered as good assets.Top Officials of bank:

If they declare all bad accounts as bad , there will be multiple rise in volume of bad assets, they will need to make higher provisions for bad loans, there will be lesser profit , they will need more capital and so on. As a consequence , MOF will fire them and as a result their mental peace will be disturbed, their retirement will become unpleasant and they will not get post retirement job from GOI. They will face disciplinary action or punishment for irregularities and malicious work they committed during their working in bank. As such it is good for Chiefs of Banks to opt for free restructuring of all bad loans or write them off .Junior Officers, Credit Officers , Branch Head, Regional Head And Zonal Head:

All will get quick promotion,higher cash incentive and cream posting if they artificially , rightly or wrongly treat all assets as standard. On the contrary , if they become rigid on telling spade a spade, their survival , their family life, their career , their income, their prospect of earning bribe in cash or in kind, their image among bad customers and higher officials,their annual appraisal reports all will be adversely affected.RBI Officials, Auditors and Vigilance Officers.:--

If auditors become rigid on treating all bad assets of banks as bad asset, they will not get job of auditing in banks in future. Auditors who do not obey orders of bank officials are blacklisted by banks as well as by business men. In this way it is direct loss to their income and attack on their family comfort and mental peace. Therefore they think it wise to give certificate of good health to even bad accounts. RBI officials and vigilance officers spend luxurious life if all accounts are good and they need not visit branch after branch and bank after bank to carry out inquiry and find out culprit or make exercise for rehabilitation of sick industry.Ministry of Finance and Government of India. :-

They will say with proud that banks in India are safer than other countries. Media will not ask humiliating questions. Rating agencies will not create headache for them by downgrading the rating. They will not need to arrange for infusion of capital in banks if they go sick due to burden of bad loans. Politicians who looted banks for their families and friends and for vote bank will not face any action . And the most important is that GOI will more from banks by way of tax and dividend.Industrialists and business men:- They will get more and more loans if their existing loans are not considered bad. They will lead a luxurious life taking more and more loans, they will accumulate more and more properties in the name of their relatives. And if their loot crosses the limit , they will pray for compromise or write off of loans and thus save themselves from pain of advocates and court cases.

Businessmen like Satyam Computers know how to book artificial profit and how to present attractive balance sheet and for this purpose they are always ready to pay attractive fees to Chartered Accountants. In this way, not only they will get more loans but even auditors will earn more and more money. It is beneficial for auditors to prepare good Balance sheet for borrowers which not only earns more fees from business men but from banks also. It is just like killing two birds from one stone.  Investors, Depositors ,shareholders and all stake holders in public sector banks:

If banks book all assets or major portion of assets as standard, and show lesser volume of bad assets, banks will earn more and more profit, pay more and more dividend and price of shares of PS banks will go up and up. For this, they always need to restructure bad assets because it is not easy in India to recover loan from bad borrowers either directly or by legal course of action. As such process of restructure is a winning proposition for banks as well as for investors, shareholders, and all stake holders.

Architects, Advertisers, valuers of property who give valuation certificates for mortgageable properties to avail loans from banks of loan seekers , Advocates who legal opinion of good or bad property all get handsome fees for preparation of reports as per whims and fancies of bank officials and borrowers. If banks earn good profit rightly or wrongly, banks spend lavishly on advertising and hoardings. IN this way not only advertises earn more , even newspapers and vendors who prepare banners and hoarding get more business. ATM , Contractors, Land Owners:

When bank earn higher profit , they will open more and more branches and more and more ATMs. Land owners and ATM manufacturers will get more and more opportunity to earn money and higher profit. Again they will give more and more costly gifts to bank officials to get higher volume of business share.

Although it is bad and equivalent to corrupt practice if bank officials sanction restructuring of loan or write off of loan or compromise settlement without valid reasons, such activities are considered as boon for all and hence there is none to question the process or doubt the integrity of any individual involved in such unhealthy acts.

Corruption does not mean only accepting or giving bribe in cash or in kind. It also means giving undue and illegal advantage to any individual by a person holding powerful post , thus misusing power investing in him or her. But the million dollar question is who will bell the cat?

