NEW DELHI: The government may make a dramatic shift in the principle underlying capital infusion in state-run banks, making such exercises contingent on performance rather than desperate need, as it looks to encourage managers to start running banks as businesses and also build the case for consolidation in the sector. If put into practice, the change could be initiated from the next fiscal year.
This will serve a two-fold purpose — the better-performing banks will have more capital and thus be well-positioned to meet credit demand and aid economic recovery in the country while laggards will be forced to improve if they want more support, two officials involved in the process told ET. They indicated that the Budget could set aside about Rs 10,000 crore for this purpose.
"The Centre cannot continue to blindly infuse capital as it has its own constraints," said one of the government officials.
The government official, however, clarified that ailing banks won't be left in the lurch. "This is not to say we will not support banks to meet the regulatory requirements, but they will also need to consolidate their balance sheet." Most state-run banks that have declared December quarter results thus far have shown a deterioration in performance with gross non-performing assets (NPAs) rising to nearly 6% of advances. Such losses will eat up capital, burdening the government with the need to provide more support.
"We will assess banks on the parameters of both efficiency and business growth, which include return on assets (RoA), net interest margin (NIM), reduction in NPAs and credit growth," said another government official, adding that banks will be ranked on these parameters before a decision on capital support. India Ratings, a Fitch Group company, has pointed to the disproportionate capital needs of middling, state-run banks.
"Mid-sized PSBs (public sector banks), which add up to 19% of th ..
Weak governance, frail finances fail to dent Indian banks' global brand appeal
Domestic lenders improved their brand value by 61% in the past one year, according to Brand Finance.rankings---Business Standard
Mounting bad loans, reduced revenues and low capital adequacy have failed to spoil the global appeal of Indian banks. Local lenders have improved their brand value by 61% in the past one year despite their weak finances, according to a study by brand valuation consultancy Brand Finance.
India now ranks No 13 worldwide, four notches higher than the 17th rank a year ago, as domestic banks grew their brand value at the second fastest pace globally.
The study, Brand Finance Banking 500, showed that Indian banking brands' total value outranked that of Russia, Italy, Sweden and South Korea.
Not surprisingly, the findings have caught experts off-balance.
"I don't know the methodology used to calculate the brand value. In my understanding, for a bank to improve its brand position there should be a visible improvement in the customer service quality. I don't think that has changed drastically between last year and this year to justify a significant change in brand value," Shinjini Kumar, leader – banking and capital markets – at PwC in India, told Business Standard.
| GLOBAL RANK | ||
| BANK NAME | 2014 | 2105 |
State Bank of India
| 54 | 40 |
| ICICI Bank | 107 | 80 |
| HDFC Bank | 133 | 104 |
| Axis Bank | 178 | 131 |
| Bank of Baroda | 208 | 187 |
| Punjab National Bank | 227 | 197 |
| Bank of India | 275 | 199 |
Kotak Mahindra Bank
| 245 | 201 |
| IDBI Bank | 351 | 255 |
| Canara Bank | 301 | 262 |
Another banking analyst, who spoke on condition of anonymity, pointed out that governance was still a challenge for many public sector banks.
“It is one of the reasons why some of these banks are finding it difficult to raise capital from the market. Also, non-performing assets continue to haunt Indian banks. The recent earnings performance does not reflect that these problems are behind us," this analyst said.
“It is one of the reasons why some of these banks are finding it difficult to raise capital from the market. Also, non-performing assets continue to haunt Indian banks. The recent earnings performance does not reflect that these problems are behind us," this analyst said.
Criminal wrongdoing has also cast a shadow over the Indian banking industry, particularly public sector banks.
In August last year, the Central Bureau of Investigation (CBI) arrested Syndicate Bank's chairman and managing director Sudhir Kumar Jain for allegedly accepting a bribe from a private company to grant it credit extension despite repayment defaults on existing loans. The top post in the bank has been vacant since then.
But that seems to have made little difference to its brand value on the Brand Finance Banking 500 list– it has increased to $211 million in 2015 from $174 million a year ago. The state-run lender's global rank has also improved to 420 from 451 during this period.
