Tuesday, August 28, 2018

SBI branch shuts after minister tells it to ‘wind up’

Rajkot, August 28 (Express News Service): Civil Supplies and Consumers Affairs Minister Jayesh Radadiya on Monday ordered officers of State Bank of India (SBI) branch in Jetpur town of Rajkot district to shut down after telling them that they were not clearing crop insurance claim dues of farmers. After the warning from the minister, the bank remained closed to public in the evening.

Radadiya, who is a BJP MLA from Jetpur, went to the SBI branch on Junagadh Road of Jetpur Monday afternoon and demanded bank officials to pay crop insurance to farmers who were accompanying him. After the bank officials told them that the crop insurance claims were still being processed, the minister lost his cool and ordered the bank to shut down.

Aa badhu sankelo kar. Have kai kam nathi tamaru (Wind up all this. You are not required here),” Radadiya is heard in video clips of the incident that were shown on local TV news channels.

After the minister’s visit, the branch remained closed to public in the evening hours.

Radadiya who himself is chairman of Rajkot District Cooperative Bank, said that the SBI branch had failed to clear crop insurance due to farmers for the year 2016-17. “Around 150 farmers had paid their premium for insuring their groundnut crop. But the bank has not cleared their insurance claims even after 10 months. Farmers have paid premium to the bank, which in turn, is supposed to pass it on to the insurance company. Now when the insurance is due to farmers, the bank is not paying them. Either the bank or the insurance company is responsible. Being a representative of the area, it is my duty to make representation on behalf of people,” Radadiya told The Indian Express.

He said that around 150 farmers who had got their crops insured via the SBI branch on Junagadh road were waiting for around Rs 1.75 crore insurance claims. “More importantly, there is another SBI branch in Kanakiya plot area of Jetpur. Farmers who had availed of insurance and loan from that branch have got their insurance due. But the Junagadh branch has been dragging its feet,” the minister added.

Radadiya claimed that around three months ago he had called a meeting of farmers and officers of the Junagadh Road SBI branch. “At that time, the bank officers told me that they had notified the insurance company about the pending calls. When I went to the bank branch, officers gave me the same answer. This cannot go indefinitely,” Radadiya said, adding that farmers of around a dozen villages were waiting for their crop insurance claims.

Ravi Parmar, the manager of the SBI branch, said that no police complaint has been filed against the minister. “I was on leave. I’m returning to Jetpur. But no police complaint has been filed for today’s incident so far,” he said.
by The Indian Express Published on August 28, 2018

Tuesday, May 22, 2018

State Bank of India PRESS RELEASE Q418 RESULTS : net loss of Rs. 7,718 Cr during the Quarter.

Q4FY18 OVER Q4FY17
 The Bank incurred a net loss of Rs. 7,718 Cr during the Quarter.
 Bank’s net loss is attributable to:
▪ Lower Trading Income and significant MTM losses due to hardening of
bond yields
▪ Incremental Provision during the quarter for NPAs.
▪ Higher provisioning on account of Wage Revision and enhancement in
Gratuity ceiling.
 Bank has not availed the benefit of RBI dispensation with regard to amortization of
MTM losses.
 Operating Profit declined by 8.24% from Rs. 17,309 Cr in Q4FY17 to Rs. 15,883 Cr
in Q4FY18.
 Net Interest Income declined by 5.18% from Rs. 21,065 Cr in Q4FY17 to Rs. 19,974
Cr in Q4FY18, contributed mainly by reduction in MCLR & Base Rate and increase in
NPAs.
 Interest Expenses on Deposits was down by 6.28% YoY from Rs. 35,431 Cr in
Q4FY17 to Rs. 33,206 Cr in Q4FY18 despite a growth in Deposits by 4.68% YoY.
 Non-Interest Income improved by 2.23% from Rs. 12,222 Cr in Q4FY17 to
Rs. 12,495 Cr in Q4FY18, driven mainly by higher fee income and recovery in written
off accounts.
 Fee Income is up from Rs. 7,434 Cr in Q4FY17 to Rs. 8,430 Cr in Q4FY18, a YoY
growth of 13.40% with significant contribution from Cross Sell income which registered
a growth of 65.83% during the period.
 Recovery in Written-Off Accounts registered a robust growth of 21.18%.
 Increase in Staff Expenses was contained at 3.82% from Rs. 8,914 Cr in Q4FY17 to
Rs. 9,254 Cr in Q4FY18, despite higher provisions for wage revisions and gratuity.
 Increase in Overhead Expenses was contained at 3.79% from Rs. 7,064 Cr in
Q4FY17 to Rs. 7,332 Cr in Q4FY18.
 Increase in Operating Expenses was contained at 3.80% YoY.