When all effective persons are getting benefit due to such corrupt practices, it is in common interest for all to keep mum on such corruption And in long run such corruption become an acceptable culture in the system and the person who goes against the culture is taken to task.

In India drinking wine or consuming tobacco or pornography is considered as social crime . But Government does not ban it because it generates billions of rupees for them , job opportunities for many unemployed, Business opportunity for wine makers, tobacco makers and traders. GOI does not want to even take penal action against evil doers and law violators. This is called Indian culture.
Private bankers in fray for top job in five PSBs including Punjab National Bank, Bank of Baroda -Economic times 23rd March 2015

NEW DELHI: Candidates from topnotch foreign and private banks such as Citibank, Standard Chartered, ICICI and Yes Bank have made a beeline for being considered for the post of managing director and chief executive officer at five state-run banks.

The government has received about 40 applications for the banks which include Punjab National Bank and Bank of Baroda
"There are applicants from small banks in the Middle East as well," a senior government official said on the condition of anonymity.

The interest evinced by private sector candidates for the top post in public sector banks or PSBs is in sharp contrast with the situation at state-run monopoly miner Coal India, where no private sector candidate had applied for the top post.

"These applications are now being reviewed and shortlisted candidates will be called for interviews," the official said, without naming any of the applicants.

Earlier this year, the government had approved new norms for selection of MD & CEO for five PSBs, paving the way for appointment of private sector candidates on flexible salary packages. Bank of India, Canara Bank and IDBI Bank are the other lenders in the list.

"We have no plans to bring private sector candidates in smaller banks. For smaller and mid-sized banks the candidates will be chosen from PSB cadre itself," the above quoted official said.

Read more at:
http://economictimes.indiatimes.com/articleshow/46669539.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

‘Excess liquidity’ prompts banks to cut deposit rates -Hindu Business Line

March 23:

There are no signs of banks reducing lending rates, yet they have started another round of deposit rate cuts. Bank of Baroda, on Monday, reduced the interest rate for deposits below ₹1 crore by 10 basis points for select maturity brackets. This follows the decision by Axis Bank to cut its deposit rates by 25 basis points in select slabs.

With 50 bps cut in the policy rate since January, corporate and individual borrowers have been clamouring for a reduction in lending rates. But so far most banks have only lowered the deposit rates.

Between December and January, SBI, ICICI Bank and HDFC Bank, among others, have cut deposit rates. Bankers have maintained that to pare lending rates, the deposit rates need to fall before banks can be comfortable in cutting lending rates.

“There is a lot of liquidity in the market and therefore deposit rates are being cut. Banks would prefer to wait for the April policy before taking a decision on lending rates,” said a top executive of a state-owned bank.

Bank of Baroda has decided to revise rates payable on domestic term deposits and NRO deposits of below ₹1 crore, applicable to fresh deposits and renewal, with effect from March 24, 2015.

“The applicable rate of interest in the maturity range of 181 to 270 days has been reduced from the existing 7.75 per cent to 7.65 per cent,” the public sector lender said in a filing with the BSE.

The third-largest private bank Axis Bank cut fixed deposit rates by up to 25 bps across various maturities in the 18-36 months window.

Similarly, for deposits of up to 18 months, the rates have been reduced by 15 bps to 8.50 per cent. Earlier this month, Axis Bank’s rival HDFC Bank reduced its deposit rate by 25 bps on deposits between ₹1 crore and ₹5 crore.

While banks claim the policy moves generally take time to get transmitted into actual lending rates, the RBI has been unhappy with banks for not passing the benefits of the rate cuts to borrowers.

Don’t outsource credit appraisal function, Mundra tells bankers-Hindu Business Line

Banks should resist the temptation to lend to a sunrise sector following a herd mentality, SS Mundra, RBI Deputy Governor, said.

Concentration risk can hurt banks badly as has been the case in the past in lending to the steel, mining, gems and jewellery and infrastructure sectors, Mundra said at an Assocham event here on Monday. Exposure concentration in one sector in a geographical area (exposure to sugar mills in UP, for instance) also suffers from political risk, Mundra said.

Critical function

Mundra also advised bankers not to outsource their responsibility of credit appraisal to any third party.

“Lending is the most critical of banks’ functions and that cannot be outsourced. We encourage banks to outsource non-core activities,” Mundra said.

