Forced PSU bank mergers won’t work

An architecture has emerged for the Government to tackle the massive bad loan problem of state-owned banks. There is now a Banks Board Bureau to pick new top managers for banks and act as a buffer between banks and the Government to ensure proper governance.

There is also an insolvency and bankruptcy code which is a single legal window, so to speak, to speed up the process for resolution of bad debts. Though these measure will take time to show results, they can be termed the good part of the architecture.

The indifferent part is the Government empowering itself to ask the RBI to direct banks to initiate proceedings under the code and also form committees to give banks directions in this regard.

Since bank managements will move slowly on their own to resolve bad debts for fear of future scrutiny, this move makes sense but it also lays the ground for the government to pick and choose between bad debts and the promoters behind them. So this can be termed the indifferent part of the architecture.

Merging concerns

But where the Government is going conspicuously slow is in recapitalising public sector banks whose net worth is severely eroded. Witness the minuscule ₹10,000 crore provided for this in the latest budget when the NPA load goes into lakhs of crores.

Instead, it has decided to move forward with the merger of banks, reducing their total number by almost half to around a dozen. For this the government has approved a mechanism which will both oversee and speed up things. This is the bad part of the architecture.

Mergers are being touted as the way to have only big strong banks which will then have enough depth in their balance sheets to take care of future provisioning needs and also keep lending big to achieve rapid economic growth. But by simply merging a weak bank with a strong bank you will merely create a bigger bank which will be weaker than what it was in its earlier avatar.

We need go no further than to look at the immediate fallout of the merger of five associate banks of the State Bank of India with itself. The associate banks made a loss of ₹5,792 crore for the March quarter of 2016-17 and ₹10,243 crore for the entire year.

This resulted in the consolidated net profit of SBI going down to a mere ₹241 crore when the stand alone net profit was ₹10,484 crore. The consolidated net profit will be a fraction of the outgo on account of dividend. Hence dividend, which props up the government’s fisc, will have to be paid out of reserves.

The shock delivered by these number caused the SBI share to tank by 4.6 per cent. Finance minister Arun Jaitley had earlier expressed confidence that the merger would make the bank a global player!

Systemic risks

In fact, the experience since the financial crisis of 2008 suggests that governments should have on their hands as small a number of entities as possible which are too big to fail as they are systemically important.

This puts the responsibility over them ultimately in the hands of the regulator whose job it is to ensure systemic stability.

On the other hand, it is small banks with strong local roots which lend to small and medium enterprises with good knowledge of the world they operate in that have a lot going for themselves.

Through the small units and startups they fund, smaller banks are the creators of jobs and wealth. In fact, in today’s world of banking, it is the small that is beautiful because they have their feet firmly planted in the ground and are thereby robust on their own terms.

Merging banks so as not to have to recapitalise them in a big way will merely postpone the need to adopt a real solution and probably make things worse when it will not be possible to hide any more behind stopgap measures.

The contrast between mergers based on the basis of felt commercial needs as opposed to simply doing so in order to show that one is doing something is illustrated by the two stages which the State Bank of India group has gone through. Earlier an associate bank was merged with the parent when it was considered to be weak.

This led to the merger of State Bank of Bikaner and Jaipur and State Bank of Indore with the parent. But the subsequent merger of the five remaining associate banks is a blanket action which is justified only on the ground that it is better to have fewer state owned banks than more. It is no wonder that post the mass merger, the merged entity is seen to be weaker than its earlier stand alone self.

Professional management

If merger, per se, is not a solution then what is? Obviously, given the present dead weight of non-performing large corporate loans, there is a future for public sector banks only if they are run by professional managers who can take a view on a project and other risks at stake before making a commitment. On the other hand, what had happened was politically directed lending for projects whose costs had sometimes been gold plated (overstated) and with inadequate assessment and coverage of the risks at stake.

Crony capitalism and public sector bank bad debts are two sides of the same coin. Once the top managers chosen by the Banks Board Bureau settle down and start changing the managerial culture, professionalism can emerge in an ambience of improved governance.

But that can happen without mergers! The right policy now would have been to simply continue chasing bad debts armed with the powers conferred by the bankruptcy and insolvency code and not engage in forced mergers. These are as dubious as forced marriages.

GDP Growth Slides To 5.7%, In June Quarter, Which Is A Three-Year Low--This is sab ka sath sab ka vikas

GDP or gross domestic product growth fell to a three-year low of 5.7 per cent in the April-June quarter. The economy had expanded at 6.1 per cent in the March quarter and at 7.9 per cent in the April-June quarter last year. Destocking in the run-up to the July 1 launch of the goods and services tax (GST) and a lingering impact of demonetisation hurt the June quarter GDP numbers, say economists.

Economists polled by Reuters had forecast that the economy would grow at 6.6 per cent in the June quarter.

Finance Minister Arun Jaitley said the June quarter data "is a matter of concern.'

"It is quite obvious that it therefore throws up a challenge for the economy. In the coming quarters, we really require, both in terms of policy and investments, to work more to improve upon these figures," he said soon after the data was released.

