WEDNESDAY WORTHY WORDS: BANKING NEWS AS ON 17.03.2014 BANKING NEWS COMPILED BY SHRI. D.S.GANESHAN 1. Glitches in NPA classification, priority-sector lending pain behind United Bank of Indias mess: Probe Financial Express / New Delhi / March 17, 2014 The alarming rise in United Bank of Indias (UBI) non-performing assets (NPAs), an internal probe has revealed, could be attributed to many priority-sector loans turning bad and software glitches. The sudden jump was also attributed to 21 consortium/multi-bank accounts that were deemed as NPAs even as other banks that partnered with UBI treated them as “standard” accounts. The inquiry initiated by the department of financial services (DFS) and assisted by the bank, according to sources, did not reveal any criminality on the part of the UBI officials as this aspect was really not explored. The sources, however, did not rule out action if agencies/regulators such as Sebi, Institute of Chartered Accountants of India, Central Vigilance Commission or the CBI later finds that mala fide intentions/decisions had led to the crisis. UBIs gross NPAs saw near 200% increase in absolute terms to Rs 8,546 crore by December end from a year ago. As percentage of advances, the gross NPAs rose from 4.42% to 10.82% during the period. The Kolkata-based public sector lenders compliance with priority-sector lending (PSL) targets with respect to agriculture and micro, small and medium enterprises has added to its NPA burden. The banks PSL had gone up from Rs 23,177 crore in December 2012 to Rs 28,389 crore in December 2013. Of this, agriculture credit had risen from Rs 9,083 crore to Rs 10,326 crore during the period, while MSME advances had grown from Rs 9,366 crore to Rs 11,406 crore. Mainly, farmers and MSMEs in West Bengal and Tripura benefitted from this. Since the bank is the State Level Bankers Committee (SLBC) convener in these two states, the bank had, starting 2010, wittingly or unwittingly lent more to agriculture and SME segments to meet the annual credit targets, the probe revealed. UBIs NPAs in the agriculture sector had jumped from Rs 351 crore in December 2012 to Rs 1,156 crore in December 2013 while that in the SME segment rose from Rs 858 crore to Rs 2,436 crore during the period. Of course, the economic slowdown has made the recovery even more difficult. Financial services secretary Rajiv Takru told FE the probe report was “under examination,” adding, the government would take necessary administrative action on the basis of the report as well as the reports of the RBI and consultancy firm Deloitte, which have also been submitted to the ministry. On the issue of classification of 21 consortium/multi-bank accounts as NPAs, the sources said this has happened as the concerned clients had repaid the other banks in the consortium/multi-bank accounts, while keeping UBI high and dry. More discussion with other banks, the UBI Board and its statutory auditors could give a clearer picture as to whether these accounts can now be treated as standard by UBI also, the sources said. They said Archana Bhargava, during her tenure as the banks chairperson and managing director, had asked auditors to be strict and unrelenting in treating accounts as NPAs. This, sources said, resulted in some of the accounts, which could have been restructured, also being classified as NPAs. The probe also found that there were deficiencies in Finacle core banking software of Infosys which led to incorrect classification of accounts. However, the IT major had denied this allegation and stated that Finacle has the proven ability and framework required to address asset classification and NPA reporting as per the RBI norms. The bank is trying its best to recover loans by holding video-conferences every alternate day with the zonal heads. It has reduced NPAs to the tune of Rs 1,200 crore in January and February, said finance ministry sources. This included recovery of Rs 400 crore and upgrading accounts involving Rs 800 crore. The finance ministry is monitoring the recovery of bad loans on a daily basis. 2. People can get pre-2005 currency notes exchanged at any bank Financial Express / New Delhi / Mar 16 2014 You can walk into any bank to get your pre-2005 currency notes, including Rs 500 and Rs 1,000 denominations, exchanged till January 1, 2015, following a Reserve Bank directive asking banks to help the public get rid of old currency notes. There is no limit on the number of notes that can be exchanged. RBI has decided to withdraw the pre-2005 currency notes from circulation and asked the holders of such currency to exchange them by January 1, 2015. The earlier deadline was June 30. Thereafter, people would have had to produce identity proof to exchange more than 10 notes of Rs 500 and Rs 1,000. In the recently released FAQs, the RBI