by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, News, Politics
New Delhi : Recapitalisation is a major issue for state-run banks owing to the massive non-performing assets (NPAs), or bad loans, accumulated by them and they are now exploring various sources of raising capital, according to a leading public sector bank (PSB).
“Banks’ capitalisation is a major issue for PSBs. We have to make high provisions, also now with the NCLT (National Company Law Tribunal) cases,” UCO Bank Chief Executive R.K. Thakkar told BTVi channel.
The Reserve Bank of India (RBI) has identified the second batch of large accounts which have defaulted in repayment of loans and has advised banks to resolve them.
In June, the RBI had come out with a list of 12 large accounts, which totalled about 25 per cent of the current gross NPAs of the banking system for reference to the NCLT under the Insolvency and Bankruptcy Code (IBC).
“We are trying various source to raise capital… We have requested the government for support, but for the balance beyond the budgetary support we have to go to the market, depending on the appropriate time,” Thakkar said.
He said the UCO Bank’s capital requirement for the current fiscal is to the tune of Rs 3,000 crore and “with the provisioning required for the NCLT cases the requirement may go up to another Rs 500-600 crore.”
The RBI has also advised banks to make higher provisions for the accounts to be referred under the IBC.
This was intended to improve bank provision coverage ratios and to ensure that banks are fully protected against likely losses in the resolution process.
Thakkar said that he expected the first tranche of the government support to arrive to the bank in a month’s time.
He also said that recapitalisation bonds would be one of the possible instruments to explore in the efforts to supplement the government recapitalisation.
The PSBs have accumulated a high ratio of NPAs, going up to 17-18 per cent of their loan portfolio.
The government has committed Rs 70,000 crore for banks’ recapitalisation over five years, of which Rs 10,000 crore remains to be disbursed for the current fiscal.
—IANS
by admin | May 25, 2021 | Banking, Economy, Markets, News
Mumbai : Continuing a recent trend, Indian foreign exchange reserves shot up by a massive $3.572 billion to touch a high of $398.122 billion for the week ended September 1, Reserve Bank of India (RBI) data showed on Friday.
The country’s foreign currency assets (FCAs), a major portion of the overall reserves, increased by $2.808 billion, to $373.641 billion for the week in consideration.
According to the latest RBI data, while gold reserves also rose by $748.3 million to $20.691 billion, India’s special drawing rights (SDRs) with the International Monetary Fund increased by $6.5 million to $1.506 billion.
The special drawing rights with the International Monetary Fund (IMF) increased by $6.5 million to $1.506 billion, the apex bank said.
In the previous week, the reserves had increased by $1.148 billion to $394.55 billion.
The inflow of foreign currency into the Indian equity and debt markets have contributed substantially to the impressive rise in reserves.
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, News
By Meghna Mittal,
New Delhi : While the RBI launched the 200-rupee note a week ago, it may take up to three months for ATMs to start dispensing the new denomination currency as it will involve a huge exercise of recalibration.
Some banks have even asked the ATM companies to begin testing the new note for recalibration of the machines, though they have not got supplies of the new currency. Only last year, the banks were involved in recalibration of ATM machines after the demonetisation of high-value currency notes in November.
Reserve Bank of India (RBI) did issue a statement saying that the supply of the new Rs 200 notes would soon be ramped up, but has not given any time-frame by which it will be available in adequate numbers.
ATM manufacturing companies said that they have not received any directive from the RBI regarding the recalibration of ATMs for the new Rs 200 note. They disclosed that some banks have at an informal level have asked them to start testing of the new note, since it is of a different size.
It is yet to be seen whether all the 2.25 lakh ATM machines across India would be recalibrated for dispensing the new note.
Ravi B Goyal, Chairman and Managing Director, AGS Transact Technologies Limited, which claims to have an installed base of 60,000 ATMs, told IANS, “The process of recalibration will begin once we receive the directive from the RBI. The size of the new notes is different from the existing ones and so, once we receive the new notes, we will have to understand its dimensions and accordingly reconfigure the ATM cassettes. Next, we will have to check if the supply of notes is good enough to run the cassettes at full capacity.”
“The entire process of recalibration can be completed within 90 days without affecting the regular functionality of ATMs to a large extent. In fact, the ATMs will continue to be fully operational during recalibration and will continue to supply Rs 100, Rs 500 and Rs 2,000 denominations,” he said.
Among the other companies operating in the sector are NCR Corporation, which has over 1,08,000 machines, and BTI Payments, which has 4,500 cash dispensers.
NCR Corporation said that while some banks have reached out to them to start testing of the new note, they were yet to receive the supply to begin the process.
“Banks have started getting in touch with us for testing the same. They will let us know which machines they wish to configure for Rs 200, which will require physical visits to ATMs. However, the new notes are still to be provided to us by the respective banks so that the testing can begin,” Anand Garollu, General Manager (Services), NCR Corporation said.