Indians Pay Over 50% Tax on Fuel, One of the Highest Rates in the World

As on May 21, while the refineries produced petrol at
Rs 37.19 a litre, the state and central government
together made Rs 35.76 for every litre of petrol sold.
New Delhi, May 21:  India’s soaring fuel prices despite relatively stable crude rates is a direct result of more than 50 percent tax levied on petrol and diesel. After the Centre introduced daily revision of fuel rates from June 16 last year to absorb sudden shocks, retail rates have gone up by Rs 11.09 per litre as on May 21 in New Delhi in less than a year.

As on May 21, while the refineries produced petrol at Rs 37.19 a litre, state and central government together made Rs 35.76 for every litre of petrol sold.

According to the price buildup mechanism used by Indian Oil Corp. Ltd, the price of petrol charged to dealers as on May 21 was Rs 37.19 a litre. The rate finally swells to double its value when 25.44 percent excise duty, 4.72 percent dealer commission and 21.26 percent VAT gets added. The final retail price of Rs 76.57 a litre is a sum of 51.44 percent tax addition.

Petrol price in New Delhi is used for all calculations. However, rates in Mumbai and most other state capitals are predominantly higher as these taxes do not fall under Goods and Services Tax (GST) and are subject to revision by state governments. Retail price of petrol in Mumbai on May 21 reached an all-time high of Rs 84.40 per litre.

The same tax rate when compared to other developed economies and South-Asian countries emerges as one of the highest. The US levies a tax of 17 percent in its fuel while India’s immediate neighbour Pakistan taxes petrol at 23.5 percent.

India’s high tax rate also comes in sharp contrast to Bangladesh and European countries. Sharing Eastern borders with India, Bangladesh levies 25 percent corporate tax along with 15 percent on fuel while the average tax rate on petrol in the European nations approximates to 21 percent.

However, Norway and the Netherlands have tax rates higher than India.

Retail prices of petrol, when compared to its neighbours, topped the charts. Save China which has an average petrol rate of Rs 80.83, India has the highest petrol price in all of South East Asia. Pakistan charges Rs 51.64 a litre for petrol with Bangladesh and Sri Lanka selling a litre of petrol at Rs 71.54 and Rs 63.91 respectively.

Indian petrol is also costlier than Malaysia, Indonesia, the Philippines and Nepal along with 89 other countries.

According to weekly prices of petrol tracked in 167 countries, India ranks 90 with an average price of Rs 78.29 a litre. Iran with huge oil reserves sells petrol domestically at Rs 20.43 a litre. Iceland on the other hand petrol rates hovering around Rs 142.78 a litre.

According to a study by Bloomberg, it takes 20.11% of daily wages in India to afford a litre of petrol. India ranked the worst in terms of affordability of fuel. The study surveyed 60 major economies with Pakistan registering the 59th spot.

Crude prices have forever been blamed for the upward curve of retail prices. Average crude oil prices in the Indian basket during the financial year 2016-17 was USD 46.56 per barrel rising to USD 56.43 a barrel in 2017-18. Rates rose to USD 69.30 per barrel in the month of April 2018. Indian Crude Basket is weighted average of Dubai and Oman (sour) and the Brent Crude (sweet) crude oil prices.

The price hike gains further prominence because India is world’s third largest consumer of oil. In the financial year 2016-17, India consumed 194.2 million tonnes of crude, roughly 5 percent higher than the previous financial year. India has 230 million metric tonnes of refining capacity but imports 78 percent of its fuel needs. India spent $70 billion to import crude oil in the last financial year.

Top positions at 8 state-run banks to be vacant soon; four operating without heads

Mumbai, May 21: It has come to light that top positions at 12 state-run banks will be vacated soon, leaving the government with a tough task of filling the slots. While top position holders at eight state-run banks are on the brink of an exit, four others are operating presently without a head, reported The Economic Times. The report, quoting senior officials, suggested that this is the first time such a large number of positions will become vacant. 

