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“SBI has made $87 million available to the companies on the red flag list since June 2012,“ PAX said. “ SBI always works in accordance with local laws and regulations,“ a bank spokesman said. | “SBI has made $87 million available to the companies on the red flag list since June 2012,“ PAX said. “ SBI always works in accordance with local laws and regulations,“ a bank spokesman said. | ||
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| + | =RBI’s asset quality review under Raghuram Rajan: 2015= | ||
| + | [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Banks-wont-forget-him-too-soon-19062016011016 ''The Times of India''], June 19, 2016 | ||
| + | [[File: Top quarterly losses, bank-wise and worst performers in 2015-16.jpg|Top quarterly losses, bank-wise and worst performers in 2015-16; Graphic courtesy: [http://epaperbeta.timesofindia.com/Article.aspx?eid=31808&articlexml=Banks-wont-forget-him-too-soon-19062016011016 ''The Times of India''], June 19, 2016|frame|500px]] | ||
| + | | ||
| + | A few years down the line several of the current bank chiefs would probably remember Raghuram Rajan for one thing eating into their annual bonuses. | ||
| + | ICICI Bank has already announced that its top management won't receive performance bonus for 201516. PSU bank chiefs too are expected to miss the annual pay-out as soaring bad debts have hit the financial performance of lenders. | ||
| + | |||
| + | Just when data showed promise of the economy stabilising, the RBI started what's come to be known as asset quality review, a term that most bankers dread.While annual inspection of banks was the norm, RBI has now opted to ask banks to classify several loans as non-performing assets (NPA), which in normal course would have been treated as “standard“. | ||
| + | |||
| + | Classifying a loan as an NPA or a sub-standard asset means that banks have to set aside more funds to cover for potential losses due to nonpayment of dues. The result is for everyone to see: NPAs of Indian banks shot up to a little under Rs 6 lakh crore as each lender was handed a list of companies where funds had to be set aside, called provisioning in banking parlance. Even loans which were restructured were to be monitored strictly and funds set aside for a year. | ||
| + | |||
| + | As a result, against cumulative profits of close to Rs 31,000 crore in 2014-15, state-run lenders ran up losses of almost Rs 18,000 crore as bank after bank reported record losses. Some of the large private banks, such as ICICI Bank, man aged to stay profitable but saw a steep decline in profit. | ||
| + | |||
| + | But the hit is not just for banks, it also impacts India Inc. Companies that get the NPA tag would be choked of funding, a move that will impact economic revival as these entities would be unable to add more capacity to their factories. | ||
Revision as of 10:49, 29 June 2016
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This is a collection of articles archived for the excellence of their content. |
Contents |
Loss in scams: 2011-15
Mar 27 2015
In four years, Rs 25 banks lost Rs 12k cr to fraudsters
Chethan Kumar
Twenty-five nationalized banks have lost Rs 12,620 crore to frauds in the last four financial years, according to documents obtained from the finance ministry. Of these, Rs 2,060.75 crore were lost by five banks headquartered in Karnataka alone -Canara Bank, Vijaya Bank, Corporation Bank, Syndicate Bank and State Bank of Mysore. The documents revealed that there have been 4,845 cases of bank frauds over this period. Finance ministry sources said in most cases bank staff either connive with the fraudsters or are negligent.
The latest instance surfaced on Wednesday when the CBI registered a case against an Ahmedabad-based telecom company and its directors following a joint complaint from State Bank of India, Vijaya Bank and Canara Bank. “It is alleged that expressing urgency , the company promoter got Rs 40.4 crore released from the three banks even though some documentation was pending. He disappeared after seeking time until August 31, 2013, to repay the loan,“ the CBI said in a statement.
Among the documents the promoter submitted were letters of credit (LCs), which turned out to be fake. A term loan of Rs 86 crore was also released to this firm, which too was allegedly siphoned off. There is an estimated total loss of Rs 126.4 crore to the banks.
In another case, the CBI on Thursday arrested a former managing director of a Bhopal-based private firm, who was absconding in a case relating to alleged loss of Rs 3.63 crore to State Bank of Indore.He conspired with bank officials to obtain credit facilities on the basis of fake collateral during 2003-2004.