Mr Jaitley attributed the slowdown in the June quarter to a "pre-GST effect", destocking ahead of the rollout of the new tax regime. The finance minister remained optimistic of growth recovering in the coming quarters. "The domestic public investment is certainly going to be quite high because the revenues trend seems to be positive, global economy is improving faster than what we thought, monsoon picture continues to be good and destocking exercise seems to have been completed," he said.

Chief statistician TCA Anant said the major reason for the decline in GDP growth was a slump in manufacturing growth. The sector's growth fell steeply to 1.2 per cent in the June quarter, compared to 10.7 per cent in the same quarter last year. The financial, insurance, real estate and professional services sectors also slowed to 6.4 percent in the June quarter from 9.4 percent a year ago.

Dr Anant also added that "wholesale price inflation (WPI) normalisation, not demonetisation, is majorly responsible for decline in GDP Q1 figures."

Abheek Barua, chief economist at HDFC Bank, said: "GDP numbers are certainly disappointing. The numbers seem to suggest that the slowdown from last quarter has intensified due to the combination of long-term slowdown and temporary shock factors like demonetisation and GST (goods and services tax) destocking," 

"We have to revise our GDP outlook numbers for the full year," Mr Barua added.

Prime Minister Narendra Modi's shock decision last November to scrap high-value old banknotes wiped out about 86 percent of currency in circulation overnight, pounding consumer demand.

Going ahead, says Indranil Pan, group economist at IDFC Bank, "growth will be driven by GST (goods and services tax) and the pace of cleaning banks' balance sheets to improve the credit culture in the economy."

Economic activity in the country, which had lost some momentum in the run-up to the July 1 Goods and Services Tax (GST) rollout, has started to recover, according to global brokerage Nomura. The GST tax collection is off to a good start, with collections exceeding the revenue target for the first month of July. Nearly one-third of tax payers are yet to submit their returns. Analysts say that collections are likely to go up as more tax payers pay their dues.

The RBI estimates economic activity as measured by gross value added (GVA) to expand by 7.3 per cent in the current fiscal, up from 6.6 per cent in 2016-17, according to the central bank's annual report unveiled on Wednesday. Real gross value added (GVA) is another measure of economic activity that is arrived at by excluding net indirect taxes from GDP.

Expected DA for Bank Employees from November 2017 is 40 to 44 slab

Consumer Price Index (CPI) for the month of July 2017 has been published by Labour Bureau, which is 285 and if CPI for the next two months i.e., August 2017 and September 2017 remains same at the same level (285) as that for the month of July 2017, DA slabs for the next quarter, November 2017 to January 2018 will be 516 i.e., 51.60 %. That means, bankers’ DA from November 2017 is expected to increase by 3.80%  from the present quarter (which is 47.80%). 

1. On assumptions that CPI would remain at least same as of Jul'17 for the next month i.e. Aug & Sep'17. In this situation the expected (tentatively) increase in DA Slabs would come to 38 slabs.(on this assumption the total tentatively revised DA slabs would be 516 i.e. 51.60%)
2. On assumptions that there would be increase of one point in CPI data for the month of month Aug & Sep'17. In this situation the expected (tentatively) increase in DA Slabs would come to 44 slabs.(on this assumption the total tentatively revised DA slabs would be 522 i.e. 52.20%)
3. Keeping in view of the movement of CPI data as realeased during the last three months i.e. on average increase of two points in CPI in remaining next two months, In this situation the expected (tentatively) increase in DA Slabs would come to 50 slabs.(on this assumption the total tentatively revised DA slabs would be 528 i.e. 52.80%)

As per our experience and present market trend Consumer price index for the month of  August and September obviously will  increase  because   petrol  gold    potato  mineral ore  jute  and few other items price  in increasing order. Flood is also one of the reason for increasing commodity price.

So from November 2017 to January 2018  Da may  increase 40 to 44 slab for banker 

Dearness Allowance for bankers had declined consecutively for previous two quarter before the same increased by 2.20% during the quarter Aug-Oct 17.

Demonetisation data released by the RBI

• Rs 16,000 crore was not deposited back to the banks in the Demonetisation,2016.
  the Reserve Bank of India (RBI) today said out of the Rs 15.44 lakh crore of notes taken out of circulation, Rs 15.28 lakh crore was returned to the system by way of deposits by the public.
• This means that 0.16 lakh crore or Rs 16,000 crore was not deposited back to the banks in Demonetisatio.
• According to demonetisation figures released by the central bank, 8.9 crore old Rs 1,000 notes out of 632.6 crore is yet to be returned after demonetisation.
  In percentage terms, it is 1.4 percent of the now-defunct Rs 1,000 notes which is missing from the banking system.
• The government had banned old Rs 500 and Rs 1,000 notes in an attempt to weed out black money in the country in the November-2016. RBI said there were as many 588.2 crore of Rs 500 notes, both old and new in circulation as of March 31, 2017. As of March 31, 2016, there were 1,570.7 crore Rs 500 notes in circulation.
• The report further said that the cost of printing of currency notes more than doubled to Rs 7,965 crore in 2016-17 from Rs 3,421 crore in the previous year on account of new currency printing.
• It detected 199 counterfeit notes of the new Rs 500 denomination and 638 of Rs 2000 notes. But these were a minuscule proportion of the 762,072 fake note pieces detected during that year, an increase compared to 632,926 pieces a year ago.

