Tides of 19.11.2015

1.  Around 17,000 employees of the Reserve Bank of India (RBI) will be on “mass casual leave” on November 19 to demand improvement in pensions and to protest against the Union Government’s move to dilute the central bank’s autonomy. The strike in the form of mass leave is the first in over six years and threatens to disrupt settlement activities and the bond and foreign-exchange markets. A walkout staged by RBI employees in 2009 hampered bond trading and agency reports suggest that investors have been informed to be prepared about a similar possible disruption. However, according to a source, the RBI is trying to ensure that the public is not inconvenienced and will try to run the RTGS facility.

2.  In a rare intervention, the finance ministry has asked the insurance regulator to reconsider its order directing SBI Life to pay Rs. 84.31 crore to its group insurance members/ beneficiaries.In June 2008, the Insurance Regulatory and Development Authority (IRDA), during an onsite inspection at SBI Life, found that the company had paid Rs. 204.71 crore to 14 ‘Master Policyholders’ in contravention of its regulations. The master policyholders, in this case, were the banks that sold SBI Life’s home loan product. In 2011, the regulator had levied a fine of Rs. 70 lakh on SBI Life, reserving its rights to take further action in the matter. SBI Life paid the penalty. Later, in 2012, the regulator ordered the life insurer to distribute Rs. 84.31 crore to members/beneficiaries of the respective group insurance policies. Following this order, SBI Life appealed to the regulator, which rejected the petition. SBI Life then filed an appeal with the Finance Ministry, which heard both parties in February this year.

3.  Private sector insurer Shriram Life Insurance aims to increase its branch network across India by opening about 30 branches by the end of this fiscal year.The network expansion is likely to boost new business revenues by 30 per cent from about Rs. 500 crore last fiscal year to around Rs. 650 crore this year.The company had sold over 1.9 lakh policies last year, which it expects to cross 2.5 lakh by the current fiscal year.“We cater to the bottom of the pyramid. And that’s where we expect the maximum growth to come. We provide insurance to truck customers and gold loan customers. Our average premium is one of the lowest at Rs. 12,000 per annum,” said Manoj Kumar Jain, CEO & whole time director, Shriram Life Insurance Company Ltd.In Gujarat, the company has tied up with SEWA Bank n Gujarat to offer Pradhan Mantri Jeevan Jyoti Yojana to cater to the rural population and provide cheap life insurance.“In a tie-up with SEWA Bank, we have sold more than 5,000 policies across Gujarat. The average premium for these customers is just Rs. 360,” he said.Jain added that the company will open four more branches in Gujarat during this fiscal year to increase its presence from the existing 28 branches in the state.

Tides of 7.11.2015

1.     Expressing concern at the growing volume of non-performing assets, Rajan hoped that banks would take “responsible and prudent decisions” while funding major projects. He said the RBI and banks would have to work together with the government and Parliament to find a solution to the banks’ burgeoning non-performing assets. In his submission before the PAC, Rajan said banks would have to finance major infrastructure projects and loans to such projects cannot be compared with personal loans. He hoped that banks would be careful while processing big loans. The RBI note to the PAC members said the domestic and global economic slowdown, delays in approvals, aggressive lending practices during the upturn, laxity in credit risk appraisal and loan monitoring, lack of appraising skills and wilful default were the key reasons for the non-performance of loans. Rajan told the PAC that the RBI has given guidelines to all banks on formulating a loan and loan recovery policy with the approval of the board of directors. Members also took up individual cases with him.

2.    The much-awaited September quarter results of the top three public sector banks — State Bank of India, Punjab National Bank and Bank of Baroda — packed a fair punch, with all the three stocks rising 2 to 4 % on Friday. Among the biggies, SBI scored better on the asset quality front, with its gross non-performing assets (GNPAs) as a percentage of loans falling marginally over the previous quarter on account of lower slippages. BoB, on the other hand, saw a sharp rise in slippages; PNB’s performance was a mixed bag. While PNB’s GNPA fell marginally to 6.36 per cent in the September quarter, from 6.47 per cent in the previous quarter, it is still higher than its peers. Moreover, PNB’s restructured loans, which can slip into the NPA category are also a cause for concern. Restructured loans as of September 2015 stood at about 10 per cent of loans. For BoB, there was no substantial reduction in bad loans, either on account of recovery, upgradation or write-offs that could offset the sharp rise in slippages.The bank’s slippages has been the highest in many quarters at Rs. 6,816 crs, up from Rs. 1,685 crs in the previous quarter.

