Volume-45

I N D I A

BANKING E-BULLETIN

February 2019

THE ASSOCIATED CHAMBER OF COMMERCE AND INDUSTRY OF INDIA

ASSOCHAM Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, Delhi-110 021
Tel: 011-46550555 (Hunting Line) Fax: 011-23017008, 23017009 Email: [email protected] Web: www.assocham.org
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TOP RBI SPEECHES

REFLECTIONS ON CURRENT liberalising the FDI regime and
POLICY ISSUES FACING THE undertaking efforts to provide a
INDIAN ECONOMY conducive business climate. Let me
(By Shri Shaktikanta Das, Governor, dwell a bit more on some of these
Reserve Bank of India, delivered at the aspects.
Investors' Roundtable, 9th Vibrant Inflation: First, let me talk about
Gujarat Global Summit 2019 on Friday, inflation. Maintaining price stability in
January 18, 2019):- the economy is a basic mandate for a
As this august audience would know, central bank. Delivering low inflation by
India in recent years has emerged as one the central bank induces greater
of the most vibrant economies in the confidence among both domestic and
world. Not only has India survived many global investors. India has witnessed
global shocks successfully in recent significant disinflation since 2012-13 -
years, it also tops the list of fastest with headline CPI inflation moderating
growing emerging market economies from an annual average of 10.0 per cent
(EMEs) in the world. According to the in 2012-13 to 3.6 per cent in 2017-18
IMF's database, India's contribution to and 3.7 per cent in 2018-19 so far
world growth has risen from 7.6 per cent (April-December). As per the latest
during 2000-2008 to 14.5 per cent in reading, headline inflation stood at a low
2018. Multilateral agencies are further of 2.2 per cent in December 2018. The
optimistic on this as far as the medium- disinflation was marked by the
term outlook is concerned. Most commitment of the Reserve Bank to
importantly, India's growth story is bring down inflation in a sequential
backed by strong domestic manner – to 8 per cent by January 2015,
fundamentals. For instance, (i) inflation 6 per cent by January 2016 and 5 per cent
has eased, (ii) central government by Q4 of 2016-17 – which was called the
remains committed to the fiscal targets, glide path for inflation. This, in turn,
and (iii) the current account deficit (CAD) paved way for the formal adoption of
is far less than its peak level during the flexible inflation targeting (FIT) through
stress period (i.e., taper talk period of a legislative amendment to the Reserve
mid-2013). Indian economy has Bank of India (RBI) Act under which price
witnessed an accelerated pace of stability has been mandated as the
domestic reforms in recent years. These primary objective of monetary policy,
reforms include, inter alia, the flexible while keeping in mind the objective of
inflation-targeting monetary policy growth. Price has been defined in terms
framework, the Insolvency and of a numerical CPI inflation target set by
Bankruptcy Code (IBC), the Goods and the government at 4 per cent with a
Services Tax (GST) and steps for tolerance band of ± 2 per cent. With the
enhancing foreign investments by formal setting up of a Monetary Policy

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Committee (MPC), there has been a shift the current assessment of the Reserve
to a committee-based approach for Bank, the ratio may further improve to
determining the monetary policy. This 10.3 per cent by March 2019. The new
has enhanced transparency and resolution framework with the
accountability of the decision making Insolvency and Bankruptcy Code (IBC) as
process. Since the adoption of flexible its lynchpin and RBI's regulatory
inflation targeting in India, inflation has framework as its facilitator, is a game
been reasonably range bound within the changer. It endeavours to create an
target band. I must add here that easing environment in which maximum value
of global crude oil prices also augured can be realised from troubled assets,
well for our inflation outcomes. bolstered by the early identification of
Financial Sector: Let me elaborate on incipient stress. The shift of power in
some of the major policy developments favour of creditors in the IBC framework
in domestic financial sector in recent will facilitate speedier and impartial
years. Banking sector, We all know that resolution process and help in improving
Indian banking sector had emerged the credit repayment culture. The
largely unscathed in the aftermath of the framework has been providing a
global financial crisis. However, market-driven, time-bound process for
headwinds from international and insolvency resolution of a corporate
domestic economic developments debtor, thereby helping financial
posed challenges to the banking sector institutions to clean up their balance
in recent years. Indian banking system is sheets. Most importantly, it is aiding a
on the cusp of a transformation, aided by paradigm shift in the extant credit
recent policy measures to reduce culture and discipline. The progress of
vulnerabilities and improve its financial IBC framework so far has been
health. Several initiatives are underway encouraging and has resulted in better
to strengthen the regulatory and recovery as compared to the earlier
accounting frameworks aimed at mechanisms. Data available till January
increasing the resilience of the 3, 2019 suggest that the resolution
institutions. The Reserve Bank's processes have been approved in 66
initiatives in the recent period are aimed cases, involving around ?800 billion as
at ensuring better and timely recognition resolution value to creditors. The
of stressed assets, sufficient gradually building resilience of the
provisioning and an efficient resolution banking sector is evidenced by the fact
process. Recent supervisory data that banks have improved their
suggests that these efforts are bearing profitability ratios and capital positions.
some results and incipient signs of Other soundness indicators such as the
improvement in asset quality of banks tier I leverage ratio at 6.7 per cent and
are emerging. After reaching a peak of the liquidity coverage ratio at 134.8 per
11.5 per cent in March 2018, the gross cent as at end-September 2018 remain
non-performing asset ratio improved to well above the minimum regulatory
10.8 per cent in September 2018. As per requirements. Provision coverage ratio
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also increased to 52.4 per cent at end- regulatory approach of RBI has been and
September 2018 from 48.3 per cent at will be aimed at ensuring that the
end-March 2018. Bank credit is banking system withstands the
recovering from the risk aversion of transitory difficult phase and keeps
recent years. Bank intermediation in the playing a positive intermediation role in
flow of resources to the commercial supplementing the financial needs of our
sector is regaining lost ground. The growing economy.
growing size and complexity of the Non-Banking Financial Sector N o n -
Indian financial system warrants banking financial sector is another
strengthening of corporate governance segment that plays an important role in
systems in banks. Incidence of financial the Indian financial system, given its
fr a u d s i n r e c e n t t i m e s fu r t h e r unique position in providing
underscores the significance of sound complementarity as well as competition
corporate governance standards in to banks. This sector, with a size of
banks. The Government, the Bank Board around 15 per cent of combined balance
Bureau and the Reserve Bank are sheet of scheduled commercial banks
currently engaged in developing an (SCBs), has been growing robustly in
objective framework for performance recent years, providing an alternative
evaluation and this should redefine the source of funds to the commercial
contours of corporate governance in the sector. However, the sector has faced
public sector banks (PSBs) with a focus challenging times recently. The debt
on transparency, accountability and default of a systemically important NBFC
skills.0. On the consumer protection highlighted the vulnerability and need
front, improvements in grievance for strengthening regulatory vigil on the
redressal, introduction of innovative sector in general and on asset liability
products for digital payments, and management (ALM) framework in
measures to improve cyber security in particular. The Reserve Bank intends to
banking are all expected to expand strengthen the ALM framework for
financial inclusion and provide financial NBFCs and harmonise it across different
services efficiently and cost-effectively. categories of NBFCs with the objective of
The Reserve Bank is cognisant of the fact enabling the NBFCs to play a vital role in
that deepening of digital payment our economy. In order to allow additional
systems will facilitate greater access to access to funding for the NBFC sector in
institutional finance by the informal the wake of the recent crisis, the Reserve
sector, furthering the cause of financial Bank has relaxed the norms for NBFCs to
inclusion. We have very recently securitise their loan books. In addition,
constituted a High Level Committee on banks have been allowed to provide
Deepening of Digital Payments with Shri partial credit enhancement to bonds
Nandan Nilekani as Chairman to suggest issued by the systemically important
measures for increasing digitisation of non-deposit taking non-banking
payments and enhance financial financial companies and Housing
inclusion through digitisation. The Finance Companies. This measure will
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enhance credit rating of bonds and advanced economies are on the path of
enable the companies to access funds monetary policy normalisation, there
from the bond market on improved has been global portfolio rebalancing
terms. We are keen to foster a well- away from EMEs, including India.
regulated, well-functioning and vibrant Another factor that has repercussions
NBFC sector. for India's external sector is the recent
External Sector India's external developments around Brexit. There are
sector has remained resilient in recent consequential policy challenges for India
period despite terms of trade losses due which enjoys strong trade and
to the firming up of international crude investment relations with UK and the EU.
prices and uncertain global demand We will carefully weigh the challenges
conditions. The current account deficit and opportunities that lie ahead and
since FY 2013-14 (i.e., period after the undertake appropriate policy responses.
taper talk) has been below 2 per cent of As regards policy environment relating
GDP, though it rose to 2.7 per cent in the to the external sector, sectoral norms for
first half of the financial year 2018-19 Foreign Direct Investment have been
reflecting elevated crude oil prices. eased gradually and now 100 per cent
Modest current account deficit in recent FDI is permitted in all sectors, barring a
years was accompanied by robust flows few prohibited sectors. In recent years,
of foreign direct investment (FDI). Strong the focus has been to simplify the FDI
FDI inflows and build-up of foreign policy regime by abolishing the Foreign
exchange reserve buffers have helped Investment Promotion Board,
India meet its external financing rationalising various procedures,
requirements despite domestic capital introducing e-biz portal as a single
market facing sizeable outflows of window for obtaining clearances from
foreign portfolio investment. As a few the central government and using

