Centre has cleared the appointment of five PSU bank's chiefs

The Centre has cleared the decks for appointing five public sector bank chiefs.

Mr S. Raman, Executive Director, Union Bank of India, will shortly assume charge of Bangalore-headquartered Canara Bank as Chariman and Managing Director.

Mr Ramnath Pradeep, ED, Central Bank of India, will be at the helm of Mangalore-headquartered Corporation Bank as CMD. Mr Arun Kaul, ED, Central Bank of India, will be the new CMD of Kolkata-headquartered UCO Bank.

Mr R. Ramachandran, ED, Syndicate Bank, will be the new CMD of Hyderabad-headquartered Andhra Bank. Mr M. Narendra, ED, Bank of India, will assume charge of Indian Overseas Bank in November.

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Education loan defaults rising

Education loans, a segment with lowest defaults among all other retail loans so far, have seen a sudden spurt in NPAs (non-performing assets) due to the shrinking job markets following the global economic meltdown.

The defaults have been higher in loans below Rs 4 lakh, which are given without any collateral, according to senior bank officials.

Indian Bank, for instance, has bad loans worth Rs 80 crore on its books as on June 30, 2010, according to its Chairman and Managing Director, Mr T.M. Bhasin. “We have witnessed some loans in the below Rs 4 lakh category going bad recently. We are tracking the students and trying to work out the recovery methods. The rise in delinquency is due to the lack of proper placements on completion of the course,” Mr Bhasin told Business Line.

The bank's education loan outstanding was at Rs 2,700 crore as on June 30. The bank plans to extend the tenure of loan to help the students repay the amount.

“We are planning one-year relaxation in order to give some breathing space to the students,” he said. Banks are also encouraging students to look at alternative job options such as BPOs in order to help them repay the loan on time.

“Though no cases of NPAs have been reported as yet, there is a cause for concern as in some cases it is difficult to track the students. But banks are taking a cautious approach,” said Mr K.R. Kamath, Chairman and Managing Director, Punjab National Bank.

The defaults have been higher for loans given for courses in B-grade engineering or management colleges as these do not guarantee assured placements, said a senior official at a public sector bank.

State Bank of India, Bengal Circle, has also witnessed a rise in NPAs from such loans. “There has been a clear rise in NPAs from such loans; so, we are stepping up the recovery methods. Students already get a one year moratorium on such loans. This can further be extended to 18-24 months depending on the case,” said Mr Sureinder Kumar, Chief General Manager, SBI, Bengal Circle.

The Circle registered 40 per cent growth in educational loans at about Rs 405 crore (Rs 289 crore) as on March 2010. The total loan outstanding for the bank was at Rs 450 crore as on date. The level of NPAs increased to about 4.27 per cent (three per cent) as on June 2010.

Talking about the growing defaults in the educational loans segment, a senior official at UCO Bank said, “Though our data do not reveal a rise in NPAs from educational loans, the industry has witnessed a rise in delinquencies. So we are being cautious and have already alerted our branches to take necessary measures to step up the recovery process.”

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Education loan defaults rising

Education loans, a segment with lowest defaults among all other retail loans so far, have seen a sudden spurt in NPAs (non-performing assets) due to the shrinking job markets following the global economic meltdown.

The defaults have been higher in loans below Rs 4 lakh, which are given without any collateral, according to senior bank officials.

Indian Bank, for instance, has bad loans worth Rs 80 crore on its books as on June 30, 2010, according to its Chairman and Managing Director, Mr T.M. Bhasin. “We have witnessed some loans in the below Rs 4 lakh category going bad recently. We are tracking the students and trying to work out the recovery methods. The rise in delinquency is due to the lack of proper placements on completion of the course,” Mr Bhasin told Business Line.

The bank's education loan outstanding was at Rs 2,700 crore as on June 30. The bank plans to extend the tenure of loan to help the students repay the amount.

“We are planning one-year relaxation in order to give some breathing space to the students,” he said. Banks are also encouraging students to look at alternative job options such as BPOs in order to help them repay the loan on time.

“Though no cases of NPAs have been reported as yet, there is a cause for concern as in some cases it is difficult to track the students. But banks are taking a cautious approach,” said Mr K.R. Kamath, Chairman and Managing Director, Punjab National Bank.

The defaults have been higher for loans given for courses in B-grade engineering or management colleges as these do not guarantee assured placements, said a senior official at a public sector bank.

State Bank of India, Bengal Circle, has also witnessed a rise in NPAs from such loans. “There has been a clear rise in NPAs from such loans; so, we are stepping up the recovery methods. Students already get a one year moratorium on such loans. This can further be extended to 18-24 months depending on the case,” said Mr Sureinder Kumar, Chief General Manager, SBI, Bengal Circle.

