Massive Bank Fraud ; Employee Disappears Swindling Rs 7 Cr From Fixed Deposits

 Massive fraud was unearthed in Canara Bank from its branch in  Pathanamthitta . Money to the tune of Rs 7 crore was found swindled from various fixed deposits maintained by customers at the bank. The culprit, bank’s own employee has vanished meantime.  Police have begun investigations into the case.

Money was swiped misusing password assigned to the bank’s officers. The culprit joined the bank just two years ago in 2019. The embezzlement came to light when a sum of Rs 10 lakh was found withdrawn from a fixed deposit account of another bank employee’s wife without her knowledge. When asked for explanation on the mismatch, the culprit said it was a mistake. Further examination showed shortfall of Rs 7 crores in fixed deposits with the bank.

All monies were found drawn fraudulently from various FDs and transferred to the culprit’s wife’s account and that of his other relatives. Meanwhile the culprit, Vijeesh, along with family,  has gone into hiding. The bank, originally a Syndicate Bank branch, became Canara post its merger.

Police will, after initial procedures,  hand the case over to CBI.

 

STAFF UNION CONCERNED ABOUT BANK PRIVATISATION

PARITY OF PENSION TO RETIRED FAMILY PENSIONERS OF PUBLIC SECTOR BANKS

PARITY OF PENSION TO RETIRED FAMILY PENSIONERS OF PUBLIC SECTOR BANKS.

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shown in the chart below, is the reason why the Pension of retirees of Public Sector Banks be reviewed and paid in accordance with corresponding revised scales for the rank they once belonged to at the time of their retirement.

From the chart below, it is clear that those who have retired from the services of the Bank prior to November 1992, the spouse, who is family pension holder in such cases, if alive, are getting a meagre amount of Rs.1250/- per month, i.e. near about Rs.42 per day, with which he or she, could not afford even two cups of tea per day.

Not much difference in the cases of post November '92 pensioners and family pensioners.

Interestingly, such pension amount is not to be given curtailing part of Banks revenue or income, but from his own PF kitty, which retired bankers handed over to employer for repayment at subsequent monthly intervals, and that to for his living. 

I hope, learned members,  would like to throw light on the subject.

WHAT IS AGRI-CESS? WHETHER IT AFFECTS THE GENERAL PUBLIC?

 The Union Budget 2021 proposed an Agriculture Infrastructure and Development Cess (AIDC) effective from February 2, 2021on specific goods as below.

Items     

Petrol – Rs.2.50 per litre

Diesel – Rs.4 per litre

Gold, Silver and Dore bars -2.50%

Alcoholic beverages (falling under chapter 22)-100%

Crude palm oil -17.50%

Crude soyabean and sunflower oil-  20%

Apples – 35%

Coal, lignite and peat- 1.50%

Specified fertilizers (Urea etc)- 5%

Peas-40%

Kabuli Chana-30%

Bengal Gram/Chick peas-50%

Lentil (Mosur)-20%

Cotton (not carded or combed)-5%

The Agriculture Infrastructure and Development Cess (AIDC) is a tax the government imposed on the commercial production of agricultural produce.  The Finance Minister announced that the money collected through Agri cess will be used for infrastructure development in agriculture across the country.  The Finance Minister told in her speech that “while applying this cess, we have taken care not to put additional burden on consumers on most items”. The Finance Minister further said that the impact will be offset by an equivalent or more reduction in the import duty. The higher cess will be adjusted with lower customs duty, she said. For example, to accommodate the new cess of Rs 2.5 a litre on petroleum, the Centre has cut the basic excise duty on petrol from Rs 2.98 to Rs 1.4. Similarly, for diesel, the basic excise has been cut from Rs 4.83 to Rs 1.8 a litre.  Likewise, for alcohol, to negate the impact of 100 percent cess, the corresponding basic customs duty was reduced from 150 percent to 50 percent. As a result, the net effective rate of import duties remained at 150 percent.

