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Wednesday, June 28, 2017

12 large NPAs: SBI chief rules out big hit on bottomlines

The nation's largest lender State Bank today ruled out the additional provisioning towards the 12 largest NPA accounts which have been referred to insolvency proceedings denting the bottomlines very hard as most of the provisioning has already been done.

"The increased provisioning requirements, more or less, in all of these accounts we have pretty large provisions. But yes, we have to make a little more but it should not very badly impact our earnings going forward," chairman Arundhati Bhattacharya told reporters after the AGM here this late evening.

She was responding to questions from the media about the possibility of increased provisioning towards the 12 RBI- referred accounts impacting the bank's bottomlines.

It can be noted that domestic ratings agency Crisil had yesterday estimated that led by public sector banks, lenders will have to take a huge haircut towards these NPAs.

It has pegged an additional burden of Rs 40,000 crore or 25 per cent more towards provisioning for these 12 accounts which have been sent for insolvency by RBI.

These 12 large accounts had become NPAs by end-March 2016 and Crisil estimates show the banks had already provisioned 40 per cent for these NPAs worth Rs 2 trillion or about Rs 80,000 crore.

"We estimate a 60 per cent haircut would be needed on these loan assets. That would mean banks will have to increase provisioning by another 25 per cent or Rs 40,000 core more this fiscal, compared with 9 per cent in the last," Crisil said in a note.

The total NPA provisioning of banks stood at Rs 2.2 trillion as of FY17, up from Rs 2 trillion in FY16.

Parrying a question on whether RBI has been very stringent or overcautious on with these accounts, she said "the regulator has done what it felt was right. Now whether it is overcautious or whether it is in order, we will come to know with time."

"The only thing is that they have given us three quarters to do it which I think is adequate. Also, provisioning doesn't mean write-offs. It merely means that you keep the provisions if things are better, and then we can write it back," the chairman of SBI which is the lead banker to six of these 12 accounts said.

But she was quick to point out that the problem with higher provisioning is that "if a buyer comes to take over that account will immediately take that as the lowest level of write-off or haircut. So, to that extent, we may have realised better value if we haven't exactly quantified the amount of provisioning that we made."

Bhattacharya said the remaining six accounts from the RBI list will be taken up within the stipulated time of 15 days itself or even earlier.

"All the preparation that were required to be done most of them is already done. To that extent we are doing things as per book. And we expect that this will enable quick resolution," Bhattacharya said.

The largest 12 accounts named by RBI are Bhushan Steel (Rs 44,478 cr), Lanco Infra (Rs 44,365 cr), Essar Steel (Rs 37,284 cr), Bhushan Power (Rs 37248 cr), Alok Industries (Rs 22,075 cr), Amtek Auto (Rs 14,075 cr), Monnet Ispat (Rs 12,115 cr) Electrosteel Steels (Rs 10,274 cr), Era Infra (Rs 10,065 cr) Jypaee Infratech (Rs 9,635 cr), ABG Shipyard (Rs 6,953 cr), and Jyoti Structures (Rs 5,165 cr).

Of these six accounts have already been sent to NCLT by banks -- Bhushan Steel, Essar Steel and Electrosteel Steels by SBI; Bhushan Power by PNB; Lanco Infratech by IDBI; and Amtek Auto by Corporation Bank- for possible liquidation.

Source : Economic Times
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Tuesday, May 9, 2017

SBI makes home loans cheaper, cuts rate by up to 25 bps; but analysts don’t see a rush by buyers anytime soon

Even as home buyers put off purchases in anticipation property prices could correct, State Bank of India (SBI) on Monday made home loans cheaper for new customers. Loans of up to Rs 30 lakh will cost women 8.35% and others 8.4%; that’s 25 basis points (bps) less than rates available a few months ago. Women borrowing more than Rs 30 lakh will need to pay an interest rate of 8.5% while others will cough up 8.55%.

Rival ICICI Bank charges salaried persons an interest rate of 8.7% for loans up to Rs 75 lakh while mortgage specialist HDFC charges between 8.5% and 9% for a loan of up to Rs 75 lakh. So far, Bank of Baroda’s product is the most attractive at an interest rate of 8.35%.

With little demand for corporate loans, lenders are trying to make mortgages more affordable. A CLSA report says mortgage rates are at 12-year lows, having dropped 150 bps in the last two years; every cut of 100 bps is equal to a 5-6% price cut, CLSA notes.  But this may not be enough to nudge buyers; loans for housing grew at a slower 15.2% year-on-year (y-o-y) in March compared with 18.8% growth in March 2016, data from the Reserve Bank of India (RBI) show.

Clearly, there’s no rush. Stocks of unsold apartments are piled high and even before demonetisation, inventories were not small. At last count, there were 6.7 lakh unsold residential units across the country with 1.55 lakh in the Mumbai Metropolitan Region (MMR) alone. Registrations of property sales in MMR, which had fallen to a six-year low in November and December, remain low.

If 2016 ended with the lowest number of residential launches and sales, 2017 hasn’t got off to a great start, say builders. Banks, however, are trying to prod potential customers to buy homes. SBI had revised rates in January, effecting a steep 90 bps cut to its one-year MCLR, and bringing it down to 8%. ICICI had cut its one-year MCLR by 70 bps to 8.2% and HDFC had lowered its benchmark rate by up to 45 bps.

The country’s largest lender is also hoping to cash in on the push to affordable housing. “We have come out with a special offering of lower rates for the category,” said Vaijinath MG, CGM (real estate and housing), SBI.

The general slowdown in home purchases is hurting developers. Gopal Sarda, group CEO, Kolte-Patil Developers, told FE, “The real estate market had seen some fluctuations in recent times. The implementation of demonetisation and the introduction of RERA (Real Estate Regulation Act) and GST (goods and services tax) only made home buyers delay their decision of home buying.”

In March, the government had raised the annual income ceiling for families eligible under the credit-linked subsidy scheme (CLSS) to up to Rs 18 lakh. The move, however, is likely to benefit housing finance companies (HFCs) rather than banks, analysts say.

According to a report by Crisil, that the assets under management of pure-play affordable HFCs have risen nearly 50% in the past fiscal to Rs 23,000 crore as on March 31. “The high growth has also led to increase in market share of these new pure-play players in the overall affordable housing finance sector from ~10% as on March 31, 2016 to ~15% as on March 31, 2017,” the report said. Crisil defines affordable housing loans as those with a ticket size less than `15 lakh.

Source : Financial Express
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Shareholders to elect 4 independent directors of SBI on Jun 15

The country's largest lender SBI has invited applications for appointment of four independent directors to its central board who will be elected by the public shareholders on June 15.

The election has been necessitated after the resignation of Sunil Mehta and the expiry of the three-year-term of the three other directors -- Deepak Amin, Sanjiv Malhotra and MD Mallya, the bank said in a notice.