The Circle registered 40 per cent growth in educational loans at about Rs 405 crore (Rs 289 crore) as on March 2010. The total loan outstanding for the bank was at Rs 450 crore as on date. The level of NPAs increased to about 4.27 per cent (three per cent) as on June 2010.

Talking about the growing defaults in the educational loans segment, a senior official at UCO Bank said, “Though our data do not reveal a rise in NPAs from educational loans, the industry has witnessed a rise in delinquencies. So we are being cautious and have already alerted our branches to take necessary measures to step up the recovery process.”

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PMO rejects FinMin proposal on bank chief appointments

The Prime Minister’s Office (PMO) has turned down a finance ministry proposal to allow bankers with less than two years of residual service to be appointed as public sector bank chiefs.

The move will affect several candidates in race for top posts of banks
Sources close to the development said PMO was against dilution of appointment norms, which have been in place for several years and have coincided with the re-emergence of public sector banks as strong players in the banking space.

The sources said a term of less than two years did not give individuals time to implement their decisions properly.

Following the feedback from South Block, the finance ministry has prepared a fresh set of names and sent them to the Appointments Committee of Cabinet (ACC).

PMO’s objections come at a time when some lawmakers have written to Finance Minister Pranab Mukherjee expressing concerns over the proposal to allow executive directors with 18 months of residual service to be considered for appointment as bank chiefs. The members of Parliament said the decision was taken unilaterally by the finance ministry and ACC’s approval was not taken.

They said since 2007, the government had followed ad-hocism in appointment of bank chiefs and not followed a uniform set of rules. For the interviews conducted in February, the government kept changing norms, so much so that some candidates from State Bank of India, who were called for the meeting, were dropped at the last moment.

Interestingly, because of this intervention by PMO, a long tradition of appointment of chairmen of government banks has been broken. Traditionally, appointments at large banks are done through lateral movement, that is, the chairman of a smaller bank takes charge of a big bank. However, for Canara Bank’s top job, the government has decided to promote an existing executive director because present chairmen of smaller banks do not meet the two criterions, that is, two years of residual service and one-year experience as chairman of a smaller bank.

Union Bank’s S Raman is scheduled to take charge of Canara Bank when the present chief, A C Mahajan, retires in July. For six large banks, Punjab National, Bank of Baroda, Canara Bank, Bank of India, Union Bank of India and Central Bank of India, the system of lateral movement has been followed.

The sources said the finance ministry sought consent from eight candidates for appointment in as many number of banks where top positions would be vacant till February next year.

Apart from Canara Bank, the government has sought consent from candidates for appointment as chiefs of Corporation Bank, Andhra Bank, Indian Overseas Bank, Uco Bank, Oriental Bank of Commerce, Bank of Maharashtra and Vijaya Bank. Except for Vijaya Bank, where the post will be vacant in February, the top posts in seven other banks will be vacated in 2010.

The government has also sought consent from 11 general managers for the position of executive directors in nine banks

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PSBs to get new chiefs soon, plan set into motion

The government is set to appoint a slew of public sector bank chiefs and in the fray are executive directors (ED) of various state-owned banks. A communication to this effect was sent by the Centre late on Tuesday evening.

A number of EDs have given their consents to the government for their promotions to the top posts of few PSBs RM Malla, who is currently serving as chairman and managing director (CMD) of SIDBI, will succeed IDBI Bank CMD Yogesh Agarwal, who has been appointed as the chairman of PFRDA from next month.

Similarly, Uco Bank CMD SK Goel is likely to head India Infrastructure Finance Company and Corporation Bank CMD JM Garg is likely to get berth in chief vigilance commission(CVC). Meanwhile, Union Bank executive director S Raman has given his consent to take charge as the CMD of Canara Bank. Normally, the CMD of top six PSBs are chosen from among the CMDs of comparatively smaller PSBs on the basis of lateral transfer.

Some of the other executive directors that have given their consent for chairman and managing director’s post include Ramnath Pradeep of Central Bank of India for Corporation Bank, M Narendra of Bank of India for Indian Overseas Bank, Arun Kaul of Central Bank of India for Uco Bank, AS Bhattacharya of Indian Bank for Andhra Bank, R Ramachandra of Syndicate Bank for Bank of Maharashtra, Nagesh Pydah of Punjab National Bank for Oriental Bank of Commerce and HSU Kamath of Canara Bank for Vijaya Bank.

However, the ministry of finance is to yet to find out a person who would be replacing GS Vedi, CMD of Punjab Sind Bank who will be retiring in June.

On a similar footing, quite a few general managers serving at various PSBs have also given their consent for becoming the executive directors of the public sector banks. The list of general manager include Archana Bhargav of PNB for Canara Bank, VR Iyyer of Union Bank for Central Bank of India and N Badrinarayan of Bank of Baroda for Uco Bank. Anil Bansal of Union Bank is the only candidate whose clearance from RBI for is still being awaited to promote him as executive director.

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