Vijaya Bank bags Rajbhasha Kirti Puraskar (BL 15.09.17)
Vijaya Bank has bagged the first prize under the Rajbhasha Kirti Puraskar (Region C) for the year 2016-17. It got the award for active implementation of Hindi in its day-to-day activities. President Ram Nath Kovind gave away the award to the MD and Chief Executive Officer, R. A. Sankara Narayanan, in the presence of Home Minister Rajnath Singh, Minister of state Kiren Rijiju, Minister of state Hansaraj Gangaram Ahir, and others.
Declare wilful default of loans a criminal offence: bankers’ union (BL, FE, ET 15.09.17)
The United Forum of Bank Unions (UFBU), a representative body of nine bank unions, demanded that the Centre and RBI take steps to strengthen public sector banks rather than looking to dilute state shareholding in such banks, bring consolidation or privatise them. The attempt should be to recover the non-performing loans and not write them off, they said, adding that the current policies on the banking front are against public interest. Opposing government policies on banking sector, thousands of bank employees are to go on morcha to Parliament on Friday. “Eighty-nine companies account for as much as 80% of the non-performing assets (NPAs) of nearly Rs. 9 lakh Crs. We want a change in law so as to declare wilful defaulting of bank loans as a criminal offence and ensure that criminal action is taken against the defaulters,” CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA), said. The UFBU is also of the view that the newly introduced resolution process — through the insolvency and bankruptcy code — will not yield any benefits to the banking system. “Even in the initial 12 cases referred for insolvency proceedings, money will not come back to the banks, but the birds (promoters) will escape,” Venkatachalam said. The recovery laws need to be drastically amended and more debt recovery tribunals need to be set up, he added. There is a need for fast-track courts to deal with high value NPAs. Also, the RBI Act must be changed to enable the central bank to publish the names of wilful defaulters, he said. S Nagarajan, General Secretary, All India Bank Officers’ Association, said the insolvency and bankruptcy mechanism will end up as an “escape route for those 12 people (initial cases referred for insolvency) who do not want to return money to the banking system”. Post the insolvency ordinance, the RBI had referred a first set of 12 cases to the banks for the latter to initiate insolvency proceedings before courts. “We want to draw the attention of the government that they cannot turn a Nelson’s eye to the banking sector. They need to take stringent measures to recover the bad loans,” another UFBU member said.
Banks' stressed loans are unlikely to get larger here on: Crisil (BL, BS, FE 15.09.17)
Stressed loans in the banking system are unlikely to see any big increase going forward, according to Crisil. The stressed loans in the banking system are estimated at around ₹11.5 lakh Crs, or about 14% of total advances. This number may not increase significantly over the medium term, said a statement from the rating agency. That’s due to gradual recovery in the credit quality of corporates, driven by higher commodity prices, lower interest rates, improved capital structures, and efficiency gains. About two-thirds of the overall stressed assets in the banking system has already been recognised by banks as NPAs as on March 31, 2017. The stressed assets include both reported gross NPAs and standard assets that are under pressure currently and could deteriorate into NPAs over the medium term. The assets under pressure mostly comprise not-yet-recognised bad loans (recognised as NPA in one bank, but not in others), restructured standard accounts, and stressed assets structured under schemes such as SDR, 5:25 and S4A. Crisil expects gross NPAs in the banking system to be about 10.5% of advances as of March 2018, up from 9.5% as of March 2017. “With the majority of stressed assets now recognised as NPAs, the rest of the corporate loans portfolio of banks can be expected to perform better over the medium term. “However, the performance of MSME and agriculture loans could see some deterioration mainly due to the impact of Goods and Services Tax (GST) and farm loan waivers, respectively. But these are unlikely to stress bank balance sheets the way large corporate NPAs did,” said Gurpreet Chhatwal, President, CRISIL Ratings. Faster resolution of stressed accounts through the Insolvency and Bankruptcy Code and various structuring schemes, therefore, is critical to improving the asset quality of banks.