The term of appointment for the four new directors will be for three years till 2020, and the election will be held during the forthcoming general meeting of shareholders on June 15, it said.

"The election of directors is being held to fill in the vacancies arising out of the retirement/resignation of the four directors elected by eligible shareholders of the bank, other than the government," it said.

Any shareholder having not less than 5,000 shares either in his/her name or as first named holder when jointly held, is eligible to contest the election.

Led by chairman Arundhati Bhattacharya, who is on an extension till September, the central board of SBI comprises four independent directors, two government nominees, one representative from the Reserve Bank and also four of its managing directors.

Nomination form and the format of declaration and undertaking to be submitted by shareholders is available with the secretariat of the chief general managers at all the local head offices and the central board secretariat at the Corporate Centre of the bank in Mumbai.

The final date for submitting the documents is May 24, the notice said.

If the total number of valid nominations exceed four, there would voting for the election at the general meeting.

Any shareholder other than government with over 50 shares each for a minimum of three months prior to the date of the general meeting will be eligible to vote in the election, the public notice said.

Source : Economic Times
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Stake dilution in PSBs after their health improves: Arun Jaitley

The government will dilute its stake in state-run banks to 52 per cent once the health of the lenders improve and the money will be used to inject capital in them, Finance Minister Arun Jaitley said today.

He hoped for a resolution to the burgeoning bad loan problem following the government empowering the Reserve Bank of India (RBI) to order lenders initiate insolvency proceedings against defaulters and create committees to advise banks on recovering non-performing loans.

"We already have a programme under which we have been supporting recapitalisation of banks. Where more funds are required from the government, we will be quite willing to look at that.

"But once the health of the banks themselves improve, we have also announced that the government will be willing to bring down its own equity in the banks to 52 per cent and that can be used for banks' recapitalisation," he said at a CII-Kotak investor roundtable here.

This fiscal, the government has budgeted Rs 10,000 crore of capital infusion in public sector banks.

The amount is lower than Rs 25,000 crore set aside in the previous budget but will be insufficient to help state-run banks raise about Rs 80,000 crore of equity capital that they will require over the next two years to comply with the Basel III norms and support credit growth.

Jaitley said the non-performing assets (NPA) problem is limited to "a certain set of accounts and these numerically are not very large in number but the quantums are high and therefore, they impact the balance sheet of banks".

"Now, we will wait for the result over the next few months of what we decided (through the ordinance) and ensure that under the empowerment that is being given to the RBI, the banking industry itself goes in for resolution," he said.

At a separate interactive session on 'India's Business Environment: Reforms and Opportunities' organised by CII, Indian Embassy and Japan Chamber of Commerce, he said that with the new empowerment of RBI, a resolution to the stressed asset problem will be reached.

"We were trying over the last few years to address this problem and about three days ago, we have empowered the central bank to take certain precipitative action in relation to resolving the issue of stressed asset itself.

I do hope, with this new system in place, resolution of lot of stressed asset in India would take place," he said.

Source : Economic Times
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Bad debt situation not that grim, recovery hopes intact: SBI chief Arundhati Bhattacharya

State Bank of India, the country's largest lender, today said most of the nation's bad loans belong to industries that are still in business and banks will probably recover the write-downs when growth turns up and they perform again.

Speaking at a seminar on 'Asian Banking in Challenging Times' here, SBI Chairman and Managing Director Arundhati Bhattacharya said the loans which have turned bad are because they are not producing enough money to cover their interest liability.

And the reasons for that have been huge time overruns, leading to cost overruns, which lead to over leveraged positions, she said.

About 16.6 per cent of loans to corporates - or about 8.4 per cent of the GDP - had been declared non-performing, according to Credit Suisse.

Banks are straddled with anywhere between Rs 9 lakh crore to Rs 12 lakh crore of stressed assets - made up of bad loans, restructured debt and advances to companies that cannot meet servicing obligations.

The government yesterday through an ordinance amended law to give powers to the Reserve Bank of India (RBI) to order banks to initiate insolvency proceedings against defaulters and to create committees to advise them on recovering non- performing loans.

"I still believe we have huge potential in the country. The difference of the NPLs (non-performing loans) this time around is the fact that many of the NPLs are assets that are still working," she said at the seminar held on the sidelines of annual meeting of the Asian Development Bank here.

To set this NPL cycle right would need dilution of equity, paring down of debt and finally leaving the asset with debt that ensures that it can be sustainably serviced, Bhattacharya said, adding this will ensure that these units get the support to enable them to raise their capacity utilisation.

"In view of the fact that our economy is still growing so there is demand over there which has to be properly nurtured and may be also channelised. If you do that, many of these units will probably come back and the write-downs that we will take will probably, not surely, but probably, we will be able to claw back at some point of time," Bhattacharya said.

She said the Indian banking sector faces headwinds both in respect of over-leveraged corporate debt and "stiffer" regulatory requirements.

The biggest challenges faced by the regulators, she said, was how to handle the bad debt situation to ensure that the resources are not wasted.

"On the other hand they have to ensure that they are perceived as being conservative and they are perceived as doing the right thing for right reasons. So I think this is the challenge that we as a country have and the regulators have as well," Bhattacharya said.

Source : Economic Times
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Friday, April 21, 2017

Finance Ministry approves 8.65% interest rate on EPF for 2016-17

Labour Minister Bandaru Dattatreya on Thursday said that the Finance Ministry has approved 8.65 per cent interest rate on Employees Provident Fund (EPF) for 2016-17.

The ratification of the 8.65 per cent on EPF will enable the retirement fund body Employees' Provident Fund Organisation (EPFO) to credit this rate of return into the accounts of four crore subscribers.

"Finance Ministry has agreed to 8.65 per cent rate of interest. Now, the communication will come. The formal discussions are over," the minister said.

He further added, "We will immediately issue the notification and credit the rate of interest to over four crore subscribers."

The Employees' Provident Fund Organisation trustees had approved 8.65 per cent rate on EPF in December last year.

The Finance Ministry has been nudging the Labour Ministry to lower the EPF rate for aligning it with the rates of small savings schemes like PPF.

Source : Business Standard
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Saturday, April 8, 2017

Kotak arm for infra debt fund services gets RBI registration

Kotak Mahindra Bank today said its subsidiary for providing infrastructure debt fund services has been registered with the Reserve Bank of India.

"The Reserve Bank has issued a Certificate of Registration to Kotak Infrastructure Debt Fund, subsidiary of the Bank," the bank said in a filing.

With this, the subsidiary will commence business of non-banking financial institution as Infrastructure Debt Fund (NBFC-IDF), it said.

IDFs are investment instruments sponsored by banks or NBFCs, in which domestic/offshore institutional investors, specially insurance and pension funds, can invest through units and bonds issued by them.

