Former HR manager of bank arrested

Bank Privatisation: SBI, PNB to go private? Here’s list shared by NITI Aayog

Government officials are making extensive preparations for the eventual privatisation of banking institutions (Bank Privatization in India). Niti Aayog has announced which financial institutions would be privatised and which will be left out of the sale.  The government is now considering privatising two banks and one general insurance firm.

In August of 2019, the government consolidated four out of ten banks, bringing the total number of public sector banks in the nation down from 27 to 12. All these banks, according to the Finance Ministry's recommendation, shouldn't be put up for privatisation. 

Punjab National Bank, Union Bank, Canara Bank, State Bank of India, Indian Bank and Bank of Baroda are all on the NitiI Aayog-released list. Government officials have said that they have no plans to privatise these financial institutions. A government official has revealed that no one involved in the government's bank consolidation is eligible to participate in the privatisation process.

It was announced in the budget address by Finance Minister Nirmala Sitharaman that two public sector banks and one general insurance company will be privatised. The current disinvestment goal for FY22 announced by the government is Rs 1.75 lakh crore.

A number of banks have been combined by the government in 2019, according to data obtained from the consolidation plan created that year; nevertheless, the process of their integration is still waiting, though it may be finished soon.

Banks' balance sheet grows in double digits after 7 years: RBI report

Banks' balance sheet grows in double digits after 7 years: RBI report

Gross NPA slips to 5%; regulator flags slippages from recast accounts

The health of Indian banks continued to improve in 2021-22 with their balance sheet growing at double digits after a gap of seven years and their asset quality and capital position bettering, the Reserve Bank of India (RBI) said in its annual report on trend and progress of banking in India.

At the same time, the banking regulator flagged the issue of slippages from restructured accounts. “Going forward, it is imperative that banks ensure due diligence and robust credit appraisal to limit credit risk,” the report said.

“If downside risks materialise, asset quality could be affected. Hence, slippages in restructured assets need to be monitored closely,” it said, adding that timely resolution of stressed assets was essential to prevent asset value depletion

RBI has clarified that self-declaration by customers through non-face to face channels will be sufficient for completing the re-know your customer process,

RBI has clarified that self-declaration by customers through non-face to face channels will be sufficient for completing the re-know your customer process, if there is no change in the information. Furthermore, addresses can also be updated through such channels, without the need to visit a bank branch.

The banks have been advised to provide facility of such self-declaration to the individual customers through various non-face-to-face channels such as registered email-id, registered mobile number, ATMs, digital channels (such as online banking / internet banking, mobile application), letter, etc., without need for a visit to bank branch.

This comes as a major relief to customers as they will not have to visit bank branches for re-KYC process.

If there is only a change in address, customers can furnish updated address through any of these channels after which, the bank would undertake verification of the declared address within two months.

Next revision of pension under OROP Scheme: DESW Order 04.01.2023

 Next revision of pension under OROP Scheme: DESW Order 04.01.2023

No. 1(1)/2019/D(Pen/Pol)
Government of India
Ministry of Defence
Department of Ex-Servicemen Welfare

Sena Bhawan, New Delhi,
Dated, the 4th January, 2023

To

The Chief of Defence Staff
The Chief of Army Staff
The Chief of Naval Staff
The Chief of Air Staff

Subject: Next revision of pension of Defence Forces Personnel / family pensioner under One Rank One Pension (OROP)

Sir,

The undersigned is directed to refer to the provisions contained in para 3(v) of this Ministry’s letter No. 12(1)/2014/D(Pen/Pol)-Part-II dated 7.11.2015 regarding re-fixation of pension of Defence Forces Personnel under OROP in future every 5 years.

2. The President is pleased to decide that next revision of pension under OROP Scheme would be effective from 1.7.2019. Revision of pension is based on the principles adopted in MoD letter dated 07.11.2015 which are as under:

2.1. Pension of the past pensioners would be re-fixed on the basis of pension of Defence Forces retirees of calendar year 2018 and the benefit will be effective from 01.07.2019.