T a b le : E x te r n a l S e c to r I n d ic a to r s
( P e r c e n t , u n l e s s i nt d
h iecr a
wt e
i sd

E n -M
d a r . E n -M
d a r . E n -M
d a r.
I n d ic a to r E n -S
d ep . 2 0 1
2 0 1 3 2 0 1 7 2 0 1 8

1 . C u rre n t acco u n t d e
4 .8 0 .6 1 .9 2 .7 * *
ra tio *

2 . E x te rn a l D e b t to G D 2 2 .4 2 0 .0 2 0 .5 2 0 .8

3 . R a tio o f R e se rv e s
7 1 .3 7 8 .5 8 0 .2 7 8 .5
D eb t

4 . R a t i o oofr-t
t Se h
rm D eb t
3 3 .1 2 3 .8 2 4 .1 2 6 .1
R e se rv e s

5 . R e se rv e s C o v er o f
7 .0 1 1 .3 1 0 .9 9 .5
(in n u m b e r o f m o n th s )

* A v e r a g e d u r i n g t h e F i n a n c i a l Y e a r ; * * : A -1
v e
9r a g e f o r H 1 o f 2

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information technology as enabler to priority is to preserve domestic

make governance more effective. Two macroeconomic and financial stability,
days ago, we have also substantially especially in a global environment that is
rationalised and liberalised the clouded by high uncertainty. Not only
regulations governing the External downward risks to global growth, trade
Commercial Borrowings by the Indian and investment have risen, the spill over
entities to improve ease of doing effects on emerging markets due to
business. The full impact of all these increase in global interest rates could
reforms and a stable domestic also be profound. We, therefore, need to
macroeconomic environment will brace ourselves for any sudden bout of
fructify in coming years. In fact, gross global financial market turbulence that
FDI inflows in India were at a record high domestic economy and financial markets
of US$ 61 billion in 2017-18. Further, may face in the period ahead. In such a milieu,
external debt to GDP ratio has fallen domestic macroeconomic policy framework
needs to be supported by sound financial
from 22.4 per cent at end-March 2013 to
supervision and regulation. Let me highlight the
20.8 per cent at end-September 2018. key policy challenges that the Indian economy
Other external indicators, viz., import confronts at the present juncture.
cover and short-term debt to reserves o Inflation: Although headline
ratio are also better, relative to the taper inflation has moderated significantly in recent
years, as discussed earlier, its major components
talk period of mid-2013 when the Indian
– inflation in food, fuel, and inflation excluding
rupee had come under severe pressure food and fuel – are exhibiting wide divergences
this year. While food inflation has turned
Challenges And Outlook: India is widely negative since October 2018 and fuel inflation
has been highly volatile, inflation excluding food
believed to remain world's fastest-
and fuel remains sticky at close to 6 per cent.
growing major economy in the medium Such wide divergences and large volatilities in
to long term. The growth projections of inflation across major groups pose challenges
several global agencies rank India at the for inflation assessment. Balancing the
top among the G-20 economies. In the objectives of inflation and growth under a
flexible inflation targeting framework would
medium term, annual growth is
warrant careful analysis of every new data.
projected at around 7.5 per cent by the o Financial Sector: There is need for
IMF and the World Bank. It is likely that continued vigil on the asset quality of banks as
growth will be more sustainable now, well as resolution of stressed assets with a focus
propelled by investment and private on implementation of the new resolution
framework. It will remain critical to ensure that
consumption. The latest estimates of
further slippages are contained. While
national accounts suggest that technology provides opportunities for growth
investment activity has accelerated by and innovation in the banking sphere, it also
12.2 per cent during 2018-19 as involves newer challenges and risks. Cyber risk is
compared to 7.6 per cent in 2017-18. a major challenge. Formulation of
comprehensive cyber risk and resilience policies
Investment activity is expected to
and diligent implementation is critical. Another
strengthen further as the benefits of area where policy action is required is corporate
recent structural reforms begin to governance in banks with a focus on
materialise. Going forward, the foremost transparency and accountability.
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o External Sector: While positive policy of a long day when one is reflecting on
settings and continued macroeconomic stability the subject, they start playing all over
helped contain India's external vulnerabilities, a
again, without any reason and without
close monitoring of external sector is required,
given the sharp movements in global crude oil any conscious decision to rewind to
prices and global financial market volatility. them. In my case, a few striking images
These are the two global shocks that have flash across my eyes. I have tried in what
implications for our CAD and financial flows. follows to describe these images and
Another challenge that Indian companies may
what their collage means for me. They
face pertains to developments around Brexit.
Indian companies and policy makers need to also convey how I try to think about
suitably weigh all opportunities and challenges, economics and finance more generally –
and accordingly re-strategise to respond as the media to understand daily
appropriately. situations of households around us and
Let me conclude by saying that at the RBI, we are
to derive insights on how these
committed to play our role as the monetary
authority for maintaining mandated price situations could be made better, most
stability objective while keeping in mind the often in some small ways and
objective of growth; and as the regulator and occasionally with a big bang… After all,
supervisor of the banking sector and payment the origin of the word 'economics' is in
systems. We will take necessary steps to
the ancient Greek term 'oikonomía',
maintain financial stability and to facilitate
enabling conditions for sustainable and robust meaning 'management of a household'.
growth. In October 2018, when I had absolutely Based on careful research, many [notably
no clue that I would be landing up in the Reserve Professors Abhijit Banerjee and Esther
Bank in December 2018, I had tweeted, “Central Duflo of Massachusetts Institute of
Banks across countries have a very critical role at
Technology (MIT)] contend, that it is the
the current juncture. The challenge is to try and
read the situation and take decisive steps in poor who often practice the best
pursuit of their multiple responsibilities.” As economics as the costs they face from
Governor of the Reserve Bank of India, it would mismanaging their households can be
be my endeavour to act according to these rather high. So let me describe these
principles.
images that flash across my eyes one by
one.
SOME REFLECTIONS ON
Image One: Many evenings or nights
MICRO CREDIT AND HOW A when I stroll with my brother on our
PUBLIC CREDIT REGISTRY terrace in Mumbai, we are greeted on
CAN STRENGTHEN IT one side by the Pawan Hans Helipad, the
(Dr Viral V Acharya, Deputy Governor, sprawling slums of Nehru Nagar, the
Reserve Bank of India - December 15, deafening din from the Swami
2018 – Delivered at IIT Bombay Tech Vivekananda Road (S V Road), and the
Fest) serene breeze and waves of the Juhu
Sometimes when I sit down to write down Beach. I grew up on a crowded street in
a new set of remarks, the same old Girgaum, in south Mumbai. Observing
thoughts cross my mind, a bit like one's from our first floor window how people
favorite songs that are so deeply went about their lives on the streets was
entrenched in the psyche that at the end a favorite pastime in our childhood days.
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Conditioned by that, while I'm on the ponder for a few seconds but then switch
terrace my eyes invariably end up attention to the incessant honking of the
focusing on the slums of Nehru Nagar. S V Road vehicles.
Far into the narrow alleys, bustling and Image Two: Until about ten years back, I
jostling in high density are the slum- used to spend a decent chunk of my time
dwellers, appearing as diminutive as a doctoral student, and later as a
figurines, with much activity and life all professor, working with an Indian NGO,
around. A man is fixing dish antenna on focused on pre-primary and primary
top of his blue roof; an old couple are education. This activity had become my
perched outside a modest hut, savoring umbilical cord to India. On my holiday
what must be some scrumptious desi trips back home from New York or
chat; a woman slamming blow after blow London, I would take out a few days to
on the clothes she has carefully aligned visit some of their baalwadis (daycares)
to wash; and almost always a group of in urban areas, and if travel plans
children gleefully running around, permitted, also the delivery centers for
mostly playing cricket and seasonally accelerated reading programs in
flying kites. Some of the evenings, a villages. These visits made my
plane takes off from the domestic or interactions with stakeholders more
international airport in the east and credible, engaging and vivid. But they
heads westward on its way; and a were also personally rewarding. There
chopper swings in and lands at Pawan are a few sights, if any, more uplifting
Hans with much acoustic fanfare. As than of a child figuring out the alphabet
these sophisticated means of modern for the first time, reading the first book,
transportation make their noisy flipping pages over and over again in
presence felt, you can see the children boundless excitement and frenzy, or
bunch together, one of them pointing at counting and adding up his or her
the sky, others galvanising around him collection of stones, subitizing them
to marvel at the spectacle. An instant soon after – as in figuring out the exact
later of course, the children are count without counting, by merely
nonchalantly back to gully cricket or glancing at the collection of treasures! It
running after a fallen kite. One cannot might be the innocent spark on the
but hope that these children – in that child's face, or that “Aha!” or Eureka
brief moment of marvel – have been moment as the child discovers how to
imbued with ambition; that their eyes are read, how to count, how to learn –
now set on the sky; that they will have the whatever it is, it works like magic in
initiative and will get all opportunity to bowling over the beholder. One returned
do what it takes to bridge the gap from from these visits with a shot in the arm to
their narrow alley to Pawan Hans Helipad do more; one felt like nurturing the
next door and to the flight of the giant umbilical cord to India further; one
mechanical birds that fly above. Will realised that joyful learning is an
these children take off? How will their essential groundwork for the journeys,
journey be? Where will they land? I the flights and the ascent that these

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children will undertake in due course. descent.