Market capitalization: 2014
19 nationalized lenders' combined m-cap less than HDFC Bank's Rs 2.64L cr
Mayur Shetty The Times of India Feb 03 2015
Investors Lose Interest In PSBs As Bad Loans Rise The 19 nationalized banks in India account for almost half of the total bank deposits in the country as against private banks, which together have an 18.7% share. However, the surge in bad loans among public sector banks (PSBs) and the technology gap they have vis-à-vis their private peers has resulted in these lenders losing investor interest. As a result, the Rs 2.39 crore combined market capitalization of the nationalized banks is less than the Rs 2.64 lakh crore market capitalization of HDFC Bank the most valuable pri vate lender. The nationalized banks exclude market leader, SBI which has a market cap of Rs 2.43 lakh crore. But even if the market capitalization of the 19 nationalized banks and the SBI were to be added together, it would still be less than the combined market capitalization of HDFC Bank and ICICI Bank as per Friday's closing prices. In cidentally, SBI is the only public sector lender with a market cap of over Rs 1 lakh crore. The next public sector bank is Bank of Baroda, which is a distant second in the public sector with a market capitalization of Rs 46,985 crore.
While the nationalized banks are being shunned by investors, the new generation private banks have been hit ting new highs on the back of new initiatives, which include digital technology . Besides HDFC Bank and ICICI Bank, two other private lenders have crossed the Rs 1 lakh crore mark. Kotak Mahindra Bank, which has been rallying after its recent inorganic initiatives -acquisition of ING Vysya and a deal to pick up stake in MCX -was worth Rs 1.02 lakh crore on Friday.
What the valuations mean is that the markets are discounting the market share of public sector banks in loans, their real estate assets worth thousands of crores and their customer base which accounts for almost the entire working class population of the country. Analysts say the main reason for despondency in PSU bank stocks is their disproportionate share in bad loans.
Here is what research firm Emkay Global Financial Services said about Bank of Baroda – a better performing public sector bank. “We expect the weak asset quality to persist.
While capitalization is better than peers, weak return ratios coupled with higher Basel III requirement will pose a challenge in the medium term unless there is sharp recovery. Also, capital infusion by the government, if below book value, would contain RoE improvement.”
Most NBFCs don't seek bank licence
Chennai: Several non-banking finance companies, including the Shriram Group, have stayed away from applying for a differentiated banking licence, as a January 1 clarification issued from the RBI forbids both NBFC and bank's co-existence.
The first set of guidelines dated November 27, 2014 for a differentiated bank licence, there was no explicit exclusion for NBFCs to co-exist along with these banks. The only inference was with respect to guidelines which dealt with financial and non-financial activity of the promoters, which was expected to be ring-fenced. These restrictions, according to sources in Shriram Group, vitiates the level-playing field between banks and NBFCs and also between existing banks and new ones, since the existing banks in several promoter groups like HSBC, HDFC, Federal Bank, Kotak are operating their NBFCs.
Investment banking
2015: 3 Indian banks in top 5
The Times of India Jan 11 2016
Reeba Zachariah & Boby Kurian
TNN
The merger advisory units of Axis Bank, Kotak Mahindra Bank and ICICI Bank have made it to the list of top five dealmakers by fees earned during 2015, a Dealogic report has revealed. This marks the return of Indian tigers, overtaken by American and European investment banks since mid-2000s.
Axis rose from No. 4 in 2014 to No. 2, grossing $25 million in investment banking revenue and garnering nearly 8% of the total fee pool last year. Kotak Mahindra, which didn't even figure in the top 10 list of 2014, came third with earnings of $17 million. ICICI, with $15 million in revenue, moved three ranks up from 2014 to bag the fifth spot last year.
Last week, TOI reported that JM Financial had topped Bloomberg's merger and acquisition (M&A) chart by the size of the deals advised during the previous calendar year.