The brand value ranking also seem to have given a wide berth to the weak financial performances of Bank of Baroda (BoB) and Punjab National Bank (PNB) in recent quarters. BoB reported a 68% drop in its third quarter net profit, while PNB's profit after tax growth in October-December period came in at a mere 2.5%. Notwithstanding, both banks have seen an increase in their brand value leading to an improvement in their global rankings.
Bank of Baroda now ranks 187th (compared to 208th in 2014), while PNB is at 197th position (compared to 227th a year ago).
| BRAND VALUE ($ MILLION) | ||
| BANK NAME | 2014 | 2105 |
| State Bank of India | 4,063 | 6,563 |
| ICICI Bank | 1,698 | 2,527 |
| HDFC Bank | 1,223 | 1,925 |
| Axis Bank | 766 | 1,331 |
| Bank of Baroda | 606 | 789 |
| Punjab National Bank | 511 | 748 |
| Bank of India | 397 | 724 |
| Kotak Mahindra Bank | 481 | 697 |
| IDBI Bank | 270 | 483 |
| Canara Bank | 339 | 456 |
Brand Finance, which calculates the brand value by determining the royalties a corporation would have to pay to license its brand if it did not own it (also known as the 'royalty relief' method), offered an explanation. The agency felt that economic reforms, increased infrastructure investment and a greater focus on tackling bureaucracy have boosted economic forecasts and investor confidence, laying the groundwork for India's brand to grow.
Technology has also played a part. "Technological advances are opening up exciting new opportunities for India's banks as swathes of the population begin to bank more formally. Their brand managers may need to forge new brand strategies to reach these customers most effectively while maintaining the trust and loyalty of existing ones," David Haigh, chief executive officer (CEO) of Brand Finance, said in a statement.
The country's largest lender State Bank of India (SBI) had 62 per cent increase in its brand value in 2015 compared to 2014. It added $2.5 billion to reach a total of $6.56 billion in brand value and remains India's most valued banking brand.
Brand Finance credits the bank's pioneering approach to mobile banking for the improved performance. It is estimated that 12.5 million customers used SBI’s mobile banking platform in 2014 compared to 8.57 million in 2013. Average transaction amounts also increased to over Rs 7,000 last year indicating that mobile is fast becoming a significant force in retail banking business.
A few industry experts share Brand Finance’s view but also credit the Reserve Bank of India (RBI) and its Governor Raghuram Rajan for the better-than-expected brand value of local banks.
“Indian banks' adoption and application of technology is unique. I think Indian banks' brand recognition globally has also improved because of the contributions made by the governor and RBI. The efforts made to stem inflation and reduce foreign exchange volatility have been appreciated and probably helped Indian banks to improve their brand value globally," Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services, said.
Enforcement Directorate probes deals worth Rs 800 crore, says UCO Bank-DNE
The Enforcement Directorate (ED) has taken details of accounts and transactions worth about Rs 800 crore from state-owned UCO bank over possible misuse of FEMA (Foreign Exchange Management Act) rules by exporters to Iran.
"In some cases of advance payments made to (Indian) exporters, exports have to be made within a year under FEMA guidelines. Probably, the parties didn't do that. That's why ED inquired about those accounts. They asked us to give details of those accounts and we have provided them. It involve transactions amounting to Rs 700-800 crore," UCO Bank chairman and managing director Arun Kaul said.
It was earlier reported by dna that ED is investigating multi-layered multi-crore hawala scam currently pegged at Rs 2,000 crore, and is investing a big bullion trader based in Mumbai. ED is suspecting the scam to be a much bigger at Rs 20,000 crore, as per dna's report on January 23.
Advance payments happen when Indian exporters don't trust the Iranian importer and demand advance payment and only after that exports are made, Kaul said on the sidelines of a press conference to announce third quarter financial results of the company.
The parties received funds in their UCO Bank accounts in Chandigarh and Mumbai, and 90% of the advance payment documents were fictitious, dna had reported quoting ED sources.
Kaul reiterated that that all payments handled by the bank related to Iran were through banking channel and in Indian rupees.
UCO Bank on Thursday came out with a disappointing set of number consisting of marginal drop in bottomline and sharp rise in non-performing assets.
Net profit dipped 3.48% to Rs 304 crore for December quarter even as total income rose 10.74% to Rs 5,447.39 crore on the back of shot up of other income 246% at Rs 659.80 crore.