Image Three: I am usually en route Image Four: E a r l y o n a S a t u r d a y
in car to the office at RBI or Bombay morning, already quite bright and sunny,
Gymkhana during early mornings. I need a banker carrying his thela (a shoulder
to be on S V Road before turning for the bag) steps into the passageway next to a
Milan subway or now the flyover, which series of kachcha-pukka homes. The
connects to the Western Express surrounding is semi-urban. By the time
Highway. Just before the turn, before one you have blinked an eye, an army of
reaches the Hanuman temple and about twenty women, mostly in saris, of
Santacruz bus depot, on the left ages spanning from 20 to 50, and a few
sidewalk, there is – always – a mother even 50-plus, have gathered around
toiling away no matter what time of the him. They have all borrowed certain
day. It is clear she is homeless; she has at sums of money from the banker. They
least two children, both roughly of the make their repayments one by one; each
same age. Depending on the time of the transaction is logged in a physical
morning, she has her work cut out. Some register; it is also swiped digitally onto
days she is waking up the kids with some their bank cards with a point-of-sale or
sternness on her face; on others she is POS-style machine. Some of the women
bathing them with water from an are borrowing again; some taking out
ingeniously figured out water-supply; at monies from their accounts. The
times she is getting them dressed in registrar of this group of women,
school uniforms; and then she is often appointed for the month, signs off the
running with the kids, who have their log after checking the account entries
backpacks on, towards the carefully. Banking is now done. Growth is
neighborhood school. From a distance, about to begin. I am curious to hear more
she seems to be driven with a single- about what these women are doing with
minded focus of ensuring that her kids the money. All of them, without
get their chance to fly and soar. Her role exception, are entrepreneurs. One has
as a mother certainly seems a mighty started a sari trading business, buying
one, as Yudhisthir answered to the them from the city and selling them in
Yaksha Prashna in Mahabharata, when the neighborhood with a margin; she has
asked what is heavier than the Earth. built her enterprise over several years
How does the mother make it all work? and is the recipient of the biggest loan
Can she afford the books and the (one lakh rupees) with the longest
supplies? Is she home when the kids maturity (one year) in the group; her
come back? What job does she do during friend has acquired a sewing machine
the day? Could she be a micro with the loan and is stitching blouses to
entrepreneur? The mind is so fickle, go with the saris; another has opened a
however; as soon as the car turns left at beauty parlor; yet another has started a
the traffic signal and moves onto the soft-drinks stall in her husband's
flyover, it leaves these questions in stationery store as there is extra, unused
background and embarks on its daily space therein, well utilised especially
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during the afternoons when customer our children, the skilling of our youth,
traffic is thin for stationery but the heat and lighting up of their minds with fire
unbearable. There seemed absolutely no and imagination so they can propel
shortage of services to be provided in themselves, their families, and the rest
their immediate sphere of influence. I of us, forward. Education is perceived by
was especially eager to know what many families as ticket to the ride that
prompted these women to become will catapult them out of economic
entrepreneurs in the first place. The stress. Leaving aside minor exceptions,
answer I got was not entirely expected: as a rule education is indeed a ticket to
in nine out of ten cases, women had such ride. A mother taking up an
become entrepreneurs to send their kids enterprise to shape her child's future has
to a 'top, English medium school', or to all the willingness to pay her debt. As the
have extra monies for private coaching child grows, her needs too will rise. She
so the child could excel in the state-level will need a clean credit record to be able
exams, or to get the kid to learn some to borrow again so as to finance her now
computing and programming as that is bigger liquidity requirements. This way,
where future jobs lie! there is full incentive compatibility
between her and the finance provider.
Collage Of The Images: As these images Besides her willingness to pay, the deft
flashed across my eyes, I realised that handling of her enterprise, induced by
rather than being entirely the necessity to keep buying the
compartmentalized, these images were education ticket over time, will
all linked, that there was a connection strengthen her ability to pay. At any rate,
between finance – my day job, and these the financier can start with a small loan,
images that my mind had been use a short tenor to assess repayment
subconsciously gathering in mornings, ability, and open for her a bank account
evenings and during holidays. An that can help track other payment flows
important link was established from and improve credit assessment. The
financial inclusion to education of reputation of the woman entrepreneur
children – from micro finance for women as a borrower can build swiftly as she
entrepreneurs to them sending children keeps repaying and enable her to secure
to schools, the children in turn having more credit over longer tenors.
their “Aha! I did it!!” moments in reading Borrowing as part of a group reinforces
and counting, and to their taking off for the strong incentives to repay; default by
the limitless sky and beyond. Access to a borrower when all others are repaying
finance is the lifeblood of an economy. can lead to stigma. Conversely,
Its judicious allocation is known to encouraging of defaults by some can
unlock opportunity and growth. It can, in lead to vitiation of the otherwise rich
fact, aid even the most fundamental credit culture. The financier, in turn, can
reform for growth by supporting, make a healthy spread over own cost of
directly or indirectly, the education of borrowing funds, even accounting for

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some losses from early defaults, upon these accounts is only 23 per cent of the