K. Srinivas, Managing Director and CEO of BTI Payments, an RBI-licensed firm that operates cash dispensers not owned and managed by banks, said, “Recalibration will begin as and when we receive adequate quantity of Rs 200 notes. We are looking to roll this out as quickly as possible.”
He said that the industry was expecting Rs 200 notes to be available over a period of time across various geographies.
“The recalibration can be done progressively as and when the new denomination note starts to become available. Unlike the last time around (during demonetisation), when we had to recalibrate all machines in one go,” Srinivas added.
The ATM companies said that they were expecting to receive official communication on recalibration of ATMs soon. However, e-mails to RBI in this regard did not elicit any reply, they said.
“The production of these (Rs 200) notes is being ramped up by the currency printing presses and over time, as more notes are printed, it will be distributed across the country through the banking channels and will be available for public in adequate quantity,” the RBI had said in a statement.
Currently, Rs 200 notes are available only through select RBI offices and some banks.
While State Bank of India and Punjab National Bank are reported to have received the new Rs 200 notes, Eknath Baliga, Manger, KYC-Antimoney Laundering Cell, Corporation Bank, Mangalore, told IANS that none of its branches across the country had received the Rs 200 notes so far.
The Rs 200 note is currently being printed only by RBI presses. Security Printing and Minting Corporation of India (SPMCIL) sources told IANS that the company has not received any indent so far for the printing of Rs 200 notes. India’s two currency presses are owned by RBI and two by SPMCIL, which is a government-owned company.
How the ATM recalibration happens:
Usually, an ATM holds four cassettes — three of which can continue to be used for Rs 100, Rs 500, Rs 2,000, and the fourth cassette can be used for the new Rs 200 notes. On an average, each cassette has a capacity to hold 2,000-2,500 notes depending upon the quality of cash issued by banks. However, there are many ATMs that only have either two or three cassettes.
The number of slots in the ATM can be configured as per the bank’s preference. The banks decide which denomination needs to be configured in a machine on the basis of the customer profile in the area where the ATM is located and the number of transactions on that machine.
The banks need to make requisite changes at their ATM switch before the roll-out of the physical recalibration at the ATMs in the field.
The recalibration of a new denomination takes 30-45 minutes per ATM. The process of recalibration is not very difficult but is time-consuming given an engineer has to visit every ATM and configure it to dispense the requisite denomination.
The introduction of the Rs 200 note has been welcomed as it would ease the currency circulation in the market as people prefer lower denomination cash withdrawals from ATMs. Rs 200 would also be more convenient for rural consumers.
(Meghna Mittal can be reached at meghna.m@ians.in)
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Governance, Economy, Markets, News, Politics
RBI Governor Urjit Patel
Mumbai : Dwelling upon the spillover effects of the “quick fix” solution of farm loan waivers to ease farmers’ distress, RBI Governor Urjit Patel has said that the government instead should move to more fundamental solutions, including crop insurance and opening up the farm economy to market forces and open trade.
“In the absence of coordinated and sustained efforts to put in place elements of a virtuous cycle of upliftment, loan waivers have periodically emerged as a quick fix to ease farmers’ distress,” Patel said here at a seminar on ‘Agricultural Debt Waiver – Efficacy and Limitations’ on Thursday evening.
“From a policy perspective, what needs to be done is to move away from palliatives in the form of debt relief and into a more fundamental solution that enhances welfare all around,” he added.
The Reserve Bank of India (RBI) Governor said that many elements of this optimal approach are well known — crop insurance, infrastructure, irrigation, technology-enabled productivity improvements and opening up the farm economy to market forces and open trade.
Patel lauded the government’s initiatives like establishing a nation-wide market for agricultural produce, through eNAM, the Pradhan Mantri Fasal Bima Yojana, the Pradhan Mantri Krishi Sinchai Yojana, the Paramparagat Krishi Vikas Yojana and the national drive towards financial inclusion.
“The coming to fruition of these initiatives holds the potential of achieving the mission of doubling farmers’ income over time. We need to ensure that their benefits percolate down to all the intended recipients,” he said.
While in no way detracting from the acute distress that farmers face with every disruption in crop cycles, it is important to recognise that there are externalities that spill over beyond the farm sector and eventually, other economic agents and other parts of the economy get affected, he added.
He said that the spill over effects need to be minimised so that the incidence of the burden on the taxpayers can be reduced.
The first impact of any loan waiver is on the balance sheet of lending institutions, be they formal or informal, Patel said.
“This is inherent in the inevitable lags, in the timing of impact and the arrival of compensation from the government. In this, the quality of assets deteriorates. Loan waivers impact the state of public finances in the form of higher than budgeted revenue expenditure. This, in turn, has to be financed by additional market borrowings which pushes up interest rates, not just for the states but for the entire economy,” he said.
