Future Of Public Sector Banks

What Are Factors That Are Affecting the Health of PS Banks ?
(See news on wage revision given below)

Nexus of Top Management & Big Corporates and Bulk Loans Bleeding Banking in India :

Big corporatess are looting banks in nexus with top bosses, mid-segment borrowers have looted bank's branches in towns and cities and small borrowers have decided not to repay the bank loan in villages and towns. Slow poison of small bad loans or deep poison of bulk loans , both have harmed banks to a great extent . Bank staff are mostly silent spectator of large scale loot and to save their corrupt colleague they allow Chirharn of good bankers.

 Politiicians are buy  in using banks for political gain and they do not want to punish officials of administrative and legal machineries who are wilfully not acting against defaulters of banks.

 

Who will save the banks? Who is botherd of bank staff and their families.

 

Poor Auditing Systems in Banks :

 

Audit and inspection department of each bank is also manned by dirty officers or are suffering from heavy work load due to less number of staff. They just do the formalaities of auditing and inspecting the branches.They are not allowed to give true report of bad lending and fraudulent transactions even if some of honest auditors like to report on it. They have to give good rating to all branches and submit certificate of good health to their bosses even if they detect cases of fraud or bad loaning by bank officials or any irregulalities.

 

RBI nominated Statutory auditors or concurrent auditors or RBI inspectors are also functioning in the same way as others are . They are victim of gifts and bribes. They all want red carpet wrlcome by bank officials. Huge money spent on auditors, internal or external after all comes from banks expenditure accounts or bad borrowers who managed all illegal expenses to reamin in good book of banks bosses.

 

 RBI Fails In Its Duty As Regulator :

 

RBI believes in getting certificates of good health from bank CEOs. Whenever any exposure of top bosses comes to light , they will write a letter to the concerned bank and bank in turn will give a certificate that everything is OK. RBI has neither will to verif the truth nor do they have enough staff to verify the veracity of such certificates. Several scams and numerous frauds similar to Satyam Scam has surfaced but none of top officials , ministers, politicians, borrowers and government officials have been taken to task. Always a few junior officers are subjected to little punishment to close the cases of frauds and scams involving hundreds and thousands of crores of rupees.

 

If RBI honestly investigates the reason of each bad accounts of one crore and above I think majority of current or retired CMD, ED, GM, DGM ,AGM and CMs will go to jail. It will not be an exaggeration to say that only and only corrupt officers have reached top levels and only corrupt officers have moved fast in their career. And it is they who have damaged banks and who will further add fuel to fire because till now no concrete step has ben taken to reverse the trend and no action has been taken against real culprit to send clear message down the line that cases of corruption will not be tolerated.

 

 Similarly Chief Vigilence Officers and CVOs are palying their role . Afte they picked up from gang of courrpt officers sitting at top posts in various banks. CVOs in general are more corrupt and it is they who earn money to close the chapter of corruption for ever. They too do not have enough staff and neither they are dry honest . As such all cases of bad lending or fraud are closed without any drastic action against real culprit



Pathetic Situation of Aam Banker and Political Games Played by Bank Unions :

Bank staff has lost their self respect and doing slavery to earn their livelihood. Situation is more pathetic than it was before nationalisation.     

 

Bank staff are subjected to sufferings only to serve the political interest of a few dirty leaders. Dirty game of few selfish leaders has not only ruined the future of bank staff , but also contributed largely in deteriorating health of bank assets and sharp rise in NPA and erosion in profit.

 

 

 

Leaders are mostly followers of left parties which have lost their place in political domain. CPI or CPM minded leaders of UFBU do no want early wage settlement to tarnish the image of BJP and Modi. Some of bank staff blame Mr. Narendra Modi , PM for delay. But in fact neither IBA nor UFBU have ever approached PM Modi for expeditious settlement.

 

Pending issue of  Wage Revision and Internal Rifts among Banker

 

 

 

A reading of the messages and comments at Face Book clearly indicates that youngsters in Public Sector Banks are mostly crying on Facebook but they do not think it necessary to strictly follow union line of action.

On the other hand Union leaders do not think it necessary to talk to youngsters before taking a final call on any issue.  Leaders act as if they are forced to act. They do not have inner feeling to fight against injustice. 

Young bankers do not make effort and do not have enough courage  to safeguard banks from bad bosses and bad union leaders.    

