In a move to reduce risks in the banking sector and curb the rising bad loans, the Reserve Bank of India (RBI) has proposed to reduce the exposure of a bank to a business group to 25 per cent of its capital, down from the existing level of 55 per cent.
The RBI proposal has come at time when many of the top business groups, especially in the infrastructure segment, are already over-leveraged and reeling under heavy debt burden.
In a draft paper, the RBI said, “the sum of all the exposure values of a bank to a single counterpart or to a group of connected counter-parties must not be higher than 25 per cent of the bank’s available eligible capital base at all times.”
The proposed ‘Large Exposure’ (LE) framework will be fully applicable from January 1, 2019, the paper said, while seeking stakeholders’ views on it till April 30.
Clearing operations on March 30, 31-HBL
March 27:
To provide greater convenience to tax payers, the Reserve Bank of India on Friday said all designated branches of agency banks as well as its own offices conducting government business will keep their counters open for full day on March 30 and till 8.00 pm on March 31. In order to facilitate government receipts and payments, necessary arrangements have been made to conduct special clearing operations across the country, the RBI said in a statement. Centralised payment systems such as the Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) will also be operational on both the days with extended business hours.
FinMin asks banks to deposit March TDS by month end
Worried over the shortfall in the overall direct tax collection kitty, the government has asked banks, both public and private, to not delay remitting of TDS funds of the current month into state coffers and do the same within the current financial year ending in March.
The Income Tax department and its apex policy making body, the Central Board of Direct Taxes (CBDT), are wary that the growth registered this time under the Tax Deducted at Source (TDS) category is less than half as compared to the corresponding period last fiscal.
According to official data updated till March first week, TDS collections stood at 7.49 per cent as against 16.69 per cent in the same period last year.
RBI to soon issue norms for Central Fraud Registry -HBL
The Reserve Bank of India has almost finalised the structure of Central Fraud Registry and will soon come up with guidelines to enable quick sharing of information about unscrupulous borrowers and help banks fight bad loans.
“We have almost finalised the structure. We would be issuing guidelines soon,” RBI Deputy Governor S S Mundra told PTI.
The proposed institution, which will enable quick sharing of information on entities found to be defrauding banks, would work under the supervision of RBI, he said.
Banks are advertising the list of wilful defaulters on their website and newspapers individually. With setting up of this registry, list of all unscrupulous borrowers will be available on a single platform.
Thus, banks can take advantage of the registry at the time of sanctioning loan by checking the credentials of a borrower from the registry.
“It is important for the system to weed out the unethical elements at the earliest opportunity to ensure the credibility and the efficiency of the credit system in the country,” he said.
Poor investment flows to hurt United Bank's credit growth-Business Standard
Despite RBI lifting all lending restrictions imposed on United Bank of India (UBI) due to high NPA levels, the bank's credit growth will not rise significantly owing to poor investments on the ground, its Executive Director Sanjay Arya has said.
"There has been an improvement in sentiments as several measures have been taken by the Centre and various state governments. But that has not percolated to the ground as little investments are taking place," Arya told PTI. Recently, the banking regulator had lifted all lending restrictions which were imposed in December 2013 as the bank had posted a loss in that quarter owing to high NPA levels. On December 31, 2013, UBI's gross NPA was Rs 8,546 crore, which gradually came down to Rs 7,890 crore at the end of December 2014.
Arya said though restrictions had been lifted, RBI had said the bank would not be able to increase its credit-deposit (CD) ratio beyond 70 and capital adequacy ratio should not fall below 9.5 per cent. In the given current economic scenario, UBI would not be aggressive in lending activity to raise credit. "Our approach to corporates will be very cautious as we do not want to create further slippages. We will be very selective," he said. The focus would be primarily on the retail and the MSME sectors, besides improving recovery, he said.
The bank would also raise additional tier I capital to support its renewed lending activity, he added.
Union Bank of India defers Rs1,386 cr QIP issue to next fiscal
The bank had taken shareholders’ nod for extension of approval for raising capital in June 2014
State-owned Union Bank of India has deferred its plan to raise Rs.1,386 crore funds through a qualified institutional placement (QIP) to the next fiscal.
“We have got everything in place. We will hit the market at the right time. We have taken approval for Rs.1,386 crore (fund raising) through QIP,” Union Bank of India chairman and managing director Arun Tiwari said. Last year in June, the bank had taken shareholders’ nod for extension of approval for raising capital. The bank had planned to raise funds during the current fiscal, but given the market condition it has been deferred.
“Where is the demand, why unnecessarily raise capital and sit over it as there is no demand for credit at this point of time?” he said. Besides, Union Bank of India plans to raise Rs.2,000 crore capital through issuance of Additional Tier 1 Bonds. It would be Basel III compliant Tier 1 perpetual bonds. Asked about expectations from RBI monetary policy on 7 April, he said that looking at the current situation it is highly unlikely that RBI would ease rate further. “They have already done twice in quick succession,” he said.
Earlier this month, RBI surprised markets by reducing the benchmark interest rate by 0.25% to 7.5% on the back of softening inflation and the government’s commitment to continue the fiscal consolidation programme. This was the second time in two months that RBI cut interest rates outside the regular policy review. Last time on 15 January, it had cut the repo rate by 0.25% to 7.75%.
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