He also noted that the computation of base rate by banks has not been found to be “very scientific and transparent”.

Mundra said that the level of stressed assets in the system underscores the need to improve the monitoring of banks as lenders as also the need for borrowers to adhere to the loan covenants.

The RBI Deputy Governor expressed concern over excessive leverage run up by companies. The issue of diversion of funds by borrowers to real estate or capital market for short-term gains without deploying them for purposes borrowed was also highlighted.

“Rather than de-risking the balance sheet, such short-term misadventures often prove very costly,” he said.

Frauds worth Rs 11,022 cr detected in govt banks in Apr-Dec-Business Standard 21.03.15

PSU banks have reported over 2,100 fraud cases involving a sum of Rs 11,022 crore in the first nine months of the ongoing fiscal, with PNB reporting the maximum number of such instances.

An analysis of the data available with the Reserve Bank shows fraud cases, involving amount of Rs 1 lakh and above, in 26 state-owned banks during April-December 2014 has already surpassed the 2013-14 figure.

In 2013-14 fiscal, there were 2,593 such cases involving an amount of Rs 7,542 crore. The figure has shot up to Rs 11,022 crore from 2,166 cases in the nine-month period ending December 2014.

Delhi-based Punjab National Bank (PNB) had 123 cases of fraud totalling Rs 2,036 crore, followed by Central Bank of India with 147 cases involving an amount of Rs 1,783 crore.

Although the number of such fraud cases is the highest in country's largest lender State Bank of India (SBI) at 474, the total amount involved was less at Rs 1,327 crore.

Syndicate Bank reported 114 cases of frauds with total amount of Rs 749 crore involved, followed by Oriental Bank of Commerce (OBC) at 86 cases involving Rs 719 crore.

PSU banks report fraud cases of Rs one lakh and above to banking regulator RBI.

As per the data, Bank of Baroda (BoB) reported fraud worth Rs 597 crore, followed by IDBI Bank (Rs 507 crore), UCO Bank (Rs 424 crore) and United Bank of India (Rs 376 crore).

Bank staff body to launch campaign against banking reforms-Hindustan Times
To raise voice against privatising savings of the people, the All India Bank Employees Association (AIBEA) has decided to launch a national campaign against the banking sector reforms from April 20.

Sharing this information, CH Venkatachalam, general secretary of the association, said that the banks today deal with the money of more than 80 lakh crore people as deposit in the banks. This money belongs to the people and not to the government or the RBI. These savings of the people should be protected only by strengthening public sector banks.

He also mentioned that 40 private banks have collapsed in the past 30 years due to mismanagement. He also blamed that in the name of banking reforms, the government wants to privatise the banks and also to allow corporate industrial houses to start their own private banks.

He said that the RBI wanted to allow private companies to start small banks and payment banks in the districts and local areas, which can be dangerous for the savings of people.
Talking about the national campaign, he informed that the association with publish the full list of banks loan defaulters.

He said that the association will launch a national campaign on these banking reforms and bad loan issues and would also organise strike at the national level demanding policies to strengthen public sector banks and to recover the bad loans.
He said that from April 20, bank employees will collect signatures of the people and submit to the Prime Minister demanding people-oriented banking policies.

ICAI to submit report to RBI on bank NPAs-Times of India-21.03.2015
KOLKATA: The Institute of Chartered Accountants of India (ICAI) would submit a report on rising NPAs in the banking sector to the Reserve Bank in a month.
"The institute had formed a study group comprising former CMDs of public sector banks who are trained CAs to prepare a report on the rising levels of NPAs in banking system," council member of ICAI Sumantra Guha said.

The report would be submitted to the Reserve Bank within a month, Guha said at a seminar on bank audit organised by ICAI here today.
He said that report would suggest on how to manage NPAs by the banks.

Of the 27-odd public sector banks, NPA levels of 13 of them were more than 13 per cent of their total assets amounting to Rs 2.63 lakh crore.

RBI had also urged these 13 banks to form a joint lenders forum.
Guha said as banks were facing rising NPAs, it was imperative that independent auditors be appointed.

"In places where public money is involved like PSUs and public sector banks, the auditors are appointed by CAG. But we hope that appointments of auditors should be done by an independent agency", he said.