2.2. Pension will be re-fixed for eligible Defence Forces pensioners/family pensioners on the basis of the average of minimum and maximum pension of Defence Forces Personnel retired in calendar year 2018 in the same rank and with the same length of service.

2.3. Pension for those drawing above the average shall be protected.

2.4. The benefit would also be extended to family pensioners including war widows and disabled pensioners.

25. Arrears will be paid in four half yearly instalments. However, all the family pensioners including those in receipt of Special/ Liberalized Family Pension and Gallantry Award Winners shall be paid arrears in one instalment.

2.6. Personnel who opt to get discharged w.e.f. 01.07.2014 (on or after 01.07.2014) on their own request under Rule 13(3)i(i)(b), 13(3)II(i)(b), 13(3)II(iv) or Rule 16B of the Army Rule 1954 or equivalent Navy or Air Force Rules will not be entitled to the benefits of OROP.

3. Detailed instructions along with tables for revision of pension for each rank and each category under OROP Scheme, shall be issued separately.

4. This issues with the concurrence of Finance Division of this Ministry vide their ID Note No. 10(01)/2019/Fin/Pen dated 30.12.2022.

5. Hindi version will follow.

Yours faithfully,

(B.L Meena)
Under Secretary to the Govt. of India

Copy to:
1. As per Standard distribution list.
2. AFA(Pension)
2. CGDA, New Delhi

The Story behind Corporate Bad Loans: Dubious Assessment, Rampant Diversion of Funds and Meaningless Guarantees

 Last week, I wrote about how banks basically accept meaningless personal guarantees from industrialists or their group companies which can never be effectively invoked. I specifically mentioned the massive personal guarantees of Rs11,000 crore-Rs12,000 crore from Venugopal Dhoot of Videocon, as well as Prashant and Ravi Ruia of the Essar group, which are not backed by any assets and are essentially pointless pieces of paper. (Read: Kochhar and Dhoot Arrests: Setting the Stage for BJP’s 2024 Election Campaign?)

 

A former finance secretary was disturbed enough to write to a member of the standing committee of parliament for finance suggesting that the committee “may like to go into this extraordinary travesty and propose necessary reforms and measures.”

 

As luck would have it, I received a set of documents put up for discussion by the ‘wilful defaulters committee’ (WDC) of IDBI Bank in successive meetings over the past year.

 

Remember, IDBI Bank has been cleaned up and turned around by infusing a stupendous Rs49,000 crore through the government exchequer and by Life Insurance Corporation of India (LIC), even after selling valuable legacy investments. The government plans to privatise IDBI Bank this year and has invited bids to buy a 30.48% stake from LIC and 30.24% from the government, giving full management control to the new owner. (Read: IDBI Bank Privatisation: Much-needed Move, but at What Price?). So, the manner in which the Bank handles bad loans should also be of interest to the new owners as well as investors.

 

This column will only focus on the WDC meeting of 17 October 2022 which looked at 54 cases. The documents raise serious questions on processes followed by banks that inevitably lead to misuse of funds.

 

It turns out that as many as 23 cases to be discussed that day were sub judice—among the biggest reasons for delays in India. Most sub judice cases seem to be a delaying tactic and some defaulters even obtained stay orders from courts, despite forensic audits establishing large-scale diversion of funds or fraud.

 

The WDC discussed 11 cases listed below in detail:

 

The names of the list are

 

 

The defaults date back to 2013-14 or earlier and had already gone through a loan restructuring process involving significant concessions from the lender. Forensic audits are invariably commissioned just before filing bankruptcy proceedings and have invariably revealed massive diversion of funds, and, in many cases, outright fraud.

 

The documents put to the WDC fail to answer the most obvious questions that comes to mind: Why wasn't the use of funds better monitored and why were forensic audits not ordered before restructuring loans? The answer lies in what the late Dr KC Chakrabarty, former deputy governor of the Reserve Bank of India (RBI), used to tell us. He said, by the time a bank gets around to declare a company a wilful defaulter, there is nothing much left to recover—not even the guarantees collected at the time of disbursing multiple loans. Here are some key findings from the above-mentioned list.