Source : Economic Times
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SBI ATM in Odisha spews out cash automatically, bank suspects malware attacks

State Bank of India has ordered a forensic audit into an automated teller machine in Odisha that spewed out cash without any card being swiped. It's one of about 10 cash dispensers around the country belonging to various banks that have behaved in this manner.

The suspicion is that these are localised hacks on machines running outdated software but don't involve any wider network infections.

"A forensic audit is currently underway and we are trying to understand whether a software malfunction caused the glitch in its systems," said a senior State Bank of India official.

"Typically, an audit takes around four to six weeks to be completed we should get the report within the end of this month."

Experts said the ATMs may have been subjected to a 'physical' malware attack that involves plugging a device — say a laptop or phone — into the dispenser's USB port to transfer an infected file or virus that causes the machine to behave erratically. The anomalies have been witnessed in states such as Odisha, Jharkhand, Uttar Pradesh, said people with knowledge of the matter.

"Around 10 ATMs have been affected as per preliminary information," said Navroze Dastur, managing director of India and South Asia operations at NCR Corporation, which sells and maintains ATMs.

"The Reserve Bank of India is aware of the situation and we are closely working with National Payments Corporation of India to tell banks what security measures are needed to protect the machines." The note spewing hasn't caused a big dent but SBI is looking to get to the root of the matter.

"This has not caused a significant loss to the bank because the money kept in a single machine is usually less than Rs 10 lakh and directly no customer account has been affected since no card was swiped," said the SBI official.

"The audit is being done to understand how it can be rectified." Experts pointed out that a number of machines are running obsolete Windows XP software, which Microsoft has stopped updating. "Banks mostly do not service and update these machines on time, which makes them vulnerable to highly sophisticated attacks as fraudsters use the most advanced technology available," said a top executive at an ATM deployment company.

Initial reports suggest the criminals target machines in remote locations that are usually left unguarded, allowing them to open the outer casing to access the USB port. Once infected, the machine can be remotely controlled by a virtual keyboard and instructed to spew out cash.

"There are keys available which allow an ATM to be opened by unauthorised persons as well and then it needs to be connected to a system through a cord to transfer the virus," said Altaf Halde, managing director for South Asia at Kaspersky Labs, a cyber security firm. "Leading banks and ATM service providers of the country have reached out to us to understand the threat and how it can be dealt with."

Source : Economic Times
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Wednesday, March 22, 2017

Bharatiya Mahila Bank to merge with SBI

The Government of India has decided to merge the Bharatiya Mahila Bank (BMB) with the State Bank of India (SBI) to ensure greater banking services outreach to a larger number of women, at a faster pace. The objective is to offer affordable credit to women as well as propagate women-centric products, which need to be quickly achieved through a wider network and lower cost of funds.

The decision to merge BMB with SBI has been taken in view of the advantage of the large network of SBI among other things. In the three years since BMB was established, it has extended loans of Rs.192 crore to women borrowers, while the SBI group has provided loans of about Rs.46,000 crore to them. SBI has a large outreach of more than 20,000 branches, with lowest cost of funds in the sector.

Out of the total workforce of around 2 lakh employees in SBI, 22 percent are women. SBI group already has 126 exclusive all-women branches across the country, while BMB has only seven. The proportion of administrative and managerial cost in BMB is much higher to reach the same coverage.   For the same cost, a much higher volume of loans to women could be given through SBI.

However, Union Government is committed to enhance the access to financial services to the population at large and women in particular. Under the Pradhan Mantri Jan-Dhan Yojana, preference is given to women for overdraft facility. Pradhan Mantri Mudra Yojana had 73 percent women borrowers in the previous financial year.

Source : Financial Express
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Government to infuse capital in IDBI, Bank of Maharashtra and Dena bank

State-owned IDBI Bank, Bank of Maharashtra and Dena Bank will receive a capital infusion from the government in lieu of preferential allotment of shares. IDBI Bank will get Rs 2,500 crore funding from the government, subject to regulatory approvals. Board of directors of the bank at a meeting held today approved proposal to allot preference shares to the government.

“Board of directors of the bank has approved the proposal for preferential issue of capital to government and other financial institutions, if any aggregating up to Rs 2,500 crore,” IDBI Bank said in an exchange filing. IDBI Bank extraordinary general meeting is scheduled for April 27 for obtaining shareholders’ approval to allot preferential shares to the government.

Pune-based Bank of Maharashtra said board of directors will meet on Friday to consider the proposal of raising equity capital by preferential allotment of shares to the government. The bank said it has received communication from the government on March 16 for capital allocation plan of Rs 300 crore.

Dena Bank said in a separate filing to exchange, “We would like to inform you that the Board of Directors of the Bank approved raising of share capital of the Bank up to amount of Rs 800 crore.” The government has approved the second tranche of capital infusion in public sector banks to enhance their capital base.

The first tranche was announced in July with the objective of enhancing their lending operations and enabling them to raise more money from the market. It has already announced a fund infusion of Rs 22,915 crore, out of the Rs 25,000 crore earmarked for 13 PSBs for the current fiscal.

The second round of funding entailing about Rs 8,000 crore is based on strict parameters.

Source : Financial Express
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Branches of associate banks to operate as SBI branches from April 1

All the branches of State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT) will function as branches of State Bank of India from April 1, 2017.

All the customers including depositors of these banks will now be treated as customers of SBI from April 1.

The cabinet had approved the proposed merger of State Bank of India (SBI) and five subsidiaries in February this year.

Source : Economic Times
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How India switched to digital payment methods

After the government banned Rs 500 and Rs 1,000 notes in November’16, digital activity levels were low in the initial weeks as people were busy depositing or exchanging the banned notes. But it increased from December as remonetisation progressed.

Growth was good in October 2016, mainly on account of festive season. But it continued further from November 16 to January 17 as well. This was a positive fallout of demonetisation. However, the pace of growth moderated somewhat in February 2017.

Source : Economic Times
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SBI to shut down 47% of associate banks' offices post-merger

State Bank of India (SBI), which will see five associate banks merge into it on April 1, has decided to shut down almost half the offices of these banks, including the head offices of three of them. This process will start from April 24.

"Out of the five head offices of the associate banks, we will retain only two. Three head offices of the associate banks will be unbound along with 27 zonal offices, 81 regional offices and 11 network offices of the associate banks," SBI Managing Director Dinesh Kumar Khara told IANS in an interview.

"We will keep their structure in place till April 24 and, post that, we will start dismantling the associate banks' controlling offices, which includes head offices, regional offices, zonal offices and network offices," Khara said.

The five associate banks that will merge with SBI are: SBBJ (State Bank of Bikaner and Jaipur), SBM (State Bank of Mysore), SBT (State Bank of Travancore), SBP (State Bank of Patiala) and SBH (State Bank of Hyderabad).

