PSU banks themselves responsible for NPAs, not government: FM P Chidambaram

Blaming "tardy" state-run banks for high level of non-performing assets, Finance Minister P Chidambaram said banks' boards and not the government should be held responsible for the situation.

"If the bank boards cannot perform their duty, blame should stop with the bank boards and not with the government," he said at a panel discussion at an event to commemorate NSE's 20th anniversary here.

He acknowledged that the government has a nominee director in every public sector bank, but pointed out the roles of the independent directors, full-time directors, chairmen and managing directors and senior bank management.

During his three stints in the finance ministry, running into eight years, he has never interfered with the working of a bank, Chidambaram said.

"NPAs are high because the recovery measures are soft. Bankers are being tardy and to some extent soft on recovery. We have failing companies and prosperous promoters," he said.

Gross NPAs of banks crossed 4 per cent as of the September quarter at Rs 2.37 trillion and are projected to cross 4.4 per cent or Rs 2.9 trillion by the end of the fiscal, according to a report by rating agency Icra. Most NPAs are being generated by the state-run banks. United Bank of India has an NPA level of over 7 per cent, while SBI has over 5 per cent NPAs.

The minister also said that the RBI and the government have taken serious note of the issue and asked banks to expedite recoveries aggressively. State Bank has set up a separate vertical to tackle NPAs, he noted.

Chidambaram also said it is not fair to compare NPAs in the current context with the levels of the past, as in 2004, when the numbers were lower.

On capital infusion in state-run banks, Chidambaram said the infusion will continue even as bad assets rise because of the rate at which the overall assets of the banks are growing.


Source: Economic Times

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LIC Housing Finance will meet bank licence norms: Sunita Sharma, MD & CEO

LIC Housing Finance's first woman MD & CEO, Sunita Sharma, is confident of the company meeting all of Reserve Bank of India's criteria for a bank licence. According to Sharma, the company is prepared to transfer various businesses under a holding company as required by RBI.

If successful in its bid, LICHF will convert into a bank and come under a holding company which will also own LICHFL Care Homes and LIC Financial Services — a distribution company. Both of these are at present subsidiaries of LICHF.

"LICHF is a separate private company and the application for a bank licence does not involve the Life Insurance Corporation of India," said Sharma . "We do not have any problems in meeting any of the eligibility criteria as we are a highly compliant company."

RBI's screening committee is expected to meet again this month and hand over the list of qualifying candidates to an external committee headed by Bimal Jalan, a former RBI governor . Jalan had said that the committee would be able to come out with its recommendations in three months. Earlier this month, the Tata group withdrew from the race for a bank licence after they found the process of restructuring operations too complex.

Sharma, who took charge last month, was earlier executive director in charge of equity research at LIC. She was appointed CEO of the housing finance company following her predecessor V K Sharma's elevation as MD of LIC.


Source: Economic Times

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IOB to open 400 more branches this fiscal

Indian Overseas Bank is opening branches in Bangkok and Dubai. The bank Chairman and Managing Director M. Narendra told reporters here on Friday that the bank was in an expansion mode and had set itself the target of opening 400 more branches during the current financial year. At present, the bank has 3,059 branches.

Financial inclusion

“Our focus is on opening more rural branches and taking banking to villages. We have covered 3,000 villages under the financial inclusion scheme. There is a lot to be done on that count. Till now all the banks put together have covered only half of the six lakh villages in the country and there is a huge challenge and an opportunity ahead,” he said. He said the bank’s business — currently at Rs 3,89,000 crore — would cross the Rs 4 lakh-crore mark by the end of the current financial year, “but we have set ourselves a stiff target of Rs 4,25,000 crore.” He said the economic downturn was affecting the performance of banks, and inflation was also a cause for worry.

Narendra said the bank had recently recruited 4,562 employees and 6,500 more would be recruited depending on the expansion plans.

In Andhra Pradesh, the bank has 240 branches and 30 more would be added during the current financial year. “Our expansion will go on at the same pace during 2014-15, and we will add 500 branches all over the country, 50 of them in Andhra Pradesh,” he said.

The gross NPA of the bank stands at 4.65 per cent and net NPA at 2.83 per cent. “We want to bring down the gross NPA to below 3 per cent,” he added.

sarma.rs@thehindu.co.in

Source: thehindubusinessline

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RBI on course to issue new bank licences, says Rajan

The Reserve Bank of India will start issuing new banking licences from early next year.

RBI Governor Raghuram Rajan said the apex bank is ‘primarily on course’ to hand over the licences. “We are largely in line with our target date, may be a few weeks this way or that way. We hope to start handing out the licences by early next year,” Rajan told reporters here.

He, however, did not peg on the number of licences that would be handed out. The decision to issue licences would be taken by a committee. “That will be based on what the committee recommends and what the RBI decides. We don’t have a fixed number in mind,” Rajan said.

A total of 26 companies have applied for licences.

Foreign Banks

According to Rajan, foreign banks operating in the country are neither keen on expanding their branches nor are they looking for the wholly owned subsidiary model, proposed by the central bank.

“It is interesting. One section thinks that we have given away too much to the foreign banks and therefore they are protesting against the (wholly owned subsidiary) model. But the foreign banks themselves don’t seem to be interested,” he said.

The wholly owned subsidiary model, he pointed out, is important from the perspective of stability in the banking system. “There are benefits to it (subsidiary model) that foreign banks will see as they study it over (a period of) time. One of the benefits is that they can expand a little more, but they don’t seem to be interested,” he said.

The wholly owned subsidiary model would also help the foreign banks preserve capital.

Increased Liquidity

According to Rajan, as far as government bond yields are concerned, the RBI would look at keeping liquidity in markets. It would look to maintain liquidity at a certain level.

Source: thehindubusinessline

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RBI offers borrowing under MSF on Saturday

In anticipation of liquidity tightening due to outflows on account of advance tax, the Reserve Bank of India has decided to extend borrowing facility under the MSF window on Saturday.

“As the liquidity conditions are expected to tighten on account of advance tax payments commencing from mid-December 2013, Reserve Bank has decided to offer funds to the Banks for two days through Marginal Standing Facility (MSF) on Saturday,” RBI said in a statement.

The MSF window will remain open between 5.00 p.m. and 5.30 p.m. and the due date of repayment will be December 16, 2013 (Monday), the statement said.

Currently, the MSF rate is at 8.75 per cent.

On December 11, banks had borrowed Rs 250 crore through the MSF window, while a day later on December 12, the amount borrowed was limited to Rs 50 crore.

Earlier this week, RBI had had decided to provide additional liquidity of Rs 10,000 crore through the 14-day term repo on Friday. In the auction, the RBI notified allotted Rs 48,506 crore from bids amounting to Rs 76,625 crore. The cut off rate was 8.01 per cent.

beena.parmar@thehindu.co.in

Source: thehindubusinessline

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