whose realisation the entrepreneur can total. Is there a big opportunity for us to
be rationed from future loans or offered rethink and reshape our credit eco-
only stricter loan terms and tenor. This system for the future so that micro credit
way, the availability of micro finance for can thrive to unlock economic value, as I
micro entrepreneurs thrives and benefits laid out in my collage of images? At the
the society all around.So let me turn RBI, we firmly believe so. We have
from these images to my day job at the initiated work on a Public Credit Registry
RBI and what efforts we are undertaking (PCR). We are excited about how we can
to help ensure that micro credit becomes solve in a fundamental way the
available to more borrowers; micro information problem affecting access to
finance provided a robust foundation; credit for micro entrepreneurs. Let me
micro enterprise given an additional elaborate on the information problem
fillip; and indirectly, in the process, our and how a PCR can help get around it.
children offered greater opportunity for Information asymmetry with the
schooling and skilling. borrower is the major difficulty faced by
any lender while granting a loan. Put
Public Credit Registry (PCR) An simply, the borrower has more
Important Step to Democratize and information about her own economic
Formalize Credit: In an emerging condition and risks than the lender.
economy like India, it is always felt that Credit information systems aim to
the smaller entrepreneurs, mostly reduce this asymmetry by enabling the
operating under the informal economy, lender to know the credit history with
do not get enough credit as they are past lenders and the current
informationally opaque to their lenders indebtedness of the borrower. They
who prefer to provide loans to more improve efficiency of credit allocation, as
transparent larger businesses. Data as of the lender can use credit information
March 2018 of scheduled commercial systems to properly differentiate and
banks (SCBs) from RBI's basic statistical appropriately price (interest rate) as well
returns (BSR) shows that close to half of as alter terms (maturity, collateral,
the outstanding credit is for ticket size covenants, etc.) of the loan. What would
above a hundred million rupees and occur without the credit information
thirty per cent is above one billion systems? As borrowers build history,
rupees. Credit penetration is particularly lenders would like to protect the
low for Micro, Small and Medium information of their profitable
Enterprises (MSME) sector where the customers and may not be ready to share
ticket size is generally believed to be it directly with other lenders. This way,
between one to ten million rupees. Even borrowers can get locked to their initial
though more than 95 per cent of lenders, become vulnerable to gouging
accounts with SCBs are having in loan terms, and worse, be unable to
sanctioned credit limit less than one convey their credit quality to new lenders
million each, the amount outstanding on if existing lenders experience problems
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of their own (such as due to capital envisaged the Public Credit Registry
erosion from recognition of losses, as (PCR) to be. The HTF examined the data
was witnessed in India over the past gaps in the current credit information
decade in the form of high retail and system in India and recommended that a
MSME cost of borrowing from banks due PCR be set up, backed by an appropriate
to spillover from their large corporate Act, to improve the information
borrower loans turning non- efficiency of the credit market and
performing). This is where third-party strengthen the credit culture in India.
credit information companies come in to How Will The Public Credit Registry (PCR)
play, those that will pool the data from For India Work?: The PCR has been
lenders and share the information with envisaged as a database of core credit
other lenders as per the laid down policy. information – an infrastructure of sorts
Globally, Private Credit Bureaus (PCBs) on which users of credit data can build
and Public Credit Registries (PCRs) both further analytics. It will strive to cover all
operate in this space. PCBs can be regulated entities (i.e., financiers) in
legislatively authorised to receive credit phases and in this way get a 360-degree
data; however, being for-profit view of borrowers. It will facilitate
enterprises, they may focus primarily on linkages with related ancillary
those data segments around which it is information systems outside the
most profitable to build a business banking system including corporate
model (e.g., provision of credit scores filings, tax systems (including the Goods
based on data gathered). Indeed, it is and Services Network or GSTN), and
found internationally that a PCR, being a utility payments. The PCR will have to be
non-profit enterprise, is able to ensure backed and governed by a
much better data coverage than PCBs. In comprehensive Public Credit Registry
turn, the PCBs when given access to Act to be brought in consultation with
comprehensive data from a PCR can the Government. It will have to follow the
provide better and greater value addition latest privacy guidelines based on a laid
through data analytics and innovations, down consent framework.
complementing the PCR. One can easily The Proposed Public Credit Registry
surmise that to be useful, it is important (PCR) Information Architecture: Let me
for credit information systems to gather now spend some time on how the PCR
complete credit information, possibly will work and help strengthen the credit
even asset-side and cash-flow details culture.
about the borrower, which is sometimes o First, PCR will make borrower
referred to as the '360-degree view'. information more complete with
Also, the latest information is more increasing coverage of lending entities.
important, giving rise to the demand for In particular, it will eventually reach out
near-real-time data. That is how the even to the smallest primary agricultural
Report of the High-Level Task Force credit societies. It will also cover entities
(HTF) on Public Credit Registry for India, which may not be regulated by the RBI.
chaired by Shri Y.M. Deosthalee, has This will have to be done in phases and it
12 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