Besides, new Rs 500 and Rs 2000 notes, the RBI has also printed new Rs 200 notes.

Former Finance Minister P Chidambaram said the central bank lost Rs 21000 crore in printing new notes.

Bank of Baroda changes in working hours of administrative offices

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• Bank Of Baroda has decided to open its administrative offices across the country for business earlier by an hour than branches/service outlets in business district areas.
• In a circular to all branches/offices, it said that the work timings of its administrative offices have been changed to 9 am to 4 pm with effect from September 18.
• Head office, corporate office, zonal offices, regional offices, zonal inspection and audit divisions, SME Loan Factories, specialised mortgate stores, back offices, Baroda Academies and Apex Academy, and the government business department, New Delhi.
• These are the offices for which the revised timings are applicable.This is inclusive of recess period of 30 minute from 1 pm to 1.30 pm.The notice of a change in terms of Section 9A of the Industrial Disputes has also been issued.
• These are determined by the market dominion such that the service outlets located at suburban districts commence business at 9 am.This is to suit the requirements of customers who would ideally be residents of the locality and would prefer to carry out some banking activity before proceeding to work.
• Branches/service outlets located in business district areas catering to the banking requirements of business houses/corporates/traders commence business hours usually at 10 am or 11 am.
• This would ensure speedy and timely support to the branches, the circular said.The bank is predominantly a customer-service oriented business and good customer service is the key to its growth and stability, the circular reiterated.

Demonetisation: Have all old Rs 500, Rs 1,000 bills come back? It’s critical RBI ends surprise now

Nearly 99 percent of the demonetised Rs 1,000 notes came back to the banking system at the end of March, 2017, according to a report in the Times of India, which cites Reserve Bank of India (RBI) data.

To be precise, there was Rs 8,925 crore worth of Rs 1,000 notes in 'circulation' at the end of March. Considering that Rs 6.86 lakh crore worth of Rs 1,000 notes was in circulation at the time of demonetisation (the ToI report cites a statement made by Santosh Kumar Gangwar, minister of state for finance, in the Lok Sabha on 3 February 2017), this means only a little over a percent of Rs 1,000 notes were not returned to the banking system at the end of the demonetisation exercise. In other words, as far as Rs 1,000 notes are concerned, the expectations of unaccounted money getting perished outside the formal system, has fallen flat.

Now, what about the Rs 500 notes? As the ToI report rightly mentions, a similar calculation is not possible in the case of Rs 500 notes since unlike Rs 1,000 notes, new Rs 500 notes were introduced to the system shortly after note ban and the RBI’s data doesn’t offer a break-up between the old and new Rs 500 notes. Hence, the circulation numbers of Rs 500 notes can be misleading. Remember, more than half of the Rs 15.4 lakh crore demonetised notes were Rs 500 notes. For the same reason, one will have to wait for the RBI numbers on the break-up of Rs 500 notes to arrive at the final figure. The Rs 1,000 notes data is at best an indicative figure of what could finally emerge.

If indeed the Rs 500 notes follow the Rs 1,000 notes trend and all Rs 15.4 lakh crore returns to bank counters, then again the theory of black money stashed in cash outside the formal system that isn’t accounted in any manner getting extinguished falls flat. That leaves us with only two possibilities. First, there was no significant black money in cash in India.

Second, the crooks took all their black money (in cash) to the banks in an attempt to whiten it, either directly or through benamis or in other ways (purchases/refunds/political donations etc). They now face the risk of getting caught by the taxman and possible punitive actions. But, the tax cheats would have thought that it is anyway better to face the risk of paying penalty rather than burning the loot or throwing it down the sewage. Besides, the hopes that an over-burdened tax department would take ages to lay their hands on the guilty, too, would have emboldened the crooks.

Data on Rs 500 notes, however, holds the key before one can arrive at a final conclusion on all this. And here is where the RBI comes across as a spoilsport. Even after nine months of demonetisation, the central bank is yet to give the data on how much money came back to the system in old notes post-demonetisation. The Urjit Patel-headed RBI is still counting the notes that have returned to the banking system. The last update on this came just a month after the demonetisation announcement, i.e., in the second week of December, when the RBI said the banking system received Rs 12.44 lakh crore in invalidated high value notes until 10 December, 2016. After that, there is no information and only the excuse that the counting process is still on.

Have the RBI and government already got the provisional number and are re-counting the notes because they are not happy with what they have seen? We don’t know. The excuses so far given by the central bank—not enough counting machines, tiring process of identifying fake notes, etc,---are surprising. Post-demonetisation, each bank branch accepted the money from the public after issuing receipts, entering the value on core banking systems and also using fake note detectors. Hence, there is already an estimate of what amount came in. Why does it take so long for the central bank then to finish the process even if, one assumes, that it has gone for re-counting of the notes?