Net non-performing assets zoomed 43% to Rs 6,051 crore due to delinquencies in steel, power and food processing industries, Kaul said.
"In some cases of advance payments made to (Indian) exporters, exports have to be made within a year under FEMA guidelines. Probably, the parties didn't do that. That's why ED inquired about those accounts. They asked us to give details of those accounts and we have provided them. It involve transactions amounting to Rs 700-800 crore," UCO Bank chairman and managing director Arun Kaul said.
It was earlier reported by dna that ED is investigating multi-layered multi-crore hawala scam currently pegged at Rs 2,000 crore, and is investing a big bullion trader based in Mumbai. ED is suspecting the scam to be a much bigger at Rs 20,000 crore, as per dna's report on January 23.
Advance payments happen when Indian exporters don't trust the Iranian importer and demand advance payment and only after that exports are made, Kaul said on the sidelines of a press conference to announce third quarter financial results of the company.
The parties received funds in their UCO Bank accounts in Chandigarh and Mumbai, and 90% of the advance payment documents were fictitious, dna had reported quoting ED sources.
Kaul reiterated that that all payments handled by the bank related to Iran were through banking channel and in Indian rupees.
UCO Bank on Thursday came out with a disappointing set of number consisting of marginal drop in bottomline and sharp rise in non-performing assets.
Net profit dipped 3.48% to Rs 304 crore for December quarter even as total income rose 10.74% to Rs 5,447.39 crore on the back of shot up of other income 246% at Rs 659.80 crore.
Net non-performing assets zoomed 43% to Rs 6,051 crore due to delinquencies in steel, power and food processing industries, Kaul said.
CBI raids Mittal aide’s house in bank fraud case of over Rs 52 cr-IndianExpress
Sleuths from the CBI on Thursday raided the residence of Gurinder Kumar Garg, a city-based chartered accountant and associate of controversial advocate Mukesh Mittal, who is under the ED scanner for alleged money laundering, in a case of bank fraud, involving more than Rs 52 crore.
The CBI team, which came from Delhi, also searched the residence of Nishan Lal, a suspended manager of the State Bank of Bikaner and Jaipur branch in Sector 11 of Panchkula, who is Garg’s co-accused in the case.
Garg, Nishan Lal and four unknown persons have been booked on the charges of criminal conspiracy, breach of trust, cheating, forgery of valuable security and under the Prevention of Corruption Act.
CBI sees links between Matang Sinh and officials-Financial Express
Although the CBI has not yet been able to get the police custody of former Union Minister Matang Sinh in the Saradha chit fund scam case, it has reasons to believe that his interrogation could lead to further discoveries regarding his associations with other senior bureaucrats.
The CBI is tight-lipped over the circumstances and evidence on the basis of which it decided to go ahead with the arrest of the former Minister. However, it is learnt that he allegedly made frantic calls to his contacts when he realised that he was going to be arrested on January 31. A young woman, who had accompanied him to the CBI office in Kolkata, was also spotted making calls purportedly in an attempt to stall his arrest.
It is alleged that at Mr. Sinh’s instance, the then Home Secretary Anil Goswami contacted an agency official in a bid to influence the investigating team’s decision. After several hours of questioning, he was finally arrested. “The agency was left with no choice but to arrest him in the Saradha case,” said an official. This is the first time Mr. Sinh has been arrested by the CBI in any case. He was earlier charge-sheeted in another case of cheating a nationalised bank of Rs. 67 crore in 2013, but was not arrested.
“Based on a complaint lodged by the Canara Bank, the agency’s bank security and forgery unit had registered the earlier case in 2011. Investigations revealed that Ms. Sinh had applied for a loan of Rs.70 crore for a company, M3 Media Private Limited. He allegedly floated several fake companies and got generated false invoices showing purchase of infrastructure and technology,” said a senior CBI official.
Based on the documents, the bank released Rs.67 crore in loan for the company. However, the firm allegedly defaulted on loan repayment causing huge losses to the bank. “The bank declared the account non-performing assets and sent a complaint to the CBI. In 2013, we filed a charge sheet against Mr. Sinh and two chartered accountants who were allegedly involved in the conspiracy to cheat the bank,” said the official.
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