However, State Governments are not happy with the decision of the Central Government to impose agri-tax or cess because their revenues are likely to take a hit as hitherto Central excise and customs duties is divided between the Centre and the states according to a formula devised by the Finance Commission. Opposition parties are critical against imposing Agri-cess. Leader of the Opposition in Karnataka Assembly Siddaramaiah said that Finance Minister Nirmala Sitharaman while claiming to have not imposed any new tax, has tried to mobilise resources through the AIDC. “Cess has been levied on even agricultural products such as fertilizers and fuel, that will, in turn, affect farmers also,” he said.

If you are a loan guarantor, your liability will increase and credit eligibility will go down-- So before sign in any guarantee paper think two times

 Don’t let your emotions get the best of you

To be honest, the reason why most people opt for Personal Loans, more than any other source of financing, is because they are unsecured loans. Meaning, unlike other loans, personal loans do not require you to put up a collateral.

However, some banks and other financial assistance institutions might ask you for a guarantor before accepting your loan application. So, if you’re planning on becoming a guarantor its better you read this article before letting your emotions get the best of you.

What Is a Guarantor?

A guarantor is a financial term describing an individual who promises to pay a borrower's debt in the event that the borrower defaults on his or her loan obligation. Guarantors pledge their own assets as collateral against the loans. On rare occasions, individuals act as their own guarantors, by pledging their own assets against the loan. The term "guarantor" is often interchanged with the term "surety."

KEY TAKEAWAYS

• A guarantor guarantees to pay a borrower's debt in the event that the borrower defaults on a loan obligation.
• The guarantor guarantees a loan by pledging his or her assets as collateral.
• A guarantor alternatively describes someone who verifies the identity of an individual attempting to land a job or secure a passport.
• Unlike a co-signer, a guarantor has no claim to the asset purchased by the borrower.

The moment you sign up as a guarantor, your own loan eligibility will come down. In case you apply for a loan, lenders will consider the outstanding amount on the loan for which you are a guarantor as your contingent liability and may extend credit to you accordingly.

“Guaranteeing a loan will reduce the overall loan eligibility of a loan guarantor by the outstanding loan amount of the guaranteed loan. So, one should always factor in his own credit requirements before agreeing to become a loan guarantor," added Aggarwal.

Besides, the fact that you are a guarantor to a loan will also figure in your credit report. This also means that any default, either by the primary borrower or you, will affect your credit score.

Understanding the Role of a Guarantor

A guarantor is typically over the age of 18 and resides in the country where the payment agreement occurs. Guarantors generally exhibit exemplary credit histories and sufficient income to cover the loan payments if and when the borrower defaults, at which time the guarantor's assets may be seized by the lender. And if the borrower chronically makes payments late, the guarantor may be on the hook for additional interest owed or penalty costs.

Guarantors as Certifiers

In addition to pledging their assets as collateral against loans, guarantors may also help individuals land jobs and secure passport documents. In these situations, guarantors certify that they personally know the applicants and corroborate their identities by confirming photo IDs.

Limited Versus Unlimited

As defined under the terms of the loan agreement, a guarantor can either be limited or unlimited, with respect to timetables and levels of financial involvement. Case in point: a limited guarantor may be asked to guarantee a loan only up to a certain time, after which the borrower alone assumes responsibility for the remaining payments and alone suffers the consequences of defaulting. A limited guarantor may also only be responsible for backing a certain percentage of the loan, referred to as a penal sum. This differs from unlimited guarantors, who are liable for the entire amount of the loan throughout the entire duration of the contract.

Other Contexts for Guarantors

Guarantors aren't solely used by borrowers with a poor credit histories. Pointedly: landlords frequently require first-time property renters to provide lease guarantors. This commonly occurs with college students whose parents assume the role of the guarantor, in case the tenant is unable to make the rent or prematurely breaks the lease agreement.