said: Banks have been advised to freely provide this exchange facility to all members of public, whether customer or non-customer. RBI further said that there is no such restriction on the number of pieces that can be exchanged. Banks have been advised to freely exchange these notes till January 1, 2015. Meanwhile, banks have been advised to stop re-issue of the pre-2005 series notes over the counters/through ATMs. The banks have been asked to forward the pre-2005 notes to RBI. It has also clarified that the public can continue to freely use these notes (pre-2005) for transactions and can unhesitatingly receive these notes in payment as all such notes remain legal tender. It is easy to identify pre-2005 notes, as the currency notes issued before 2005 do not have the year of printing on the reverse side. In the notes issued after 2005, the year of printing is visible at the bottom of the reverse side. Post-2005 notes have added security features and help in curbing the menace of fake currency. RBI said it will monitor and review the withdrawal and exchange process so that the public is not inconvenienced in any manner. At present, currency notes are issued in denominations of Rs 5, Rs 10, Rs 20, Rs 50, Rs 100, Rs 500 and Rs 1,000. Earlier, the RBI had withdrawn a certain series of currency notes at the bank level but bearers were not asked to get them replaced. 3. SBI to open 100 branches in AP next fiscal Business Standard / Visakhapatnam / March 16, 2014 As on date, it has 1,382 branches in the state and by the end of this fiscal, this would touch 1,400 State Bank of India (SBI) will open about 100 new branches in Andhra Pradesh (both Telangana and Seemandhra) during the next fiscal. As on date, it has 1,382 branches in the state and by the end of this fiscal, this would touch 1,400, said CR Sasi Kumar, chief general manager, SBI. Continuous agitations had affected the banks business and growth had fallen significantly in AP during the current fiscal. However, SBI was anticipating more than 20 per cent growth, particularly in Seemandhra, during the next fiscal and about 10 per cent in Telangana, he added. After the announcement of state bifurcation, we have got clarity. In Seemandhra, industrial and economic activity will get a boost because of the incentives announced by government. Hence, SBI is expecting more than 20 per cent growth for the next 4-5 years in this region, he told media persons here today. SBIs total business in AP stood at Rs.1.3 lakh crore. The bank is taking all steps to reduce NPAs, which for industrial sector was 6 per cent and for the retail segment was only 2 per cent, according to him. 4. SBI to sell Rs. 5,000-crore NPAs to asset reconstruction cos The Hindu / Mumbai / Mar 17 For the first time in over two centuries of its history, the nation’s largest lender State Bank of India, which had reported 5.73 per cent of its assets as bad loans in the December quarter, is going all out to stem the rot by offloading around Rs. 5,000 crore of its Rs. 67,799 crore dud assets to ARCs before the end of the month. The move comes ahead of the tighter provisioning norms kicking in from next April, which the Central Bank had in May last year announced when it had more than doubled the provisioning for restructured loans to 5 from 2 per cent. “There are 14 ARCs functioning today, and we have invited many of them to pick up our stressed loans of around Rs. 5,000 crore. We will definitely be offloading at least a large portion of this to the highest bidders. The process should be concluded before the end of the month,” a senior SBI official told PTI on Monday. Earlier this month, Chairperson Arundhati Bhattacharya had said in Kolkata that “the bank was considering a proposal to sell NPAs in the current quarter. This would be for the first time we would be selling NPAs to asset reconstruction companies or ARCs.” But she did not specify how much the bank was planning to offload. Normally ARCs pay 5-10 per cent of the total bad loans being bought in cash and the rest could be security receipts (SRs), the SBI official cited earlier said, adding the bank is confident of selling a good portion of the dud loans earmarked for offloading. In the quarter to December alone, the lender had added as much as Rs. 11,400 crore in fresh bad loans or 5.73 per cent, taking its overall NPA mount to a whopping Rs. 67,799 crore. This pulled down its net profit by a whopping 34 per cent to Rs. 2,234 crore, as the bank was forced to make Rs. 3,428.6 crore towards loan provisions up from Rs. 2,766 crore a year ago. The bank added Rs. 11,400 crore in fresh slippages, including Rs. 9,500 crore from SMEs and mid-corporates and added Rs. 6,165 crore into the restructured loan book during the quarter, while a cleaning up of balance sheet resulted in a