SBI is India's largest bank with assets of Rs 30.72 lakh crore and figures at No. 64 in the global ranking of banks (as of December 2015; December 2016 ranking is still awaited). Post-merger, with assets of approximately Rs 40 lakh crore, it will be among the top 50 banks in the world. SBI Chief Economist Soumya Kanti Ghosh told IANS that, post-merger, the bank will be at No. 45.

The move is to avoid overlapping offices in the same area and "we intend to remove any kind of duplicacy in the controlling structure", Khara said.

The five associate banks will cease to exist as legal entities and become a part of SBI from April 1, but the various merger processes will start only after April 24, once the balance sheets of the five entities are audited and added.

"We will have to get the balance sheets of the associate banks audited a day prior to the merger, that is, on March 31. The balance sheets of the banks will be drawn up and added; it takes 15-20 days. Soon after the audit is done, the branches will be completely merged with SBI," Khara told IANS.

There are currently 550 SBI offices while its associate banks have 259. The target for the number of controlling offices after the merger is 687 -- a reduction of 122 offices.

Employees directly affected by these shutdowns -- estimated at 1,107 -- will be redeployed, mostly in customer-interface operations, Khara said.

"The net result is that people in controlling functions will be available for deployment on the ground for improving reach to the consumer," he said.

"There are about 5-7 people in every regional office and 20-odd people in each zonal office. One regional office controls 30-40 branches, while 4-5 regional offices are controlled by one zonal office," he told IANS.

The associate banks have also offered a Voluntary Retirement Scheme (VRS) to employees who do not wish to relocate. "VRS is only an option, else they will be relocated. They will have a different role," he said.

Along with the winding-up of these offices, a number of merger processes will come into effect simultaneously, including the data merger of the five entities.

"Data merger will also start from April 24 and we will finish it by May end. That is the plan of action," he said, adding that the bank had given itself six months to complete all merger-related processes.

"I would rather say that within a quarter all the things should be in order. Ideally, we would like to have it in one quarter, but it will not spill over beyond the second quarter," Khara said.

SBI says the merger will be done seamlessly as it has the experience of two earlier mergers. State Bank of Indore was merged with SBI in 2010, while State Bank of Saurashtra was merged in 2008.

Source : Economic Times
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Saturday, March 18, 2017

Government approves second tranche of capital infusion in PSU banks

The government has approved the second tranche of capital infusion in public sector banks to enhance their capital base. In a regulatory filing to the stock exchanges, Dena Bank said it “has received a communication from Government of India vide its letter… dated March 16, 2017 informing inter alia capital allocation of Rs 600 crore as part of turnaround linked infusion plan.” Kolkata-based United Bank of India too said it has received a communication from the central government regarding capital allocation of Rs 418 crore as part of turnaround linked capital infusion plan.

The proposal for allotment of equity shares of face value of Rs 10 each at premium to the President of India acting on behalf of the central government by way of preferential allotment will be taken up at the board meeting at March 27, the bank said.

Dena Bank said “the board approval for raising of capital of the bank through issue of equity shares to Government of India, LIC of India and GIC of India on preferential basis, is being obtained.”

The second round of funding entailing about Rs 8,000 crore is based on strict parameters.

The government has already announced fund infusion of Rs 22,915 crore, out of the Rs 25,000 crore earmarked for 13 PSBs for the current fiscal. Of this, 75 per cent has already been released to them.

The first tranche was announced in July with the objective of enhancing their lending operations and enabling them to raise more money from the market.

Under Indradhanush roadmap announced last year, the government will infuse Rs 70,000 crore in state banks over four years while they will have to raise further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global risk norms Basel-III.

PSBs are to get Rs 25,000 crore in each fiscal, 2015-16 and 2016-17. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.

In the Budget 2017-18 speech on February 1, Finance Minister Arun Jaitley announced capital infusion of Rs 10,000 crore for the next fiscal beginning April 1.

Source : Financial Express
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n a first in Kerala, ESAF Small Finance Bank opens; targets Rs 20,000 cr worth business by 2020

ESAF Small Finance Bank, Kerala’s first small finance bank, is targeting businesses worth R20,000 crore by 2020. Kerala chief minister Pinarayi Vijayan on Friday inaugurated the SFB in Thrissur. ESAF Microfinance is among the 10 financial services firms selected by the RBI for setting up small finance banks. The bank, promoted by ESAF Microfinance and Investments (P) Ltd, has announced that it will open 85 branches in the first year of operations.

The new bank is offering interest rates of between 5.75% and 9% for term deposits of varying maturities. For savings deposits, the rates vary from 6% to 7%, based on the outstanding balance in the account. Senior citizens will be entitled to an additional .05% for term deposits.

ESAF Microfinance, which has a network of 285 branches in 93 districts spread over 11 states, will convert all its existing branches into customer service centres or ultra-small branches or satellite offices,” said K Paul Thomas, founder and ED, ESAF SFB.

ESAF Microfinance, which owes its success to the doorstep delivery of services, will replicate the same model for the bank. The bank envisages to appoint 10,000 agents in the next five years. They will function as human ATMs going to the doorsteps of customers for services, Thomas said. Higher interest rates and free Skype calls for customers at retail branches will be the unique selling proposition.

ESAF SFB plans to introduce new schemes such as Hridaya social deposits targeting high net worth individuals and NRIs. “The minimum deposit will be R15 lakh…” Thomas said.

Source : Financial Express
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29 lakh debit cards subjected to malware attack: Santosh Kumar Gangwar

A total of 29 lakh debit cards were subjected to malware attack last year through ATMs that were connected with the switch of Hitachi, the government said today.

As reported by commercial banks, 2.9 million cards were used at ATMs that were connected to switch of Hitachi, which was subjected to malware attack, Minister of State for Finance Santosh Kumar Gangwar said in a written reply to the Lok Sabha.

However, he said the successful attempts of misuse of compromised cards as reported to the RBI by banks was only 3,291.

"RBI has informed that Hitachi Payment Services (HPS) appointed SISA Infosec for PCI forensic investigation. The final report suggested that the ATM infrastructure of HPS was breached and the data between May 21 and July 11, 2016 were compromised, but not the POS (point of sale) infrastructure," he said.

According to the minister, the National Payment Corporation of India (NPCI) has said no independent investigation was carried out by it.

He further said the RBI advised banks to improve and maintain customer awareness and education with regard to cyber security risks.

"Banks were also asked to educate the customers on the downside risk of sharing their login credentials or passwords etc to any third-party vendor and the consequences thereof," he added.

RBI has set up a Cyber Security and IT Examination (CSITE) Cell within its Department of Banking Supervision in 2015, he said, adding that the bank issued a comprehensive circular on June 2, 2016 covering best practices pertaining to various aspects of cyber security.