Guarantors Versus Co-Signers

A guarantor differs from a co-signer, who co-owns the asset, and whose name appears on titles. Co-signer arrangements typically occur when the borrower’s qualifying income is less than the figure stipulated in the lender's requirement. This differs from guarantors, who step in only when borrowers have sufficient income, but are thwarted by lousy credit histories. Co-signers share ownership of an asset, while guarantors have no claim to the asset purchased by the borrower.

However, in the event the borrower has a claim against a 3rd party that has caused the default, the guarantor has the right to invoke a process called "subrogation" ("step into the shoes of the borrower") in order to recover damages.

WHO IS A PERSONAL LOAN GUARANTOR?

When a person applies for a Personal Loan, many banks ask for a guarantor. He/she is not only a witness or someone who proves the authenticity of the borrower, but is also someone who guarantees that the borrower will repay the loan. And in case the borrower doesn’t, the guarantor becomes liable to cover up for the defaults.

WHY DO BANKS ASK FOR A GUARANTOR?

Asking for a guarantor is the bank’s way of ensuring that the money they have lent is safe and secure, and will be duly repaid.

SITUATIONS UNDER WHICH A BANK ASKS FOR A GUARANTOR:

• The borrower’s credit health does not meet requirements
• Unstable employment with frequent transfers to different cities
• Job stability is a concern
• Unstable income which brings a big cloud of doubt when it comes to repayments
• Poor academic background

Additionally, there might be other reasons as well. For example, the requirement of a guarantor may be a part of the lending party’s rules and regulations.
PS: Not everybody can become a guarantor for a Personal Loan. There are almost always certain norms specified by financial institutions which a guarantor must meet.

WHAT HAPPENS WHEN THE BORROWER DOES NOT REPAY THE PERSONAL LOAN?

It is quite understandable that you would want to help out a friend or a family member in their time of need. But, it is also equally important to understand the repercussions of the worst case scenario i.e them not being able to repay back the Personal Loan they have taken.

When you sign up as a Guarantor to their Personal Loan, you become liable for the loan as the principal borrower. Which is basically you giving consent to the bank that you’ll be financially backing the borrower in case they default.

What follows next are a series of events that don’t look well for the Guarantor-

• Banks usually send a notice to the guarantor to take up the responsibility of clearing the loan. In case the guarantor fails to take up the responsibility, the bank will treat him/her as a ‘wilful defaulter’.
• This in turn reflects poorly on the credit rating of the Guarantor which then hampers his or her ability to get a loan easily in the future.

The decision to become a Guarantor is yours, and yours only. But, it is pertinent that you be aware of all that is involved in doing so. The Pros and the Cons.

MEANING OF CORPORATE SOCIAL RESPONSIBILITY (CSR) AND IMPACT OF AMENDED RULES 2021

Corporate Social Responsibility (CSR) activity means an activity undertaken by a company in pursuance of its statutory obligation laid down in Sec 135 of the Act. Every company having a net worth of rupees five hundred crores or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crores or more during the immediately preceding financial year, shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. On January 22, 2021, the Government of India amended the exiting Companies (Corporate Social Responsibility Policy) Rules, 2014, and brought into effect the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (“Rules”).

The amended rules 2021 shifted CSR spending mandatory from the voluntary. The Board of every company referred to in section 135 sub-sections (1), shall ensure that the company spends, in areas or subject, specified in  Schedule VII (listed below) in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities. In case the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount [and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year].If the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for a such number of succeeding financial years and in such manner, as may be prescribed. In case of any amount remaining unspent under sub-section (5), pursuant to an ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

The list of CSR specified in Schedule VII:

 The following activities are  included in the list of CSR specified in  Schedule VII such as  eradicating extreme hunger and poverty;(ii) promotion of education;(iii) promoting gender equality and empowering women;(iv) reducing child mortlity and improving maternal health;(v) combating human immunodeficiency virus, acquired immune deficiency,syndrome, malaria and other diseases;(vi) ensuring environmental sustainability;(vii) employment enhancing vocational skills;(viii) social business projects;(ix) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and (x) such other matters as may be prescribed.