Wage talks: IBA team to meet officers tomorrow (BL 15.09.17)
The Indian Banks’ Association (IBA) will meet on Saturday with a core group of the United Forum of Bank Unions (UFBU), as part of ongoing wage negotiations. SK Kakkar, Senior Advisor, Human Resources and Industrial Relations, IBA, said this in a letter to the UFBU leadership. The previous meeting of the IBA core group (officers) was held on August 1. The IBA sub-committee negotiating wages for staff other than officers had met with representatives of five unions on September 6 in Mumbai. The IBA side was represented by Rakesh Sharma, MD & CEO, Canara Bank, and Chairman of the sub-committee. The meeting discussed various demands but was inconclusive. The next meeting is slated for October 3. Among the demands were additional casual leave for physically challenged employees; accumulation of privilege leave of up to 300 days and encashment; improvement in sick leave benefits; relook at maternity and paternity leave; sick leave for women staff when children fall ill; child care leave; handling absence during curfews and other exigencies; leave bank system; simplified overtime wage calculation; and problems on the NPS front. Meanwhile, the All India Bank Employees’ Association (AIBEA), one of the five unions, said it is offering help to banking job aspirants as part of its outreach initiative. This is aimed to benefit ‘deserving candidates constrained by inadequate financial background’ who want to sit for the IBPS recruitment examination. AIBEA will provide study material free of cost to them as also online test papers, said CH Venkatachalam, General Secretary. A number of training institutes have come up to train candidates but they collect heavy amounts in fees, he added.
Dena Bank CMD leads race for SEBI WTM post (BL, ET 15.09.17)
Seven people have been shortlisted for the final interview for the post of SEBI’s whole time-member (WTM) to be held in New Delhi on September 25. Ashwani Kumar, Chairman & MD of Dena Bank is the frontrunner for the post, a source close the development said. Others in the race include Shashank Saksena, Joint Secretary, Department of Economic Affairs in Finance Ministry. Rajiv Nabar, Principal Commissioner, Income Tax Department, and PK Nagpal, ED, SEBI. SEBI’s former ED Ranganayakulu, current officials SK Mohanty and Ananta Barua are among the others, who will be interviewed. SEBI has three WTM posts and one fell vacant on September 6 when S Raman, who handled the legal and investigation departments, retired.
Licence fee, spectrum payments: telecom panel against changing interest calculation (BL 15.09.17)
The Telecom Commission is learnt to have conveyed to the Department of Telecom (DoT) its reservations on replacing prime lending rate (PLR) with marginal cost of fund-based lending rate (MCLR) for calculating the interest paid by operators on delayed payment of licence fee and spectrum usage charge (SUC). The government’s top decision-making body for the sector has directed the DoT to ensure that the interest rate charged on delayed payments continue to act as a disincentive to the companies, sources said. The high-level panel has asked the Department to review the recommendation and revert to it. The replacement of PLR into MCLR was part of the final report of the inter-ministerial group (IMG) on financial stress in the telecom sector. The group was set up in May to study the financial stress of the sector and suggest solutions. The IMG had earlier recommended that the deferred payment schedule for spectrum should be increased to 16 years from 10 years and replacement of the PLR with MCLR. The telecom service providers (TSPs) also wanted it to be removed. According to analysts tracking the sector, the interest waiver on deferred spectrum payments could help the companies save around Rs. 30,000 Crs annually. Currently, the total debt for the industry is pegged at around Rs. 5 lakh Crs, from which around Rs. 2.70 lakh Crs are related to the deferred spectrum payments to the Centre. The other two recommendations include ‘Deferred payment liability of telecom service providers (TSPs) on spectrum’ and ‘Amendments to spectrum trading and guidelines’ made by the IMG.
Rajasthan to waive loans of up to Rs. 50,000 (BL, BS 15.09.17)
The Rajasthan government will waive farm loans up to Rs 50,000 of small and marginal farmers, State Farm Minister, Prabhu Lal Saini, said. An agreement to waive farm loans was reached late on Wednesday in Jaipur at a meeting between representatives of farmers and State government officials. With this waiver, Rajasthan becomes the fifth State to announce waiver of farm loans. Earlier, Uttar Pradesh, Maharashtra, Punjab and Karnataka had announced waiving loans of farmers. Following the announcement, farmers in Rajasthan called off their 13-day strike in Sikar. Farmers and traders in Sikar had stopped trade in the local mandis demanding loan waiver for farmers and better returns for their produce. The State will form a committee that will frame norms for the loan waiver, the Minister said. The committee will study the loan waivers in other States and the issues faced by farmers. The committee will submit its report in a month. “In other States where loans were waived, many farmers have claimed that only Rs. 100 or Rs. 500 have been waived, which is meaningless,” he said. “We don’t want to repeat such mistakes,” the Minister said.