My Blog dated August 8, 2012 Is Reproduced below

Fraud and Manipulation Is Deep Rooted Culture

Culture of fraud is deep rooted in Indians. Fraud and manipulation are at the root of all successes barring a few exceptions. If a person enters into any government service by paying bribe or by using the source of some VIP or by using any unfair means as per demand of the situation, he is bound to promote fraud culture, he is bound to apply all tools to earn money and power by same brand of illegal means to gain money power, positional power and finally to become a attractive figure in the society. Similarly if a businessman or a trader has to pay bribe for starting and continuing a business he will tend to use unfair means to earn more and more wealth to perpetuate the corrupt culture.

This is why Banks incurred loss of about Rs.2000 crore in 2010, Rs.4000 crores in 2011 and Rs.2500 crores from January 2012 to June 2012 due to fraud committed by bank employees or by bank customers .It is important to mention here that these figure represents only those cases of frauds which caused loss to bank by amount more than Rs.1.00 in one cases. If the amount lost by bank in petty frauds i.e. cases involving less than one crore rupees , total loss caused by frauds to banks will be much more than banks appear to suffer loss due to bad assets.

As a matter of fact volume of fraud by number and by amount involved will go on increasing until the government stops mal practices prevalent in recruitment, promotion and transfers of services in banks and other government offices. Loss by frauds or by bad assets may be reduced to minimum not merely by strengthening control mechanism but by striking at the root of corruption wherefrom it originates.

It is also true that after the exposure of fraud of Mr. Harshad Mehta or Mr. Telgi or Mr. Raja or Mr. Kalamadi , the perception about loss has completely changes. Now a days loss of one crore or ten crore rupees by fraud or by bad lending caused to any bank or any organization is treated as very small crime and treated in a very casual manner. This is why CBI has instructed banks not to report the cases of fraud to CBI if the value involved is less than three crore rupees.

As a matter of fact government does not want to punish the evil doers but want to punish those who raise voice against the evil doers. This is why the person who report the cases of fraud with the system or who report the incident of corruption or any crime is taken to task not only by the evil doers who are exposed but by the protecting agencies like police , CBI  top officials and ministers forming part of the  government.

Government did not try to understand the exposure made by Team Anna and neither they thought it fit to frame strong Lokpal but they left no stone unturned to torture key members of Team Anna on flimsy grounds and puncture the movement.CBI or nay top officials who try to precipitate real criminal by their devoted and sincere investigation are transferred to remote places so that the prime evil doers are saved from further exposures. Similarly judges in courts and top officials in all departments are removed from the post if they make efforts to reveal the truth of the system.

CBI does not get time to devote on cases related to ministers and VIPs but have enough time to trap Bal Krishna , disciple of Ramdeo Guru and they got success in sending him to jail without loss of much time.CBI did not not think it fit even to penalize Passport officer in the same way as Bal Krishna was.

It is the tradition and it is the strategy of the top ranked officials to save bad persons and to punish good persons. This is why they do not like to act and respond on anonymous complains, anonymous emails or anonymous message even if they contain serious facts of fraud and manipulation with the system. Top officials try to investigate who are sending anonymous complains to expose the truth but never tries to look into the truth hidden in such messages. Police starts torturing the person who go for lodging FIR against any VIP because they know it is VIP who may help them in trouble or when their misdeeds are exposed by media or any crusader or any whistle blower.

This is why honest speakers do not want to speak the truth of frauds or any crime incident to police or CBI or any investigating agency. Everyone knows that the people who speak against criminal are to face the torture of the system.

Further government also makes all efforts to weaken the capacity of police, CBI , Court and all agencies which are meant to provide justice and punish evil doers .Government will never provide adequate manpower and infrastructure to these protecting agencies so that they may not pursue the cases of fraud or any crime to its logical conclusion.

This is why lacs and crores of cases against actual criminals, evil doers and fraud committers are pending in Indian courts and in topmost offices of CBI or CVC and on the contrary lacs of innocents accused of crime are languishing in jail waiting justice by court or by CBI or CVC.

It is pity that an officer who is entrusted to prevent corruption is not provided proper infrastructure whereas those who are master in fraud and crime are provided all support and all infrastructures.