In another reply, Gangwar said total stressed assets (gross non-performing assets and restructured standard advances) of scheduled commercial banks were Rs 9.64 lakh crore as on December 31, 2016.

Source : Economic Times
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Modi government, RBI may look at penal action, one-time settlement to fix bank defaulters

The Narendra Modi government and RBI are readying a strategy to deal with the bad loan problem, including a one-time settlement scheme for weak sectors and penal action against siphoning of funds. Sources tell ET Now that PMO, Finance Ministry and RBI are together working out a comprehensive strategy to nab top 50 defaulters.

Government and the central bank are awaiting the report from banks post completion of forensic audit on big defaulters, an official told ET Now on condition of anonymity.

"We are instructing banks to initiate forensic audit for all top 50 defaulters. We want to understand the nature of the defaults to see if it is a genuine case of business going bust due to sectoral issues or was money siphoned off. In case of siphoning of money, government will ask banks to initiate criminal action", said another source in the know of the development.

The department of financial services made a presentation to RBI last week at a high-level meeting on NPAs and has asked the central bank to overhaul the existing tools such as Joint Lenders Forum. Sources indicate that 3-4 banks with the highest exposure in JLF will be asked to make a decision for bad loans instead of the existing 60% voting requirement.

Moreover, PMO is also actively working on contours for a one-time settlement for bad loans. "Various bankers are worried to take decisions and agree to one time settlement options, so government lead panel is working on a one time settlement that will aid decision making", the source added

SBI recently announced one time settlement in the farm sector that make up about 6000 crore of doubtful cases on its books. Sources indicate that many more banks could look at similar mechanism for weaker sectors.

Gross non-performing assets in the banking system were estimated at around Rs7 lakh crore as of the end of December.

Source : Economic Times
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Government plans to swap CEOs of IDBI Bank and Indian Bank

The government is likely to tap Indian Bank chief executive MK Jain to try and turn around troubled IDBI Bank after seeing his hand in the stunning transformation of the Chennai-based lender. Jain, who is credited with making Indian Bank profitable, would swap positions with IDBI Bank chief Kishor Kharat, who would move to head Indian Bank.

This is the first time in recent memory that such a move is being considered and it is likely to set a precedent with performers being rewarded with challenging assignments, said two people familiar with the matter. A formal announcement is likely soon. Jain and Kharat could not be immediately reached for comment.

Jain’s selection was also prompted by the realisation that IDBI Bank needs stable leadership for some time so that a turnaround can be sustained. Jain has three years to go.

IDBI Bank reported record losses recently, and Jain would work to help recover dud loans amid an overall freeze in other operations of the bank, said the people who did not want to be identified.

Under Jain’s leadership, Indian Bank shares have delivered an over-three-fold jump in returns even as many of lender’s peers have struggled amid rising bad loans. In contrast, IDBI Bank is up just 22% from its year’s low. The stock price of the two banks reflects their financial performance over the past year.

IDBI Bank also had to contend with sagging morale after the Central Bureau of Investigation arrested five of its officials over alleged irregularities in lending to the failed Kingfisher Airlines.

Jain joined Indian Bank in No-vember 2015 and in the past one ye-ar has overseen a remarkable tur-naround. Net profit jumped nearly eight-fold to Rs 373.47 crore in the quarter ended December 2016 and earnings per share improved to Rs 7.78 in the same quarter from Rs 0.88 in October-De-cember 2015.

IDBI Bank, on the other hand, posted a record loss of Rs 2,255 cro-re in the Decem-ber quarter as it had to make huge provisions for bad debt which stood at 15% of the total loan book. Due to poor de-mand for loans and non-payment of dues, the bank’s net interest in-come crashed 45% to Rs 850 crore while non-interest income fell 5% to Rs 551 crore.

ICRA, which downgraded the bank’s rating, has said the lender would need at least Rs 9,000 crore to stay afloat, which is almost the bud-geted capital investment by the central government for all banks.

Source : Economic Times
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Government may shuffle heads of some PSU banks

The government is considering a proposal to shuffle the heads of some public sector lenders, including IDBI Bank, to improve their performance and resolve the issue of bad loans.

"There is a proposal for swapping of MD level position in banks which is being looked into. Final decision would be taken after careful consideration," said a source.

There are also talks of the CEO and managing director of IDBI Bank, Kishor Kharat, being moved to another bank.

The Appointments Committee of the Union Cabinet, headed by Prime Minister Narendra Modi, will take a final decision on this issue.

IDBI Bank has largest presence in joint lending and a has critical role in many Corporate Debt Restructuring (CDR) proposals, sources said.

According to a Parliamentary Committee report, although IDBI Bank has been a pioneering institution in the financial sector of the country, in 2015-16 it registered a loss of Rs 3,664 crore as against a net profit of 873 crore in 2014-15.

The bank has also seen decline profits on a sequential basis -- Rs 2,031 crore in 2011-12, to Rs 1,882 crore and Rs 1,121 crore in 2012-13 and 2013-14, it said.

The decline in profits of IDBI Bank could be attributed to increase in Gross Non-Performing Assets, loan write-offs and poor financial results, Committee on Petitions said in its report.

It has recommended that the Finance Ministry should effectively liaise with the IDBI Bank for formulating a Transformational Plan with a target of putting the stressed projects back on track.

It has suggested bringing down Gross NPAs to 3 per cent and Net NPAs to zero per cent by 2018-19, selling of non-core assets to fund the growth.

The board of IDBI Bank last month approved proposal for dilution of stake in some non-core businesses to shore up capital base.

Source : Economic Times
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Thursday, March 16, 2017

Farm loan waivers: As bad loans crisis in banks worsens, SBI chief Arundhati Bhattacharya warns of dangers ahead

State Bank of India (SBI) chairman Arundhati Bhattacharya on Wednesday made her reservations clear on the recurrent practice of waiving crop loans, stressing it disrupts credit discipline as borrowers expect more such relaxations in future. The statement came amid bankers warning of a worsening of the bad loan crisis, and days after the BJP secured a historic mandate in Uttar Pradesh where it had made a pre-poll promise to bring in a loan waiver scheme for farmers in the state.

“We feel that in case of a (agriculture) loan waiver there is always a fall in credit discipline because the people who get the waiver have expectations of future waivers as well. As such, future loans given often remain unpaid,” Bhattacharya said on the sidelines of a CII event in Mumbai. However, she added that the bank has not yet received any loan waiver proposal.

As of the first quarter of 2016-17, close to 10% of the Rs 86,000-crore farm loans in Uttar Pradesh, mostly disbursed by public-sector banks, are assumed to be impaired, according to a report by Kotak Institutional Equities. Out of Rs 13,300 crore worth farm loans extended by SBI in UP as of Q1FY17, 27% are overdue, the report said.