 

Old leaders are in general speakers of top bosses. Staff in general are afraid of union leaders and not their bosses. There may not be bigger tragedy than this

Wage structure of bankers have suffered erosion in each settlement during last two decades as compared to that of central government employees. . Delay in settlement has become unavoidable .    Is it imaginable for any PSU where wage talks are not finalised even after two years?

 

 Even other PSUs are paying huge sums in Ex-gratia to all staff of all cadres which is as good as bonus. Bankers are deprived of bonus for last two decades. Only a few Subordinate staff are paid bonus.

 

Whether Things Are Llikely to  Improve in Near Future ?

I am unable to dream that government of India will be able to control the vicious circle of bad officials sitting in all offices .All top officials preach good sermons and all speak good words when they are addressing public or bank staff but in practice they do just the opposite  . But when someone talk of corruption of high level, they will pass the matter to some others.

 See the latest example of Supreme Court order cancelling allocation of coal mines . More than 25 percent of banks advances are related to infrastructure sector and power sector and most of them have been in bad health for years together and for even decades . But clever politicians and clever bankers have put entire blame on Supreme Court order of cancellation of coal licenses. In 2008 they blamed Subprime crisis of USA and later they accused RBI for not lowering interest rate . None of regulators like to pinpoint accusing fingers towards the real guilty , it is their culture. Who will bell the cat?

 

 

 

 

 

 

 If the same situation persists, bank staff should leave the idea of improvement of banks and should not hope for respectful service and neither hope for respectful wage hike.

 Politicians who have caused much damage to banks to serve their political interest now talk of paying capacity of banks and suggest denial of wage hike as demanded by bank unions on the ground of less profitability and more NPA. Neither Finance Secretary nor FM is bothered of delay in wage settlement and neither they are worried of bank's health. They do not understand that billions of rupees are to protected by bankers and if these bankers are dissatisfied and frustrated, the quality of health will further deteriorate .

They are allowing reckless branch expansion without taking care of quality and quantity of bank staff . Billions of rupees are lost in frauds and scams and bad debts, but the are least bothered. They are positive minded.

 

AIBOC decides to stop extra cooperation over delay in wage revision-Times of India

15th October 2014
MANGALORE: Piqued at delay on part of Indian Banks Association in meeting demand of salary revision of officers, All India Bank Officers' Confederation (AIBOC) has from Monday decided to stop all extra cooperation.

Under this agitation method, officers will strictly observe office hours, and not attend office on Sunday, holidays and work beyond extended officers, DN Prakash, vice president, AIBOC stated here.

In addition, the officers will hold country wide protest demonstrations jointly with United Forum of Bank Unions (UFBU) constituents on October 17 and a one-day dharna, dates of which will be decided by the state units of UFBU, at all state capitals from October 18 to 31. AIBOC will issue media statements, and advertisements on October 30 to mark the second anniversary of submission of charter of demands with rallies in all state capitals.

Prakash, also president of city-based Corporation Bank Officers' Organisation said these decisions were taken an emergency meeting of the executive committee of AIBOC in Delhi recently. The meeting discussed major issues of wage revision for officers, their working conditions and many other issues including seeking stringent action against bank loan defaulters. The meeting was critical of the stand taken by IBA on wage revision.

The committee also authorised the AIBOC leadership to decide on minimum two-day strike along with other constituents of UFBU in the first week of November and indefinite strike, if above measures do not evoke any positive response from either the IBA or the union government. Prakash said as things stand, wages of bank officers are the lowest compared to those in central governments and other PSUs and this is a hurdle to attract talent.

My Comment:
United Front of Bank Unions has asked its members to work to rule and not sit late or not attend office on Sundays and Holidays.

What does it mean?

Leaders of all prominent unions and that of UFBU are well aware that bank offices are usually sitting late in offices to complete the work and they are forced to work even on Sundays and Holidays.

God knows what these leaders were doing when their members were facing torture and exploitation in the hands of bosses. It proves that hitherto these leaders were working on behalf of top officials of ban management and they are equally responsible for exploitation of bank officers.

These leaders know very well that reckless expansion of banks without increasing manpower and manifold increase in business of all banks have forced bank staff to sit late and work on Sundays and Holidays.