Activities excluded from the list of CSR activities:

The following activities are excluded from the list of CSR activities:-

(a) Activities undertaken in pursuance of the normal course of business of the company except R&D of a new vaccine, drugs, and medical devices related to Covid 19 for the Financial Years 2020-21, 2021-22, and 2022-23 in their normal course of business. The details of such activities shall be disclosed separately in the Board’s Report under the heading ‘Annual report of CSR

(b) Any activity is undertaken by the company outside India save training of Indian sports personnel representing any State at a national level or India at the International level.

(c) Contribution of any amount directly or indirectly to any political party under section 182 of the Act.

(d) The activities benefitting employees of the company.

(e) The activities supported by the companies on a sponsorship basis for deriving marketing benefits for its products or services;

(f) The activities carried out for the fulfillment of any other statutory obligations under any law in force in India

The amended CSR Rule 4 which is completely revised in the amendment Rule 2021states that a Company can undertake CSR activities by itself or through any (i) company incorporated under Section 8 of the Act; (ii) registered pubic trust; (iii) registered society under Sections 12A and 80G of the Income Tax Act, 1961; (iv) any entity established under an Act of Parliament or a State legislature; or (v) any company incorporated under Section 8 of the Act, registered pubic trust, registered society under Sections 12A and 80G of the Income Tax Act, 1961 which has an established track record of at least three years in undertaking similar activities. The amended Rule 4 also places an additional obligation on the Chief Financial Officer of the company. Any funds disbursed for a CSR Project is required to be utilized to the satisfaction of the board in the manner approved by it and shall be certified by the Chief Financial Officer (CFO) or the ‘person’ in charge of financial management. Any entities that wish to undertake any CSR activity will have to register themselves with the Central Government. These entities would be required to fill the CSR-1 Form electronically with the Registrar of Companies from April 1, 2021. As per Rule 4(3), a company may engage international organizations for designing, monitoring, and evaluation of the CSR projects or programs as per its CSR policy as well as for the capacity building of their personnel for CSR. Further, under Rule 4(4), a company may collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules. As a result of the amended Rule 4, the relevant provisions of Rule 6 have now been incorporated in Rule 4 itself

Original article published in Banking School

Which PSBs could be privatised? Read details report

 

Though experts have their own take on the subject, there is no clear indication on what’s in store

Two public sector banks (PSBs) in India’s financial services sector firmament may come a full circle if the government makes good on the Budget announcement of privatising them.

Why full circle? Because prior to their nationalisation, which happened in two phases – in 1969 (14 banks) and 1980 (6 banks) – all PSBs were private sector banks.

Since the Budget announcement on February 1, various viewpoints have emerged as to which two PSBs could be picked up for privatisation.

Some experts say the six PSBs that were left out of last year’s mega-consolidation exercise could be on the government’s radar for privatisation. Others opine it could be two of the five large PSBs into which eight mid-sized PSBs merged in the last two years.

There could also be another dimension – the government may choose a combination of the aforementioned two possibilities.

Though Debashish Panda, Secretary, Department of Financial Services, has said that all PSBs are eligible for privatisation, in all likelihood, State Bank of India (SBI) will be kept out of this exercise as it the only government-owned bank that is classified as a domestic systemically important bank (D-SIB). The other two D-SIBs – ICICI Bank and HDFC Bank – are private sector banks.

 

The bid to privatise PSBs stems from the fact that the government is having to keep pumping in money year after year to help them meet regulatory capital as well as growth capital despite stretched finances.

So, the government’s move to have a bare minimum presence of public sector enterprises (PSEs) in strategic sectors, including “banking, insurance and financial services”, comes in the aforementioned backdrop.

The remaining Central PSEs in the strategic sector will be privatised or merged or subsidiarised with other CPSEs or closed, per the Budget.

Since 2017-18 and till date, the government has infused capital aggregating ₹2,56,943 crore. Of the recapitalisation provision of ₹20,000 crore for FY21, ₹5,500 crore has been provided to Punjab & Sind Bank. The balance ₹14,500 crore has not yet been allocated.