According to R Gandhi, a former RBI deputy governor, it will not be before March 2018 when the RBI completes the counting of old demonetised notes that returns to the banking system (Read his interview to CNBC TV18 here.

How did Prime Minister Narendra Modi, in his Independence day speech, say that Rs 3 lakh crore that had never come into the banking system before, has been brought into the system after demonetisation even before RBI finished counting banned notes?

Certainly, there are some positives of demonetisation. For instance, the increase in number of taxpayers vulnerable to taxmen’s scrutiny. Also, high value cash transactions are now being monitored which will act as a disincentive to tax evaders. But, it is doubtful whether the main stated objectives of demonetisation, tackling black money and corruption have been achieved (read a report on demonetisation impact on corruption here). Even former top officials of the RBI have questioned the lack of transparency in the way the central bank has carried out the implementation of the demonetisation excercise. The delay in releasing the count of old Rs 500, Rs 1,000 notes would only add to the embarrassment.

Dena Bank, Oriental Bank of Commerce, Indian Overseas Bank and Central Bank of India could be the initial targets for Merger

he government’s decision to set up an ‘alternative mechanism’ to fast-track consolidation among public sector banks (PSBs) to create strong lenders will help the PSBs streamline costs and improve governance, but a continuous focus on risk management and capital infusion from the government are crucial for a turnaround, industry experts said.

The government’s decision to set up an ‘alternative mechanism’ to fast-track consolidation among public sector banks (PSBs) to create strong lenders will help the PSBs streamline costs and improve governance, but a continuous focus on risk management and capital infusion from the government are crucial for a turnaround, industry experts said. The Cabinet on Wednesday gave an in-principle approval for public sector lenders to amalgamate for creating strong and competitive banks. The proposal for a merger would have to come from banks and would be placed before the AM for in-principle approval. The final scheme will be notified by the government in consultation with the Reserve Bank of India. “We think bank consolidation will be positive in the long term, both from the bank management and governance perspective. Consolidation can lead to strengthening of management teams at the banks and can help improve the overall oversight from the government,” said Alka Anbarasu, vice-president, financial institutions group, Moody’s Investors Service. There are 21 state run banks including State Bank of India (SBI), the country’s largest lender. Analysts believe the number of banks could come down to seven-eight after consolidation. In April, the integration of SBI with its five associate banks and Bharatiya Mahila Bank became effective.

Ultimately, the assets of the banking industry need to be protected and this is a positive step towards it,” said Khushroo Panthaky, director, Grant Thornton Advisory. “There will be synergies in terms of savings, better risk management and a more comfortable capital position.” While it is too early to arrive at specific numbers, there would be significant savings in marketing costs, business development costs, and distribution costs, Panthaky said, adding that due to better risk management procedures, bad loans of combined entities could come down in future. Lenders such as Dena Bank, Oriental Bank of Commerce, Indian Overseas Bank and Central Bank of India could be the initial targets for acquisitions, analysts said.

However, bank consolidation will require support from the government in the form of capital injection. “In the current condition of the banking system, we don’t think just bringing two banks together will resolve their asset quality and capital challenges,” said Anbarasu of Moody’s. “Furthermore, we don’t think bank consolidation will change the situation of NPA resolution compared to the process banks are already following. For resolution of NPAs to take place, banks will need to take haircuts, and until their provisioning coverage ratio improves further, we think their capacity to take haircuts is limited.”

However, the biggest challenge could emanate from the fact that most of the public sector banks function in a similar manner. While consolidation will create larger banks, there will be little improvement in governance, decision making in terms of credit disbursement and the overall culture, a senior official of a large credit ratings agency, who is not authorised to speak to the media, said. “The balance sheet will be larger, but it will be difficult for them to move away from the existing ways of doing business. The exercise will be successful if they can do that,” the official said.

Bonus for all bank employee whose salary below 21000 per month

Bonus for Bank employees : Reasons to cheer

"Payment of Bonus Act was amended recently. As per the amended provisions the ceiling on salary and wage has been increased from Rs.10000/- to Rs.21000/- per month. As such, employees whose salary/wage does not exceed Rs.21000/- per month are now eligible for bonus.

It has been decided to pay Bonus at the rate of 8.33% of salary to all the eligible employees for the period 01.04.2016 to 31.03.2017.

Salary for this purpose includes 1) Basic pay (including FPP & PQP) 2) Special Pay 3) Dearness Allowance 4) SpecialAllowance with DA only."

Women's Battalion Commandant R. Nishanthini, IPS faces departmental action for physical assault on senior bank manager..

 The Kerala government has ordered departmental action against Women's Battalion Commandant R. Nishanthini, IPS. The proceedings have been ordered based on a complaint that the officer beat up up a Union Bank of India (UBI) senior manager in custody, after arresting him in a false case when  she was assistant superintendent of police (ASP) at Thodupuzha. 

The court had annulled the case against the bank manager, who was arrested on charges of harassment of a woman cop who approached the bank for a loan. An inquiry was conducted earlier on a complaint from the manager that false charges were foisted on him. The inquiry report, which found Nishanthini and other cops cops who were with her guilty, prompted the previous government to order proceedings against them.  