These leaders also know very well how top leaders earn by corrupt means by lending to bad borrowers and how main culprits who caused rise in bad debts are promoted instead of punished.

These leaders know how flatterers are promoted and bribe earners are elevated to top post. Now when bank staff talk of wage hike thy talk of work to rule.

Anyway, even work to rule dictate of UFBU has gone unattended and leaders of UFBU are silent spectator. They are totally indifferent whether the agitation programme is followed by their members in true spirit or not .

There is no doubt in it that the agitation or strike will face great flop and again management will keep their head high. God knows when this drama of UFBU will end.

Bank employees are on work to rule on paper since 10th of October 2014. Will anyone confirm here that the advice of UFBU is really put into action or UFBU is firing paper bullets.
http://importantbankingnews2.blogspot.in/2014/10/one-more-news-on-bank-strike.html

Rush For Payment Bank

Airtel, Vodafone & Idea may rush for payments bank permit-Times of India

KOLKATA: Top mobile operators such as Airtel, Vodafone and Idea Cellular are expected to be among the first ones to set up 'payments banks', opening up a new revenue stream by leveraging their large customer base and wide geographical reach through retail outlets.

The Reserve Bank of India (RBI) had on July 17 issued draft guidelines for those seeking licences to open payments banks and small banks in a bid to ensure banking services covered most households across the country. A payments bank can accept deposits and remittances but cannot lend. While Bharti Airtel and Vodafone India declined to comment on whether they will apply for payments bank licence, Idea Cellular did not respond to ET's queries as of press time.

Analysts and top industry executives said such a permit can give a big boost to telcos' mobile money transactions. The top two telcos in the country, Airtel and Vodafone, are familiar with the business model and have seen a sharp spurt in revenues in African markets such as Kenya, they pointed out.

Analysts, however, said it is not clear if the norms for payments banks in India will be as liberal as in Kenya, where the mobile banking and payments business has been a runaway hit for companies such as Vodafonemanaged Safaricom.

"We suspect Indian payments bank licences will be much more restrictive than those issued Kenya," Credit Suisse said in a note to clients, adding that it expects mobile payments to add 1%-1.2% of telecom industry revenues "although a more liberal interpretation gives a 7-8% revenue upside".

The Swiss brokerage also does not expect EBITDA contribution to be significantly higher due to higher competition levels in India's telecom sector compared to Africa.

Rajan Mathews, director general of Cellular Operators of Association of India (COAI), the lobby body representing GSM mobile operators, said the RBI move would boost mobile banking services and financial inclusion, saying the "biggest deterrent to expansion of mobile payments" so far has their inability to offer cash-out transactions.

"Though RBI's proposals don't allow telcos setting up banks to lend, we believe they will allow cash-out transactions, which I reckon can be a game-changer to boost mobile payments and financial inclu sion in India as in Africa," he said. The cash out facility, Mathews said, would enable a person who has deposited mon ey with a mobile company to withdraw it at any location he wishes. For example, if a migrant labourer deposits Rs 10,000 in Delhi with a mobile operator, his relatives can get the sum at a mobile operator's retail outlet from anywhere.

Credit Suisse, however, said it's not yet clear whether cashouts in the form of 'people-topeople' (P2P) money transfers will be allowed in India. "It is still not clear if telcos will be allowed to use standalone retail partners as agents, and whether cash-out transactions will be permitted as these were critical factors that drove the success of Vodafonemanaged Safaricom in Africa," the brokerage said.

RBI Sets Norms For New Banks

RBI sets stiff terms for niche bank licences-Business Standard

Draft norms set Rs 100 cr as minimum capital, allow corporates to open payment banks

The Reserve Bank of India (RBI) on Thursday paved the way for niche banking by issuing draft guidelines for setting up payment banks and small banks. While payment banks will offer remittance services, small banks will offer low-ticket loans and basic banking services within a limited area of operation.

After initial screening to ensure eligibility, the central bank will set up an external committee to vet applications, which will be invited after the final norms are issued. Successful applicants will have to start operations within a year of the date of approval.

Both these categories of banks could set up subsidiaries to undertake non-banking financial company (NBFC) activities, RBI said. This was seen as a hindrance for existing NBFCs to convert themselves into banks.

The minimum paid-up capital required for both categories would be Rs 100 crore, of which the promoter would have to contribute at least 40 per cent initially, with a five-year lock-in period, RBI said. They would also have to maintain a capital adequacy ratio of 15 per cent, though under Basel-I norms.

