The finance ministry will meet chief executives of public sector banks on November 20 to take stock of the progress made under the Prime Minister's Jan Dhan Yojana (PMJDY).
There will also be a review of the performance of the lenders.
Hasmukh Adhia, the newly appointed secretary of financial services, who took charge on November 8, will chair the meeting. Adhia, a Gujarat-cadre IAS officer of the 1981 batch, succeeded Gurdial Singh Sandhu, who has been appointed as the chairman of the National Authority for Chemical Weapons Convention.
The Prime Minister and the finance minister were scheduled to meet the bankers on 5 November to discuss the same issues but that interaction was cancelled at the last minute.
According to latest government data, close to 72.5 million accounts have been opened under the PMJDY till November 10 with on average half-a-million accounts every day. However, 54.8 million or over 75 per cent accounts have no balance in them.
The remaining 25 per cent garnered Rs ,600 crore since the scheme was launched in August 28.
While the target was to open 75 million accounts by January 26, it now seems that the target will be achieved well in advance. There is speculation that the account opening target will be revised upward.
Public sector banks are also experiencing rise in bad loans for more than two years now amid a slowing economy where interest rates stayed elevated. Rising in loan loss provisioning has depleted their capital at a time when the Basel-III norms has mandated higher Tier-I capital. The BJP government is yet to allocate fresh capital in the banks in the current financial year.
The previous UPA government had allocated Rs 11,200 crore in the interim budget for 2014-15.
The meeting assumes importance on the back drop of the new BJP government's attempt to revive the economy which saw two successive years of sub-5 per cent growth.
Loan growth in the banking system has been sluggish with no new projects commissioned by the industry. According to latest data available, year-on-year credit growth was 11.2 per cent till October 31 as compared to 16.2 per cent during the same period of the previous year.
Loan growth remained muted amid high interest rates as the central bank yet to cut its key policy rate or the repo rate. Reserve Bank of India (RBI) has maintained status quo on interest rate in the last four policy reviews. The next policy review will be on 2 December.
Gold may be the new Swiss bank: $1 mn of black money = 25 kg of gold-First Post-By Sri R Jaganathan
The government is said to be mulling curbs on imports of gold after witnessing two consecutive months of surge in September and October. According to a report in The Economic Times, gold imports may have soared nearly six-fold in October to 148 tonnes (over last year's artificially low levels), coming on top of 39 percent growth in September.
Since high gold imports have an impact on the current account deficit (CAD) and the rupee's value against the dollar, alarm bells are ringing both in North Block and Mint Street.
Noise from these bells may be ear-splitting, but Arun Jaitley and Raghuram Rajan should put on earplugs and work on the root causes of the gold import surge. Panic action will do more harm than good. They are reportedly thinking of further clamps on gold, even though import duties are already prohibitive, having been raised five-fold from 2 percent to 10 percent in August last year. The World Gold Council estimates that 200 tonnes of gold may be smuggled into India this year, nearly a quarter of total annual demand.
The central bank and the finance ministry will also have to reckon with a new threat: the possibility that incremental black money generated in India may be moving towards gold once more. With Swiss bank accounts under siege, keeping a million dollars in gold is both safer and easier. A million dollar is 25 kg of gold. Not a large physical size for storage in a bank locker for anyone.
Here’s a dumbo’s guide to what may be happening in gold.
First, and most obvious, Indians have had a centuries-old appetite for gold that has very low linkages with price. Indians buy gold both for use value (jewellery) and store value - that is, as a long-term hedge against inflation. Over the very long term only gold has retained its value.
Second, it follows that gold is a form of saving in India, not speculation. This is why people buy some gold whatever its price. They buy less when the price is high, and more when its price is low. It's like what mutual fund investors do with systematic investment plans (SIPs). Gold buyers are smart SIP-pers. They buy regularly and build a portfolio. Right now global gold prices are down over a third from their all-time peaks three years ago - which means more gold can be bought for the same investment.
Third, the import spike this year is a natural reaction to excessive curbs last year. If you artificially compress supply by physical and financial means, demand will jump at you like a jack-in-the-box the moment curbs are eased or unmet demand builds up again over time. Both things have happened. In May, curbs (but not duties) on gold imports were reduced, and in September-October this year people bought gold that they could not buy in last year's festival season.
Fourth, black money may be chasing gold now. Ever since the issue of unmasking the holders of Swiss bank accounts became a political obsession in India, the fresh black money being generated in Indian transactions that would normally have gone abroad to Switzerland, the Cayman Islands or Mauritius is staying in India for reasons of safety. This money has gone partly into gold and real estate. All holders of black wealth abroad know that tax-havens are under global attack and sooner or later they could face a crackdown, with people holding money there facing criminal charges. This is one reason why even the names already given to India by the French government have zero-balance accounts. The money has largely flown.
Consider what you would do if you had a million illegal dollars stashed abroad and you know the government is going to get after it, one way or the other. You will try to either move it to a safer place (increasingly difficult), or bring it home where you can guard it personally.
A million dollars of black money would amount to around 24-25 kg of gold bars at current global prices of $1,555-1,560 an ounce. Storing a million dollars is easier in gold and real estate than in a Swiss bank account that can be traced back to you. Gold gives you value preservation and anonymity as the metal always has a market in India. Gold would, however, work for medium-size black money holders generating upto $1 million annually; for much larger amounts, real estate may be a better bet.