Bhattacharya said while it is important for banks to make credit available to farmers so that they can leverage and do better, it is also important to maintain credit discipline. She isn’t alone in questioning the policy of loan waivers and interest rate subvention. In 2014, then Reserve Bank of India governor Raghuram Rajan had said interest subventions and loan waiver could distort the price of credit and also lead to misuse of such schemes. Recently, RBI governor Urjit Patel said “steep interest rate subventions and large credit guarantees impede optimal allocation of financial resources and increase moral hazard” and, as such, these don’t solve the sector-specific issues.

Even the Rs 60,000-crore farm loan waiver scheme announced by the UPA government ahead of the 2009 general election attracted criticism from the Comptroller and Auditor General, which had said that 8.5% of farmers out of 80,299 accounts audited were not eligible for debt waiver.

Fresh crop loans to UP farmers have been to the tune of Rs 65,000-75,000 crore per annum over the last few years, or around 9% of the such loans to farmers in the country. “Crop loan disbursed to UP farmers during 2016-17 rabi season was around Rs 32,700 crore, and more than 95% of this was by commercial banks and the balance by cooperative banks. During the 2016 kharif period, fresh loans disbursed was to the tune of over Rs 30,000 crore, with a sixth of it by cooperative banks,” a UP finance department official had earlier told FE. Any waiver of these loans will likely add roughly 70 basis points to the state’s fiscal deficit.

The loan waiver promise comes at a time banks, especially the public-sector ones, are struggling with non-performing assets (NPAs). More than four-fifths of the NPAs are estimated to be in public-sector banks, where the NPA ratio had touched almost 12% compared with 9% across all banks as of September last year. The NPA ratio worsened by the end of December 2016. According to CARE Ratings, bad loans touched Rs 6,97,409 crore, or 9.3% of banks’ advances, by December last year, rising from Rs 4,37,859 crore a year earlier.

Meanwhile, the finance ministry on Wednesday said the rate of increase of bad loans has slowed in the current quarter of 2016-17. It added that the steel sector, with a significant exposure, shows sign of improvement and that the setting up of more oversight committees, along the lines of the one already established by the RBI, is under consideration to address the NPA crisis.

Speaking at the first meeting of the Consultative Committee (which has members cutting across political parties), finance minister Arun Jaitley said the government is taking sector-specific measures to deal with the NPA problem, specifically for the resolution of large cases of debts. The members of the committee suggested that the government set up the Public-Sector Asset Rehabilitation Agency (PARA), as mooted by the latest Economic Survey, and it should only consider those NPAs where sector-specific reforms do not work. It was also suggested that the government explore long-term debt market for financing NPAs.

Members also suggested a close monitoring of private-sector asset reconstruction companies (ARCs), which haven’t done well so far, especially in the wake of the government’s decision to allow 100% foreign direct investment in ARCs through the automatic route. Other suggestions include allowing state governments to take part in the auction of stressed assets to fixing the gross NPA norm in the range of 9-10% as well as not counting the asset as an NPA if it has been restructured.

Source : Financial Express
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Deutsche Bank may sell its Indian retail business to boost capital

Deutsche Bank AG is weighing the sale of its Indian retail businesses as the German lender considers asset disposals to help boost capital levels, two people with knowledge of the matter said. The bank is also considering selling retail operations in European countries including Spain, the people said, asking not to be identified as the plans aren’t public. The Frankfurt-based lender declined to comment.

Chief Executive Officer John Cryan earlier this month announced a strategic overhaul that includes offering 8 billion euros in stock, selling part of the asset management business and raising 2 billion euros ($2.13 billion) of capital. While asset disposals are part of the strategy, Cryan stressed that they’ll play a minor role in the overall aim of boosting capital levels.

Deutsche Bank has previously sold parts of its India business. In 2010, it sold the mortgage business acquired as part of its takeover of German retail bank Postbank, and five years later, it sold its local asset management unit. The bank’s Indian business had 693 billion rupees ($10.5 billion) in assets in total at the end of its last fiscal year ended on March 31, 2016, according to company filings. It made a profit of 23.4 billion rupees that fiscal year.

Source : Financial Express
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Merger of SBI, Bharatiya Mahila Bank to herald slew of reforms

The government is expected to initiate reforms in the financial sector soon, starting with merger of Bharatiya Mahila Bank with State Bank of India, India’s largest lender.

Other key decisions that may be unveiled over the next 2-3 months include new capital infusion parameters for 2017-18, a consolidation road map for state-run banks and insurance firms and steps to resolve stressed assets.

“The merger of Bharatiya Mahila Bank may happen within the next few days,” said a senior finance ministry official, adding that consolidation of other state-run banks will be taken forward by bringing in the Banks Board Bureau. “The government is only expected to play a matchmaker. It is for the banks to finally decide and kick-start the process,” the official said. There are six to seven merger combinations on the table.

After being nudged by the government, SBI announced its intent in 2016 to merge its five associate banks and Bharatiya Mahila Bank. The cabinet approved the merger last month and said in a gazette notification that the entire undertakings of these five banks will stand transferred to and vested in SBI from April 1.

On the proposal to merge Bharatiya Mahila Bank with SBI, finance minister Arun Jaitley had then said, “It is under consideration as of now.”

The government is open to sell stakes in IDBI Bank in small tranches, including a possible follow-on offer of shares. “We are providing extended capital support to IDBI. Once it has more control on its bad loan portfolio, we are sure there will be enough interest from investors,” the official said. IDBI Bank’s gross nonperforming assets widened to Rs 35,245 crore, or 15.1% of gross advances, at the end of December from Rs 30,134 crore, or 13.05% of advances, as of September 30.

Separately, the finance ministry is giving final shape to more stringent norms on capital infusion in PSBs. The government budgeted Rs 10,000 crore for supporting banks in this fiscal.

“We have already directed banks to divest non-core assets. Increasingly, capital will only be allocated to performing lenders and laggards will either need to change business strategy or merge to achieve economies of scale,” said another ministry official aware of the developments.

The Banks Board Bureau will work with lenders to develop business strategies and capitalraising plans.

In 2016-17, the government decided to infuse funds early to allow banks to step up lending. It set aside 25% of funds to be disbursed based on performance parameters including more efficiency, growth of credit and deposits and reduction in operation costs.

Jaitley and senior government officials met Reserve Bank Governor Urjit Patel and his two deputy governors last week to take stock of stressed assets in staterun banks and firm up ways for their quicker resolution, which may include the setting up of a bad bank, an asset management company to tackle stressed loans.

The non-performing assets of public sector banks stood at Rs 5,89,502 crore (11.82%) in September, the government said in parliament last month.

Source : Economic Times
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SBI to hike stake in credit card JVs to 74 per cent

State Bank of India on Tuesday said it will hike its stake in its two credit card joint ventures with General Electric Company to 74 per cent.