The order was, however, frozen later. The manager then approached the High Court, which set a a four-month deadline for the government to act on the complaint. 

Superintendent of police A.V. George had conducted the first inquiry. The State Human Rights Commission as well as the State Police Complaints Authority had recommended action against the cops. The home secretary issuedthe orders for departmental proceedings after examining these reports. 

Before action is initiated, ..an officer not below the rank of inspector-general will scrutinize the allegations. Final decision on the action against the IPS officer will be taken on the basis of the panel's recommendation....

 

Total advance , deposit gross npa and CAR of indian PSU at a glance

Consolidation of loss-making banks is the birth of a large loss-making entity.and consolidation will amount to little more than putting lipstick on a pig.

The PSU Bank Nifty index moved up 2.1% on Wednesday on news that the Union Cabinet has moved another step towards the merger of some of the state-owned banks. Bank consolidation has been on the cards for a long time, but the latest move will give it a push.

The Cabinet has given its in-principle approval to PSU bank mergers and a panel of ministers led by the finance minister will decide on the candidates and the scheme to create 10-15 large public sector banks by merging some of the state-owned lenders. Then the boards of the banks will have to initiate the consolidation process.

Ostensibly, the decision to go in for a merger lies with the individual bank boards. But the government is the largest shareholder and everybody knows it calls the shots.

A merger between a healthy bank and a zombie one risks dragging down the merged entity into the ranks of the Undead

Why is consolidation necessary? The accompanying chart shows that most of public sector banks have gross non-performing assets (NPAs) in excess of their net worth. They are generating no shareholder value. As independent expert Ashwin Parekh succinctly put it, “It is not a question of efficiency but that of survival.”

With their net worth eroded, several PSU banks are in no position to lend. They are the walking dead of Indian banking. Unless something is done, these zombie banks will infect the entire economy. The decision to merge some of them is the government’s way of showing that something is being done.

Mergers, claim its votaries, will prevent erosion of capital and help banks meet higher requirements under Basel-III norms. More importantly, the government will be spared from spending money to recapitalise the banks—it will instead reach into the pockets of the better-off banks for the purpose.

Will the mergers lead to a healthy, vibrant state-owned banking sector? Sometimes mergers can be effective, but it will take time and expertise, luxuries state-owned banks lack. The costs will be front-loaded and the benefits will come later, if they come at all. Investors in some of the zombie banks will of course rejoice—a merger is a lifeline for them. But for the better-run banks, mergers with weak banks are a disaster. A merger between a healthy bank and a zombie one risks dragging down the merged entity into the ranks of the Undead.

Most public sector banks have exposure to the same set of stressed assets. A merger increases the concentration risk as the merged entity will end up holding a larger exposure to stressed sectors.

What the government risks creating through merging loss-making banks is the birth of a large loss-making entity. But that is just one set of problems.

It simply isn’t true that bigger banks are better. The Indian market itself has seen several smaller private banks that have a higher valuation than their larger peers.

On paper, PSU bank mergers are supposed to create the highest value for shareholders and increase efficiencies. But consider the facts on the ground: in India, even well-managed private sector banks have struggled to digest their acquisitions. Recently, State Bank of India (SBI) saw its fresh slippages soar in the quarter ended 30 June simply because its staff and those of its associates were preoccupied with rationalizing processes after the merger. As more and more man hours are involved in making sense of new systems, existing problems get ignored. This is something the banks cannot afford as the bad loan problem is akin to a ticking time bomb.

Also, since public sector lenders cannot fire excess staff, voluntary retirement benefits would punch a hole into their earnings in the short-term. Plus, which bank now has the money for a VRS? Add to that the problems with technology mismatches and, even more importantly, the very different cultures of two organizations.

Investors will soon realize that, for the state-owned banks, mergers and consolidation will amount to little more than putting lipstick on a pig.

What is the Financial Resolution and Deposit Insurance Bill 2017

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017 to be introduced in the Parliament. This Bill is similar to the Insolvency and Bankruptcy Code, 2016, which was enacted last year in May. Both of these are about issues that can arise when companies go bankrupt or insolvent, except that this Bill deals only with the companies that are in the financial sector. The insolvency code Act deals with companies in all other sectors. The FRDI will provide a comprehensive resolution framework to deal with bankruptcy situations in financial sector entities such as banks and insurance companies. Let’s read more about the Bill.

Background

In his 2016-17 budget speech, Union finance minister Arun Jaitley said, “A systemic vacuum exists with regard to bankruptcy situations in financial firms. A comprehensive Code on Resolution of Financial Firms will be introduced as a Bill in the Parliament during 2016-17.” Following the announcement, on 15 March 2016, a committee was set up under the chairmanship of Ajay Tyagi, additional secretary, Department of Economic Affairs, Ministry of Finance, to draft and submit the Bill. The committee also had representatives of the financial sector regulatory authorities and the Deposit Insurance and Credit Guarantee Corporation.

The committee submitted its report and based it the draft FRDI Bill was drawn up. The finance ministry sought comments on the Bill till 31 October 2016 and after consideration of the suggestions, the Union Cabinet approved it to introduce it in the Parliament.