may take up to three to five years to will help the users to access other data
accomplish, possibly sooner. on borrowers' assets and evolving cash
o Secondly, PCR will vastly simplify flows, which are essential for taking
and reduce the reporting burdens on the efficient credit decisions.
lenders. Other entities including o Finally, it will be possible within
regulators and supervisors will be able to the PCR architecture to address privacy
access it for core credit information and concerns and control access to data with
supplement it with only the incremental a proper consent-based framework for
part as per their requirement. Many of appropriate usage, better than what is
the statistical returns presently collected currently feasible. These concerns will
by the RBI may also accordingly be have to balance the objective that the
substantially rationalised and pruned, PCR is just a step in helping the
freeing up resources in the financial eco- democratisation of credit, whereby
system for analysis instead of repetitious credit data is not only used for regulatory
efforts in data collection, follow-up and / supervisory purposes, but also
cleaning. The same would be the case leveraged to expand the credit market
with other entities that presently collect efficiently. In particular,
such data from banks. § While an individual will have
o Thirdly, PCR will have credit data access to her data stored in PCR, she
available digitally at a higher frequency should be empowered to share it with
than at present. Therefore, it will make other lenders for availing credit.
credit decision-making faster and § Similarly, lenders need to be given
efficient. access to their own customers' complete
o Fourthly, as the chart here shows, data for monitoring such accounts.
with linkages to other information § Regulators / supervisors will
systems like corporate data from the require full access to the data for their
Ministry of Corporate Affairs (MCA21) work so that they can address systemic
and tax filing or invoicing data (GSTN), it risk concerns with the advantage of a

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 I N D I A

holistic view. and being linked to various digital

To appropriately put in place the systems in place (as shown in the chart
required access and control policies, the above), it would be possible to identify
High-Level Task Force recommended and get to know well businesses, even
that a separate Public Credit Registry Act micro enterprises and micro
(PCR Act) be brought in. The PCR Act will entrepreneurs. In other words, the PCR
need to ensure adequate safeguards on could supply the missing link, which is
data while at the same time address the complete '360-degree view'-
extant restrictions on sharing of credit information of the borrower or
data that prevent efficient allocation and prospective borrower. This will allow
regulatory supervision of credit. The PCR lenders to assess the borrower's credit
Act would also have to be comprehensive risk keeping in view the viability of cash
so as to bring in data from the section of flows, ask the relevant questions (e.g.,
lenders who do not directly fall under the are there other underlying issues that
RBI regulations. To this end, the RBI are affecting ability to pay the loan in
plans to engage with the Government spite of healthy cash flows from the
and other regulators in the coming micro enterprise?), and price the loan
months. In the meantime, the RBI has set terms without compromising on due
up an Implementation Task Force that is diligence.Based on these, nearly-
putting the systems infrastructure in automated loan sanction and
place to kick-start the PCR with data disbursement mechanisms can be
from regulated entities that can be devised, as are also being attempted by
covered either under, or with minor fin-tech companies.In fact, credit
tweaking, of the extant legislative products could get transformed with the
framework. possibility of sanctioning small ticket
Public Credit Registry Can Help loans with short maturity and zero or low
“Sachetise” Micro Credit: To build credit collateral requirement. Borrowers and
models for individuals and small credits, entrepreneurs can build their reputation
the financier and its modelers are ideally and credit quality by repaying well such
required to know not just outstanding initial information-building loans.
credit for the micro borrowers, but Gradually, they can borrow more and at
possibly also their entire repayment longer maturities, potentially making
history and their cash flow fluctuations, capital investments to enhance
so as to tailor the terms of credit productivity. Once their size increases
suitably. In the absence of such and they register with the GSTN, tax
information, many borrowers may invoices can act as the cash-flow
simply get 'rationed' out of the market verification with PCR. Robust credit
due to severe information asymmetry history built over a period can work as
faced by financiers.With a PCR tracking sturdy collateral, building the trust of the
every credit transaction from its lenders. Such 'sachetisation' of credit
origination to closure (initial terms, can rapidly expand access to credit for
repayment, default, restructuring, etc.), those micro and small enterprises,