 

Dubious Lending – Zero Accountability 

Poor assessment before sanctioning loans and lack of monitoring is the story behind every default in this list. Take the case of Winwind Power and Energy Pvt Ltd, listed for discussion. This company is a part of the Siva group of C Sivasankaran. It may be recalled that, in Siva Industries, IDBI Bank itself had accepted 94% haircut settling for just over Rs300 crore out of an outstanding of nearly Rs5,000 crore.

 

That only the public sector banks (PSBs) have extended loans to group entities of Siva is unknown to most people. State Bank of India’s (SBI’s) exposure was Rs399 crore, Punjab National Bank (PNB) Rs310 crore and Bank of India (BOI) Rs75 crore to Winwind Power. After huge payment defaults and other issues, it was declared a fraud account by PNB and BOI in 2020 when it was already too late. Finally, Winwind was sold for a mere Rs63 crore as part of a liquidation process in October 2020 with IDBI Bank receiving a mere Rs4.93 crore on a pro-rata basis.

 

Diversion of Funds

Massive diversion of funds seems a constant in every discussion on wilful defaulters. What is more remarkable is that none of the dozen-odd lenders in the consortium ever seems to notice rampant diversion or fraud until a company is about to be declared a wilful defaulter.

 

Consider the case of Techpro Infra Projects Ltd (Techpro) which is into laying oil, water and gas pipelines. IDBI Bank had an exposure of Rs79.4 crore on 25 November 2021 out of its total bank borrowings of Rs362 crore. It was declared a fraud six months later (25 May 2022) by Standard Chartered Bank, Bank of Baroda and IDBI Bank. A forensic audit revealed crores of rupees transferred to subsidiaries and group entities (Shriram Cement, Techpro Infrastructure Pvt Ltd, Huthro Power Corporation and GET Power Ltd). The recommendation to the WDC was to issue show-cause notices to the promoters—a pointless exercise, since the company was already under liquidation. The guarantees, as you will see, are a bigger joke.

 

Meaningless Guarantees

In every single default, the Bank had personal guarantees from all the promoters and, in some cases, from group entities. Documents put before the WDC do not always include documentation or discussion about whether the guarantees are backed by any assets and what is the current status. In a few cases, there is a mention of a share-pledge, but these have no value when a company faces bankruptcy. Others say, guarantees have been invoked without explaining if anything is recoverable.

 

In the case of Winwind Power and Energy Pvt Ltd of the Siva group, documents show that IDBI Bank had accepted a pledge of 100,000 shares of Tata Teleservices held by Siva Industries and Holdings. Wouldn’t we want to know the bankers who signed off on the decision to accept such a guarantee?

 

The Techpro documents say that personal guarantees by the promoters and three group entities were invoked. But this is clearly a futile exercise in all three cases—Techpro Engineers is under liquidation; Citizen Communications has been struck off after SARFESI proceedings and the status of Techpro Infotech Ltd is also listed at ‘strike off’ by the ministry of corporate affairs. There is no mention of whether anyone in the Bank responsible for monitoring the loans had kept track of the guarantors or made any effort to secure alternate collateral.

 

GVR Projects, which is in the EPC business, is even worse. The documents list 15 guarantors, of whom 10 are third-party guarantors. IDBI Bank’s exposure was 11% or Rs243 crore out of a total exposure of Rs2,271 crore. The documents note that it is evident that the promoters/directors/guarantors have “disposed of or removed the movable fixed assets or immovable property” given to secure the loans without the knowledge of the lender. This is a criminal offence. And it is another empty guarantee. The documents claim that IDBI Bank retains the right to proceed against 15 persons who issued personal guarantees and two more firms (GVR Realities and GVR Realities Pvt Ltd); but it is probably safe to bet this will only lead to legal costs for the Bank without any recovery.

