WEDNESDAY WORDS: BANKING NEWS AS ON 10.09.2014 CONTRIBUTED BY - TopicsExpress



          

WEDNESDAY WORDS: BANKING NEWS AS ON 10.09.2014 CONTRIBUTED BY SHRI.D.S.GANESAN: 1. Bandhan Bank will usher in a new model in financial inclusion: CMD Business Line / Kolkata / September 9: When Bandhan Bank roll outs its services across the country in October 2015, it will be a bank with a difference. The plan is unique. Bandhan will start its journey with 600 branches. The microfinance company’s existing 2,016 offices will operate as sub-branches, each having an army of salaried field staff to take banking to the villages. “We will operate in a hub-and-spoke model,” says its Chairman and Managing Director, Chandra Shekhar Ghosh. While the nitty-gritty is yet to be finalised, Ghosh says he will bring about a new model in financial inclusion by connecting consumers, right from the large cities to the remotest of remote villages. Fresh recruitments Keeping in line with its micro-financing business, the largest in the country, half of the Bandhan Bank network will be in the nooks and corners of West Bengal. Overall, nearly 70 per cent of the network will be in five States - Bengal, Bihar, Odisha, Uttar Pradesh and Assam. The rest will be spread across other States. The four southern States will have three branches each. Overall, there will be around 3,000 people managing the core banking. While efforts are on to train some of its existing 13,000 employees in banking activities, indications are that Bandhan will go for nearly 3,000 fresh recruitments. “I anticipate the final staff strength to be 16,000,” says Ghosh. East focus Ghosh is clear that he is not going to run after the creamy layer so far as lending is concerned. Instead, he will try to bolster lending activities to those in the small and unorganised sector who cannot meet the rigorous paperwork that commercial banks require. While it is costly to take banking to the doorsteps of rural depositors, Bandhan wants to bank on the un-banked to make money. A vast rural presence brings an added advantage - scope to sell other financial products. “We already have a tie up with Life Insurance Corporation of India. Going forward we will explore this opportunity further,” he says. Remittance potential Going deep into the rural areas of Bengal and other eastern States will also help Bandhan tap the remittance market. Most of these States are exporters of labour to other parts of the country. Due to low banking penetration in villages, remittances mostly come through informal arrangements or channels. Ghosh wants to tap this source of funds. In fact, the bank’s branches in the South will be in areas dominated by Bengali labourers. 2. RBI sets 70 years as upper age limit for MD, CEO of pvt banks Business Line / Mumbai / Sept 9: The Reserve Bank of India on Tuesday decided to fix the maximum age for Managing Directors and Chief Executive Officers in private sector banks at 70. RBI said in the light of the provisions of the Companies Act, 2013, the upper age limit for Managing Director & Chief Executive Officer (MD & CEO) and other Whole Time Directors (WTDs) of banks in the private sector should be 70 years. Within the overall limit of 70 years, individual bank’s boards are free to prescribe a lower retirement age for WTDs, including MD & CEO, as an internal policy, RBI said in a circular. RBI said the Companies Act, 2013 prescribes that no company shall appoint or continue the employment of any person as Managing Director, Whole Time Director or Manager who is below the age of 21 years or has attained the age of 70 years. 3. Wilfully defaulting co guarantor also to be treated as wilful defaulter Business Line / Sept. 9: In case a guarantor of a wilfully defaulting company refuses to comply with the bank’s demand, the guarantor would be treated as wilful defaulter, RBI said. “Where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter,” RBI said in a clarification on Tuesday. Amid rising concerns of wilful defaulters among corporates, banks raised queries regarding inclusion of names of guarantors who are either individuals (not being directors of the company) or non-group corporates in the list of wilful defaulters. As a recent buzz, Vijay Mallya-owned Kingfisher Airlines, now grounded due to financial troubles, was declared as a wilful defaulter by United Bank of India last month. “It is advised that the liability of the surety (guarantor) is co-extensive with that of the principal debtor unless it is otherwise provided by the contract,” RBI said. Therefore, when a repayment default is made by the debtor, the banker will be able to proceed against the guarantor even without exhausting the remedies against the principal debtor. RBI further asked banks/FIs may include “Guar” in brackets i.e. (Guar) against the name of the guarantor and report the same in the Director column, while reporting such names to RBI. The central bank also said this would apply only prospectively and that this position may be told to all prospective guarantors at the time of accepting guarantees. 