RBI may be inclined to impose severe restrictions on lending in the coming quarters.
It has been a year since the Reserve Bank of India (RBI) initiated prompt corrective action (PCA), an exercise that puts weak banks under central bank scrutiny, against the 94-year-old Lakshmi Vilas Bank (LVB). But recently, this low-profile Chennai-headquartered bank found itself attracting some unwonted publicity when 60 per cent of its shareholders voted against a proposal to re-appoint seven directors, including one of the promoters, K R Pradeep (who holds around 2 per cent), and the company's managing director & chief executive officer S Sundar.
The Reserve Bank of india is likely to tell state-run United Bank of India (UBI), which has seen erosion of capital due to bad loans and higher provisioning to implement prompt corrective action.
Large urban co-operative banks may come to be solely under the provisions of the Banking Regulation Act, even as the smaller among them are to remain within the exclusive fold of the Registrar of Co-operative Societies. The upcoming changes will bring the curtains down on the vexed issue of dual control of UCBs, which has been in vogue for 54 years. The new framework will affect 1,551 UCBs in the country, which had a total business of Rs 7.36 trillion.
The recapitalisation, the finance minister said, will enhance the lending capacity of state-owned banks and help them come out of RBI's Prompt Corrective Action framework.
This is the first tranche of capital infusion for the fiscal and more funds would be provided in future depending upon the performance of PSU banks.
The banks total income for the September quarter this fiscal was Rs 17,324.3 crore.
The RBI expects CPI inflation to fall from 5.8% in Jan '16 to 4.8% in Jan-Mar '17.
Analysts say strengthening bank's capital will boost earnings, bank needs chief with long stint to run show
Finance Minister Arun Jaitley sought parliament's approval on Friday to increase the spending budget for this fiscal year by $4 billion, with almost half to be used to inject extra capital into state banks struggling with bad loans.
The need to allow government shareholding in public sector banks to come down below 51 per cent
The RBI now brings in important and contentious changes directly through voluminous Master Directions, or Master Circulars
The rupee closed at 60.31/32 on Thursday.
Ironically, bad loans and non-performing assets are on the rise in public sector banks in India, say sector watchers.
'The RBI has not allowed any commercial bank to fail in the past three decades.' 'It has always played the role of a matchmaker, but this is the best deal it has stitched,' notes Tamal Bandyopadhyay.
One-sponsor-one-fund rule may set off merger as Amundi seen sponsoring two funds following buyout.
Concerned over banks hiding their actual NPA numbers, RBI Governor Raghuram Rajan on Tuesday said the central bank is "increasingly turning towards taking action" on such divergences.
Banking services are likely to be affected for the next four days as employees of PSU banks plan to go on a zone-wise relay strike beginning with Southern region from Tuesday, after wage revision talks failed.
'Space out when raising funds; Sebi mulls securitisation platform'
Many things could play spoilsport for the Indian economy.
'The financial sector will be hit even harder than the overall market.' 'The banking sector will eventually be rescued.' 'But it may go into a long downwards spiral before things turn around.' 'Threat or buying opportunity?' asks Devangshu Datta.
Letter to corporate affairs ministry cites slowing economy, capital challenges.
Banks get bonds boost to raise funds for core sector; up to Rs 50 lakh of home loans in metros and Rs 40 lakh in other cities not to have CRR, SLR requirements
Given that it is only a temporary breather for PSBs, the government now needs to look at the harder options.
Indian companies are in a precarious financial position.
Capital infusion of $30 bn over two years needed amid high dividend payouts and impairment ratios.
'The full effects of the government initiatives will have to work their way through, whether in infrastructure or in the banking sector.'
The country's largest lender State Bank of India will get the largest sum of Rs 8,800 crore as government's capital infusion.
Public resources are scarce and need to be used well.
Will Citibank gain from India's position among emerging markets?
Capital adequacy and tighter regulation are just one step forward.
"Fitch Ratings has placed Punjab National Bank's (PNB) Viability Rating of 'bb' on Rating Watch Negative (RWN), following the large fraud reported by PNB," the US-based agency said in a statement.
After 2015, all re-structured assets will be treated on a par with non-performing assets, requiring the same level of provisioning.
The need for larger investment in infrastructure that is the biggest shortcoming, says A V Rajwade.
Government hits back, tells rating agency to introspect on processes.
What was the RBI doing, what was the PNB top management doing, what were the auditors doing, asks Debashis Basu.
The Sensex and the Nifty witnessed biggest one day loss in percentage terms since June 24
Though Indian banks don't have large exposure to subprime mortgages, analysts are worried at the rise in their restructured loan portfolios and deterioration in credit quality.
Non-performing assets of banks have been on the rise for past several months due to slowdown in the economy.
Managing Brexit, inflation and banking reforms, along with the political environment, will be tough.
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