What the Bill offers

According to the finance ministry, FRDI Bill, 2017 seeks to protect customers of financial service providers in times of financial distress.

It also aims to inculcate discipline among financial service providers in the event of financial crises, by limiting the use of public money to bail out distressed entities.

The Bill would help in maintaining financial stability in the economy by ensuring adequate preventive measures, while at the same time providing the necessary instruments for dealing with crisis events.

The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of retail depositors.

Further, it seeks to decrease the time and costs involved in resolving distressed financial entities.

Once enacted, a resolution corporation will be setup to strengthen the stability and resilience of the entities in the financial sector.

11th bipartite updation as on 23 rd August 2017. Next talk will be on 6 th September

====================

Wednesday ,   23 rd  August

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Sub :   *11 th Bipartite*  

             *Settlement*   

             *Negotiations.*

Today 4 th round of discussions took place between I.B.A. and Unions. *

The meeting began with discussion on Ten "Management Issues" as under :

1.  Compensation Package on Cost to Company. Fixed and Variable Pay concept for Offficers / Workmen. I.B.A. desires to introduce declaration of 'Performance based Bonus.' After discussion it was decided to further discuss this issue during detailed Wage Revision process.

2.  Rationalisation of Special Pay Carrying Posts. There are 8 & 3 such posts at Clerical and Sub Staff level. We made it clear to I.B.A. that additional burden of duties should be compensated. It was decided to discuss this issue during next rounds with more details from I.B.A.

3. Review of two graduation increments. Only elementary discussion took place. We opposed this move of I.B.A.

4.  Transfer and deployment of Workmen Employees - para 536 of Sastry Award. We demanded better monetary compensation for transferees as transfers are effected by Managements.  This issue to come for discussion during future rounds.

5.  Simultaneous disciplinary action by Banks and Police. Only discussion took place. No conclusive decision.

6.  Continuing departmental proceedings post retirement for Workmen Employees. Only discussion took place.

7.  Premature Retirement of Workman in Public Interest. We opposed this move.

8.  Outsourcing : We have asked I.B.A. to elaborate Business Needs.

9.  Automatic Movement of pay Scales  for Officers. Only discussion. No decision.

10.  To mark Lien on NPS Fund of employees to recover Bank's Loss. We opposed move. Issue will be discussed further.

*Thus Management Issues were discussed only. No decision was arrived.*

*Other Issues* 

  *Discussed*

============

1. Improvement in Pay Scales and Stagnation Increments.

2. D. A. Formula

3.  H. R. A.

As load factor and basic pay structure is not decided , the issue remains hanging. Will be discussed in future rounds.

*Leave Rules*

1. Maternity Leave and in continuation Special Leave to Women employees was discussed. No conclusion.

2. Leave Bank. We requested  IBA to put forth exact scheme. It will happen during next rounds.

        *L. F. C.*

We put forth demand for enhancement in maximum distances. Uniform inclusion of Special Trains like Rajadhani etc in all bank schemes. Also one more option to employees to select periodicity of LFC.

Discussion inconclusive.

Road Travel cost reimbursement should be at same rate for Officers and Workmen was our demand. Our other demand was to include Sight Seeing Expenses in overall limit. Cost of Taxes such as GST should be included in Ticket Price which should be enhanced accordingly and reimbursed was our firm demand.

Thus even though so many issues came up and discussed, all were discussed on primary level. Discussions to continue. IBA to come up with concrete plans to give shape to discussion.

All these issues will be discussed during future rounds.

*Next Round of Negotiations is scheduled on Wednesday,  the 6 th September,  2017*

Bank employee unions have also opposed merger proposals over concerns that they could lead to job losses

The Cabinet approved a proposal on Wednesday to set up a ministerial panel to speed up consolidation of state-run banks as part of its efforts to revive credit and economic growth.
Prime Minister Narendra Modi will name the members of the panel, which will oversee proposals for mergers from the boards of the banks, Finance Minister Arun Jaitley said after a meeting of the federal cabinet. New Delhi owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia's third-biggest economy.

But these banks also account for the lion's share of more than $150 billion in sour assets plaguing the sector, and need billions of dollars in new capital in the next two years to meet global Basel III capital norms.

Banking sector reforms are a major plank of Modi's administration to revive credit growth, which has slowed to multi-decade lows as banks struggle with bad loans.

After top lender State Bank of India merged with its five subsidiary banks and also took over a niche state-run lender for women earlier this year, officials have said that more deals are being planned.
"The object is to create strong banks," Jaitley told reporters, adding decisions would be solely based on "commercial considerations".

The minister also said the onus of initiating such merger proposals would be on the boards of the banks.

Local ratings agency CRISIL, a unit of Standard & Poor's, said the new mechanism was an important first step towards kick-starting the consolidation process.

While analysts and investors have hailed the government's plan to have fewer but nimbler banks, they are sceptical of the benefits of merging two or more weak banks or a weak bank with a stronger bank that could strain the stronger entity.