4. ICICI Bank board approves five-for-one stock split Business Line / Mumbai / Sept. 9: ICICI Bank said on Tuesday that its board has approved a five-for-one stock split, the first such split by the country’s top private lender. “The Board of Directors of ICICI Bank Ltd has considered and approved the sub-division (split) of one equity share of the bank, having a face value of ₹10, into 5 equity shares of face value of ₹2 each,” the bank said in a statement. Renewing investor interest According to analysts, a stock split results in lowering of the share price, usually leading to renewed smaller or retail investor interest, which can have a positive impact on the stock. “Every company has an FII limit and therefore, will need more retail interest in its shares after the stock price reaches a certain high. A stock split can also give the company alternate routes other than QIP to raise capital in future,” an analyst said. On Tuesday, ICICI Bank shares ended down 1.31 per cent, at ₹1,547.70, on the Bombay Stock Exchange. ADS impact “Each American Depositary Share (ADS) of ICICI Bank will continue to represent two underlying equity shares as at present. The number of ADSs held by an American Depositary Receipt holder would consequently increase in proportion to the increase in number of equity shares,” said the bank, in its statement. The sub-division of shares will be subject to approval by the shareholders, which will be sought by postal ballot, and any other applicable statutory and regulatory approvals. The record date for sub-division of shares will be announced in due course, the ICICI Bank statement added. 5. Wilful default: apex court verdict, ‘a boost’ for banks Business Line / Kolkata / September 8: Bankers are likely to be more assertive against wilful defaults in the days to come, says Deepak Narang, executive director of United Bank of India. Narang, who had slapped a “wilful defaulter” case on UB group chairman Vijay Mallya and three other directors of Kingfisher on September 1, feels the court verdict has so far vindicated the powers granted to banks by the RBI to recover bad-debts. “It’s a landmark judgement”, he told Business Line on Monday. The case in point is UBI’s stand that only company officials, representing the board members, should take part in grievance redressal (over NPA) procedures. Mallya opposed this stand and wanted his lawyers to handle the matter. He was successful in thwarting a similar attempt by Punjab National Bank, which also lent money to the grounded airline. A Delhi High Court had ruled in favour of Mallya. Empowered to act But this time, a single-judge bench and then a Division Bench of Calcutta High Court ruled in favour of UBI. And, now the Supreme Court has rejected an appeal on the same grounds. “We thought we were empowered to deny KFA’s appeal. Now our stand is vindicated,” Narang said. He expects the judgement will be a shot in the arm for other banks trying to avoid legal hurdles in declaring entities “wilful defaulters” and summoning them for non-recovery of dues. Taking a cue from UBI’s success, PNB has lodged a fresh appeal before a Division Bench of Delhi High Court. Narang is all praise for the courts in disposing of the petitions from Mallya swiftly. Praise for court “For me the court has been a temple of justice,” he says elaborating that the single-judge bench took just six days to reach a conclusion and the division bench completed the hearing in about two weeks. But didn’t he face political pressure? Narang says he did not. Moreover, the actions were not specifically against Mallya or Kingfisher. The bank was in the news last fiscal for piling up bad debts. UBI is now working in ‘mission mode’ to bring down gross NPAs from 10.49 per cent to nine per cent of total advances by the end of this fiscal. “We have served wilful defaulter notices against many others,” Narang says. Drastic action against defaulters helps by sending the right message down the line, he says. The move will get a further boost with the Centre planning to table a Bill against wilful defaults in the winter session of Parliament. 6. Reserve Bank to pick talent via UPSC-like test Business Line / Hyderabad / September 8: The Reserve Bank of India will adopt a common recruitment system from next year to tap talent for its core functions. The larger objective is to strengthen itself in the changing economic scenario. “Starting from 2015, there shall be common recruitment for all core functions of the bank,” the RBI said in an internal report on HR initiatives. At present, it recruits officers and support staff for core and non-core functions through different examinations, such as the Grade ‘B’ officers level exam. The RBI now has about 17,000 employees. The proposed common recruitment will not only cover traditional areas such as economics and statistics but also include niche skills, such as risk management, financial markets trading, accounting, legal, human resources management and counselling. The officers that are recruited will have a common seniority. In effect, it will be like the common cadre under the All India Services of the Union Public Service Commission. The Reserve Bank Services Board hopes to complete the entire recruitment cycle within three to four months. Assessment centre By December, an assessment centre will be in place to evaluate the actual/potential performance of an officer. “We do need to engage external consultants,” the RBI said. The apex bank may disassociate itself from functions such as debt management and micro management of sector lending, among others. The focus on forensic audits, on-tap bank licensing, differentiated bank licensing, enforcement, IT systems and risk modelling will increase. As part of the restructuring initiatives, an amendment to the existing RBI Act is on the anvil to create additional positions in top management. New units such as a market intelligence division and departments for corporate services and corporate strategy are also in the offing. 