Nod to merger of six banks with SBI

Jun 15, 2016 0

New Delhi/Chennai– With the government on Wednesday giving its in-principle approval to the mega merger proposal in the banking sector – the merger of six banks with SBI, State Bank of India chairperson Arundhati Bhattacharya hailed the move as a “win-win” for all.

The nod was given at a cabinet meeting chaired by Prime Minister Narendra Modi, the Union Finance Ministry spokesman told IANS though there was no mention of the mega merger proposal at the media briefing of the cabinet decisions.

Arundhati Bhattacharya

Arundhati Bhattacharya

The six banks are SBI’s five associate banks – State Bank of Bikaner and Jaipur (SBJJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT) – as well as the Bharatiya Mahila Bank Limited (BMB).

In a statement issued by SBI, Bhattacharya said: “The merger of SBI and its associate banks is a win-win for both. While the network of SBI would stand to increase, its reach would multiply.

“One can expect efficiencies to be created from rationalisation of branches, common treasury pooling and proper deployment of a large skilled resource base. Currently, no Indian bank features in the top 50 banks of the world. With this merger, some visibility at global level is likely to increase.”

On the talks of approval by the government to the merger, share prices of SBI, SBM, SBJJ and SBT flared up.

“The merger of six banks with SBI is the gateway for consolidation to happen in the banking sector. The decision shows that the government is serious about consolidation in the sector. In fact merger of banks is one of the aspects of Indradanush plan for the sector,” Saswata Guha, director, Financial Institutions at global credit rating agency Fitch Ratings, told IANS.

Indradanush is a seven-pronged plan to revamp the public sector banks announced by the central government last year.

According to Guha, the benefits of the merger will take around 18 months to accrue to SBI as integration of human resources and other aspects have to happen and going by the past mergers – of the State Bank of Saurashtra and State Bank of Indore.

“Post merger SBI will be around 24,000 branch strong and will have a market share of around 25 per cent. I am interested in seeing how the huge scale would benefit SBI,” he added.

The merger will create a banking giant with assets worth around Rs.37 lakh crore.

On May 17, SBI had informed the bourses that it is seeking “in principle sanction” of the central government to enter into negotiation with the six banks to acquire their businesses including assets and liabilities.

Global credit rating agency, Moody’s Investors Service had estimated it would cost SBI around Rs.16.6 billion ($250 million) for the merger and will have limited impact on its credit metrics, including its asset quality and capitalisation level.

It also said the opposition to the merger by the employee unions also poses considerable risk that potential synergies of the merger may not materialise.

Currently, the five associate banks operate as standalone banks with their own financials, board and management team, with oversight from SBI.

In addition, SBJJ, SBM and SBP are also listed with the presence of minority shareholders.

According to SBI, the net profit of the merged entity (SBI and five associate banks) for the year end March 31, 2016 would be Rs.11,590 crore, capital adequacy ratio 12.66, gross NPA Rs.121,969 crore, net NPA Rs.68,894 crore and restructured advances Rs.94,569 crore.

However the unions in the five SBI associate banks are opposed to the merger in this form.

The All India Bank Employees’ Association (AIBEA) has demanded the merger of five associate banks of SBI into one entity.

“It is unfortunate that despite opposition by unions and even political parties, the government has taken the decision to go ahead with the decision to close down the five associate banks and hand their business to SBI,” its general secretary C.H.Venkatachalam told IANS, adding that India needs banking expansion and not consolidation.

“Tomorrow (on Thursday) AIBEA office bearers are meeting in Chennai to take decisions in this regard,” he added.

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Securities Exchange Board for changes in infrastructure investment trusts regulations

May 19, 2016 0

Mumbai–The Securities Exchange Board of India (SEBI) on Thursday decided to publish a consultation paper, proposing changes and clarification in the Infrastructure Investment Trusts (InvIT) Regulations.

“The paper will propose changes and provide clarification on InvIT process to invest in two-level special purpose structure,” the market regulator said in a statement here.

At a meeting earlier in the day here, the board also decided to consider reducing to 10 percent from 25 percent on mandatory sponsor holding in InvIT norms.

“The consultation paper will also consider increasing sponsors to five from three and other operational needs in line with the provisions of Companies Act, 2013 and filing of project implementation agreement with other documents.

“The paper will be placed on the official website for public comments,” the statement added.

The board also approved to set up two SEBI chairs at its National Institute of Securities Markets by contributing some corpus to it.

“The chairs will provide research-based policy inputs and help in increasing academic interest and awareness about the regulator’s activities,” the statement noted.