Suppressed market valuation

Karthik Srinivasan, Group Head - Financial Sector Ratings, ICRA, said the current suppressed market valuation (of PSBs) makes it tricky as to how much the government will be able to raise from disinvestment.

And given the very low market capitalisation of many PSBs, unless the government dilutes a significantly large stake, the effective money it can raise is not going to be meaningful.

Srinivasan observed that if the government has to sell a significant stake in PSBs, it will also need to have the Reserve Bank of India (RBI) on board because of the regulations relating to (cap on) single party shareholding in banks.

Not selling family silver

In her address at a conclave in Mumbai February 7, Union Finance Minister Nirmala Sitharaman rebutted Opposition charge that disinvestment/ privatisation of public sector enterprises (PSEs) is akin to selling family silver.

“This (disinvestment/ privatisation) needs to be seen in the correct perspective. It is not, as the Opposition says, a case of selling family silver. Not at all. Family silver should be strengthened. It should be your taakat (strength). “To prime the PSEs is the only aim of our policy. You need them, you need them to scale up, you need them to be in maximum potential so that they meet the aspirations of growing India,” said Sitharaman.

She emphasised that the logic of bare minimum presence in the strategic sectors is that the government enterprise should operate on a large scale so that India gets a strategic advantage.

Sitharaman observed: “For India’s aspirations and developmental requirements, we may possibly need 20 banks of the size of State Bank of India (SBI).

“For that, we need to create more and more strength for the existing public sector undertakings, scale them up and make sure that they professionally run themselves.”

Which PSBs could be privatised?

This is a million-dollar question and there is no clear-cut answer. However, analysts have tried to wrap their head around this question and find answers, as is their wont.

Some analysts posit that the government may leave out the five large PSBs – Bank of Baroda (BoB), Punjab National Bank (PNB), Canara Bank, Union Bank of India (UBI) and Indian Bank – from the privatisation exercise as, post-consolidation, they are currently in the midst of stabilising their operations and have just started to reap the benefit of cost-savings.

Moreover, going by the FM’s statement that India may need 20 banks of the size of SBI, the aforementioned banks are likely to remain in the public sector. Maybe, a 5-10 per cent disinvestment of government stake could happen in these PSBs a year or two down the line.

Hence, the attention turns to the six PSBs – Bank of India (BoI), Bank of Maharashtra (BoM), Central Bank of India (CBoI), Indian Overseas Bank (IOB), Punjab & Sind Bank, and UCO Bank – which were not part of the mega-consolidation exercise that happened last year. Since BoI is a fairly large PSB with an international presence (global business mix of ₹10,26,866 crore as of December-end 2020), the government may not be keen on privatising it.

UCO Bank, too, is unlikely to be privatised as two Kolkata-headquartered PSBs have already been amalgamated (United Bank of India with PNB and Allahabad Bank with Indian Bank). So, the Centre may want to retain at least one PSB with its headquarters in East.

Since the government infused ₹5,500 crore in Punjab & Sind Bank only two months back, it may hold back on its privatisation for a year or two. So, the shortlist of PSBs that could be eligible for privatisation gets whittled down to three – BoM, CBoI and IOB. CBoI and IOB are still under the RBI’s prompt corrective action (PCA).

But they could be brought out of PCA as there are visible signs of improvement in some of the key parameters such as profitability and asset quality (in net NPA terms as they have stepped up provisioning) in the last 3-4 quarters.

BoM stands out as it has posted net profit for eight quarters on the trot after the massive quarterly loss of ₹4,856 crore in December 2018. The Pune-headquartered PSB’s asset quality has shown marked improvement and it has a good RAM (retail, agriculture, MSME) to corporate loan mix of 61: 39.

In 2018, Uday Kotak, Executive Vice-Chairman and MD, Kotak Mahindra Bank, observed that private banks’ market share will go up significantly and be on a par with that of PSBs in the next five years. The top banker’s comment came in the backdrop of PSBs then reeling under bad loans and provisioning constraining their ability to lend.