7. Apex accounting body to help PM track Jan Dhan scheme online Business Line / New Delhi / September 8: Prime Minister Narendra Modi will be able to track the progress of bank accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) with the click of a mouse. This is thanks to the Public Financial Management System (PFMS), an initiative of the Controller General of Accounts (CGA). The CGA is the principal accounts adviser to the Government and responsible for establishing and maintaining a sound management accounting system. It works under the Finance Ministry and is manned by officers from the Indian Civil Accounts Services. “We are ready to offer a customised version of this system to the Prime Minister. This will help him know how many accounts are operative or dormant… from the national level to village level,” a senior CGA official told BusinessLine. Once approved, it will not take more than a month to customise the system, the official said. The system is already linked with 26 nationalised banks, seven private sector banks and 69 regional rural banks. It also has an interface with 1.05 lakh post offices, out of a total of 1.50 lakh post offices in the country. The PMJDY was launched on August 28 as a comprehensive financial inclusion programme to bring those without bank accounts into the banking system. The target is to open 7.5 crore bank accounts by January 26. The mission also envisages expansion of Direct Benefit Transfers under various Government schemes through the bank accounts of the beneficiaries. Direct Benefit Transfer would mean the transfer of amounts due to the beneficiary directly to her/his Aadhaar-linked bank account, thereby eliminating the existing intervening layers. “After issuing the payment order, the system can validate the bank account of the real beneficiary and filter duplication or bogus accounts. Leakage will be plugged,” another official said. The system will help know if the money transferred from the Government reaches the real beneficiary. As on March 31, direct benefit transfers amounting to ₹346.81 crore had been made to 24.13 lakh beneficiaries. 8. UBI may declare UB Holdings a wilful defaulter Business Standard / Kolkata / September 10, 2014 Sources said a few other lenders were also contemplating a move to declare both Kingfisher Airlines and UBHL wilful defaulters United Bank of India (UBI) has sent a notice to United Breweries Holdings (UBHL), which was the corporate guarantor for loans to now grounded Kingfisher Airlines, seeking an explanation on why it should not be declared a wilful defaulter. They have responded to our notice. We are yet to take a final decision on whether to put their name in our list of wilful defaulters, Deepak Narang, executive director at UBI, told Business Standard. Kingfisher Airlines has borrowed around Rs 350 crore loans from UBI. It has close to Rs 6,500 crore loans outstanding to a consortium of 17 banks. UBI has already declared the airline company, its Chairman Vijay Mallya and three other directors - Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly - wilful defaulters for non-payment of dues. Sources said a few other lenders, including Punjab National Bank, are also contemplating a move to declare both Kingfisher Airlines and UBHL wilful defaulters. Banks are exploring ways to recover their dues from Kingfisher Airlines. It has already been identified as a wilful defaulter by UBI. Since UBHL is the corporate guarantor for these loans, it can also be included in the wilful defaulters list, said a banker with a public sector bank, which has offered loans to the airline company. A spokesperson of UB Group declined to comments on this subject. Bankers explained that the Reserve Bank of India (RBI)s guidelines on wilful defaulters has a provision that allows lenders to classify group companies of a defaulting unit as wilful defaulters. While dealing with wilful default of a single borrowing company in a group, the banks/financial institutions should consider the track record of the individual company, with reference to its repayment performance to its lenders. However, in cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by the banks/financial institutions, such group companies should also be reckoned as wilful defaulters, RBI said in a clarification on the rules pertaining to guarantors of wilful defaulters released on Tuesday. A wilful default happens when a borrower does not repay his dues despite having the capacity. A borrower is also classified as a wilful defaulter if he does not repay and has siphoned off the funds or used the money for some purpose other than the one for which the loan was availed. Once an entity or an individual is declared as a wilful defaulter, they are debarred from availing finance from banks and financial institutions. Lenders can also initiate the legal process against wilful defaulters. Mallya has so far maintained that he was not given a hearing before being declared a wilful defaulter by UBI. We were not given hearing, we have not appeared before them, we disagree with their action, and we shall pursue with legal remedies, he reportedly told shareholders at United Breweries (UBL) annual general meeting last week. 9. Wary banks park excess liquidity with RBI at 7%, but won’t cut deposit rates Financial Express / Mumbai / Sep 10 2014 The recent improvement in liquidity has led banks to park funds with the Reserve Bank of India at 7% through the daily reverse repo tender, but bankers are wary to cut deposit rates despite credit being slack. Banks parked Rs 2,600 crore at the reverse repo tender on Tuesday and have been putting in an average of Rs 9,000-10,000 crore daily over the last two weeks. Money market rates, right from the overnight call rate to the three-month certificates of deposit, have softened owing to the improved liquidity. However, a more widespread deposit rate cut is unlikely, bankers said, as this liquidity is transient and inflation remains high. “It is difficult for us to cut rates when inflation is high. Depositors expect a real rate of return. Deposit rates will start trending down when inflation trends down,” said State Bank of India chairperson Arundhati Bhattacharya. Bankers are wary that if they cut deposit rates on the back of this transient improvement in liquidity, depositors may pull out money as retail inflation remains near 8%. Year-on-year deposit growth