As I have said before, gold is the aam aadmi's Swiss bank account - a saving that retains its value over generations and can be passed on to progeny. The additional factor this time may be that even the khas crook may have piled into gold to anonymise his black money.
Can, or should, the government do anything to deal with the gold craze?
Yes, but the remedies are long-term.
#1: For the aam aurat, make savings inflation-proof. I believe an easy instrument like the fixed deposit, which is actually more popular than gold, if it is given a measure of inflation-proofing, will take off vertically and challenge the lust for gold. Over time people will see value in this, but this also calls for a long-term government commitment - both fiscal and monetary - to keep inflation down. Only this will keep the costs of such inflation-proofing down for the government.
#2: A formal black money amnesty scheme is overdue. It will take some of the immediate pressure off gold imports and give the government cheap resources for investment in growth and building infrastructure.
#3: Moderate taxes, minimal restrictions on external and internal gold trade, and transparency in government rules and state funding of elections will reduce the long-term demand for black money. If accompanied by no-nonsense implementation of tough, new laws on tax evasion and money laundering will force a gradual reduction in the attraction of black money.
#4: Gold hoarders (excluding those who hold it for black money storage) are actually behaving more responsibly than the RBI. Gold purchases amount to savings; in contrast, the RBI’s scheme last year to encourage NRI deposits at low cost amounts to encouraging borrowing. If saving is better than borrowing, why should gold buying be considered a criminal activity and not the RBI’s reckless dollar borrowings abroad?
So, Dr Rajan, Mr Jaitley, cool it. Think the issues through before plunging mindlessly into further gold import curbs. You will only help smugglers.
http://firstbiz.firstpost.com/money/gold-may-new-swiss-bank-1-million-black-money-25-kg-gold-108282.html
SBI numbers show promise but worst is not over for public sector banks-First Post-By Sri Dinsh Unnikrishnan
State Bank of India (SBI), the country’s largest lender, on Friday came out with decent numbers in the September quarter. The most critical factor in SBI’s earnings is steady decline in fresh slippages and health recovery.
Gross non-performing assets (NPA) of the lender, during the quarter, have come down to 4.89 percent of its total loan book from 4.9 percent in the preceding quarter.
Thus, SBI’s bad loans have come down by a total of 84 basis points (bps) since the third quarter of last fiscal from 5.73 percent to 4.89 percent. One bps is one hundredth of a percentage point.
Net NPAs, after adjusting provisions, too have declined to 2.73 percent from 2.91 percent compared with the year-ago quarter even though have gone up marginally from the preceding quarter
In the last one year, SBI has attempted to get a firm hold on the bad loan scenario by identifying the problematic areas and intensifying the fight against wilful defaulters, borrowers who do not pay back even if they have the capacity to do so.
The biggest pain on SBI’s book emerged from the mid-sized corporate segment and agriculture, which continued to be significant contributors to bad loans this quarter. But the bank has clearly managed to address the stressed asset situation as reflected in the quarter numbers.
The net profit at Rs 3,100 crore has beaten the estimates of analysts polled by CNBC at Rs 3,096 crore. The improvement in the net interest income to Rs 13,275 crore, up 8.4 percent, from Rs 12,251 crore in the corresponding period last year, has aided the 30 percent jump in the profit on a year-on-year basis.
SBI’s other income, which includes the treasury income, too have grown by 39 percent to Rs 4,571 crore from Rs 3,278 crore in the year-ago period.
Loan growth has been robust for the bank with its advances growing by 9.7% on year, which, in turn, helped the lender to manage strong growth in Interest income.
Total provisions, during the quarter stood at Rs 4,275 crore of which Rs 4,028 crore was set aside for bad loans.
That said, the numbers announced by other state-run banks such as Punjab National Bank and Indian Bank of India, reiterate the belief that the banking sector, dominated by government banks, is yet to come past the worst as far as bad loan situation is concerned.
Gross NPAs of total 40-listed Indian banks have grown by 17.5 per cent in the September quarter to Rs 2,68,933 crore from Rs 2,28,895 crore in the year-ago quarter and up by 7 percent compared with Rs 2,51,962 crore in the June quarter. But the pace of increase in bad loan generation has surely come down.
Of the total bad loans, almost 90 percent comes from state-run banks
Bad loans are only one segment of the total stressed assets in the banking system. The other chunk is the restructured loans, which constitute almost double to the declared gross NPAs in the banking system.
Together, stressed assets constitute 13-14 percent of the total loans given by banks, while bad loan generation remained modest in private banks.
There are at least 10 banks in the Indian banking system, which have Gross NPAs above 5 percent of their total loans. Topping the list are state-run banks such as United Bank of India and Indian Overseas Bank.
As Firstbiz has noted earlier, the seeming economic revival is yet to show on the ground as reflected in the muted credit growth of banks largely due to the absence of new project proposals.
Unless the positive sentiments post the arrival of the Narendra Modi government at the Centre translates into investments and real economic activity on the ground, banking sector will not be freed from the ills of NPAs.
But the long-term solution lies in freeing state-run banks from the control of the government. These banks must be prepared to find sufficient capital to survive on their own instead of the current practice of annual capital infusion through budget allocation.
Going ahead, the government will find it extremely difficult to meet the rising capital requirement of state-run banks unless it is willing to reduce holding in these banks.
Also, shorter tenures of top executives and frequent intervention from politicians in the business decisions of government banks have only helped to add to their incompetence of sarkari banks before deep-pocketed tech-savvy rivals in private sector
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