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Tuesday, March 3, 2015

25 per cent staff of PSU banks to retire by 2020: Jayant Sinha

The government today said that an average 25 per cent of the total staff presently working in public sector banks will retire over the next five years.

"On an average, about 25 per cent of officers and employees would retire by 20202 in PSBs," Minister of State for Finance Jayant Sinha said in written reply in the Rajya Sabha.

PSBs assess and anticipate vacancies including retirements annually and take necessary action to fill the same including intimating their requirement to Institute of Banking Personnel Selection ( IBPS) for making allotment well in advance, he said.

The government has granted managerial autonomy to the PSBs in the matters related to Human Resource including recruitment, he said, adding the government has also advised all PSBs to prepare a succession plan.

In a separate response, Sinha said RBI collects and compiles information on defaulters (non-suit filed accounts) for Rs 1 corore and above on half yearly basis and wilful defaulters (non-suit filed accounts) for Rs 25 lakh and above on quarterly basis from banks and financial institutions.

It is disseminated among banks and financial institutions for their confidential use, he said.

Besides, banks have been advised to submit the wilful defaulters' data for non-suit filed accounts to Credit Information Companies (CICs) from December 2004 onwards, he said.

Also the list of wilful defaulters (suit filed accounts) is now prepared by CICs and banks directly, he added.

Source : Economic Times
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LIC unveils two new plans

Life Insurance Corporation (LIC) launched two new plans- Jeevan Sangam a savings cum protection single premium plan and a new children’s money back plan.

LIC’s Jeevan Sangam is a participating, non-linked, savings cum protection single premium plan wherein the risk cover is a multiple of single premium. The proposer will have an option to choose the Maturity Sum Assured. The single premium payable (exclusive of service tax) will depend on the chosen amount of Maturity Sum Assured and age of the life assured. The plan will be open for sale for a maximum period of 90 days from the date of launch.

LIC's New Children’s Money Back Plan is a participating non-linked money back plan. This plan is specially designed to meet the educational, marriage and other needs of growing children through Survival Benefits. In addition, it provides for risk cover on the life of child during the policy term and also for Periodic payments on surviving to the end of specified durations.

Source : Thehindubusinessline
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PSBs should look at alternatives beyond govt infusion: RBI

Welcoming the Government’s move to selectively allocate capital to lenders, Reserve Bank Deputy Governor R Gandhi today said PSBs will have to look at alternatives beyond the Centre’s support for raising money going forward.

“Going forward, banks will definitely need more capital which we are emphasising, and banks will have to find other methods of capital as well, not just relying on the Government,” Gandhi told presspersons, replying to a question on the Budget proposal to decrease the recapitalisation amount at Rs. 7,940 crore in FY16 from the Rs. 11,200 crore in FY15.

Apart from capital raising from other sources such as the markets, there are various other options which the banks can follow for capital management, including conserving capital by staying off risky assets, he said.

“Enhancing or additional capital is not the only solution. They can rejig their portfolio in such a way that they have less risky assets which will require less capital,” Gandhi, who looks after the banking operations and supervision, said.

Gandhi also welcomed the Government move to selectively allot capital to only a few of the 27 lenders, saying this will improve efficiency.

“The communication that has been sent by the Government to all the banks is that they have to improve their profitability and efficiency. So to send the message a little stronger, the Government has taken the decision to reward those banks which have better figures so that they’ll get more capital,” he said.

On the concerns of the banks which have been left out in the Rs. 6,990-crore fund infusion exercise, Gandhi said all the capital levels of all the banks are above the minimum required.

“They have to pull up their socks, they have to also become profitable and they should reach the benchmarks,” he said.

When asked if this is a signal from the Government on the long-speculated consolidation process among the state-run lenders, Gandhi said it is on the boards of the respective lenders to take a call on it.

Gandhi’s comments contrast the views expressed by his colleague Deputy Governor S S Mundra last week, where he opined that the selective allocation may “aggravate” the situation for the lenders who are left out.