Bank employee unions have also opposed merger proposals over concerns that they could lead to job losses. A million bank workers observed a one-day strike on Tuesday opposing bank mergers.
Nine of the 21 state-run banks reported a net loss for the last financial year ended March. Thirteen had posted losses the previous financial year.

Non-performing loans in the state banking sector have more than doubled in the past two years and were 12.5 per cent of their total loans at the end of March. Including restructured loans, total stressed assets were more than 15 per cent, central bank data shows. State-run banks as a group had a negative return on assets at the end of March, the central bank said.

State lenders' shares rose after the cabinet approval with the Nifty state bank index closing 2.1 per cent higher in the Mumbai market that gained 0.9 per cent.

Punjab National Bank, the second-biggest government-owned lender by assets, gained 3.4 per cent, while No.3 Bank of Baroda added 1.2 per cent. Canara Bank rose 2.9 per cent.
 

BAD LOAN WRITTEN OFF BY PUBLIC SECTOR BANKS UPTO MARCH 2017

Cabinet approves plans to merge PSU banks-The final scheme will be notified by the central government in consultation with the Reserve Bank.

 The Union Cabinet has reportedly given an in-principle approval for merger of PSU banks, paving the way for the government’s ambitious plan for consolidation among state-run lenders to help them gain efficiency and scale. Public sector bank shares surged on the news, with the Nifty PSU Bank index gaining as much as 1.8% to 3,290.4 points. Allahabad Bank was the top gainer, up 4.9%, while Bank of India shares jumped 3.8%; Punjab National Bank rose 3.44%; Bank of Baroda gained 1.6%; and India’s largest lender SBI was up 1.37%.

The government is pushing for consolidation among the state-run banks in order to help the lenders gain efficiency and scale, and operate without the support of repeated capital infusion to bolster their balance sheets. The government is reported to be mulling creating six large public sector banks of global scale, also with an aim to help the smaller banks with weaker balance sheets get support from the larger ones with strong finances.

The development comes close on the heels of State Bank of India’s move to merge its five associate banks and Bhartiya Mahila Bank with itself effective April 1. The merger will further expand the size of State Bank of India, which, with over 500 million customers now, would be counted among the top 50 banks in the world. The merged entity now has a deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore.

TV news channels ET Now and CNBC TV18 reported citing unidentified sources that the Union Cabinet has given an in-principle approval for alternative mechanism for PSU banks merger. The reports further said that the public sector banks’ boards will themselves decide the final contours of the proposed amalgamation, and will then seek approval from the GoM (Group of Ministers).

CNBC TV18 report said that the names of the banks to be merged with each other would be considered on the basis of four major aspects: 1) Banks to be merged should cover same regions; 2) asset quality of the entities to merged should be comparable; 3) capital adequacy of the banks to be merged should be comparable; and 4) profits of the banks to be merged would also be considered.

Given that India’s PSU banks are reeling under the burden of massive stressed assets, it has now become imperative for the government to shore up these lenders finances and strengthen their balance sheets. The central government and the Reserve Bank of India are already working on a recapitalisation plan for public sectors banks. The proposed consolidation is also partly being seen in that direction.

he government today decided to set up an Alternative Mechanism to oversee the proposals for consolidation of public sector banks (PSBs) with a view to creating fewer but stronger lenders. 

The Alternative Mechanism will be decided by Prime Minister Narendra Modi, Finance Minister Arun Jaitley said after the Union Cabinet meeting. 

The Cabinet gave in-principle nod to the constitution of the mechanism which will clear proposals of banks for mergers and amalgamation, he said. 

The government aims to create strong and competitive banks in public sector space to meet the credit needs of the growing economy, absorb shocks and have the capacity to raise resources without depending on the state exchequer, he said. 

The decision regarding creating strong and competitive banks would be solely based on commercial considerations, he added. 

After the in-principle approval, Jaitley said, the banks will take steps in accordance with law and Sebi's requirements. 

The final scheme will be notified by the central government in consultation with the Reserve Bank.

Union cabinet headed by the PM Narendra Modi has passed the FRDI bill if this bill passed by parliament your job unsecured

Dear Comrades,

Union cabinet headed by the PM Narendra Modi has passed the Financial Resolution and Deposit Insurance (FRDI) Bill on 14-June-2107. This is not just another law.

Thie FRDI Bill, if passed by the Parliament.Then the following things will happen.

1. DICGC will be abolished

2. A Corporate body called 'Resolution Corporation' will replace DICGC

3. Salary and Remuneration of Bankers will be reduced as per Sec 44 (3-c)

4. On Merger or Amalgamation of Banks, Workmen employees will be sent home as per Sec 49 (i) and (j).

5. The Corporation Board can list any bank as unviable and Liquidate it. (Chapter 14)

6. All the Employees will be sent home without any notice on Liquidation of banks.(Chapter 14)

7. No Court can question the action of liquidation and the Board will become all powerful. Sec 64

8. Depositors will not get 1 Lac as assured by DICGC. But only a part payment of the minimum amount decided by the Board.

9. Assets of the Banks can be sold to any person at the discretion of the Board. Sec (65)

I have mentioned just 9 points but the bill run for 147 pages. From this anyone can imagine the draconian nature of the Law. After presidential election all the process will be smoothly executed.