The investment banking revenue compiled by Dealogic comprises fees earned from M&A advisory , debt deals and equity transactions. Despite the strong showing by domestic dealmakers, Citigroup earned most fees, which was pegged at $32 million last year. Citi, with 10% share of the fee pool, was active in technology and consumer internet deals as startups gathered heft and deals got bigger, attracting the attention of foreign investment banks.
The total wallet of India's investment banking industry shrunk to $329 million last calendar compared to $408 million in 2014. M&A brought the highest revenue of $137 million, followed by $100 million fetched by debt deals and $92 million by equity issuances.
“Domestic banks have far superior execution capabilities and ear to the ground, reflecting on the performance of every deal this year and have hence beaten foreign banks,“ said Dharmesh Mehta, MD & CEO, Axis Capital, the M&A advisory arm of Axis Bank.
Besides Citi, the only other foreign bank in the top five list was JP Morgan, which jumped from the sixth position in 2014 to the fourth, garnering $15 million in fees last year. 2014's topper Deutsche Bank tumbled to the eighth position.
Sourabh Chattopadhyay , country head, Wellesley Partners, a Hong Kong-based placement firm focused on the financial services industry , said, “The underlying stories from last year's performance by foreign banks include Citigroup's re-emergence to the top, the continuing capital market success of Morgan Stanley and Credit Suisse's performance despite losing key senior members. There is measured optimism for 2016 as selective upgrading has picked up“.
2015: Crisis in the Banking sector
The Hindu, February 13, 2016
Banks, it is often said, are the fulcrum of a robust economy. Healthy banks are an essential prerequisite for placing the economy on a higher growth orbit. The banking scene in India, however, presents an absolutely scary picture. A combination of factors ranging from poor credit appraisal to political interference and mismanagement by borrowers have conspired to push the banking industry into a messy cobweb. Bank after bank, especially the government-owned, has come out with poor third-quarter results. The stressed assets (comprising gross non-performing assets plus written-off assets and restructured assets) account for 14.1 per cent of total bank loans as of September 2015, up from 13.6 per cent in March 2015. For public sector banks, the stressed assets were in the vicinity of 17 per cent at the end of September, while the figure for private sector banks stood at 6.7 per cent. The rising stress level, or increase in bad loans, has yielded a twin fallout — of declining profitability at banks and poor credit disbursal. The double effect is already telling on the economy in various ways. For long, banks have either managed to, or rather been allowed to, keep the stress invisible, giving the outside world very little clue as to the happenings inside the industry. The Reserve Bank of India under Raghuram Rajan’s stewardship, however, has decided to clean up banks’ books rather than letting them camouflage the real picture. “There are two polar approaches to loan stress,” he said at the CII Banking Summit in Mumbai this week. “One is to apply band-aids to keep the loan current, and hope that time and growth will set the project back on track. Sometimes this works. But most of the time, the low growth that precipitated the stress persists. The fresh lending intended to keep the original loan current grows. Facing large and potentially un-payable debt, the promoter loses interest, does little to fix existing problems, and the project goes into further losses.” Indeed, legacy problems should be given a burial, and should not be allowed to persist. So hinting, Dr. Rajan articulated the need for surgical action to retrieve the health of the industry.
Forcing banks to recognise a problem is one thing, and finding a viable long-term solution to it is quite another. That requires not just holistic thinking but an out-of-the-box approach as well, especially in the evolving global context. A meaningful fix can happen only if banks are given functional autonomy at various levels. Restricted freedom inevitably leads to a blame game, making it even more difficult to fix responsibility. The concept of arm’s- length relationship especially needs to be clearly defined and implemented in letter and spirit in the banking industry. It is not just about how much money the Central government will freshly pump into stressed banks. The litmus test for the government lies in its ability, and capacity, to let go of control. The banking system indeed needs a change in the way it is managed.
Mobile banking transactions
The Economic Times, Mar 22, 2016
Mayur Shetty
Top 5 banks generate 92% of mobile banking value
Mobile banking penetration in India is concentrated among customers of five banks. According to data released by the Reserve Bank of India, the top five banks account for more than 92% of the entire value of mobile banking transactions in the country.