“To my mind, at this point of time, to restrict allocation only to a few banks and to leave the other banks out...time may not be very appropriate, that is what I feel.

“To deprive them of capital at this point of time, I think, would only aggravate the problem and would also have implication on growth... Few challenges which they face at this point of time can be managed if they are able to maintain a growth momentum in coming point of time,” Mundra had said.

The Government had announced an infusion Rs. 6,990 crore in nine better performing banks among the total 27, which was the first tranche of the Rs. 11,000 crore allocated in the Budget.

The beneficiary banks include State Bank of India and Punjab National Bank, among others.

Source : Thehindubusinessline
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Moody’s downgrades Central Bank, IOB

Moody's today downgraded two banks to below investment grade in possibly the start of similar rating revisions for other weaker state-owned lenders.

The agency downgraded to Ba1 from Baa3 its ratings on local and foreign-currency deposits of Central Bank of India and Indian Overseas Bank. IOB's senior unsecured debt was also downgraded to Ba1 from Baa3.

Moody's action reflect its assumption of a lower level of support from the Government, which is rated Baa3/BBB-/BBB-.

State supports typically gives a lift of anywhere between 2 and 6 notches to a standalone rating of a lender, according to analysts.

Even after today's downgrades, CBI and IOB final ratings have government support of five and four notches above their standalone ratings, respectively. Central Bank of India and IOB have standalone ratings of B3 and B2, respectively, from Moody's.

On February 7, the Government announced that it would inject Rs 6,990 crore in capital into nine state-owned banks, the first portion of the Rs 11,200 crore capital infusion earmarked for the current fiscal year to March 31 2015.

Most importantly, the Government changed the criteria for this capital injection, using banks' profitability as a key parameter.

Under the new criteria, the preference for capital infusion will be given only to banks with average returns on assets over the past three years and returns on equity over the past one year that surpass the corresponding weighted average ratios of state-owned banks overall.

Earlier, state owned Indian banks with weaker capital levels received higher capital allocations, regardless of their size or profitability.

The change in criteria was negative for less-profitable Indian banks, such as Central Bank of India, IOB and IDBI Bank, Moody's said in mid-February.

Moody's also said last month that Punjab National, Bank of Baroda, State Bank of India and Syndicate Bank would benefit because they were among the more profitable state-owned lenders.

The agency said today it continued to assume a very high probability that the Government would support Central Bank of India and IOB.

"However, the change of government policy means that the standalone credit quality of public sector banks has become a more important consideration for the senior unsecured and deposit ratings of the banks, compared to previously, when Moody's rated all SOE banks at the same level as the Government of India," Moody's said.

The agency noted that this new approach had been reflected in the capital allocations earmarked for the fiscal years ending March 2015 and March 2016.

For 2015-16, the government has only allocated Rs 7,940 crore for capital infusions even as the requirement remains high.

Source : Thehindubusinessline
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IFC to invest $50 m in YES Bank’s Green Bonds

International Finance Corporation (IFC), Washington, plans to invest up to $50 million in Green Bonds to be issued by YES Bank.

In addition, IFC will also give a $50-million long-term financing line to the private sector bank for on lending to women-owned small and medium-sized enterprises.  In a project report, IFC said the financing will flow to target customers of YES Bank in different parts of India.
New asset class

IFC’s investment is expected to generate support and confidence in the Green Bond market which is a new asset class in India and help create a new and viable source of long-term financing for climate change projects in the domestic markets.

“The development of the Green Bond Market will provide an impetus to the development of the overall local currency bond market which is a high developmental priority for IFC and for the Government of India.

“IFC’s investment in an Emerging Market Green Bond will encourage issuers in other markets to issue Green Bonds and support greater resources for Climate Change finance and development of domestic capital markets,” IFC said.
Earlier issue

Last week, YES Bank raised ₹1,000 crore by issuing green infrastructure bonds of 10-year maturity. The proceeds of the issue will be used for lending towards renewable energy sector.