At a time when banks in the country have been crippled by rising bad loans and gigantic frauds, the government would be looking to expedite the process of filling up the top positions, as leaving them vacant may lead to more internal errors. However, the process of hiring will not be easy, considering the strict regulations or guidelines introduced by the RBI in light of the recent Rs 13,600 crore Punjab National Bank scam. 

Soon after the incident came to light, scrutinising the banking and financial sector shed light on the involvement of senior bankers in scams. According to the report, Dena Bank, Andhra Bank and Punjab & Sind Bank have been operating without an head since the beginning of this calendar year, while Allahabad Bank lost its head Usha Ananthsubramanian, after a CBI chargesheet named her for involvement in PNB or Nirav Modi scam. 

Among others, Bank of Baroda CEO PS Jayakumar is also on the verge of retirement as he will be completing the three-year term this year. Likewise, Central Bank of India CEO and MD Rajeev Rishi is going to complete his five-year term and sources told ET that he is unlikely to get an extension. 

Others whose terms have ended include Canara Bank’s Rakesh Sharma, Indian Bank’s Kishor Karat and Melwyn Rego of Syndicate Bank and PK Bajaj of UBI and RK Takka of UCO Bank. The ET report suggested that there are 19 executive directors available to fill the 12 top slots at different PSUs. 

A senior official told the publication that those (executive directors) who have completed a year plus an additional two years are eligible for the post of CEO. It should be noted that the cut-off date for applying was April 1, 2018. Besides the government-run banks, there are two key positions that are lying vacant – the MD of State Bank of India and Deputy Governor at RBI. 

This government faces a rather difficult task in selecting the heads due to the strict guidelines introduced after a flurry of scams were uncovered. At least 11 such banks are facing restrictions from the RBI due to poor performance – based on an increase in bad loans in the past two years. 

Friday, May 18, 2018

India’s bad-loan levels have peaked, says SBI chairman

Banks now demand substantial equity in projects
to keep controlling shareholders engaged

Mumbai, May 18:  The head of India’s biggest bank has declared an end to a protracted, dramatic rise in the sector’s bad loan ratios, which has forced a huge government bailout and sparked fears for the country’s economic outlook.

Indian banks lent enthusiastically to large-scale industrial projects over much of the past decade, only for many big corporate borrowers to struggle with repayments after their projects failed to meet ambitious forecasts.

The banks’ declared bad debts have risen seemingly inexorably over the past two years, reaching $130bn at the end of March, prompting a $32bn recapitalisation plan for the dominant state-controlled banks and weighing on credit growth.

Now, the recognition of bad loans resulting from that rush of lending is effectively complete, Rajnish Kumar, chairman and managing director of State Bank of India, told the Financial Times.

“As far as the recognition part is concerned that is largely over,” said Mr Kumar, whose bank is by far the largest in India with more than $500bn of assets.

New rules issued by the Reserve Bank of India, the central bank, in February— which some in the banking sector described as excessively rigid —  left “little scope for anyone to hide anywhere”, said Mr Kumar. “So that part is over.”

The RBI’s new rules stipulate that if a debt goes unserviced for 180 days, lenders must take action under India’s powerful new bankruptcy code, forcing the sale or liquidation of the company.

This was just the latest stage in a sustained campaign by the RBI, beginning under former governor Raghuram Rajan, to force lenders to disclose the full extent of their distressed assets — and to end the practice of “evergreening”, whereby banks would repeatedly allow borrowers extra time to repay their debts.

Vital lessons had been learnt from the surge in non-performing loans in sectors such as steel and infrastructure, said Mr Kumar, who spent 27 years at SBI before becoming its chairman in October.

“When the funding for the projects came into the sector eight or nine years ago, we all thought it was a great opportunity for us,” he said. “But honestly we did not realise there are so many pitfalls.”

In particular, Mr Kumar said, banks were now insisting that company “promoters”, or controlling shareholders, put substantial equity into new projects, rather than relying excessively on bank credit.

“Now, when we underwrite any credit, the equity from the promoters [is] being looked into in much more detail,” he said. “We want promoters to be in the game.”

State-run banks by far saw the biggest rise in bad loans, which comprised 13 per cent of their outstanding lending as at the end of December, according to Credit Suisse.

The banks’ problems with asset quality — combined with the concerns raised by an alleged $2bn fraud at Punjab National Bank, one of the biggest lenders — has prompted growing debate over whether the government should privatise the banks, which were nationalised by then prime minister Indira Gandhi in 1969.