3.    Punjab National Bank (PNB) is “shifting gears” to change itself into a retail bank in a big way, Usha Ananthasubramanian, MD & CEO, said on Friday.As part of its risk-diversification strategy, the public sector lender will focus on expanding the share of “small value loans” in its balance sheet, she said at a press conference while announcing the bank’s second quarter results. The general perception is that PNB’s lending is heavily focused on large corporates and medium enterprises. Special focus will now be laid on retail loans. There is ample room for PNB to expand its retail loan book and this would be the way forward, she said. This was Ananthasubramanian’s first press conference after assuming charge as CEO of PNB in August this year.

4.    Reeling under two frauds, one relating to bill discounting and the other to outward forex remittance, Bank of Baroda plans to centralise many of its processes and also set up a transaction monitoring unit to ensure that such incidents do not recur.

Tides of 3.11.2015

1.      Rating agency Moody’s has changed its outlook for India’s banking system to stable from negative due to an improvement in the operating environment for banks. The outlook was negative for the past four years. The problem of bad loans has impacted the ratings outlook in the past. Srikanth Vadlamani, Vice-President and Senior Credit Officer at Moody’s, said that 11 of the 15 rated banks had added about Rs. 1.2 lakh crore of bad loans during each of the past four years. But now, the improved operating environment will result in slower pace of additions to problem loans, leading to a more stable impaired loan ratio.

2.      Financial services major Edelweiss has not given up on its plans to enter the banking sector. It may in the next three to four years renew efforts for the banking foray, Rashesh Shah, Chairman and CEO, Edelweiss Group, said.Shah expects Edelweiss’ asset base to cross Rs. 50,000 crore in the next three-four years. He felt that achieving this milestone cou ld be the right stage to set up a universal bank.“There is no hurry. Our current asset base is Rs. 30,000 crore. Up to Rs. 50,000 crore, we don’t have to be a bank. If we want to go above Rs. 50,000 crore, then we may have to become a bank. After three-four years, we will do it (achieve Rs. 50,000 crore asset base and set up a bank),” Shah told BusinessLine .Edelweiss had not made the cut when the Reserve Bank of India had invited applications for of universal bank licences.

3.      Indian Bank’s net profit for the second quarter of this fiscal has jumped 17 per cent over the comparable quarter last year.It reported a net profit of Rs. 369.31 crore ( Rs. 314.33 crore in the year-go quarter) on a total income of Rs. 4578.65 crore ( Rs. 4340.32 crore) for the quarter ended September 30, 2015.The bank benefited from treasury operations, which contributed Rs. 194.18 crore ( Rs. 80.72 crore) to the profits. Corporate banking brought in Rs. 282.23 crore ( Rs. 361.62 crore), retail banking Rs. 239.61 crore ( Rs. 303.34 crore), and other banking operations Rs. 19.47 crore ( Rs. 19.23 crore).On the assets front, the slippages were marginal with gross non-performing assets (NPAs) standing 4.61 per cent ( Rs. 5,772.77 crore) of gross advances as of September 2015, against 4.21 per cent ( Rs. 5,003.41 crore) in the year-ago period.Likewise, net NPAs were 2.60 per cent ( Rs. 3,187.53 crore) of net advances during the quarter under review, up from 2.55 per cent ( Rs. 2,975.85 crore) in the same quarter of the previous fiscal.In the first quarter of the current fiscal, gross NPAs stood at 4.65 per cent ( Rs. 5,815.14 crore) and net NPAs 2.62 per cent ( Rs. 3,193.29 crore).Mahesh Kumar Jain, Managing Director and CEO (Additional Charge), Indian Bank, told media persons that the bank has managed to contain slippages in sequential quarters with enhanced recovery and containing big-ticket exposure.