was 13.58% as of August 22 while credit growth was 11.04%, a four-year low. “This improvement in liquidity is frictional and does not warrant a cut in deposit rates. Once advance taxes move out, this liquidity will tighten again,” said Mohan Shenoi, head of treasury at Kotak Bank. Bankers expect this improved liquidity to tighten further after advance tax payments scheduled next week. Tax payments are estimated to be between R40,000 and R50,000 crore. Nevertheless, rates of CDs or wholesale deposits of banks have fallen 10-15 basis points in the last one month. Rates on commercial papers, a key source of working capital funding of companies, too have edged down by a similar margin. The RBI has said that it would continue to manage liquidity through various operations. It said it would conduct term reverse repo auctions to suck out excess funds from the system. The first such auction was held on July 2 and, since then, the RBI has drained close to R1.5 lakh crore through such auctions. 10. Banks like Punjab National Bank, State Bank of India and others to have alert-based surveillance to prevent burglaries Economic Times / Sep 10 Banks losses due to crimes at Automated Teller Machines (ATMs) may be a drop in the ocean as compared with corporate fraud generated losses. Nevertheless, banks are responding with sophisticated monitoring systems to prevent it from getting out of hand. With crimes at ATMs on the rise, banks are beginning to replace the previous decades approach of physical guarding or monitoring with alert-based surveillance. Having a camera inside the ATM and a security guard posted at the premises has not helped much - especially in preventing crimes - as in the case of a bank employee being attacked a few months ago in Bangalore. The alert-based system, however, aims to prevent crimes, especially where criminals have perfected the art of concealing their identity. One such system at Axis Bank recently helped to catch criminals in the act. On August 16 this year, inspector Devendra Shinde from a police station in a Pune suburb got an unusual call at 1.30 am. Someone was alerting him that two criminals were at work to break open an ATM machine. It was unusual in the sense that it was not from someone passing by the ATM, but from a distant Navi-Mumbai-based centralised control room operated by Securens Systems, a private service provider that was monitoring its client ATMs. We had fun operating in a live environment, says Shinde, on how the police team was able to prevent the burglary and arrest the duo. All banks should have a mechanism like this. Integrated surveillance systems are being put in place to help banks receive alerts from ATMs across the country, be it someone breaking into an ATM in Palakkad or Ludhiana. All the monitoring happens from one point, depending on the company that sets up the system based on the banks needs. The alert-based monitoring system is software that buzzes an alarm for about 30 different kinds of activities inside the ATM, barring a normal withdrawal or other transactions. It detects attempts to tamper with the cash vending machine and any unusual movement inside an ATM - such as a person staying inside for more than a few minutes — and throws up alerts at the control room. This helps someone or the control room operator to ask a customer through a microphone what he or she is looking for giving them the idea that someone is watching them live. In most cases, the warning through a speaker drives miscreants out, says Sunil Udupa, managing director at Securens Systems, a provider of e-surveillance services. But if it does not, we follow the process alerting our quick response teams and then the local police. The technological solution not only detects crime on a real-time basis, but also attempts to prevent it immediately. Although there is no precise data with regard to ATM crimes, industry interaction shows it is on the rise. According to the latest Reserve Bank of India data, ATM/debt/credit card related complaints rose by 25% to 17,867 during 2012-13, some of which may be just related to poor internet connectivity. 11. SBIs operations disrupted in Kashmir valley due to floods Economic Times / Chandigarh Banking operations in as many as 66 branches of State Bank of India in Kashmir valley were severely affected following heavy floods in Jammu and Kashmir where massive rescue operations are underway to help out trapped people. With no communication link functioning with the branches in the valley, SBI is hoping to restore banking operations once the water level recedes. Banking operations in Srinagar are completely disrupted due to floods. We have 66 branches in the valley. Out of total branches, minimum of 60 are supposed to be closed, while there is no connectivity with rest of branches which are located on the outskirts, so we are not sure whether they are functioning, a senior official of SBI told PTI today. SBI, which has 66 branches in the valley spread across 10 districts, generates total business of more than Rs 3,000 crore in Kashmir valley, he said. The official said the banking operations could only be restored when water level recedes, adding that communication link could not be established with the affected branches. Unless flood water level drops, banking operations cannot be restarted. But we have a back up team in place there which will start working towards restoring operations as and when water level comes down, the official added. As far as banking operations in Jammu is concerned, SBI official said banking operations were normal. One branch was affected in Udhampur area but that has also started functioning from today, he informed. SBI has a network of 177 branches in Jammu and Kashmir.
Posted on: Wed, 10 Sep 2014 06:06:12 +0000

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