Major Salary Hike Not For Bank Staff

Bank staffers shouldn’t expect major salary hike’-Times of India

Pune: Union minister of state for environment and forest Prakash Javadekar hinted that bank employees should not expect a significant salary hike.


Javadekar said the public sector banks are facing a challenge of non-performing assets (NPA) and their finances are strained.

Speaking at the inaugural function of the treinnial general body conference of the All India Central Bank Officers' Federation (AIBOC) on Saturday, Javadekar exhorted banks to encourage entrepreneurs by providing them with "appropriate capital". He said banks should not shy away from giving loans to small entrepreneurs and the poor as these customers never create NPAs. Javadekar said opening of 11.50 crore accounts under the Jan Dhan Yojana was a major step towards financial inclusion of the unbanked.
Link Times of India

Nationalised banks' non-performing assets shoot up to R2,16,739 crore-DNA-01.02.2015
According to the Reserve Bank of India (RBI), its non-performing assets of nationalized banks has swelled from Rs9,190 crore in 2011-12 to Rs2,16,739 crore in 2013-14.
The statistics were provided by the RBI to former journalist Ketan Tirodkar under the Right to Information Act (RTI). Tirodkar has filed a public interest litigation in the Bombay high court seeking that the Central Bureau of Investigation (CBI) be directed to conduct a probe in the NPA scams.

The HC, in March 2014, had directed the CBI to inform what action it has taken against 140 cases of alleged fraud registered by the RBI with regards to NPA of nationalized banks. Despite HC directions, neither the CBI nor the RBI have filed their replies to the PIL. During the hearing on Thursday, no counsel was present for either RBI or CBI.
A division bench of chief justices Mohit Shah and B P Colabawalla has kept the matter for further hearing on February 12.

Tirodkar has alleged in the petition that RBI and the nationalized banks do not comply with the Banking Regulation Act, 1969, which mandates periodical tendering of audit reports to the RBI. The same is not complied in order to suppress the NPA scenario and shield the culprit beneficiaries working in collusion with the banking authorities, alleges the petition.

According to information obtained by Tirodkar under the RTI, the NPAs of nationalized banks were Rs455 crore ending March 2008. The same shot up to Rs9,190 crore in ending March 2012.

The petition states that over 140 bank fraud cases of around Rs15 crore each were reported to CBI by various banks between 2008 and 2012.

His petition adds: "Recently the United Bank of India's chairperson and managing director, Archana Bhargava, resigned citing personal reasons. At that time, the gross NPA of the bank was Rs8,545 crore, which was 10.82 per cent of its gross advances, and net NPA was Rs5,630 crore or 7.44 per cent of the net advances."

Also the Sarada Chit Fund of the State Bank of India created NPAs of hundreds of crores with the bank which has not been reported to the RBI. This was mandatory under various sections of the Banking Regulations Act, 1969.

The Central Vigilance Committee Rules state that the CBI has to be informed of any fraud case more than Rs50 crore. In a case where the amount exceeds Rs100 crore, an FIR has to be filed directly.

Capital crisis-Business Today

The 150-year-old Allahabad Bank has weathered the Swadeshi movement, survived the global monetary crisis of 1913, witnessed two World Wars, seen the nationalisation of banks and fought intense competition from the private sector. But it probably never had to face a situation it is confronted with now.

The Kolkata-based public sector bank stares at an uncertain future with mounting non-performing assets (NPAs), worsening asset quality and a falling capital adequacy ratio (CAR) of just 9.99 (the worst among state-owned banks). It needs to raise an estimated Rs 11,000 crore within four years to meet the new CAR norms for banks that have kicked in from April 2013 in a phased manner and are expected to be fully implemented by March 31, 2019. If it fails to do so, it could be asked by the Reserve Bank of India (RBI) to stop handing out any fresh loans. Not a prospect that any bank would relish.

Twenty-five other PSU banks face a similar situation. These banks - including household names such as the State Bank of India (SBI), Punjab National Bank, Bank of India and Canara Bank - need to raise an estimated Rs 4.60 lakh crore capital within the next four years.

CAR is a bank's buffer against current and future losses. Just five years ago, Allahabad Banks CAR stood at 13.62 per cent. Worsening CAR has a debilitating effect on a bank's capacity to meet liabilities and manage credit and operational risks.

PSU banks account for two-thirds of India's banking system. The capital shortage looming before them threatens the nation's ambition of achieving over 10 per cent GDP growth and having a bustling manufacturing sector through the Narendra Modi governments Make-in-India initiative. It also practically bids adieu to the dream of emerging as a global investment destination, simply because banks that cannot raise enough capital to meet the new CAR norms risk being told by the RBI to stop giving out fresh loans.

"It's like driving a car on a near empty tank," jokes a private banker. Rakesh Sethi, CMD of Allahabad Bank isn't amused by talks of a capital shortage for the bank. "Our capital adequacy at 9.99 per cent is well above the regulatory requirements," says Sethi. Allahabad Bank may meet banking regulator RBI's current floor of 9 per cent, its capital adequacy is nowhere near what is required in the immediate future. Basel III, the third in a series of accords arrived at between the world's economies in 2010 following the global financial crisis in 2008, requires banks around the world to maintain a minimum CAR of 11.50 per cent by March 31, 2019.

Allahabad Bank can't be blamed entirely for its poor CAR. Besides rising NPAs, one main reason for the falling CAR is inadequate capital infusion by the bank's 59 per cent owner - the President of India, who owns the equity on behalf of the government. Successive finance ministers have been stingy about providing capital to state-owned banks. As a result, over the past five years the CAR of almost all the PSU banks have shown a downward trend.

Even though Basel III is a voluntary standard, it urges a country's regulator to bar a bank from carrying on its core business of lending if it doesn't meet the CAR norms by the deadline. It is another matter that the deadline for complying with the norms has been extended twice from March 31, 2015 to March 31, 2018 initially and now further to March 31, 2019. Nothing stops countries from around the world to ask for another extension. But to avoid the ignominy of having a CAR below the new norms in case no further extension is granted, all the PSUs need to start acting immediately. A September 2014 Fitch report says India's banking system needs to raise $200 billion to continue growing at the current rate and still meet the Basel III norms. "The core capital position of the Indian banking system is weaker than that of many Asian banking systems that are also migrating towards the Basel III capital norms," says the report.

You may read full article in following link
http://businesstoday.intoday.in/story/public-sector-banks-capial-crisis-npa-capital-adequacy-ratio/1/214977.html

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