IDBI Bank sells 2.5% stake in Clearing Corporation of India (BS 15.09.17)
IDBI Bank said it has sold 12.5 lakh equity shares in Clearing Corporation of India (CCIL) for an undisclosed amount. "IDBI Bank has sold 12,50,000 equity shares constituting 2.5% of the paid up capital of Clearing Corporation of India Ltd on September 13, 2017," the bank said in a regulatory filing. CCIL facilitates clearing and settlement of transactions in money, government bonds, foreign exchange and derivative markets. SBI, IDBI Bank, ICICI Bank, Life Insurance Corporation of India (LIC), Bank of Baroda and HDFC Bank Ltd are the six promoters of the company. The collective shareholding of the bank stands at 67.50%, 14% is held by financial institutions and the rest of 18.50% is owned by primary dealers and other corporate bodies.
Non-food bank credit grows 7.28% (FE 15.09.17)
Non-food bank credit grew 7.28% year-on-year (y-o-y) during the fortnight ended September 1. The growth in non-food credit was at a five-month high of 7.42% two fortnights ago. According to data released by the RBI, outstanding loans to companies and individuals rose to Rs 77.19 lakh Crs from Rs 71.96 lakh Crs in the same fortnight last year. The net corporate bonds outstanding of Rs 24.81 lakh Crs at the end of June was up 20% from Rs 20.63 lakh Crs in June 2016, as per data released by the Securities & Exchange Board of India. Data released by the RBI showed that the net outstanding on commercial papers (CPs) stood at Rs 3.59 lakh Crs as of August 15, down from Rs 3.86 lakh Crs in the same period last year. Taken together with outstandings on corporate bonds and CPs, the total outstanding credit in the system adds up to at least Rs 105.6 lakh Crs. Outstandings on corporate bonds for July and August are not available yet. Total bank credit rose 6.4% year-on-year to Rs 77.69 lakh Crs. Aggregate deposits with the banking system grew 9.6% Y-o-Y to Rs 107.47 lakh Crs, down from Rs 107.58 lakh Crs two fortnights ago.
Fitch Rating has negative outlook on banks, raises capital concerns (FE 15.09.17)
Fitch Rating held out a negative outlook on the country’s banking sector, citing weak capital position and financial performance. The global rating agency said banks look vulnerable with poor capitalisation and without adequate support from the state and capital markets. “The negative outlook is based on our assessment that the banking sector’s weak core capitalisation continues to pose downside risks to standalone credit profiles amid expectations of continued poor loan growth, weak earnings, volatile asset quality and elevated credit costs,” the agency said in a report. Banks will need USD 65 billion in additional capital to meet Basel III requirements by March 2019 with the state-run banks alone requiring more than 90% of this, it said. Some of the state-run banks are planning to raise fresh equity from the markets this financial year but it will not be easy due to low investor confidence and bleak earnings prospects. “Government will have to pump in significantly more even on a bare minimum basis if it is to address the system- related risks of huge NPAs, weak provision cover and poor loan growth,” the report said. However, the report said, private sector banks are well-placed although they have been under pressure due to deterioration in asset quality. The agency believes the asset-quality outlook could remain challenging in the next 12 months due to incipient stress in the power sector and concerns about farm loan waivers and SMEs. Gross NPA ratio touched 9.7% in FY17. The report said satisfactory resolution of large stressed loans is going on under the RBI’s oversight and it can have a positive effect on NPAs. Provisions are likely to rise in the interim as NPA cover is moderate at 40-50%, it said. It expects banks’ earnings to remain subdued in the near term.