SBI's board has given approval to infuse Rs 1,160 crore in the two JVs -- SBI Cards and Payment Services Pvt Ltd (SBICPSL) and GE Capital Business Processes Management Services Ltd (GECBPMSL)-- through purchase of equity shares from GE Capital so as to increase the bank's stake in both the companies to 74 per cent, SBI said in a filing to the BSE.

The American company seeks to exit SBI Cards.

SBI currently holds 60 per cent stake in SBICPSL and 40 per cent in GECBPMSL. The balance being held by GE Capital in both the ventures.

As per an agreement between SBI and GE Capital at the time of formation of SBI Cards, it was decided that whenever any party decides to exit the JV, the decision has to be on the basis of mutual understanding.

SBI, the nation's largest lender, entered credit card business in 1998 by roping GE Capital India, the consumer finance arm of US-based GE Capital.

Currently, SBI Cards' board has eight members, including three from GE Capital.

Source : Economic Times
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Friday, March 10, 2017

IDFC buys Natixis’s stake in mutual fund unit for Rs 244 crore

Financial services major IDFC has decided to buy Natixis Global Asset Management’s 25 per cent stake in IDFC Mutual Fund for over Rs 244 crore. The shares will be purchased through IDFC Financial Holding Company, a wholly-owned subsidiary of IDFC.

“The transaction is in line with the terms of the shareholders agreement that we signed with Natixis six years ago,” IDFC Managing Director and Chief Executive Officer Vikram Limaye told PTI.

IDFC Financial Holding Company holds 75 per cent stake of IDFC Asset Management Company (AMC) and IDFC AMC Trustee Company. The remaining 25 per cent stake is held by Natixis.

In December 2010, Natixis had entered into a share purchase agreement to pick stake in IDFC AMC and IDFC AMC Trustee.

As part of the agreement, there was a requirement that both shareholders would review the partnership at the end of five years.

Following a review clause in the agreement, IDFC “agreed to acquire through IDFC Financial Holding Company the balance stake (about 25 per cent) in IDFC AMC and IDFC AMC Trustee from Natixis Global Asset Management”, the financial major said in a filing. It has agreed to buy the stake for Rs 244.24 crore.

The deal, subject to regulatory approvals, is expected to conclude by the end of this month. IDFC AMC is among the top 10 firms in the mutual fund space with an assets base of Rs 57,998 crore at the end of December quarter. The turnover of the fund house stood at Rs 325 crore at the end of March 31, 2016.

Currently, there are 42 players in the mutual fund industry that manage assets worth more than Rs 17 lakh crore.

“Our agreement with Natixis had a clause which required us to distribute all our international products through Natixis only but after the conclusion of deal we will own 100 per cent of the business then we have the flexibility to think about exploring distribution and or strategic partnerships with others as well.

“Our relationship with Natixis has been very good and nothing prevents us from using the Natixis distribution,” Limaye said.

IDFC AMC, which manages a range of funds across debt and equity classes, has several new products in credit and balance fund category.

Limaye said that the company is focusing on portfolio management services (PMS) business quite aggressively.

Source : Financial Express
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IndusInd Bank confirms deal talks with MFI Bharat Financial

Mid-sized private lender IndusInd Bank today said it is in talks with multiple entities for business expansion, including the widely speculated merger of Bharat Financial Inclusion (BFI).

"...the management has been exploring strategic alternatives, and engaging in discussions from time to time with various parties, including Bharat Financial, as and when required," the bank said in a late evening exchange filing.

In the statement issued to bourses following media reports that IndusInd and BFI (formerly SKS Microfinance) are likely to announce a merger in an all-stock deal, the bank said the management has been authorised to evaluate strategic opportunities for business expansion.

It soon added that no decision has yet been made in this regard by either the board or any of the committees and also termed the media reports as "speculative".

As per the reports, the merger ratio is likely to be 10:7, wherein shareholders will get seven shares of IndusInd Bank for every 10 shares of BF. In its clarification to bourses yesterday, BF said it had been exploring various options but termed the media reports as "speculative".

Speculation regarding a deal between the two has been on for many months now and some reports had said the Hinduja Group-promoted bank may be looking at buying a minority stake in BFI. But off late the buzz has shifted to takeover

There have been a slew of deals between private sector lenders and MFIs as the former eye to expand their network in the hinterland which will help them meet the priority sector lending mandates and offer cross-sell opportunities.

In a note yesterday, Australian brokerage Macquarie had said such a merger was positive from a medium-term perspective for the bank but flagged execution as the key given the stress on MFI's books. A merger can enhance IndusInd's return on assets by up to 0.25 per cent and make it among the highest in the industry, it said.

BFI already has a business correspondent relationship with IndusInd in Karnataka for many years now. The then SKS had a tumultuous time four years ago as it first faced a repayment crisis in its largest market of Andhra Pradesh and a corporate battle over leadership which ended with the exit of founder Vikram Akula.

If the merger fructifies, it will be the third deal for IndusInd Bank, after Deutsche Bank's credit card portfolio in 2011 and RBS' diamond financing book in 2015.

Both IndusInd and BFI counters have seen a rally this year, but the stocks today corrected 0.26 per cent and 1.40 per cent respectively on the BSE.

Other banks, including IDFC Bank, Kotak and RBL, have either acquired or taken minority stakes in MFIs in past 18 months.

Source : Economic Times
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Thursday, March 9, 2017

SBI launches 'Work from Home' facility for employees

Country's largest lender State Bank of India today launched a new facility to enable its employees to work from home.

The Board of the bank has recently approved the 'Work from Home' policy to enable its employees to work while at home using mobile devices to address any urgent requirement they may have, that prevents their travelling to work.

The lender will be using mobile computing technologies and shall have continuous control over all the enabled devices centrally to manage and secure the data and applications on the mobile devices, the bank said in a statement here today.

The use of technology and services shall be monitored through carefully designed MIS and dashboard to enable improvements and refinements, it said.

The bank said going forward cross-sell, marketing, CRM, social media management, settlement & reconciliation, complaints management applications will also be enabled to make the work from home services comprehensive and increase the employee productivity multi-fold.

Source : Economic Times
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Banks are not Shylocks sucking money, customers need to pay for better service: HDFC's Aditya Puri

Banks are not Shylocks bent on sucking out money from customers, but those seeking higher levels of service must be open to paying for the convenience, said Aditya Puri, MD of HDFC Bank.

India’s longest serving bank chief also said strong third-quarter GDP growth has proved demonising of demonetisation was wrong.

Scrapping all banking charges ends up subsidising the wealthy carrying out high-end transactions and reduces banks’ ability to offer services to the poor, Puri said.

“You don’t go to Oberoi Hotel and ask for Mahesh Lunch Home rates,” Aditya Puri told ET in an interview.

“We are not here to charge usury costs, let us be very clear. As you go higher up on the type of product, it is perfectly reasonable to charge. There is a segment of the population which should not becharged, which we agree with.”

