The banking sector's credibility is on thin ice. Unless the government takes strict steps, things could get worse.
Norms governing investments by provident funds bar these from depositing funds in a commercial bank in case the NPAs of that bank exceed two per cent of net advances.
The Maharashtra cabinet on Thursday cleared a proposal that offers an option of availing the Old Pension Scheme (OPS) to the state government employees who joined the service after November 2005.
India's banking sector, dominated by more than two-dozen state-run lenders, has been hobbled by its highest bad-loan ratio.
'The snakes and ladders game will continue till the consolidation process is complete simply because we don't know how bad the scene is, with some of the banks being merged,' says Tamal Bandyopadhyay.
Dream hillstation project Lavasa, near Pune, is now a millstone around lenders' neck.
'As long as the government owns the banks, bankers will follow signals from politicians as to how to lend.' 'State-owned banks will remain State-owned banks as long as the current dispensation is in power -- and certainly there will be no change if the other chaps get in,' says Mihir S Sharma.
In a filing to stock exchanges, BoI said Reserve Bank of India has placed it under Prompt Corrective Action Framework, consequent to the onsite inspection under the risk based supervision model carried out for the year ended March 2017.
Recpaitalising banks through taxpayers' money will not solve the NPA problem.
PSBs' gross NPA ratio may decline to 12 per cent by March 2019 in the baseline scenario, whereas private banks' gross NPA ratio may decline from 3.7 per cent to 3.2 per cent in March 2019.
Its obsession for growth, chasing corporate clients and giving up its original mandate of meeting the needs of local trade and businesses. A quarter of its loan book has gone bad. That's an error of business strategy, points out Tamal Bandyopadhyay.
As of June, the gross NPA of nationalised banks was 3.89 per cent and State Bank Group at 5.50 per cent.
Finance Minister Nirmala Sitharaman is scheduled to meet heads of public sector banks (PSBs) next week to review performance of the lenders and progress made by them to support the economy battered by the COVID-19 pandemic. Banks would be urged to sanction loans for productive sectors to accelerate revival of the economy, sources said. According to sources, the two-day meeting would commence on November 17 and undertake a comprehensive review of various segments, progress in government schemes including Aatmanirbhar Bharat Abhiyan.
Finance Minister P Chidambaram on Thursday announced a slew of legislations that would be brought in during the winter session of Parliament, including amendments to the NPA Act and regulation of credit information companies.
With a view to protect prudent commercial decision of bankers, the government has taken a slew of decisions, including doing away with personal responsibilities of MD and CEO of PSBs for compliance in dealing with large value frauds committed by bank officials.
Analysts say there is still no visibility of earnings improvement.
Jaitley said the total gross NPA ratio has gone up to 4.03 per cent in 2013-14 from 3.42 per cent in 2012-13 and 2.94 per cent in 2011-12.
The RBI working group's proposal to allow corporate houses to set up banks is a "bombshell" and at this juncture, it is more important to stick to the tried and tested limits on involvement of business houses in the banking sector, according to an article jointly written by former RBI Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya. They also said that the proposal is "best left on the shelf".
The combined market capitalisation of the 21 listed PSU banks declined by about Rs 76,000 crore to Rs 425,800 crore during the month.
Banking stocks led by SBI, ICICI Bank, Bank of Baroda, PNB, Kotak Bank, HDFC Bank, Axis Bank, Federal Bank and Yes Bank fell as much as 2.77 per cent.
Rather, the existing ones should be implemented speedily to clean up the mess.
The broad contours of their assignment are expected to be making independent assessment of recovery prospects, and estimating haircuts for restructuring cases.
The bank's net profit on standalone basis was Rs 2,652 crore (Rs 26.52 billion) in the forth quarter of the 2013-14 fiscal, up 15.01 per cent from Rs 2,304 crore (Rs 23.04 billion) in the year-ago period, ICICI Bank said in a statement.
Das said banks have passed only 0.29 per cent in rate cuts to their borrowers as against 0.75 per cent cuts in interest rates by the Reserve Bank till June.
Former RBI governor R Gandhi said that the RBI needs to re-introduce a one-time restructuring package and mere moratoriums will not suffice in unprecedented times like the COVID-19 pandemic.
Rating agency Care Ratings said the gross non-performing assets ratio of domestic banks will increase to 4.5 per cent by March 2014 and impact the profitability by up to 30 per cent.
The gross NPAs of some public sector banks, including State Bank of India and Punjab National Bank have crossed 4 per cent of the total assets at the end of March, 2013.
Banks recovered Rs 18,933 crore (Rs 189.33 billion) worth of bad loans during the April-December period.
Corporation Bank is the biggest beneficiary of this round of capital infusion with Rs 9,086 crore of funding, followed by Allahabad Bank with Rs 6,896 crore.
Asserting that foreign funds are very bullish on investment opportunities in India, a senior government official said on Friday the country was a profitable place to do business and would soon become an easier place for business.
'If we want faster growth and want greater flow of credit towards the private sector, it's important to have many more of such large entities.'
Amid slowdown blues, the government has unveiled a raft of measures over the past few months aimed at improving liquidity in the system, moderating interest rates as well as credit growth apart from addressing stress in the NBFC sector.
The second quarter results of banks show that net profits for the industry increased 57 per cent annually. The private sector banks recorded a 64 per cent rise in profits, whereas the net profits of public sector banks jumped 50 per cent in this period. A significant portion of this increase can be attributed to the rise in credit costs and a decline in non-performing assets (NPAs).
Central bank likely to keep tabs on large wilful defaulters; policy likely by month-end.
The Reserve Bank on Monday eased norms for structuring of existing long-term project loans to infrastructure and core industries, to revive stalled plans and help banks tide over mounting bad loans.
The country's largest lender SBI on Friday reported a 41 per cent surge in standalone net profit at Rs 9,114 crore for the fourth quarter ended March 2022, helped by decline in bad loans. State Bank of India (SBI) had registered a profit of Rs 6,451 crore during January-March period of 2020-21, the lender said in a regulatory filing. Total income of the bank during the March quarter increased marginally to Rs 82,613 crore, from Rs 81,327 crore in the same period of the previous fiscal.
The major beneficiaries of loan recasting will be sub-Rs 500 crore corporate exposures and retail exposures, which were earlier expected to see the highest increase in NPAs in percentage terms.
Non-Performing Assets are a wake-up call for public sector banks.
There would be no retrenchment of employees and that their services conditions would also not be affected post merger.
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