State Bank of India leads the pack with 36% market share, followed by ICICI Bank (21.5%), HDFC Bank (17.8%), Axis Bank (12.8%) and Kotak Bank (4.7%). These banks have managed to increase the number of mobile transactions by being proactive in development of mobile apps and making mobile banking feature-rich.
According to Deepak Sharma, head of digital banking at Kotak Mahindra Bank, his customers are leapfrogging to mobile banking directly from branch banking without using the browser. "Around 35% of our online banking customers are coming in from their mobile phones without having used net banking," he said. As against its market share of 1.4% of deposits, the bank has over 4.5% share of mobile banking. He said that online has already become the primary channel for most of the customers in the bank.
"Overall, 60% of fixed deposits have moved online. But if you look at only retail, nearly 80% of FDs are opened online," said Sharma. He added that it was largely bu sinesses that were obtaining fixed deposits in the branch.
"In terms of number of logins, mobile banking had overtaken net banking more than six months ago. Now mobile banking is ahead of net banking in terms of transactions as well," said Sharma. He said that the fastest growing segment is online recharge, which is driving transactions.
"We are now getting more and more categories online, like bill pay and IPO subscription. We are also seeing systematic investment plans (SIPs) gaining traction. We feel that any simple product that is easy to start, liquidate and monitor will pick up online," said Sharma.
In terms of volumes, the top five banks account for more than 85% of all mobile banking transactions. While the banks are the same as the toppers in transaction value, the rankings and consequent market shares vary slightly for volumes.State Bank of India again led the pack with a 38.5% market share, followed by ICICI Bank at 17.7%, Axis (15.3%), HDFC Bank (9.9%) and Kotak Bank (4.3%).
Hall of shame
SBI funds bomb-makers
The Times of India, Jun 20, 2016
Top bank in `Hall of Shame' for funding bomb-makers
SBI has been named in a “Hall of Shame“ list of 158 banking and financial institutions globally that have invested billions of dollars in companies making cluster bombs. SBI is the only Indian entity on the list, which includes JP Morgan, Barclays, Bank of America and Credit Suisse that invested over $28 billion in seven producers of cluster munitions between June 2012 and April 2016, according to Dutch campaign group PAX.PAX said the Convention on Cluster Munitions bans use, production of cluster munitions. This convention was signed by 94 countries. The maximum number of 74 banks are from the US, followed by China (29).
SBI has been included in the list because of its exposure to Orbital ATK, a USbased company specialising in space and rocket systems.
“SBI has made $87 million available to the companies on the red flag list since June 2012,“ PAX said. “ SBI always works in accordance with local laws and regulations,“ a bank spokesman said.
RBI’s asset quality review under Raghuram Rajan: 2015
The Times of India, June 19, 2016
A few years down the line several of the current bank chiefs would probably remember Raghuram Rajan for one thing eating into their annual bonuses. ICICI Bank has already announced that its top management won't receive performance bonus for 201516. PSU bank chiefs too are expected to miss the annual pay-out as soaring bad debts have hit the financial performance of lenders.
Just when data showed promise of the economy stabilising, the RBI started what's come to be known as asset quality review, a term that most bankers dread.While annual inspection of banks was the norm, RBI has now opted to ask banks to classify several loans as non-performing assets (NPA), which in normal course would have been treated as “standard“.
Classifying a loan as an NPA or a sub-standard asset means that banks have to set aside more funds to cover for potential losses due to nonpayment of dues. The result is for everyone to see: NPAs of Indian banks shot up to a little under Rs 6 lakh crore as each lender was handed a list of companies where funds had to be set aside, called provisioning in banking parlance. Even loans which were restructured were to be monitored strictly and funds set aside for a year.
As a result, against cumulative profits of close to Rs 31,000 crore in 2014-15, state-run lenders ran up losses of almost Rs 18,000 crore as bank after bank reported record losses. Some of the large private banks, such as ICICI Bank, man aged to stay profitable but saw a steep decline in profit.
But the hit is not just for banks, it also impacts India Inc. Companies that get the NPA tag would be choked of funding, a move that will impact economic revival as these entities would be unable to add more capacity to their factories.