 

Cheema Spintex Ltd is another defaulter in the list accused of removing and disposing of fixed assets and immovable property that was secured against the loans. The Bank also has duly obtained ‘networth certificates’ from promoters who have given personal guarantees. A former IDBI banker tells me that these are meaningless pieces of paper, since the officers creating meticulous paperwork to justify the loans rarely bother to check whether the assets included in the ‘networth’ are free of lien or any encumbrances.

 

Shrenuj and Company, which is in the diamonds and jewellery business, has dozens of group entities and subsidiaries in India and abroad. After defaulting on loans and the subsequent forensic audit, it was accused of large-scale diversion and misappropriation of funds to group entities as well as misreporting of records. IDBI Bank declared it a fraud account in September 2020. Shockingly, Shrenuj was found to have issued corporate guarantees to the tune of Rs1,209 crore (as on 31 March 2016) to other lenders for advances sanctioned to its subsidiaries and associates. Clearly, the process adopted by banks in accepting such guarantees is flawed to the point of being fraudulent. In fact, the Shrenuj account was subsequently declared a fraud account.

 

Staff Accountability: In the few cases where there is a reference to ‘staff accountability’, there are bland remarks such as—‘staff accountability was not discernible’ (which actually seems to mean that there was no lack of accountability); however, when an account is declared a fraud—as in the case of Techpro Infra, the Bank claims to be ‘re-examining’ the issue of accountability. In Shrenuj as well as Cheema Spintex, the documents exonerate the staff completely!

 

Pathbreaking Projects Ltd (formerly Abhijeet Projects), the latest inclusion in the list, is surely one that demands some answers from Bank officers who sanctioned a loan of Rs85 crore to buy a Bombardiers Challengar 605 aircraft. Not only is an aircraft a hugely depreciating asset, but every aspect of the purchase was dubious. Instead of purchasing the aircraft directly from Bombardier, it floated a 100% subsidiary registered in Hong Kong to route the transaction with the claims (since disproved) that Bombardier had refused to accept buyers’ credit of IDBI Bank for the purchase. How and why would officials accept this logic and go ahead with the loan is anybody’s guess; but no official has been held accountable.

 

The company had borrowings from 11 lenders of whom eight had declared it a fraud account leading to action by the central bureau of investigation (CBI). The attempt to invoke a guarantee by the promoter and a group entity had apparently drawn a blank from the defaulter who did not even cooperate with the forensic audit.

 

While I have not gone into details about the extent of exposure and restructuring of each loan, the picture that emerges is clear. Indian banks, especially PSBs, have poor processes for monitoring the use of funds and the guarantee process is downright dubious. It is time we demand that the banking regulator and the finance ministry fix these issues before the exchequer is allowed to dole out any funds to bailout and recapitalise PSBs.

original article publish in money life

GPF Interest Rate from Jan 2023 to March 2023

 

GPF Interest Rate from Jan 2023 to March 2023

(TO BE PUBLISHED IN PART I SECTION 1 OF GAZETTE OF INDIA)
F.NO. 5(4)-B(PD)/2021
Government of India
Ministry of Finance
Department of Economic Affairs
(Budget Division)

New Delhi, the 03 January, 2023

RESOLUTION

It is announced for general information that during the year 2022-2023, accumulations at the credit of subscribers to the General Provident Fund and other similar funds shall Carry ‘interest at the rate of 7.1% (Seven point one percent) w.e.f. 1st January, 2023 to 31st March, 2023. This rate will be in force w.e.f. 1st January, 2023. The funds concerned are:

Also Read: GPF Interest Calculator 2022-23

1. The General Provident Fund (Central Services).
2. The Contributory Provident Fund (India).
3. The All India Services Provident Fund.
4. The State Railway Provident Fund.
5. The General Provident Fund (Defence Services).
6. The Indian Ordnance Department Provident Fund.
7. The Indian Ordnance Factories Workmen’s Provident Fund.
8. The Indian Naval Dockyard Workmen’s Provident Fund.
9. The Defence Services Officers Provident Fund.
10. The Armed Forces Personnel Provident Fund.

2. Ordered that the Resolution be published in Gazette of India.