If promoter shareholding exceeds 40 per cent, it has to be cut to this level within three years of operations, 30 per cent within 10 years and 26 per cent within 13 years.

Promoter groups, RBI said, would be subject to stringent ‘fit & proper’ criteria such as sound credentials and integrity and successful track records of running business for at least five years. The central bank also said it would adopt a cautious approach in granting new licences, as only a few aspirants would be allowed. The cases would be reviewed after these entities gained experience.

For better corporate governance practices, the draft guidelines mandate independent directors should account for the majority of the boards of these banks.

Norms on voting rights have been kept on a par with those applicable to existing private banks---capped at 10 per cent, which can be raised to 26 per cent in a phased manner, with prior RBI approval. Acquisition of more than five per cent stake in the entity will also require prior RBI approval.

Muthoot Finance, which had applied for a banking licence last year, said the NBFC would be keen to apply for a differentiated bank licence, adding it might apply for both types of licences, if regulations allowed this. “A small bank makes more sense, as it covers a wide range of activities and also because of our strong lending portfolio. A final decision will be taken after the final guidelines come,” said Oommen K Mammen, chief financial officer of the company.

The norms for payment banks are on the lines of the recommendations of the Nachiket Mor committee on financial services for small business and low-income households—prepaid instrument issuers can carry out payment services, but cannot lend. Payment banks, which will have to maintain a particular cash reserve ratio, will deploy funds only in government securities and have access to the uncollateralised call money market. Also, payment banks can accept only demand deposits and savings bank deposits; they cannot offer fixed deposit products.

The highest balance a bank can hold per customer is Rs 1 lakh, against the Mor panel’s recommendation of Rs 50,000. Apart from existing non-bank PPI issuers, NBFCs, corporate business correspondents, mobile telephone companies, supermarket chains, real estate cooperatives and public sector entities will be considered eligible to set up payment banks.

In its report, the Mor committee had mentioned the possibility of the postal department becoming a payment bank. India Post had applied for a universal licence last year, but this wasn’t entertained by RBI.

“Preference will be given to applicants who propose to set up payment banks with access points primarily in under-banked states, districts in Northeast, East and the central region of the country,” RBI said.

It added for credit and other services it couldn’t offer, a payment bank could become a business correspondent of another bank. However, it cannot set up subsidiaries to undertake NBFC activities. To differentiate them from other banks, such entities have to use the word ‘payment’ in their names.

While payment banks won’t have to have a quarter of their branches in un-banked rural areas (as applicable for existing banks), they should have at least 25 per cent of their access points in such areas.

In addition to NBFCs, microfinance institutions and existing local area banks, individual professionals with 10 years of experience in banking and finance will be allowed open small banks. The operations of such entities will be restricted to contiguous districts in a homogenous cluster of states, though these could be allowed to expand to more states, if necessary. Small banks’ branch expansion plans for the initial three years will require RBI approval, though this norm could be relaxed, based on performance.

For the first three years, small banks will need RBI approval for branch expansion. The draft regulations said small banks would primarily undertake basic banking activities of accepting deposits and lending to small farmers, small businesses, micro and small industries and unorganised sector entities. “It can also undertake other simple financial services activities with prior approval of RBI,” the guidelines said.

Small banks will also have to comply with the priority sector lending target of 40 per cent and set up a quarter of their branches in rural un-banked areas; both the norms are applicable to other domestic banks. Also, they have to meet cash reserve ratio and statutory liquidity ratio norms. Besides, all NBFCs, including microfinance institutions, must have net worth of at least Rs 100 crore.

Applicants who had earlier applied for new bank licences but were denied may apply for differentiated banking licences.

http://www.business-standard.com/article/finance/rbi-sets-stiff-terms-for-niche-bank-licences-114071701101_1.html

BRICS development bank to be Modi's priority

The Hindu

Prime Minister Narendra Modi will launch his first multilateral engagement with BRICS leaders, giving top priority for the establishment of the BRICS development bank with equal share holding for all the five members.

India is keen on the issue of equal share holding since it doesn’t want a repeat of the distortions that have crept into Bretton Woods institutions like IMF, World Bank and the Asian Development Bank in which rich countries like the U.S. and Japan have a strangle hold.

