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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