Lenders to Decide Action Plan on Reliance Naval Loans Soon (ET 15.09.17)
Banks led by SBI will soon call for a lenders meeting to discuss what to do with Reliance Naval and Engineering which has defaulted on loans worth 9,000 Crs. The Anil Ambani group firm, which was called Pipavav Shipyard and Reliance Defence in earlier avatars, has missed payments to lenders for the last two and a half months, and its loans will be classified as non-performing loan if it does not pay up in the next 15 days. “Reliance Naval is classified as special mention account-2 or SMA-2 with all banks. Somehow, in the past few months, the company has managed to make critical payment before the end of the 90-day deadline to prevent the account from slipping into the bad loan basket,“ said two senior bank officials. “This time we are not very confident if the company will be able to make critical payment before the month end,“ they added. Special mention accounts-2 or SMA-2 are those where bank have not received payment from the borrower for over 60 days. “The account has been classified SMA-2 by the lenders for more than three years,“ the company said. “The company was in CDR (corporate debt restructuring) when it was acquired by Reliance Infra (in January 2016). Post takeover, Reliance Infra has initiated steps for exit from CDR and a new debt financing package. Upon implementation of the said new financing package, the account will become regular,“ the company added. The Reliance Group acquired 18% of Pipavav Defence in an all cash deal worth 819 Crs in March 2015 from Nikhil Gandhi's SKIL Infrastructure. It bought another 11.2% for 545 Crs in an open offer.
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WPI inflation rises to four-month high of 3.24% in August (BL, BS 15.09.17)
Double-digit inflation in petrol and diesel, along with skyrocketing tomato prices, pushed the Wholesale Price Index (WPI)-based inflation up to a four-month high of 3.24% in August, from 1.88% in the previous month. This, along with rising Consumer Price Index (CPI)-based inflation, may prompt the Reserve Bank of India to not cut rates in its policy review next month. CPI-based inflation was at a five-month high of 3.36% in August, compared to 2.36% in July. Inflation in petrol jumped to 24.55% in August, from 9.6% in the previous month, showed the official data. Similarly, diesel moved up to 20.30% from 5.49% in this period. Aditi Nayar, principal economist with ICRA, said the continued rise in crude oil prices is expected to push up the mineral oils sub-index in the ongoing month. “However, the subsequent upside risk posed by crude oil and other fuels is likely to be limited,” she said.
India's GDP growth lead over China might end this year: Unctad (BS, FE 15.09.17)
After racing past China for two years, India's Gross Domestic Product (GDP) growth in 2017 is expected to return to the same level as its northern neighbour at 6.7%, according to a United Nations body. A report published by the UN Conference on Trade and Development (Unctad) forecasts 6.7% growth in 2017, a four-year low, down from seven% last year. The agency calculates GDP growth at constant 2005 prices, in dollars. By its calculations, we had lower growth of 6.3% in 2013. China's GDP growth rate had fallen consistently for six years till 2016, from when it is expected to stabilise. While Unctad calculates growth based on calendar year, India officially follows the financial year format comprising the April-March period. On that note, government figures show that in the first quarter (April-June) of FY18, the growth in GDP fell to 5.7%, the lowest since the Narendra Modi government came to power in 2014. Experts say this was largely a fallout of the scrapping of Rs 500 and Rs 1,000 notes in November 2016, which had led to massive fall in demand. Overall growth of world economy is estimated to stand at 2.6% in 2017, marginally more than the 2.2% in 2016 and the same level in 2015. This is because of the continued low growth in Japan, the United States and core euro zone economies, apart from a simultaneous slowdown in Britain as well, Unctad believes.