Selection of chairs will be with academic council of NISM. (IANS)

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Indian microfinance loans grew 36 percent in 2015-16

May 18, 2016 0

New Delhi–Total loans disbursed by India’s microfinance industry grew 36 percent in the last fiscal as compared to 2014-15, the Microfinance Institutions Network (MFIN) said on Wednesday.

“Growth of 36 percent in total number of loans disbursed by MFIs in FY15-16 when compared to FY14-15 shows the rapid pace of expansion of the industry,” MFIN — the self-regulatory body of the Reserve Bank-regulated non-banking finance companies (NBFCs) and microfinance institutions (MFIs) — said in a release here.

“Average loan amount disbursed for each beneficiary has also witnessed a growth in FY15-16 and stands at Rs.17,805 as compared to Rs.14,731 in FY14-15,” MFIN said, releasing its 17th Micrometer report of the industry.

According to the report, the aggregate Gross Loan Portfolio (GLP) of MFIs grew 84 percent in the last quarter of 2015-16 as compared to the corresponding quarter of the previous fiscal.

“There was an overall increase of 24 percent over the Q3 FY15-16 and aggregate GLP stood at Rs.53,233 crore as of 31st March 2016,” it said.

“South India leads the way with 35 percent share in GLP followed by North and West which stand at 25 percent and East contributing 15 percent.

“The industry also witnessed the year-on-year increase of 44 percent in client base where MFIs provided microcredit to 3.25 crore clients.

“Over the previous year, MFIs have been bringing down their rates of interest and today one of the largest MFIs, SKS Microfinance, is offering products at sub-20 percent. The industry is maturing and the growth is an indicator of this.” Ratna Vishwanathan, chief executive MFIN, said in a statement.

The Micrometer analysis is based on data collected from 56 NBFC-MFIs, all of whom have either received or applied for NBFC-MFI registration from the Reserve Bank of India, it said.

Meanwhile, credit-rating agency Crisil said on Wednesday that MFIs have securitised Rs.11,500 crore loan receivables in the last fiscal compared with Rs.5,075 crore in fiscal 2015.

Crisil Ratings said “a clutch of factors contributed to the more-than-doubling in volume”.

Firstly, banks are increasingly using this route to achieve their priority sector lending target. Moreover, negligible delinquencies and higher yields have made transactions attractive, and helped expand the investor base.

Besides, in the last 12-15 months, MFIs have seen a spurt in assets undermanagement and so have used securitisation to fund the growth. (IANS)

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India’s forex increased marginally to $361 billion

Apr 30, 2016 0

Chennai– India’s foreign exchange reserves increased marginally to $361.60 billion as on April 22, 2016, the Reserve Bank of India (RBI) said.

According to RBI’s forex data the reserves stood at $361.60 billion as on April 22 against $360.25 billion for the week ended April 15, 2016.

As an April 22, foreign currency assets stood at $337.53 billion, gold $20.11 billion, special drawing rights $1.49 billion and the reserve position with International Monetary Fund (IMF) stood at $2.45 billion.

On the other hand, the forex reserves for the week ended April 15, 2016, consisted of foreign currency assets of $336.18 billion, gold reserves of $20.11 billion, special drawing rights of $1.49 billion and the reserve position with IMF of $2.45 billion. (IANS)

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Reserve Bank proposes match-making platform for loans

Apr 28, 2016 0

Mumbai–The Reserve Bank of India (RBI) wants to allow peer-to-peer lending, a popular concept in developed countries where the borrower and the credit-seeker are matched on a platform for negotiating unsecured loans.

Peer-to-peer lending is a form of crowd-funding where an online platform matches the lenders with the borrowers for unsecured loans. Both the borrower and the lender can either be an individual or corporate entity. The platform gets a fee for its services from both parties.

“The Reserve Bank of India has today (Thursday) placed on its website the consultation paper on peer-to-peer lending, for seeking comments, views from all interested parties and general public,” the central bank said in a statement on Thursday, calling for responses by May 31.

“There are many variants of peer-to-peer lending platforms in terms of the nature and extent of services provided by them. Global regulatory practices also vary. At present, there is no clear regulatory framework in India governing the functioning of the peer-to-peer lending platforms.”