Comrades, Dont you understand your energy is diverted towards Wage Revision Talks with a toothless body called IBA?

Please dont waste your energy with Bipartite now.

Put the Condition " Scrap the FDRI Bill and Insolvency Bill" before any talks.

Immediately form a legal team of UFBU to study these bills.

Send the Memorandum to all the Members of Parliament.(Official email List I can provide)

If needed go for All India Strike.

Any new bill/policy introduced by this Govt against Bankers should be studied, discussed and opposed strongly by Trade Unions but unfortunately the support rendered by the members and leaders to any efforts made by handful of leaders is also not to the mark. But on the other hand the Govt, RBI and BBB are studying the pulse and feeble response of majority of Leaders and Unions to such policies/announcements and moving even harder than before.

Comrades, If any of you feel that it is not possible to stop this bill then kindly give the responsibility of leadership to someone who is positive and vibrant enough to work hard to save our nation.

We are in 'Do or Die' situation now.

Please 'DO' ....We cadres are ready...

Comradely,

Im attaching a Press statement made by Com.C.P.Krishnan, GS, BEFI TN against these bills.

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27.06.2018

Press Statement issued by T.Thamilarasu and C P Krishnan opposing FRDI Bill, 2017

On 14th June 2017, “The Cabinet, chaired by Prime Minister NarendraModi, approved the proposal to introduce the Financial Resolution and Deposit Insurance (FRDI) Bill, 2017. The bill will pave the way for set up of Financial Resolution Corporation to deal with the bankruptcy of the Banks, Insurance Companies and Financial Entities” according to the media reports.

Accordingly the Public Sector Banks (PSBs) including State Bank of India (SBI), Insurance Companies including Life Insurance Corporation of India(LIC), Regional Rural Banks (RRBs) and Co-operative Banks face the threat of closure/liquidation, if they are classified as having material risk to viabilityin the judgement of theBoard of the Resolution Corporation.Bank Employees Federation of India strongly deplores the move of the Central Government to introduce this bill and urges the Government to withdraw its proposal.

It is to be reiterated that these public sector financial institutions have been created to serve the ordinary masses besides marginalized and under-privileged sections of the people.

Out of the total Non-Performing Assets (NPAs) 88.4% is the creation of the large borrowers with the loan exposure of Rs.5 crores and above. On top of it, 12 large borrowers constitute 25% of the NPAs.

According to the Economic Times dated 26.06.2017, RBI told banks to set aside at least 50% of the loan amount as likely losses for all cases referred to the insolvency process; the regulator also said that provisioning should be 100% for those cases that don’t get resolved in the initial mandatory period for loan restructuring and instead are forced into liquidation.

It is now clear how ‘efficiently’ the law of Insolvency and Bankruptcy Code (IBC), 2016 would be utilized. If Banks have to make 50% or 100% provision, then what is the use of this law?

The present BJP Government has no political will to recover the NPAs from the corporates. Hence it attempts to show the performance of the PSBs in poor light and then liquidate them through the new bill cleared by the Union Cabinet on 14th June.

56 RRBs spread over 600 districts with around 23000 branches have been rendering excellent service to the rural people by lending almost 80% of the total advances to the poor and marginalized. Further there is a demand from the Unions/Associations to strengthen RRBs by providing adequate man power and improving their infra-structure. Despite poor support from the Government, only four RRBs incur loss. That may be cited as an excuse for the Government to wind them up.

The co-operative institutions which have been extending real service to the common man, have been weakened to some extentas 370 Central Co-operative Banks with around 14000 branches and 93000 Primary Agriculture Co-operative Societies were kept away from the note-exchange exercise during demonetization period. The losses incurred by these institutions due to farm loan waiver announced by the Government were not fully reimbursed by it. This hasfurther weakened their financial stability. These institutions which were exempted from payment of Income Tax are forced to pay the same through a change of law made about a decade ago. Due to these faulty policies, some of the co-operative institutions suffer losses for some period.The same may be attributed as their inefficiency and quoted as the reason for liquidating them.

Despite stiff competition posed by the private insurers, the Public Sector LIC stands number one in terms of market share and service in the Life Insurance sector with no competitor anywhere near LIC. The four Public Sector Non-Life insurance companies continue their dominant position with regard to market share and service to the common man in spite of unethical competition by the Private Insurance Companies imposeddue to the defective policy of the Government. There cannot be any reason for their closure even remotely.

In this backdrop, it is incomprehensible why such a bill is attempted to be brought. The move of the Government lacks any logic or reason. This is yet another deliberate attempt to serve the Corporates by encouraging more and more private banks in the name of small banks or payment banks and keeping our country’s door wide open for Foreign Banks.

BEFI strongly condemns the move of the Central Government and calls upon all the Trade Unions and democratic forces to resist the move of the Government to close down Public Sector Financial Institutions and defeat the same. BEFI also appeals to all the patriotic minded Members of the Parliament to oppose the Bill, when introduced in the Parliament.

(C P KRISHNAN)

General Secretary