FPI inflows: India’s forex reserves all set to hit whopping $400 bn mark (FE 15.09.17)
India’s foreign exchange reserves have climbed tantalisingly close to the $400-billion mark — to be precise, the reserves stood at $398.123 billion on September 1 — on the back of strong foreign portfolio investments into the Indian market, especially the debt segment. The reserves are hitting the psychological threshold also because benign current account deficits over the last few quarters had allowed RBI to use less of the reserves to finance it. To be sure, the latest $100 billion addition to the reserves has taken close to 10s years. The $300 billion mark was reached in February 2008, while the previous $100 billion was accumulated in a span of just eleven months. While the rupee remains strong against the dollar at levels of 64 having appreciated 6% so far in 2017, few would have anticipated this strength, especially after the free fall of the currency in mid-2013 when it slipped all the way to 68.85 against the greenback (the forex reserves had plunged by more than $17 billion during this period). The other critical period for the reserves and currency was in 2008, during the financial crisis when the currency lost almost 25% of its value between May and November. In this period, the reserves fell by a little over $70 billion to $245.8 billion. Currently, the reserves take care of approximately 12 months of imports; in the past the reserves have typically covered seven to eight months of imports. Interestingly, India has seen the third-highest reserves accretion globally after Switzerland and China, so far in 2017.
GDP to remain below 6% in Q2 FY18, says SBI report (FE 15.09.17)
Country’s GDP is likely to remain below 6% in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sector, says a SBI research report. The GDP stood at a three year low at 5.7% for April-June quarter of 2017-18, which the report said has raised concerns about the annual GDP numbers for the fiscal. While it has estimated GDP numbers to remain muted at sub-6% for the July-September quarter, the third and fourth quarter growth is expected to be below 6.5%. “Second quarter growth numbers are likely to be muted, almost like the first quarter numbers (below 6%), and the reasons are many,” the ‘SBI Ecoflash’ report said. “The support that first quarter got from trade, hotel, transport and public expenditure will not be there in the second quarter,” it added. Further, the report noted the agriculture growth is expected to be muted as rainfall in the first three months of monsoon was hugely deficit in key food grain producing states like Uttar Pradesh, Punjab, Haryana, and Madhya Pradesh and there was sluggish growth in manufacturing and mining sector. “July IIP (index of industrial production) data shows that production was particularly weak in consumer durable goods,” the report said. As per the document, India’s exports growth has started coming down again after picking up for a few initial months in this calendar year. It noted that exports have started their downward trajectory from May
Rise in inflation likely to keep RBI on hold, says Morgan Stanley report (FE 15.09.17)
The Reserve Bank is likely to hold the key rate in the monetary policy review next month following a jump in inflation and is expected to focus more on resolving the problem of bad loans in the banking system, says a Morgan Stanley report. There was an uptick in headline inflation in August driven by implementation of the House Rent Allowance (7th Pay Commission) hike and accordingly the RBI is expected to keep rates on hold, said the financial services major. Retail inflation rose to 5-month high of 3.36% in August due to costlier vegetables and fruits. The consumer price index (CPI) based inflation was 2.36% in July. “Against this backdrop of rising headline and core inflation, we think that this print would not give RBI the comfort to cut interest rates at its October meeting,” Morgan Stanley said in a research note. RBI reduced the repo rate by 0.25% to 6% in August, citing reduction in inflation risks. The rate cut was the first in 10 months and brought policy rates to a near 7-year low. “This acceleration was 20 bps higher than what we and consensus had expected. The acceleration in headline inflation was driven by increases in food prices and core inflation alike,” Morgan Stanley said. It forecast the September CPI inflation at around the 3.3% as favourable base effects fade from food inflation.
FY19 Budget likely on Feb 1, preparations begin (BS 15.09.17)
The finance ministry issued an official circular to begin the process of drafting the Union Budget for 2018-19. While no date was given as to when Finance Minister Arun Jaitley would table the Budget in Parliament, the document stated the final estimates for schemes and other expenditures should be decided by January 15, 2018. The Budget is likely to be presented on February 1, 2018, officials confirmed. According to the circular, work begins on September 30, with the preparation of tentative budget estimates based on the medium-term expenditure framework, (MTEF) which gives estimates three years out. The MTEF for the current financial year provides spending estimates for 2018-19 and 2019-20. These numbers will be the basis, or the starting point rather, for 2018-19 budgeted estimates, an official said. There will be meetings with various central government ministries and departments, as well as industry bodies and civil society interest groups, starting from October and continuing well into December. Like 2017-18, the government will seek comments from the public at large, including through social media platforms such as Facebook and Twitter.