Ahead of the BRICS Summit on Tuesday in this north eastern coastal city, Mr. Modi will meet Chinese President Xi Jinping and Russian President Vladimir Putin on the sidelines to discuss the issue relating to the New Development Bank.

He will also discuss the possible outcomes of the summit on other issues like reforms of the UN Security Council and international financial architecture.

Sources said India’s primary goal is equal shareholding for all the members — Brazil, Russia, India, China and South Africa.

The BRICS Development bank, an idea which was conceived in Delhi in 2012 and approved in Durban last year, is to be set up with an initial corpus of USD 50 billion, with scope for expansion upto USD 100 billion when new members are added.

For the initial USD 50 billion, India wants equal contribution by all the five members of USD 10 billion. This is because India doesn’t want the development bank to fall into the ownership pattern of IMF and WB, with a distorted share holding.

The other priorities for India are about the presidency of the bank and the name to be given for it. Apparently, India would like it to be called the New Development Bank, an expression used by Mr. Modi in his departure statement on Sunday.

“I also look forward to our discussions to further advance intra-BRICS economic cooperation and our collective efforts to advance global economic stability and prosperity.

In particular, I look forward to the successful conclusion of major BRICS initiatives like the New Development Bank and the Contingent Reserve Arrangement, which have seen significant progress since their launch in New Delhi in 2012,” Mr. Modi said in the statement.

“These initiatives will support growth and stability in BRICS and also benefit other developing countries,” he said.

India wants the modalities for the establishment of the bank through a simple route and not a complicated one.

It wants to avoid the pitfalls of the Bretton Woods institution of one who pays more calls the tune.

During his meetings with Chinese and Russian presidents, bilateral issues may also come up but no big ticket items are likely to be decided since it would be a get to know meeting.

Both Mr. Xi and Mr. Putin are likely to visit India in September and November-December respectively this year.

While with Mr. Xi it will be Mr. Modi’s first meeting, he has already met Mr. Putin on earlier occasions.

With China, Mr. Modi may discuss the need for maintaining peace and tranquillity along the border so that bilateral problems can be resolved in an amicable manner.

Bilateral trade will also come up for discussion with the Chinese leader and India is keen that the present imbalance in trade should be resolved. Mr. Modi is also keen on Chinese investment in India.

In the meeting with Russian leader, the continuance of good relations between the two countries be maintained.

Russia would like India to continue the good trend in ties that was set up by earlier governments.

Russia is also keen to provide technology and is looking for a new site in India for setting up a civil nuclear plant because Haripur in West Bengal is not working out.

Already the nuclear liability issues over Kudankulam plant 3 and 4 units have been resolved.

The BRICS summit theme, “Inclusive Growth; Sustainable Development”, will enable India to shape the post-2015 Development Agenda being discussed in the United Nations.

The Prime Minister is accompanied by a high-level delegation that includes Minister of State for Finance Nirmala Sitharaman, National Security Adviser A K Doval, Foreign Secretary Sujatha Singh and Finance Secretary Arvind Mayaram.

76000 Complains Received At RBI Against Banks

RBI receives over 76,000 complaints against banks-Times of India
NAGPUR: The service sector is fast growing in the country, especially with the growth of banking, which underwent a major revolution with the advent of ATMs and online services. On the flip side, complaints from customers regarding deficiencies in services being provided by the banks are also rising. An RTI query revealed that Reserve Bank of India (RBI) received a whopping 76,061 complaints last fiscal ending March 31.

The reply to a query by RTI activist Abhay Kolarkar informed that offices of 15 ombudsmen appointed by the apex banks received these complaints within a year. Chief information officer with RBI DG Kale provided a big list of banks that included nationalized, cooperative and private ones, against which the complaints were lodged at ombudsmen offices mostly located in the state capitals.

The Banking Ombudsmen Scheme that covers all these was introduced under Section 35A of the Banking Regulation Act, 1949, by the apex bank and came into effect from 1995. It offers an inexpensive forum to customers for redressing their grievances against deficiencies in banking services, the veteran RTI activist informed.

