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.