write-off of around Rs. 5,000 crore in Q3. The bank is also expecting at least Rs. 9,500 crore of loans being restructured in the fourth quarter. As of the December quarter, as much as Rs. 67,799 crore of its Rs. 11,83,723 crore assets or advances classified as NPAs. While its net NPAs stood at Rs. 37,167 crore or 3.24 per cent in Q3 and Rs. 32,151 crore or 2.91 per cent in the previous quarter when its total net NPA was at Rs. 11,39,326 crore. Media reports said banks, mostly State-run ones, are scurrying to sell close to Rs. 43,000 crore to ARCs by the end of the month as the total bad assets in the system rose to 4.1 per cent of the total advances. This is almost four times the amount that was put up for auctions in the past quarter. The urgency comes as the Central Bank under the new Governor Raghuram Rajan has been encouraging lenders to clean up their books. In his inaugural address on September 4 last, Mr. Rajan had famously said that promoters of failed companies have no divine right to remain in control of such companies. The rush to offload bad loans is also to guard them against higher loan loss provisions that kick in from next March, by when all restructured loans would be classified as non-performing accounts attracting higher provisions. On May 30 last year, the RBI had tightened the norms for loan restructuring norms by raising provisions to 5 per cent in line with the global practices, in a gradual manner. As per the RBI notification, provisioning on the newly restructured account was raised to 5 per cent from June 1, 2013 from 2 per cent. However, for the old CRD accounts it would be done in a phased manner till April 2015. What was more important was that the RBI had said the existing “regulatory forbearance” would no longer be available from April 1, 2015, therefore the urgency of banks to offload bad loans now. As per existing guidelines, an account after restructuring is not classified as an NPA. However, as per the new norms, restructured account would also be treated as an NPA. The RBI had also said promoters of companies seeking CDR should bring in at least 20 per cent of banks’ sacrifice or 2 per cent of the restructured debt as fresh equity. 5. Heavy rains, hailstorms take their toll on banking sectors profitability; Rs 5,000 cr of crop loans expected to turn bad Economic Times / Mumbai / March 17, 2014 More than Rs 5,000 crore of crop loans could turn bad in the wake of the Heavy rains, hailstorms take their toll on banking sectors profitability hailstorms in several parts of the country over the past few days, hitting the banking sector at a time when it is saddled with increasing non-performing loans due to the severe impact of economic slowdown on corporate borrowers. About eight lakh hectare of farmland spread across 28 districts in Maharashtra has been hit by heavy rain and hailstorms over the past 10 days, according to state government officials. About 50,000 hectare of fruit crop, including grapes, oranges, bananas and pomegranates, has been damaged, they said, adding that the damage extends to wheat, jowar and cotton crops. We have begun touring the areas, said a private banker. The loans extended by the banking sector to cash crops like grapes, pomegranates and oranges have been affected. Onions and tomato crops have also been affected. The northern parts of interior Karnataka, central Maharashtra, Marathwada, Vidarbha, entire Madhya Pradesh, Chhattisgarh, parts of Andhra Pradesh and Haryana have been affected by the hailstorms. Although these crops are insured, the insurance amount can be claimed only after the district authorities declare this as a calamity. In an election year such administrative decisions are usually delayed, which could mean loss to farmers and banks, said the banker, who didnt wish to be named. Union agriculture minister Sharad Pawar toured the affected areas in Maharashtra late last week and reportedly gave an assurance that assistance would be extended from the central government after taking due consent from the Election Commission. PJ Joseph, chairman and managing director of Agriculture Insurance Company, said, We have a commitment to 2.5 hectare of farmland that is damaged and covered around 3 lakh farmers under the two insurance schemes - weather-based insurance and national agriculture insurance scheme. Not all 100% crops are damaged and we are in the process of assessing the loss. Farmers from Maharashtra are especially in a bad shape, said a private bank executive who visited parts of Maharashtra and Gujarat. Without any relief from the government, farmers and bankers will be in distress, said the executive, who has recently taken charge as the head of agriculture business at the bank.
Posted on: Wed, 19 Mar 2014 04:51:36 +0000
Trending Topics
Recently Viewed Topics
© 2015