Recent charges levied by banks for ATM transactions and cash deposits beyond a limit have drawn criticism, especially in case of SBI, which restored the minimum balance amount after scrapping it in 2012. Opposition to charges on use of debit and credit cards at merchants is also strong, especially after demonetisation, which has led to a surge in digital payments.

“If I have to put up the (point of sale) terminals and they have to get it free, are you saying I should also subsidise Louis Vuitton or Pantaloons or Taj Hotels? Their sales are rising, he is swiping. Why should I subsidise him?” Puri said.

Demonetisation of high-value notes is pushing digitisation of Indian banking and it has not impacted growth much, though there has been some pain in the informal sector. “Admit that the impact (of demonetisation) has not been drastic,” said Puri.

He also rubbished claims that GDP growth was overstated as impact on informal sector had not been accounted for. “Now to start saying impact on parts of the informal economy was not reflected… we are talking about this for 20 years.”

Source : Economic Times
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SBI justifies penalty; says need money to bear Jan Dhan costs

Facing a backlash for levying penalty on non-maintenance of minimum balance in accounts, SBI today justified its move saying the bank needs to impose some charges to balance the "burden" of managing a large number of no-frills Jan Dhan accounts.

The bank also said it has not received any "formal communication" from the government for re-considering the penalty and it will take a call "if something comes". It also clarified the penalty would not apply to Jan Dhan accounts.

Last week, the country's largest lender decided to re- introduce penalty on non-maintenance of minimum balance in accounts and also revised charges on other banking services. The new charges would be applicable from April 1. The move by the state-run banking major has faced a lot of criticism, including from the opposition parties.

"Today, we have lot of burden such as we have 11 crore financial inclusion or Jan Dhan accounts. To manage such a large number of Jan Dhan accounts, we need some charges. We have considered many factors and after analysing carefully, we have taken this step," SBI Chairperson Arundhati Bhattacharya told reporters here on the sidelines of a women entrepreneurs' national convention.

As per the list of revised charges of SBI, failure to maintain Monthly Average Balance (MAB) in accounts will attract penalty of up to Rs 100 plus service tax.

In metropolitan areas, there will be a charge of Rs 100 plus service tax, if the balance falls below 75 per cent of the MAB of Rs 5,000. If the shortfall is 50 per cent or less of the MAB, then the bank will charge Rs 50 plus service tax.

The charges and MAB varies according to the location of bank. It is minimum in case of rural branches.

Bhattacharya said all the banks have minimum balance requirement for account holders and SBI as such has the lowest minimum balance requirement.

She said the penalty was there earlier also and SBI was the only bank to withdraw it in 2012.

"Our analysis have shown that most of the account holders maintain more than Rs 5,000 on a monthly basis and so they do not have to worry about any penalty," Bhattacharya said.

She clarified that the penalty on non-maintenance of minimum balance will not be applicable on Jan Dhan accounts.

Asked about the government's direction to the bank to reconsider the decision, SBI's Managing Director Rajnish Kumar (National Banking) said the bank has not received any communication on this issue.

"There is no formal communication. We will see if something comes," Kumar said.
Under the revised charges, withdrawal of cash from ATMs will attract a charge of up to Rs 20 if the number of transactions exceeds three from other bank's ATMs in a month and Rs 10 for more than five withdrawals from SBI ATMs.

However, SBI will not levy any charge on withdrawals from its own ATMs if the balance exceeds Rs 25,000. In case of withdrawal by its customers from ATMs of other banks, there will be no charge if the balance exceeds Rs 1 lakh.

"We are charging as people go to ATMs, withdraw cash and give it to somebody who in turns deposit it into the bank. This type of transaction involves a cost which is not known to public as bankers do not levy any charge on the customers.

"There is some cost involved in printing cash, in transportation, counting and providing security to cash. The cost is borne by the tax payers. There is a cost in installing an ATM and so we feel the charges are very reasonable," Bhattacharya said.

She said the customers must use alternate channels like mobile, internet to do their transactions.

"We do not see there is a requirement for an household person to withdraw cash through ATMs for more than four times. Daily cash requirement is more for people doing businesses and we want them to use mobile and internet banking to do transactions," she said.

While addressing the convention, Bhattacharya said the bank so far has given loan worth to Rs 1,60,000 crore to the MSME sector.

"This year alone we have done more than Rs 10,000 crore. We wish to do around Rs 16,000 crore of Mudra loans by the end of this financial year," she said.

At present, nearly 55 per cent of the bank's balance sheet comprises retail segment and balance is to large segment.

"I have no problem at all if I am able to tilt that more in favour of retail. I would love to do that. Of course large segment needs support because of that you would have the airports ... the roads you have today, for defence you are going to set up an SME and for that you need steel, cement.

"So, the large sector also needs support from the bank. But that does not mean that we (banks) are not there for you (retail segment)," she said.

Source : Economic Times
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All you need to know about saving taxes using ELSS

The last month of the financial year sees investors rushing to save tax by investing in tax-saving instruments. You can save tax by investing upto Rs 1.5 lakh in equity-linked savings scheme (ELSS) under section 80C of the Income Tax Act.

What are tax saving or ELSS schemes? How much can one invest in them?

An equity-linked savings scheme (ELSS) is a mutual fund that gives the option to save tax. These funds invest in equities and investors can choose the dividend or growth options. You can invest any amount up to 1.5 lakh in an ELSS scheme to save tax.

ELSS schemes offer growth and give investors the opportunity to earn higher returns in the long run. However, as is the case with all mutual fund schemes, there is no guarantee of any fixed returns.

What is the process to invest in an ELSS scheme?

Once an investor is KYC compliant, he can invest in an ELSS scheme just like any other mutual fund scheme.

Investment can be done by writing a cheque and filling the relevant form, or can be also done on line.

Does ELSS have any advantage over other tax-saving options under section 80C?

ELSS has the smallest lock-in period of three years.

Compared to this, the Public Provident Fund (PPF) has a minimum lock-in of 15 years, and allows only conditional withdrawal before that. The EPF is usually locked in for the term of your employment. Other tax-saving products like Tax-saving Fixed Deposits, or the National Savings Certificate (NSC) are locked in for a period of five years and above. The National Pension Scheme (NPS) is locked in until you reach 60 years of age, and only allows conditional withdrawals. ELSS also has intermittent cash flows in the form of dividends which are tax free, if one opts for the dividend option. Also, in an ELSS you do not pay any tax on dividend or at the time of redemption.

What should an investor do with his ELSS funds, once the lock-in period is over?

Investors have the option to continue holding the mutual fund units after three years or redeem them. Financial planners say investors could continue holding them if the funds perform in line with their expectations in order to meet their financial goals.

Source : By Prashant Mahesh, THE ECONOMIC TIMES
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