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 I N D I A

TOP BANKING NEWS

hitherto not included in the formal credit achieving our mark.”
market.As I stressed while describing NEW YEAR CHEER FOR BANKS,
the ability to pay and willingness to pay NPAS SEE FIRST FALL SINCE
of micro entrepreneurs, it would remain
2015
important not to undermine their
The Reserve Bank of India, which has
inherently strong credit culture by
been relentlessly pushing banks to
making it easier for borrowers not to
recognize bad loans, believes that they
repay. That would compromise the
may be over the worst with the industry
essence of how micro entrepreneurs
likely reporting a decline in non-
build a reputable credit history to
performing assets (NPAs) in the current
differentiate from others and over time
fiscal year for the first time since 2015,
grow in size and economic value
when the regulator began tightening
creation.
norms. The central bank forecast gross
Let Me Conclude: There is a deep bad loans will decline to 10.3% of total
connect between the images I started loans by March 2019 from 10.8% at the
with, their collage in my mind, and my end of September 2018 and 11.5% in
day job at the RBI. Ultimately, while March 2018. The net NPA ratio also
central banks are not always visible to registered a decline during the period. In
the common person, their policies have a sign of possible recovery from the
the potential to touch her in a impaired asset load, the GNPA (Gross
meaningful way. As its etymology Non-Performing Assets) ratio of both
suggests, this is what economics must public and private sector banks showed
help achieve in the end – better a half-yearly decline, for the first time
management of the household. It is since since March 2015, the financial
perhaps too ambitious a vision of our year-end prior to the launch of asset
future to believe that a fundamental quality review. The banking stability
change in the financial data indicator (BSI) shows that asset quality of
infrastructure such as a Public Credit the banks has improved, although
Registry can help improve access to profitability continues to erode.” The
micro credit as well as improve schooling Indian banking industry was plunged
and skilling outcomes for our children into gloom after RBI's asset quality
and youth, but so be it. My son's poster review in 2015 forced lenders to
at his school last year introduced me to a reclassify many standard loans as bad
gem from Michaelangelo, which assets. These had been shown to be
underscores why we must keep painting standard by either ever-greening or
such a vision and persist with efforts to restructuring on terms that were
convert it into reality. It says,“The impossible to achieve. Many corporate
greatest danger for most of us lies not in borrowers with revamped loans
setting our aim too high and falling continued to struggle and default on
short; but in setting our aim too low, and
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 I N D I A

payments. The turnaround will be good the same period, the PCA-PSBs
news for the government, which has registered negative growth in both credit
been looking to shore up credit growth and deposits. Shri Patel quit as RBI
to spur economic activity and generate governor following differences with the
jobs. Financial services secretary Shri government over issues such as the
Rajiv Kumar mentioned that bad loans of restrictions on weak banks under the
state-run banks were declining and that PCA regime, easing liquidity for non-
they had recognized most of their banking finance companies and the level
stressed assets. While the overall of reserves the regulator needed to hold.
situation is improving, the jump in bad https://economictimes.indiatimes.com/industr
loans under a stress test scenario will y/banking/finance/banking/new-year-cheer-
for-banks-npas-see-first-fall-since-2015
leave many banks vulnerable and push
/articleshow/67331225.cms Dated:Jan 01, 2019
them below minimum capital
requirements. Sensitivity analysis
RBI ALLOWS RESTRUCTURING
indicates that 18 SCBs (scheduled
commercial banks), including all public
OF MSME LOANS UP TO RS. 25
sector banks (PSBs) under Prompt CRORE
Corrective Action (PCA) may fail to The Reserve Bank of India (RBI) has
maintain the required CRAR (capital to allowed lenders to recast loans of
risk weighted assets ratio) under a two stressed micro, small and medium
standard deviation shock to the GNPA enterprises (MSME), provided the total
ratio, unless capital infusion takes place fund and non-fund based exposure to
and banks improve their performance. such a borrower does not exceed Rs. 25
Although the industry shows signs of crore. Such a debt restructuring, would
stabilizing, the gulf has widened not lead to a downgrade in asset
between banks under PCA due to their classification. RBI has decided to permit
weak finances and those with sufficient a one-time restructuring of existing
capital. There has been a further loans to MSMEs that are in default but
widening between PCA and non-PCA 'standard' as on January 1, 2019, without
PSBs. While the non-PCA PSBs' credit an asset classification downgrade. The
growth improved from 9.1% in March government has been pushing RBI to
2018 to 13.6% in September 2018 and provide relief to the stressed MSME
deposits increased from 6.1% to 7.9% in sector. The central bank's board on 19

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 I N D I A

November advised RBI to consider a depending on the delay in repayment of

scheme to recast loans of MSMEs, which loans. While borrowers delaying
have been hurt by the disruption caused repayments by up to 30 days should be
by demonetization in late 2016 and the classified as SMA 0, those delaying by
implementation of the goods and 31-60 days and 61-90 days will be
services tax (GST) in July the following classified as SMA 1 and SMA 2,
year. The MSME loan restructuring, respectively. The loans still remain
according to the RBI statement, has to be standard even in these categories and
implemented by 31 March 2020 and a turn bad only after a delay in payment of
provision of 5% of the total outstanding more than 90 days. According to data
loan, in addition to the money already from the central bank, for the six months
set aside to cover potential losses, will ended March 2017 (the latest available),
have to be made for such borrowers. 137,282 MSME loan accounts were
Each bank or non-banking financial referred for resolution. Of these, banks
company (NBFC) should formulate a used rectification in 80,905 cases,
policy for this scheme with board recovery in 54,180 cases and only 2,197
approval which shall, inter alia, include loans were recast. However, the
framework for viability assessment of quantum of loans for these categories is
the stressed accounts and regular not available. The amount of gross bad
monitoring of the restructured accounts. loans in the micro and small enterprises
The regulator also mentioned that sector (no data for medium) has been
MSMEs form an important component of growing over the last few years and
the Indian economy and contribute stood at Rs. 82,756 crore in FY17, up
significantly to the country's gross from Rs. 70,842 crore in the previous
domestic product (GDP), exports, year and Rs. 51,952 crore in Fy15.Source:
industrial output and employment https://www.livemint.com/Companies/rgl4JNp
generation. Considering the importance nGsE7rKerrpaNJJ/RBI-issues-norms-for-
restructuring-loans-to-MSMEs.html Dated: Jan
of MSMEs in the Indian economy, it is
02, 2019
considered necessary at this juncture to
take certain measures for creating an
COMPLAINTS WITH BANK
enabling environment for the sector. The
OMBUDSMAN SURGE 25% IN
issue of restructuring of MSME accounts,
RBI added, was discussed in the RBI FY18
board meeting on 19 November and also The number of complaints registered at
during RBI's recent interactions with banking ombudsman offices have seen a
banks and other stakeholders. In March 25% increase in the fiscal year 2018, with
2016, RBI had notified a mechanism for majority of these complaints coming
resolving stressed MSME loans of up to from urban centers owing to increased
Rs. 25 crore. As per the guidelines banks awareness and poor internal redressal
should classify stress in such loans into mechanisms of banks. The banking
three categories special mention ombudsman offices in Tier-1 cities like
account (SMA) 0, SMA 1 and SMA 2 New Delhi, Mumbai, Chennai, Kolkata,

