by admin | May 25, 2021 | Corporate, Corporate finance
New Delhi : The National Company Law Appellate Tribunal (NCLAT) on Monday said the cash-strapped Infrastructure Leasing and Financial Services (IL&FS) and its group companies will not be declared as non-performing assets (NPA) without approval from the appellate tribunal.
A two-member bench headed by NCLAT Chairman Justice (Retd.) S.J. Mukhopadhyay was hearing an application moved by some of its lenders.
The order comes after the NCLAT on February 11 said that subsidiaries of IL&FS would be divided into three categories — Green (companies that can meet all debt obligations), Amber (firms that can meet some debt obligations) and Red (companies that can’t meet any debt obligations).
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Economy, Markets, News
By Anjana Das,
New Delhi : IDBI Bank has sounded out its new owner LIC seeking another tranche of up to Rs 12,000 crore to meet its huge provisioning requirements amid mounting losses.
The fresh support is required to cover for non-performing assets (NPAs) in the January-March quarter.
Life Insurance Corporation of India (LIC) completed acquisition of 51 per cent controlling stake in IDBI Bank on January 21. The bank received total capital of Rs 21,624 crore from the insurer in the four-month period prior to formalisation of acquisition.
Recently IDBI and LIC officials met Department of Financial Services senior officials and are said to have taken up the matter of fresh capital infusion. LIC has not commented so far.
In the backdrop of capital infusion from LIC, the bank has achieved regulatory capital requirement as on December 31, 2018, and its common equity tier-1 (CET-1) capital improved to 9.32 per cent as on December 31, 2018, against 6.62 per cent a year ago.
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IDBI Bank Q3 loss has widened threefold to Rs 4,185 crore. Total income decreased to Rs 6,190.94 crore for the quarter, compared with Rs 7,125.20 crore in the corresponding quarter a year ago.
The bank’s gross NPAs shot up to 29.67 per cent of gross advances during the quarter, against 24.72 per cent in the year-ago period. However, net NPAs declined to 14.01 per cent of the total advances, from 16.02 per cent in the December 2017 quarter.
As a result, the bank’s provision for bad loan increased to Rs 5,074.80 crore in Q3, compared with Rs 3,649.82 crore a year ago.
Provisions and contingencies for the September-December period spiked 30 per cent to Rs 4,179.12 crore against Rs 3,205.56 crore in December quarter last fiscal.
Gross bad loans as a percentage of total loans stood at 24.72 per cent at end-December compared with 24.98 per cent in the previous quarter and 15.16 per cent a year ago.
IDBI Bank, with its highest NPAs, had got the maximum Rs 10,610 crore from government last year to maintain regulatory capital in January last year.
(Anjana Das can be contacted at anjana.d@ians.in)
—IANS
by admin | May 25, 2021 | Banking, News, Opinions
By Amit Kapoor & Chirag Yadav,
India’s banking sector has been hogging the headlines for all the wrong reasons. It started with the mounting problem of non-performing assets (NPAs) across banks; then came a revelation of systemic fraud in the second-largest state-owned bank; and most recently, topping it all off are damning allegations of irregularities against the head of one of the largest private-sector banks.
All of these issues point towards a pandemic problem ailing the Indian banking sector, which cannot be resolved with quick-fix solutions.
The government’s response to the issue of bad loans has been to bail out the errant banks with taxpayer’s money. A massive recapitalisation plan of Rs 1.35 trillion was announced last year, bringing the total capital infusion into banks over the past decade to an astounding Rs 2.65 trillion. Clearly, such hand-outs only amount to value destruction on a colossal scale and go nowhere close to resolving the underlying problem that gives rise to the very problem of bad lending practices.
Meanwhile, the case of fraud at Punjab National Bank of Rs 110 billion, which involved the connivance of at least 54 employees over a period of time, is experiencing no headway either. The main perpetrator of the crime, Nirav Modi, has long fled the country. No penalty has been imposed on the bank yet and there has been no management shake-up as well. Eventually, it will be the taxpayers who will bear the cost of it all.
Finally, the latest case of alleged malpractice arising out of ICICI Bank involves a quid pro quo between its former MD and CEO, Chanda Kochhar, and one of its borrowers, the Videocon Group, that has dealings with a firm promoted by Kochhar’s husband. A detailed investigation will bring more clarity, but there are obvious grounds for conflict of interests as Chanda Kochhar herself sat on the committee that sanctioned loans to Videocon.
When the problems were just limited to bad loans and even the PNB fraud, most of the guns were trained at the inefficient working of the public-sector banks. But after the ICICI case, it is evident that private sector banks fare no better. This is even more problematic because public sector banks have an implicit assurance of having the government’s backing in times of uncertainty. In case of private banks, even a small problem can trigger a panic as depositors begin to flee to government banks for safety. The banking system runs on people’s trust and if that is affected in any way, the repercussions will be costly.
So, it has become all the more important to address the core issue ailing Indian banks. All of these three instances are nothing more than a failure of governance on the part of the banks and their top management.
A major problem in Indian financial institutions is the lack of effectiveness in supervisory oversight. The Board of Directors are usually meant to conduct supervisory duties in any corporate set-up, including banking, but in India they are hardly held accountable for it.
In the United States, for instance, the central bank holds the power to dismiss a member of a bank board in case of misconduct, negligence or corruption. The boards of Indian companies similarly need to be held accountable for their role in times when the top management is found to be engaged in dubious activities.