The list of banks having complaints is expectedly led by the banking behemoth - State Bank of India - with over 21,000 cases against it. It was distantly followed by two leading private banks - ICICI with 5,209 and HDFC with 5,015 complaints. A couple of city-based cooperative banks - Nagpur Nagrik Sahakari with nine complaints and Shikshak Sahakari with two - also featured in the list. Additionally, international banks like Standard Chartered (3,717), Abu Dhabi Commercial (1), Barclays (104), Deutshe (Asia) (67), HSBC (308), Oman International (3), and Bank of Tokyo and Mitsubishi (1) also found their names in the list.

Kolarkar added that citizens could lodge complaints in various cases of deficiencies in services. It included default or delay in cheque and draft collection/issuance, violating RBI's directives, levying of charges without prior notice, refusal to open savings accounts, non-disbursement or delay in pension, closure of accounts without notice, and delays in sanctioning/disbursement of the loans. He said citizens could lodged complaints with the ombudsmen but only after raising the issue in writing with the bank concerned. It could be done by either writing to the ombudsman office or by visiting the RBI website, he added.

Some leading banks against which complaints

 were lodged:

State Bank of India - 21,018

ICICI Bank - 5,209

HDFC Bank - 5,015

Orissa Gramya Bank - 4,109

Standard Chartered Bank - 3,717

Punjab National Bank - 3,560

Axis Bank - 3,028

Bank of Baroda - 2,295

Canara Bank - 1,984

Union Bank of India - 1,957

Bank of India - 1,933

Central Bank of India - 1,631

Indian Overseas bank - 1,361

Link Times of India

RBI tough On Willful Defaulters

RBI asks banks to give monthly data about wilful defaulters
Mumbai, Jun 28 (KNN) The Reserve Bank of India (RBI) has asked the banks to give data about wilful defaulters of Rs 25 lakh and above for the quarter ended December 31, 2014, and of Rs 1 crore and above for the half year ended December 31, 2014, to credit information firms from the beginning of 2015.

“Banks/FIs may continue to furnish the data on wilful defaulters (non-suit filed accounts) of Rs. 25 lakhs and above for the quarter ending June 30, 2014 and September 30, 2014 to RBI. Similarly, in respect of defaulters (non-suit filed accounts) of Rs. 1 crore and above, they may continue to submit the data to RBI for the half year ending September 30, 2014 in the existing format,” RBI has said in a notification.

After this, banks can continue to furnish data with regard to wilful defaulters to credit information firms on a monthly or a more frequently basis, RBI said.

This will allow banks to have data on wilful defaulters on a real-time basis.

This has been based on the report submitted by the committee formed by RBI, headed by HDFC Bank MD Aditya Puri, to recommend the data format for furnishing of credit information to credit information companies.

6 Biggest Loan Defaulters in India

BANGALORE: ‘Kick out the bad loans before they kill the banks.’ This is the tag line of AIBEA‘s compaign against bad loans. All India Bank Employees Association (AIBEA) which is the oldest and largest trade union of bank employees in India. AIBEA released the list of bad loan accounts. The objective was to stop the corporate from looting public money, as the primary concern.  The list revealed that the top 50 loan defaulters owe an astounding amount of 40, 000 crores.

Here is the list of top ten loan defaulters mentioned by AIBEA:

1. Winsome Diamond & Jewellery
The company has legacy of diamond business of more than four decades is in a debt of 2660 crore. Public sector lenders, including Punjab National Bank (PNB) and Central Bank, sent legal notice to Winsome Diamond & Jewellery to recover loans in November 2013. Prior to that in March 2013 Winsome Diamond’s foreign clients failed to pay their due amounts

2. Kingfisher Airlines

Kingfisher Airlines is in the top list of loan defaulters, owing a sum of 2, 673 crore. Already the airlines had suffered through a series of crisis in early 2012 and recently United Bank of India ask over Mallya and three other directors of Kingfisher Airlines to present before a panel of bank at the head office in early July.

On the other hand SBI which lent 6, 500 crore to airlines is finding ways to declare Mallya as ‘wilful defaulter.’ "We are looking at various ways to declare Vijay Mallya a wilful defaulter and trying build a strong case in that regard," an SBI source said.

3. Electrotherm India

Engineering and steel company Electrotherm India Limited holds a heavy amount of market share in the metal melting industry, but it is also inclined to repay of loan of 2211 crore. The company received the notice from high court for winding up. Electrotherm (India) Ltd said” the Gujarat High Court has admitted a petition filed by UCO Bank to wind up EIL.”