17 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Bengaluru and Hyderabad accounted for commitments and mobile banking. In

more than 57% of the total complaints bank-wise distribution, most
received by all BO offices. The higher complaints received against public
proportion of complaints from urban sector banks were pension-related while
areas in recent years is largely due to most complaints received against
increasing awareness about grievance private banks were for credit cards
redressal mechanism among bank discrepancies. The RBI plans to set up a
customers and also the efficacy of compliance and tracking system portal
internal grievance redressal mechanism to tackle the problem of cyber-fraud
in banks, not being up to the desired under the ombudsman scheme taking in
level. Of all the complaints received at light the growing impetus of banks and
the ombudsman's offices, 97% of them financial institutions on digital
were resolved in 2017-18, up from 92% transactions and the Centre's push to a
a year earlier. Currently, there are 21 less cash economy.
functional banking ombudsman offices https://economictimes.indiatimes.com/industr
in the country. These offices were y/banking/finance/banking/complaints-with-
bank-ombudsman-surge-25-in-
established under Banking Ombudsman
fy18/articleshow/67343150.cms Dated Jan 02,
Scheme, 2006, and are the first points of 2019
contact for consumers seeking
grievance redressals and resolutions BOB SETS SHARE SWAP
against consumer frauds and
RATIO FOR MERGER WITH
discrepancies in the banking system.
Most complaints received at these
VIJAYA, DENA BANKS
Bank of Baroda (BoB) has finalized the
offices were related to non-observance
share swap ratio for merger of Vijaya
of the fair practices code followed by
Bank and Dena Bank with itself. As per
those related to ATM, credit and debit
the Scheme of Amalgamation,
cards, and for failure to meet
18 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

shareholders of Vijaya Bank will get 402 favorable share swap ratio. Recent prices
equity shares of BoB for every 1,000 suggest that traders were anticipating a
shares held. In case of Dena Bank, its swap ratio of not less than 150 shares of
shareholders will get 110 shares for BoB in return for 1,000 Dena Bank
every 1,000 shares of BoB. The shares. The announced ratio of
government in September last year had 110:1,000 comes as a huge let down.
announced merger of state-owned Assuming BoB shares stay where they are
Vijaya Bank and Dena Bank, with larger when trading resumes, Dena Bank's
peer Bank of Baroda, aiming to create the shares need to correct by about 28% to
third largest lender after SBI and ICICI align with reality. Not that this is a
Bank. massive relief for BoB. While the dilution
https://www.livemint.com/Industry/XihVSI in its equity will be lower than
wxVQZEmG1BMqL3BP/BoB-sets-share- anticipated, and may cause a relief rally,
swap-ratio-for-merger-with-Vijaya-Dena- the drag from the bank merger is a far
banks.html Dated: Jan 02, 2019 bigger worry. It's little wonder that BoB
shares have underperformed the Nifty
MERGER OF DENA BANK, PSU Bank index by about 12% since the
VIJAYA BANK, BOB AN ALL- merger was announced in mid-
ROUND LOSING GAME September. BoB shareholders are getting
The merger of Dena Bank and Vijaya saddled with the tattered balance sheet
Bank with Bank of Baroda (BoB) was seen of Dena Bank, which has low capital and
as a rescue mission for Dena Bank. Now, no ability to lend. Dena Bank has been
the share swap ratios confirm that the barred from lending by the regulator for
mission will leave everyone a loser. Even the last seven months. So, essentially,
Dena Bank's shareholders have ended up what BoB shareholders are getting is a
as losers, in contrast to the earlier fistful of deposits and a toxic pile of
expectation that they will gain from a loans. Dena Bank has a gross bad loan

19 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

pile of Rs. 16,140 crore, for which the BOOST FOR BANKS WITH BIG
lender has provided for less than 60%. It LOANS AGAINST PROPERTY
has a 13,440 strong workforce, for Banks with a larger share of loans against
which BoB will have to make good the property are likely to benefit from the
shortfall in provisions towards gratuity RBI's latest relief on small value loans to
as per rules. This is over and above the micro and medium level companies and
requirement to absorb all employees in lenders like DCB Bank, Federal Bank, City
the bank merger. While merger Union Bank and Kotak Mahindra Bank
announcements typically talk of cost could see earnings improve, nudging
synergies, this one points to an increase them to open up credit lines to ease the
in costs. Note that past instances of freeze. RBI has allowed a one-time
mergers, including the massive merger restructuring of existing loans to MSMEs
of State Bank of India (SBI) with its five that are in default but 'standard' as on
associates, show that the months that January 1, 2019, without an asset
follow are horrible for the merged entity. classification downgrade. The
SBI had to contend with depressed restructuring has to be implemented by
operating performance as its staff March 31, 2020. RBI has allowed the
became busy in dealing with new scheme for restructuring of stressed
colleagues, new systems and new assets with credit facilities not
cultures. Streamlining processes took a exceeding Rs 25 crore as on January 1.
toll on the lender and its bad loan ratio When borrowers fail to repay loans due
surged, while credit growth slowed. to genuine reasons, lenders relax terms
Analysts fear the same fate for BoB. In and conditions for repayments, known
the case of Vijaya Bank, the share swap as restructuring in market parlance. The
ratio is close to what the markets had RBI move has instilled just such
anticipated. But that is little comfort for confidence. Select banks will
its shareholders, as their fortunes have significantly do well in future as
also been tracking the drop in the value creditworthiness of small companies is
of BoB. The fact that this is despite Vijaya likely to improve giving opportunity for
Bank's superior financial performance credit expansion. The latest RBI move
makes it even more painful for its was in line with the government's
shareholders. In its bid to create the intention. This will help both credit flows
third largest lender with a balance sheet and the holistic economy as this will add
size of more than Rs. 14 trillion and a confidence among all banks, private and
network of 9,489 branches, the public. MSME loans mostly happen
government has subjected itself and through loan against properties with
other shareholders to a painful merger banks like DCB, IndusInd, Kotak having
process. The erosion of value has only larger share. Such banks' earnings would
begun. be positively impacted over a period of
https://www.livemint.com/Money/9NBbmXVLF time as the move will help in the long
25jWx2EL2dXfJ/Merger-of-Dena-Bank-Vijaya-
term. Benefits of the latest MSME relief
Bank-BoB-an-allround-losing-ga.html Dated:
Jan 03, 2019
are likely to be derived over a long period
20 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