Even if the loan waiver is accommodated within budgetary provisions, it will force cutbacks in other heads of expenditure, the RBI Governor noted.
“If, on the other hand, budgetary provisions are exceeded, higher spending and widening of the fiscal deficit have, as experience has shown, inflationary consequences and possible spillovers that could undermine external viability. Also, research points to adverse welfare effects because, ultimately, loan waivers involve a transfer of resources from tax payers to borrowers,” he said.
Patel said that there is a gamut of issues that have intensified the anguish of our farmers and farm loan waivers have brought forward the urgency of designing lasting solutions to the structural malaise that affects Indian agriculture.
“On the other, there are concerns about the macroeconomic and financial implications, how long they will persist in impacting the economy, the possible distortions that they could confront public policies with and the ultimate incidence of the financial burden,” he said.
India’s agrarian economy is the source of around 15 per cent of GDP, 11 per cent of our exports and provides livelihood to about half of the country’s population.
The importance of the sector from a macroeconomic perspective is also reflected in a significant flow of bank credit to finance agricultural and allied activities relative to other sectors of the economy.
Outstanding bank advances to agriculture and allied activities have risen from about 13 per cent of GDP originating in agriculture and allied activities in 2000-01 to around 53 per cent in 2016-17.
—IANS
by admin | May 25, 2021 | News, Politics
New Delhi : The Opposition on Thursday stepped up its attack on the government over the RBI’s annual report that revealed low efficacy of demonetisation, with the Congress terming the move to junk high currency notes as the “biggest scam” and the CPI-M demanding a “black paper” on the issue.
The Aam Aadmi Party also hit out at the Modi government and claimed that extra notes worth Rs 1.1 lakh crore were deposited in banks following demonetisation.
The Congress, AAP and CPI-M held separate press conferences to slam the government following the RBI annual report figures on Wednesday which said that of the Rs 15.44 lakh crore taken out of circulation in the November 8 demonetisation of Rs 500 and Rs 1,000 currency notes, Rs 15.28 lakh crore had returned to the system by way of public deposits.
Congress leader Anand Sharma accused Prime Minister Narendra Modi of misleading the people on demonetisation, saying that he had repeatedly made “false statements.”
Sharma said the Prime Minister had made “false remarks” in his Independence Day speech about the quantum of black money that was unearthed after Rs 500 and Rs 1,000 notes were scrapped.
He said demonetisation had led to a loss of GDP of Rs 2.25 lakh crore and the Prime Minister was “directly responsible”.
“People will accept the truth, they can also accept that a mistake has been made, but it is wrong to state repeatedly that everything done was right,” he said.
He said the Attorney General had told the Supreme Court that due to demonetisation an amount of Rs 4-5 lakh crore related to terror funding will not come back to the system.
“The government has not spoken the truth at every step. People have been misled, inconvenienced. This has been the biggest scam. Those who had illegal money, the government has helped them make it legal,” Sharma said.
CPI-M General Secretary Sitaram Yechury termed demonetisation a “money laundering exercise”.
“All of the (demonetisation) exercise’s stated objectives have failed. Normally we ask for a white paper on such issues but since Prime Minister Modi said it is fight against black money, I think the government should bring a ‘black paper’ on this,” Yechury said.
“Reportedly, more than 100 per cent of demonetised currency is coming back after Bhutanese, Nepalese and Co-op Banks Currency is taken in. This shows it was a very, very successful money laundering scheme,” he added.
Yechury said there was no mention of digitisation on November 8, 2016 but as the economy crashed, the government went out of its way “to help certain selected private companies” under the “mask of digitisation”.
“Lives, livelihoods and jobs have been decimated. This government is responsible for this…Why were people imposed with a burden of printing new notes costing Rs 8,000 crore and ATM recalibration cost of over Rs 35,000 crore in addition to the loss of economic activity estimated by the CMIE and others to the tune of Rs 1,50,000 crores?” he asked.
Yechury said that the government “must fix accountability for this disaster and punish those responsible”.
AAP leader Sanjay Singh raised questions over a figure in the RBI annual report and referred to a media report from November 2016 which cited the central bank as saying that Rs 500 and Rs 1,000 notes worth Rs 14.18 lakh crore were in circulation.
Singh said since notes worth Rs 14.18 lakh crore were in circulation and notes worth Rs 15.28 lakh crore have come back, there is a surplus of Rs 1.1 lakh crore.
“RBI is lying to the nation. Why are they lying? Why are they giving wrong facts? They didn’t know how many Rs 500 and 1,000 notes they had in circulation?” he asked.
The AAP leader questioned whether the extra money was black money or fake notes deposited by people close to the Bharatiya Janata Party.
Singh said that Rs 21,000 crore was spent in printing new notes and now a total of Rs 1.31 lakh crore will be levied from people.
“The Prime Minister and Finance Minister should answer this, else this would be the biggest corruption in Indian history,” he added.
—IANS