4. Zoom Developers

The global financial crisis of 2008 made a huge impact on Zoom Developers. The company accounts for not repaying loan amounting 1810 crore. Nearly 27 Indian banks, mostly public sector have lent around 2700 crore to the company.

Earlier United Bank of India put the indication of acquiring Zoom Developer’s assets to recover the loan amount on behalf of 25 banks.

5. Sterling Bio Tech

Sterling Biotech, a pharmaceutical firm is accounted for repayment of loans worth 1732 crore. The company deals in the manufacture of gelatin for pharmaceutical and edible uses.  Sterling BioTech reported a loss of  103.33 crores in March 2014.

The company has taken loans from SBI, PNB and BOB.

6. S. Kumars Nationwide (SKNL)

 SKNL is one of pioneers in manufacturing textiles and apparels and also involves in business of trading for the same. SKNL got the legal rights to manufacture and market the Reid & Taylor suiting in India in 1998. In spite of building a wealthy empire, SKNL is in the list of loan defaulters, and non payments worth 1692 crores.

 .

Know About DICGC And Savings Deposits

DICGC And Rules and Regulations for Insurance of Bank Deposits-By Rajesh Goyal

Q. What is the full form of DICGC :

Ans : The full form of DICGC is Deposit Insurance and Credit Guarantee Corporation .
 

Q. What is the main purpose or aim of DICGC ?

Ans : Its aim is to bring financial stability to the banking system through deposit insurance, special for the benefit of small depositors.  Thus, DICGC is a deposit insurance provider for small depositors.
 

Q. Which banks are insured by the DICGC?

Ans :  DICGC insurance covers :

(a)  Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

(b)  Cooperative Banks:  At present all co-operative banks other than those from the State of Meghalaya and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli are covered by the DICGC.

However, Primary cooperative societies are NOT  insured by the DICGC.

 

Q.  What type of deposits are insured by DICGC?
 

The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits  EXCEPT  the following types of deposits

        i.            Deposits of foreign Governments; 

     ii.             Deposits of Central/State Governments;

   iii.             Inter-bank deposits;

    iv.            Deposits of the State Land Development Banks with the State co-operative bank;

      v.            Any amount due on account of and deposit received outside India \

    vi.             Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

Q.  What is the maximum deposit amount insured by the DICGC?
 

Each depositor in a bank is insured upto a maximum of 1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

Q. What is the ceiling on amount of Insured deposits kept by one person in different branches of a bank?

The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount upto Rupees one lakh is paid.

 

Q. Does the DICGC insure just the principal on an account or both principal and accrued interest?
 

The DICGC insures  both principal and interest  (but  only upto a maximum amount of  Rs One lakh as explained above.

 

Q. Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?
 

All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.

Q. Are deposits in different banks separately insured?
 

Yes.  If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.

 

 

 

Q Can you explain the meaning of deposits held in the same capacity and same right; and deposits held in different capacity and different right?

If an individual opens more than one deposit account in one or more branches of a bank for example,  Ms Katrina  opens one or more savings/current account,  and also has one or more fixed/recurring deposit accounts etc. in the same bank, all these are considered as accounts held in the same capacity and in the same right. Therefore, the balances in all these accounts are aggregated and insurance cover is available upto rupees one lakh in maximum.

If Ms Katrina also opens other deposit accounts in her capacity as a partner of a firm or guardian of a minor or director of a company or trustee of a trust or a joint account, say with her mother Mrs Kareena, in one or more branches of the bank then such accounts are considered as held in different capacity and different right.  Accordingly, such deposits accounts will also enjoy the insurance cover upto rupees one lakh separately.

It is further clarified that the deposit held in the name of the proprietary concern where a depositor is the sole proprietor and the amount of Deposit held in his individual capacity are aggregated and insurance cover is available upto rupees one lakh in maximum.