‘Self-driving cars pose new challenges to motor insurance’ (BL 15.09.17)
Motor vehicle insurance could well be one of the casualties if self-driving cars were to conquer the streets, as is being hypothesised. This is just one instance where technology could force changes in existing insurance business paradigms, said Pushan Mahapatra, MD & CEO, SBI General Insurance. Technology will play a major role in the way insurance is transacted in future, bringing its own specific set of challenges to the fore, he said. There’s no knowing whom to blame if an incident involving a self-driving car were to trigger a claim, he pointed out. Since they are basically controlled by software, whom do you attribute the fault to — the software vendor or the vehicle manufacturer? Similarly, technologies such as telematics will become very critical in the medium term, he said. Mahapatra further said SBI General is doing proof of concept in telematics with respect to vehicles. “We’ve just started that project,” he said without divulging details. Take technology in other areas, say in crops, where insurers depend on long-term meteorological data. To calculate actual yields, today one goes by the crop-cutting exercise. This could move to satellite imagery or to drones which survey fields and take relevant pictures on the spot. SBI General is trying to work out a mechanism with providers of satellite imagery and drones, he added.
On rate-cut tweets and monetary policy videos (BL 15.09.17)
Central bankers, it was said, must be seen and not heard. That era may well have passed with the advent of social media. While the central bankers themselves remain rather circumspect while talking, their official communication channels are creating quite a cyber-buzz. Most of the central banks across the world are using social media platforms such as Twitter, YouTube and Facebook as a medium of communication along with traditional media. Twitter is the first choice of most. The RBI, for one, uses Twitter to send press release alerts and YouTube to stream speeches. The recent RBI annual report said central banks around the world have been traditionally cautious and conservative in communicating their policy matters to the public. They are opening up gradually and cautiously and increasingly using social media to connect with the public, it added. The RBI published a study on the use of social media by 24 major central banks. Similar data has been collated covering 71 central banks around the world. It was found that of the 71 central banks, 69 had Twitter accounts. However, nearly 42% of them are unverified. Nearly 73% of the 71 central banks have been posting videos on YouTube, and 63% have been posting videos and text on Facebook. Nearly one-fourth have a presence in LinkedIn and on Flickr, while around 12% are present on Instagram.
Use Google's UPI-based payment solution 'Tez' starting next week (BL, BS 15.09.17)
Google is likely to announce its UPI-based payment solution for India on Monday. The application would be named Tez, according to online media start-up The Ken. With Tez, Google would join global Internet firms, such as Truecaller, in tapping the government-backed payment standard to develop its FinTech play in the country. The Internet search giant had been working with the National Payments Corporation of India to develop its UPI payments service, and for the past month had been waiting for an approval from RBI for a launch. Google’s new payment solution is expected to be baked into its Android Pay application, which allows users to pay for products on the Web, at retail stores and within its own application ecosystem. The company is partnering with several banks to enable payments through UPI in India. Google’s chief rival Facebook is also working on integrating payments through UPI in India. Its messenger app WhatsApp is developing a way for customers to pay businesses through chat. A person aware of these developments, however, said that Facebook and WhatsApp were still some time away from deploying their UPI payment services.
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Moser Baer Solar requests Central Bank to defer loan repayment schedule (FE 15.09.17)
Moser Baer Solar (MBSL) has requested public sector lender Central Bank of India to defer its loan repayment schedule and allow the company to run on a ‘going concern’ basis. The company is facing insolvency proceedings at the principal bench of the National Company Law Board (NCLT) on a petition filed by Central Bank. “We have submitted a proposal and they are examining it,” MBSL’s counsel told NCLT’s bench. Though lawyers — representing the bank and MBSL — declined to divulge details of the proposal, sources said the solar panel manufacturer has recently urged the bank to consider the proposal as the solar power industry has been suffering due to unprecedented cheaper imports of solar panels from China. The next hearing is scheduled on September 25. Sources added that the company has a debt of around Rs 1,000 Crs at present and it owes Central Bank a little less than Rs 100 Crs. Last month, the bank had sought insolvency proceedings against the solar panel manufacturer under Section 7 of the Insolvency and Bankruptcy Code (IBC). Once the petition is admitted, NCLT would appoint an insolvency resolution professional (IRP), who, along with a committee of creditors (CoC), will work on a resolution plan.
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