The paper outlines the pros and cons of regulating the sector and proposes a suitable framework for regulating this activity, which includes minimum capital, permitted activity, governance requirements, fair practices code for customer dealing and data security. (IANS)

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India’s Banking loopholes being studied to curb money laundering

Apr 28, 2016 0

By Nirendra Dev

New Delhi– The government has asked its agencies dealing with economic offences to study the loopholes in the country’s banking laws to prevent ill-gotten money from leaving the country’s shores and facilitate the return of black money stashed away abroad, well informed sources said.

With the quantum of black money held by Indians abroad variously estimated at between $466 billion and $1.4 trillion, the idea is to get a fix on how the network operates so that the government is able to crack the nexus and deliver on its promise of getting back such ill-gotten assets.

“Pervading secrecy, cut-throat competition among private and international banks, along with the organised crime models, have all resulted in giving a boost to money laundering both in India and abroad,” said a government source, requesting anonymity.

“There is also competition. A large number of foreign and private banks operate in secrecy. Then in jurisdictions like Switzerland and Cyprus, dirty money is often pumped in their financial system via organised channels — or even wire-transferred now,” the source told IANS.

“What we also understand is that multiple layers of secrecy in the system helps clients to mask their accounts and transactions. So directives have been issued by the home ministry and the finance ministry to various agencies to study how the system is aiding such offences.”

Among the agencies roped in are the Enforcement Directorate, Serious Fraud Investigation Office, and the related wings of customs and the Reserve Bank of India. Also being studied is: To what extent the secrecy in the banking system is contributing to money laundering, sources said.

Sources explained that such an exercise also became necessary after preliminary reports from the agencies and departments under the finance ministry reported that private banks in large numbers failed to present case studies by themselves about the modus operandi.

“Privacy is at the core of the functioning of private banks. So the government is left with few options when it wants to crack down on leads — also because money laundering involves multiple transactions to disguise the source of funds,” said the source.

Officials said a comprehensive study can also help in understanding how the flow of such money can be curbed, while also equipping banks to themselves have strong anti-money laundering rules for clients, backed by law.

During the latest US visit of Finance Minister Arun Jaitley, coordination and cooperation among various countries to curb money laundering was at the core of his itinerary. Even at the special session of the US on drugs, he dwelt on the nexus between illicit money, drugs and terrorism.

India also wants to give inputs to the Organisation of Economic Cooperation and Development to be able to come up with objective criteria soon to identify jurisdictions that did not cooperate towards a transparent financial system. “Defensive” steps are being considered against them.

The move also comes against the backdrop of the recent global expose of International Consortium of Investigative Journalists (ICIJ) and over 100 global media organisations on off-shore funds of some powerful people globally, based on millions of leaked documents of a Panama law firm.

The team of officers from the Central Board of Direct Taxes’ Financial Intelligence Unit, the board’s Tax Research Unit, and the Reserve Bank of India, is probing the expose about the “Panama Papers” . (IANS)

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India’s Forex reserves rise by $2.53 billion to $355.94 billion

Mar 25, 2016 0

Mumbai– India’s foreign exchange (Forex) reserves increased by $2.53 billion during the week ended March 18, official data showed on Friday.

According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the overall Forex reserves swelled by $2.53 billion to $355.94 billion.

The overall foreign exchange reserves had risen by $2.54 billion to touch $353.40 billion for the week ended March 11.

The foreign currency assets (FCA), which is the largest component of India’s Forex reserves, increased by $2.50 billion to $332.50 billion during the week under review.

During the week ended March 11, the FCA had augmented by $2.52 billion to $329.99 billion.

Apart from the US dollar, the FCA consists of nearly 20-30 percent of other non-US dollar major global currencies, securities and bonds.

The individual movements of these currencies against the US dollar impacts the overall foreign reserves value.

The country’s gold reserves remained stagnant at $19.32 billion.

However, the special drawing rights (SDRs) gained by $12.1 million to $1.49 billion.

For the week ended March 11, the SDRs inched up by $7.2 million to $1.48 billion.

Similarly, the country’s reserve position with the IMF (International Monetary Fund) edged higher by $21.1 million to $2.61 billion.

The reserve position with IMF had gained $12.7 million to $2.59 billion for the week ended March 11.

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Lok Sabha passes Appropriations Bill, Jaitley assures solving banks stress

Mar 14, 2016 0

New Delhi–Lok Sabha on Monday passed the Appropriation Bill, completing the first phase of the budgetary exercise for 2016-17, with Finance Minister Arun Jaitley saying that his government will find a lasting solution to banks’ financial stress by addressing issues at the core of the problem – over-borrowing by long-troubled sectors like steel, sugar, power and highways.