Women-owned businesses, according to IFC, are less likely to be banked because they tend to be smaller and less formal.

It observed that the socio-cultural environment, where men are still regarded as the heads of the household owning land and property of the family, makes it difficult for women to present assets as collateral to access finance.

Source : Thehindubusinessline
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Ranjan Dhawan given additional charge as MD & CEO of Bank of Baroda

The Appointments Committee of the Cabinet has entrusted Ranjan Dhawan, Executive Director, Bank of Baroda (BoB), additional charge of the Managing Director & CEO of the public sector bank for a period of three months.

Dhawan took additional charge as MD & CEO of BoB on February 27. The appointment is for a period of three months with effect from the date of issue of the Cabinet’s order (February 26, 2014) or till the date of appointment of regular incumbent or till further orders, whichever is the earliest.

Early last month, Gauri Shankar, Executive Director, was entrusted with the additional charge of Managing Director & CEO of Punjab National Bank for a period for three months with effect from the date he assumed charge (February 9, 2014) of the post or till the date of appointment of regular incumbent or till further orders, whichever is the earliest.

These temporary appointments come as the Government wants to infuse fresh blood at the top in public sector banks. It does not want to restrict the top position to only those working in public sector banks but has also thrown it open to those in the private sector.

While BoB has been headless since SS Mundra became the Reserve Bank of India Governor on July 31, 2014, PNB has been without a chief since KR Kamath demitted the office of the Chairman and Managing Director of the bank with effect from October 28, 2014 on completion of his tenure of five years.

Source : Thehindubusinessline
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FinMin wants PSU banks to consolidate, merge

In a step towards consolidation, the Government wants banks to consider merger. It has also proposed more transparency in the appointment of independent director on the bank board.

“The Government wants to encourage Bank Boards to restructure their business strategy and also suggest a way forward for their consolidation and merger with other banks if it is a win-win for both,” the Finance Ministry said in a statement discussing reform measures for public sector banks. At present, there are 27 public sector banks including State Bank of India and its associate banks.

Terming performance of public sector banks as sub-optimal so far, the statement has listed measures taken already and to be taken in near future. These measures are based on the crown sourcing mechanism and discussion, chaired by the Prime Minister himself, with the Bank Chairman in Pune. “The focus of these reforms is to improve the quality of deliberations in bank boards, leading to better asset quality and further resulting in better market valuations,” the statement said.

Independent directors

It said that guidelines relating to appointment of non-official directors are being revisited to ensure that bank-boards get people with relevant expertise. “Anybody eligible would be able to apply through a web site which will soon be available in the public domain,” it said. It may be noted that the Finance Minister, while announcing the budget, proposed setting up an autonomous Bank Board Bureau with professionals as its members. It would be responsible for search and selection of heads of PSBs, as also for Non-Official Directors on the Boards of Banks. This would be an interim step towards moving in the direction of having a Bank Investment Company.

Performance incentive for banks

The statement has also talked about more incentives for better performance. “The banks have been entering into an MoU for achieving certain objectives known as Statement of Intent. The whole system of Statement of Intent is being revised with provision for higher cash incentives,” it said. It may be noted that the Government has recently amended the norms for infusing capital in the banks. Now, money will be given only to efficient banks and not just capital deprived banks. Accordingly, only nine banks were chosen for re-capitalisation during 2014-15 and given Rs. 6,990 crore.

The Government has already separated the post of Chairman and Managing Director along with enabling provision for the appointment as MD & CEO in five major banks, so that wider choice is available. Both public sector and private sector bankers can apply and higher salary could be given to deserving candidates. It has revamped the present selection system which includes three separate interviews, allotment of banks on merit-cum-preference basis.

The Government has also issued clear instructions regarding no interference whatsoever in any matter whether related to HR issues or credit decisions or even otherwise.

Source : Thehindubusinessline
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