It is further disheartening that in the current era of information and technology when most of the works are done online and on computers, adequate policies and tools are not developed to prevent misuse of technology. More disheartening is the fact that all departmental heads and the government in general look into academic qualifications of the person, his flattery quality and his appearance before recruiting him or and before elevating him or her to higher post attracting higher responsibilities. Character of the person has either become the last point or has become NO-POINT at all levels. This is why I usually say that the culture of fraud and manipulation is deep rooted and the culture of flattery and bribery irrigates and promotes the same.

If at all government want to reduce level of corruption prevalent in government offices, they have to fight it out on all fronts

Ensure Quality education (Stop Giving jobs of teachers on recommendation of VIP or through bribe).

Ensure honesty in recruitment, promotion and positing in all offices and in all departments (stop recruiting inspectors on payment of bribe).Stop promotion of flattery culture.

Ensure timely punishment to evil doers after quickest investigation into all types of allegation and all acts of fraud including that in Human Resource Department. Punishment to evil doers should send a message to all that if they commit crime they will face the same consequences.

Ensure all protection to those who expose the fraud, who informs the facts of crime and who tries to awaken the system of persisting irregularities.

Unfortunately, most of the key posts are manned by corrupt persons and hence they make all efforts to close the files of evil doers if willingly or unwillingly the evil works of him or her is exposed by any person or any group or by media. Who will then bell the cat?

The greatest tragedy of our country is that there are hundreds of sympathizers of a person whose evil works are exposed and who are likely to be punished. There are hundreds of well wishers who make all efforts to save such evil doers from punishment. On the contrary there are none to save an innocent person who is wrongly or under a conspiracy by a team of evil doers is falsely alleged of evils and who is punished for none of his or her fault.

There are persons in all offices who ridicule and who laugh at a person who advocate honesty and who try to ensure justice or try to punish who perpetuate reign of injustice.

after the launch of reformation era in 1991 when banks were given complete freedom to recruit and promote strictly as per their choice in the name of merit and recruit and promote fully based on their  whims and fancies they forgot to verify the credentials of officers and staff joining the bank.

Before that, banks used to get credentials of a new recruit got verified by two valued persons of his locality. Now these banks ask for police report which is obtained by payment of a few pieces of five hundred rupee notes. This is why persons with doubtful integrity has entered into various banks and they managed timely and before time promotions by managing their bosses by offering what bosses liked , it may be any of WWW or all three WWW.

Due to this ,persons of bad integrity not only entered into bank but could reach upto even highest level and that is why volume of fraud and bad assets have gone unchecked and now appears to be beyond control and have crossed all prudential limits set by RBI or GOI

NOT only NPA But Growth of Frauds Is Also With Alarming Speed

CBI developing database to curb banking frauds
TNN | Aug 8, 2012, 01.18AM IST  ( collected from times of India )
NEW DELHI: The CBI is developing a database of bank fraudsters to check cheating cases, which have resulted in loss of Rs 3,799 crore during 2010-11, an increase of 53% as compared to the previous year, agency chief A P Singh said on Tuesday.

"Banks lost Rs 2, 017 crore due to frauds in 2009-10. This has seen a quantum jump in 2010-11, with the loss amount rising to Rs 3,799 crore," he told the annual conference of Chief Vigilance Officers of public sector banks and financial institutions. "While CBI's Bank Securities and Fraud Cell registered criminal cases involving Rs 4,000 crore in 2011, cases regarding frauds worth Rs 2,500 crore have been registered from January to July this year," he said.

Singh said the CBI is developing a Bank Case Information System (BCIS) which contains names of accused, borrowers and public servants in its records. "This information may also be made accessible to field functionaries of the banking sector in collaboration with the Indian Bank Association (IBA) once modalities are worked out," he said.

Delivering the keynote address, Singh said the increasing amount of frauds in the banking sector is a "disturbing factor". The CBI chief said the agency would now probe only those bank fraud cases where loss is more than Rs 3 crore, while those below it would be investigated by the state police.

To read further click on following link

http://dkjain497091112006.blogspot.in/2012/08/not-only-npa-but-growth-of-frauds-is.html

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