Indian Finance Minister Arun Jaitley

Indian Finance Minister Arun Jaitley

In his reply in the Lok Sabha to the debate on the Union Budget 2016-17, he said banks stress on account of fraud, where defaulters have wilfully declined to repay loans, will be dealt with legally.

“But there are also some other issues due to which non-performing assets (NPAs) have added up in the banking system,” he said, adding that some genuine economic reasons for the delays in repayments to banks were required to be addressed.

In steel, he said, it was dumping by China. In sugar, it was low global prices, while in power, it was indiscriminate moves by some states to sell electricity below cost, forcing distribution companies to resort to borrowing. In highways, it was poor policy implementation that had crippled the sector, Jaitley said.

“But all these are being tackled with appropriate policy action,” he said.

“There is no point in pushing dirt under the carpet and saying the room is clean,” he added.

Jaitley listed the steps taken by his government such as the anti-dumping duty and high minimum import price of steel, high customs duty on sugar and the Uday discoms’ debt restructure package for power utilities.

The NPAs of public sector banks (PSBs) have increased by close to Rs.1 lakh crore in the first nine months of the current fiscal, parliament was told last week.

Jaitley also rejected demands for rollback of 1 percent excise duty on jewellery saying it was in preparation for unveiling of the Goods and Services Tax, which hopefully will “come soon”

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164 chit fund companies under probe for cheating

Mar 12, 2016 0

New Delhi–As many as 164 ponzi, or chit fund, companies are currently being probed by central agencies for duping customers across the country, parliament was told on Friday.

Cases relating to the 164 companies operating ponzi schemes are being investigated by the Serious Fraud Investigation Office (SFIO), Finance Minister Arun Jaitley told the Lok Sabha in a written reply.

He also released a list of firms against which inquiries are in progress.

Jaitley also said the government has taken a number of steps to check cases of corporate frauds and protect interests of the investors in such ponzi schemes.

“Greater application of technology for early and preliminary identification of cases involving frauds through data analysis and usage of forensic tools etc., is being promoted,” he said.

“CBI (Central Bureau of Investigation) probe has been initiated in a large number of cases, many people were prosecuted and arrests made while several promoters continue to be in jails,” he added.

Noting that the Enforcement Directorate (ED) has also attached properties of many promoters under the Prevention of Money Laundering Act (PMLA), the minister said the government has decided to set up a central authority to take proper action against such offenders.

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Five Syndicate Bank officials booked in Rs.1,000 crore scam

Mar 8, 2016 0

New Delhi– The CBI on Tuesday registered a case against five Syndicate Bank officials, a CA, three private people and others on charges of causing a loss of Rs.1,000 crore to the bank by discounting of fake cheques and bills against fake insurance policies and overdraft limits against non-existent policies.

The bank officials have been identified as New Delhi branch’s then general manager Satish Kumar Goel, Jaipur regional office deputy general manager Sanjeev Kumar, Jaipur branch chief manager Deshraj Meena and assistant general managers of Malviya Nagar branch in New Delhi and Jaipur branch Adarsh Manchanda and Awdhesh Tiwari respectively.

Sources said that the fraud was unearthed recently and a Central Bureau of Investigation complaint was made after the suspension of the bank officials.

Goel was recently transferred to the Syndicate Bank’s New Delhi Branch.

The other accused have been identified as chartered accountant Bharat Bamb, a resident of Udaipur, and three Jaipur residents identified as Shankar Khandelwal, Piyush Jain and Vineet Jain.

All of them have been booked by the CBI under charges of criminal conspiracy, using a forged document as genuine, cheating and forgery of Indian Penal Code (IPC) and sections of Prevention of Corruption Act.

“It was alleged that the accused persons in connivance with the bank officials committed a fraud of Rs. 1,000 crore by resorting to discounting of fake cheques and fake inland bills against fake LICs and arranging over-draft limit against non-existent LIC policies,” said CBI spokesperson Devpreet Singh.

He said that the fraud was allegedly committed at Jaipur and Udaipur branch in Rajasthan and Malviya Nagar branch in Delhi.

“It was further alleged that the bank officials of the two branches were colluded with private persons in the crime since 2011. The amount involved in individual transactions ranged from Rs. 40 lakh to Rs.5 crore but majority of them were in the range of Rs.2.5-4 crore,” the official said.

To avoid detection, many of these transactions were nullified from the proceeds of new fraudulent transactions, he added.

“Searches are being conducted at 10 locations including Jaipur, Udaipur and New Delhi which led to recovery of incriminating documents,” the official added.

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