Illustrations

	Savings A/C	Current A/C	FD A/C	Total Deposits	Deposits Insured upto
Ms Katrina (Individual)	17,000	33,000	80,000	1,30,000	1,00,000
Ms Katrina  (Partner of  Filmworld & Co.)		75,000	60,000	1,35,000	1,00,000
Ms Katrina   (Guardian for Master Joseph)	8,000		80,000	88,000	88,000
Ms Katrina (Director, CineWorld Ltd.)		2,40,000	45,000	2,85,000	1,00,000
Ms Katrina,  jointly with Ms Kareena	17500	1,50,000	50000	2,17,500	1,00,000

Deposits held in joint accounts (revised w.e.f. April 26, 2007)

If more than one deposit accounts (Savings, Current, Recurring or Fixed deposit) are jointly held by individuals in one or more branch of a bank say three individuals A, B & C hold more than one joint deposit accounts in which their names appear in the same order then all these accounts are considered as held in the same capacity and in the same right. Accordingly, balances held in all these accounts will be aggregated for the purpose of determining the insured amount within the limit of  1 lakh.

However, if individuals open more than one joint accounts in which their names are not in the same order for example, A, B and C; C, B and A; C, A and B; A, C and B; or group of persons are different say A, B and C and A, B and D etc. then, the deposits held in these joint accounts are considered as held in the different capacity and different right. Accordingly, insurance cover will be available separately upto rupees one lakh to every such joint account where the names appearing in different order or names are different.

Illustrations

Account (i) (Savings or CurrentA/C)	First a/c holder- "A" Second a/c holder - "B"	Maximum insured amount upto 1 lakh
Account (ii)	First a/c holder - "A" Second a/c holder - "C"	Maximum insured amount upto 1 lakh
Account (iii)	First a/c holder - "B" Second a/c holder - "A"	Maximum insured amount upto 1 lakh
Account (iv) at Branch ‘X’ of the bank	First a/c holder - "A" Second a/c holder - "B" Third a/c holder - "C"	Maximum insured amount upto 1 lakh
Account (v)	First a/c holder - "B" Second a/c holder - "C" Third a/c holder - "A"	Maximum insured amount upto 1 lakh
Account (vi)( (Recurring or Fixed Deposit)	First a/c holder - "A" Second a/c holder - "B"	The account will be clubbed with the a/c at (i)
Account (vii) At Branch ‘Y’ of the bank	First a/c holder - "A" Second a/c holder - "B" Third a/c holder - "C"	The account will be clubbed with the a/c at (iv)
Account (viii)	First a/c holder - "A" Second a/c holder - "B" Third a/c holder - "D"	Maximum insured amount upto 1 lakh

 

Q. Can the bank deduct the amount of dues payable by the depositor?

Yes. Banks have the right to set off their dues from the amount of deposits. The deposit insurance is available after netting of such dues.

Q. Who pays the cost of deposits insurance?

Deposit insurance premium is borne entirely by the insured bank.

Q. When is the DICGC liable to pay?

Rules when a bank goes into liquidation, :   DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit upto Rupees one lakh within two months from the date of receipt of claim list from the liquidator.

Rules when a bank is reconstructed or amalgamated / merged with another bank:   DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction / amalgamation scheme within two months from the date of receipt of claim list from the transferee bank / Chief Executive Officer of the insured bank/transferee bank as the case may be.

Q  Does the the DICGC directly deal with the depositors of failed banks?

No. In the event of a bank's liquidation, the liquidator prepares depositor wise claim list and sends it to the DICGC for scrutiny and payment. The DICGC pays the money to the liquidator who is liable to pay to the depositors. In the case of amalgamation / merger of banks, the amount due to each depositor is paid to the transferee bank.

Q. Can any insured bank withdraw from the the DICGC coverage?
 

No. The deposit insurance scheme is compulsory and no bank can withdraw from it.

Q  Can the DICGC withdraw deposit insurance coverage from any bank?
 

The Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods. In the event of the DICGC withdrawing its coverage from any bank for default in the payment of premium the public will be notified through newspapers.

Registration of an insured bank stands cancelled if the bank is prohibited from receiving fresh deposits; or its licence is cancelled or a licence is refused to it by the RBI; or it is wound up either voluntarily or compulsorily; or it ceases to be a banking company or a co-operative bank within the meaning of Section 36A(2) of the Banking Regulation Act, 1949; or it has transferred all its deposit liabilities to any other institution; or it is amalgamated with any other bank or a scheme of compromise or arrangement or of reconstruction has been sanctioned by a competent authority and the said scheme does not permit acceptance of fresh deposits. In the event of the cancellation of registration of a bank, deposits of the bank remain covered by the insurance till the date of the cancellation.

Source : Compiled from DICGC and RBI websites