Historically, India has not held the boards to as much media and public scrutiny as it has done for the CEOs of any company. This is especially true for the independent directors on the board. Independent board members by definition need to stay independent of the influence of the CEO and be the de facto torchbearers of corporate governance. A mechanism needs to be set up to make the board more accountable in case of any wrongdoing by the top management.
On a related note, if the 2008 banking crisis taught us anything it is that a defined regulatory framework and swift corrective measures are extremely crucial. For instance, the United Kingdom has a separate regulatory authority, the Financial Conduct Authority, to oversee the behaviour of financial entities in the country. In May, the CEO of Barclays was fined a heavy sum by the body for trying to establish the identity of the whistleblower who had complained against him. Such sound regulation can strengthen the trust in the system and improve its resilience to momentary shocks.
India is undergoing a crisis of confidence in its banking system. In these bleak times lies an opportunity to unleash reforms and strengthen governance. The government must refrain from temporary fixes like throwing more and more money at lenders. Such solutions only amount to kicking the can down the road. The real problem lies elsewhere.
(Amit Kapoor is chair, Institute for Competitiveness India. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Chirag Yadav is senior researcher, Institute for Competitiveness, India).
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Buzz, Economy, News
Kolkata : State-run Allahabad Bank, which referred 65 stressed accounts involving around Rs 12,566 crore to the NCLT for IBC resolution during last fiscal, is focusing on recovery and rebalancing its loan book with emphasis on small, micro, agriculture and retail advances.
The lender also said the number of “wilful defaulters” declared by the bank stood at 257, a two-and half-fold jump from March 2017 figure of 101.
“Taking into account the optimistic outlook of the economy and its different sectors, the bank will align its business objective to maximise its gains.
“The bank shall primarily focus on aggressive recovery drive, further build-up in CASA (current account and savings account), rebalancing of loan book with focus on SMARt (small, micro, agriculture and retail) loans thereby increasing its share to the loan book supported by technology,” its latest annual report said.
The Kolkata-headquartered lender would also look at different avenues to raise capital with simultaneous reduction in risk weighted assets.
“Bank has referred 65 Non-Performing Assets borrowal cases involving an amount of Rs 12,566.11 crore to the National Company Law Tribunal (NCLT) for resolution under Insolvency and Bankruptcy Code (IBC) during FY18.
“A separate — NCLT Cell — at Head Office for exclusive monitoring of NCLT referred cases is being formed,” it said in the report.
At the end of the 2017-18, gross NPA of the bank stood at Rs 26,562.76 crore as compared to Rs 20,687.83 crore in FY 17 (2016-17) and Net NPA remained at Rs 12,229.13 crore as on March 31 as against Rs 13,433.51 crore in FY17.
According to it, FY18 was a challenging year for the Indian banking industry due to continued stress faced in asset quality on account of various macroeconomic and other factors.
The lender has nine Asset Recovery Management Branches (ARMBs) which function exclusively for resolving NPAs and it organised 12 recovery camps in the previous year (one camp in each month) involving all the branches.
“This step was very successful in terms of recovery that amounted to Rs 3564.55 crore,” it said.
According to lender, it sold 216 stressed accounts and assets worth Rs 2,539.21 crore to asset reconstruction companies (ARCs) during the last financial year.
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Buzz, Corporate finance, Economy, Markets, News
New Delhi : State-run lender Punjab National Bank is expected to recover around Rs 1,800 crore from its non-performing assets (NPAs) recovery mechanism — “Mission Gandhigiri” — which will soon complete one year of operation.
A senior bank official told IANS the mission, was launched in May 2017, had consistently delivered positive results with an average recovery of Rs 150 crore from the initiative.
“The mission was born out of the need to name and shame defaulters to increase societal pressure and urge them to pay back. Mission Gandhigiri has a dedicated recovery team across all circles of the bank,” the official, who did not want to be named, told IANS.
Accordingly, the passive recovery mechanism entails the team members to “visit the borrowers’ office or residence and sit their silently with placards that have hard-hitting messages such as ‘It is public money, please repay the loans’.”
On the legal side of the operation, following the government’s directions regarding wilful defaulters, the bank has declared 1,084 wilful defaulters.
“Due to PNB’s aggressive stance towards wilful defaulters, 150 passports have been impounded over the past few months,” the official said. Additionally, over the last 9 months, the bank has also lodged 37 FIRs against defaulters.
The bank is also leveraging data analytics for loan recovery and risk management.
“We have tied up with a leading credit agency and with the help of a third-party expert analytics, we will now be able to get access to contact information of PNB defaulters who have good credit record with other lenders,” the official said.
“This partnership is a part of the larger strategy to deploy technology to strengthen internal systems. This partnership will not only help the bank with loan recovery but will also help identify and automate profitable lending strategies and minimise credit and fraud risk,” the official said.
The bank has also recently started works towards “improving internal systems by incorporating analytics and Artificial Intelligence for reconciliation of accounts”.
In addition, two special OTS (One-Time Settlement) schemes have helped the bank to accelerate NPA recovery.
“From an average of recovering loan amount from 70,000-80,000 NPA accounts in a year, this move has resulted in recovery in 225,000 NPA accounts over a span of 10 months,” the official added.
“These schemes apply to small NPA accounts helping defaulters come out of debt.”
—IANS