Mr Kumar argued that India’s development requirements meant it would need government banks for another two decades to perform important but low-margin work such as extending financial services to the rural poor.

“If we can develop the country in the next 20 years, then the need for state ownership to push development will be less,” he said.

Sri Karthik Velamakanni, an analyst at Investec, said further increases to the default figures could still potentially come from “nagging pain points in the economy” such as construction and power.

The state banks’ weak capital situation was threatening their ability to ramp up their lending to the economy, he added. “There will be a long and painful road ahead.”

Thursday, May 17, 2018

Aadhaar only an add-on, not mandatory for getting pension: Government

Aadhaar is an additional facility to enable the use of technology for submission of life certificate without the need for visiting banks

New Delhi, May 16 (PTI): Aadhaar card is not mandatory for central government employees to get their pension, Minister of State for Personnel Jitendra Singh has said.

In 30th meeting of the Standing Committee of Voluntary Agencies here recently, he said Aadhaar is an additional facility to enable the use of technology for submission of life certificate without the need for visiting banks.

His assertion assumes significance as there were reports of some retired employees facing difficulty in getting the pension in the absence of Aadhaar linkage with their bank accounts.

The minister clarified that Aadhaar has not been made mandatory for getting pension for government employees, according to the minutes of the meeting.

Aadhaar is a 12-digit number, issued by the Unique Identification Authority of India (UIDAI), that acts as identification and address proof.

There are about 48.41 lakh central government employees and 61.17 lakh pensioners.

Singh cited various initiatives started by the central government for the welfare of its employees and pensioners.

"For instance, minimum pension has been increased to Rs 9,000, ceiling of gratuity has been increased to Rs 20 lakh, fixed medical allowance has been increased to Rs 1,000 per month," the minister said.

"Constant attendance allowance has been increased from Rs 4,500 to Rs 6,750 with effect from July 1, 2017. Some benefits relating to income-tax e.g. standard deduction, tax-rebate etc. on interest made available in the Finance Bill, 2018," he said.

Tuesday, May 15, 2018

High Net NPA Ratio: Four more PSBs may face RBI lending restrictions

Mumbai, May 14:  After the Reserve Bank of India’s (RBI) lending restrictions on Allahabad Bank and Dena Bank, at least four other public-sector banks (PSBs) could face similar curbs if net bad loan ratios are anything to go by.

According to data compiled by FE, four PSBs— IDBI Bank (net NPA ratio of 16.02%), Indian Overseas Bank (13.08%), Bank of Maharashtra (12.17%) and United Bank of India (11.96%) have reported higher net NPA ratio than Dena Bank (11.52%) for the December quarter of FY18.

Net NPA ratio is the amount of bad loans as a percentage of net advances. Dena Bank’s net NPA ratio rose to 11.95% in the March quarter. However, most other public-sector banks have not yet declared their Q4 financial results.

On the other parameter of return on assets (RoA), Dena Bank’s stood at -1.27% as on December 31, 2017— the highest among other banks under prompt corrective action (PCA).

The lowest RoA was reported by Oriental Bank of Commerce (OBC) at -3.07%, followed by Central Bank of India (-2.13%), Allahabad Bank (-2.09%) and Corporation Bank (-2%).

Going by analyst estimates, the March quarter of FY18 would see an increase in slippages. This could, in turn, lead to RBI imposing further restrictions on the PCA banks.

Nomura expects the top six corporate lenders to report slippages worth Rs 75,500 crore, up from the Rs 35,000-50,000 crore range seen over the last six quarters. This, in turn, would lead to a 50% y-o-y rise in provisioning.

RBI had released revised PCA norms last year classifying the degree of risk into three categories. It had said if a bank reached the level of ‘risk threshold 3’, it could end up as a candidate for amalgamation, reconstruction or even be wound up.

Among the many metrics that are used to gauge how weak a lender is, are capital, net NPAs, RoA and Tier-1 leverage ratio.

A capital adequacy of less than 3.625% would leave the lender at the risk threshold three.

Today, a bank needs to have a minimum capital of 10.25%.

If net non-performing assets are 12% or more, a bank will find itself classified as threshold three.

Under PCA, banks face restrictions on distributing dividends and remitting profits.

The owner— government in this case— may be asked to infuse capital into the lender.

That apart, lenders would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors’ fees would be capped.