of time in the form of improved GST to genuine reasons, lenders relax terms
compliance and resultant improvement and conditions for repayments, known
in credit flows. The move will be interim as restructuring in market parlance. The
relief for banks in the form of lower RBI move has instilled just such
provisioning requirements. The twin confidence. Select banks will
impact of demonetization and GST has significantly do well in future as
impacted them negatively and this creditworthiness of small companies is
measure can ensure better credit flows. likely to improve giving opportunity for
Banks can restructure loans only if such credit expansion. This will help both
borrowing companies are GST credit flows and the holistic economy as
compliant. This means, more companies this will add confidence among all banks,
are expected to come under GST regime, private and public. MSME loans mostly
pushing up the government's tax happen through loan against properties
collections. A GST compliant company is with banks like DCB, IndusInd, Kotak
seen as more creditworthy compared to having larger share.Such banks'
non-complaint entities. earnings would be positively impacted
https://economictimes.indiatimes.com/industr over a period of time as the move will
y/banking/finance/banking/boost-for-banks- help in the long term. Benefits of the
with-big-loans-against-property/articleshow
latest MSME relief are likely to be derived
/67358901.cms Dated: Jan 03, 2019
over a long period of time in the form of
improved GST compliance and resultant
BOOST FOR BANKS WITH BIG
improvement in credit flows. The move
LOANS AGAINST PROPERTY will be interim relief for banks in the
Banks with a larger share of loans against
form of lower provisioning
property are likely to benefit from the
requirements.The twin impact of
RBI's latest relief on small value loans to
demonetization and GST has impacted
micro and medium level companies and
them negatively and this measure can
lenders like DCB Bank, Federal Bank, City
ensure better credit flows. Banks can
Union Bank and Kotak Mahindra Bank
restructure loans only if such borrowing
could see earnings improve, nudging
companies are GST compliant. This
them to open up credit lines to ease the
means, more companies are expected to
freeze. RBI has allowed a one-time
come under GST regime, pushing up the
restructuring of existing loans to MSMEs
government's tax collections. A GST
that are in default but 'standard' as on
compliant company is seen as more
January 1, 2019, without an asset
creditworthy compared to non-
classification downgrade. The
complaint entities.
restructuring has to be implemented by
https://economictimes.indiatimes.com/industr
March 31, 2020. RBI has allowed the y/banking/finance/banking/boost-for-banks-
scheme for restructuring of stressed with-big-loans-against-property/articleshow
assets with credit facilities not /67358901.cms Dated: Jan 03, 2019
exceeding Rs 25 crore as on January 1.
When borrowers fail to repay loans due MOBIKWIK REPORTS

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 I N D I A

DOUBLING OF REVENUE, BUT PARLIAMENTARY PANEL

LOSSES KEEP PILING UP ASKS RBI TO REVIEW CAPITAL
The company, which competes with the NEEDS FOR BANKS
likes of Paytm and PhonePe, has been In a hard-hitting report, a parliamentary
facing tremendous competition from its panel has asked the Reserve Bank to ease
rivals in the payments space. Gurugram- capital adequacy norms for banks,
based digital payments company review supervisory framework PCA, and
Mobikwik has doubled its revenue to Rs urged the government to set up a
85.6 crore in 2018 against Rs 44.3 crore committee to look into issues
in 2017, even though losses piled up 51 concerning accountability of the central
per cent to Rs 200 crore against Rs 132 bank as a regulator. The standing
crore in the same period. The company, committee on finance also asked the RBI
which competes with the likes of Paytm to evaluate the efficacy of its own
and PhonePe, has been facing guidelines on dealing with frauds.
tremendous competition from its rivals Besides, the committee headed by
in the payments space. Therefore it has veteran Congress leader and former
made an effort to move on to become a Union Minister Shri M Veerappa Moily
broader fintech player by entering also suggested increasing the retirement
lending and investments as well. Further of age of chiefs of public sector banks to
the company also made disclosures that 70 years and effect proper manpower
its co-founders Singh and Upasana Taku planning and HR development strategies
earned Rs 2.15 crore each during the in PSBs. The report of the committee was
reported year. 2018 has also been a very tabled in Parliament. Questioning the
critical year for Mobikwik having made RBI's decision to keep capital adequacy
its first acquisition in the FINTECH space. norms higher than prescribed under
The company acquired Mumbai-based global framework of Basel III, the
investment platform Clearfunds. lawmakers mentioned that the central
Mobikwik, which was founded way back bank has restricted lending capacity of
in 2009, is backed by marquee investors banks and increased the burden on the
like Sequoia Capital, American Express government for recapitalization of PSBs.
and even counts Bajaj Finance as one of The committee mentioned that it has
its strategic backers. It was one of the been informed that while Basel
last standalone payment entities till it framework requires application of
entered other services as well, since capital standards to internationally
Paytm became a bank, Freecharge was active banks of the 21 PSBs, nine PSBs are
absorbed by Axis Bank and Citrus not internationally active as also most of
Payments got bought by PayU. the older private banks are also not
https://economictimes.indiatimes.com/industr internationally active. In respect of the
y/banking/finance/banking/mobikwik-
nine PSBs, (Central Bank of India, Andhra
reports-doubling-of-revenue-but-losses-
keep-piling-up/articleshow/67369159.cms
Bank, OBC, Corporation Bank, Vijaya
Dated: Jan 03, 2019 Bank, Bank of Maharashtra, United Bank
of India, Dena Bank and Punjab and Sind
22 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

Bank) which had aggregate risk weighted of these banks and relax/review the PCA
assets of approximately Rs.9.93 lakh framework. With regards to spurt in
crore as of March 2018, this translates frauds in banking system, the panel
into additional capital requirement of asked the RBI to look into and review the
approximately Rs 35,000 crore. As per role and effectiveness of various types of
the parliamentary panel stipulated audit conducted in banks and its inability
additional capital requirement for these so far to mitigate incidence of frauds in
nine banks (who are already under RBI's banks. The RBI should also evaluate the
PCA framework with lending efficacy of their own guidelines of May 7,
restrictions), if waived, will release huge 2015 providing a framework for dealing
funds to the extent of approximately Rs with loan frauds. On the issue of RBI
5.34 lakh crore, representing 51 per cent seeking more powers, the panel
growth in the loan book of these banks. mentioned that it has recommend that
This will lead to generation of additional the government should constitute a
interest income of about Rs 50,000 crore high-powered committee to evaluate
annually, "which will obviate the need" the role, powers and authority of RBI in
for additional capital infusion into these "its entirety", while also appraising the
banks through our fiscally constrained economic impact of the various NPA
national budget. The committee further resolution guidelines/schemes
notes that the RBI has been tightening formulated by RBI from time to time. The
the screws on the operations of 11 PSBs proposed Committee should look into
including their lending and hiring those provisions of the RBI Act, Banking
activities under the Prompt Corrective (Regulation) Act and other relevant
Action (PCA) framework. The RBI's statutes with a view to ensuring the
revised PCA framework, implemented in accountability of RBI as the regulator of
2017, monitors and classifies banks into the banking sector including the matter
three risk parameters based on their of having RBI nominees on the Boards of
capital adequacy, net non-performing banks. The panel also suggested that a
assets (NPAs), return on assets and three-month overlap may be provided at
leverage. The committee would CEO level to facilitate smooth transition
therefore expect the RBI to provide a in PSBs. Further, with a view to utilizing
coherent and positive road map for each the expertise of senior bankers, the
of these 11 banks to come out of the retirement age of CEOs of PSBs can be
stringent PCA framework within a raised to 70 years as in the case of their
stipulated timeframe, so that they can private sector counterparts. The
resume their normal banking committee also desired that RBI as
operations. The panel "apprehensive" regulator should consider separate
that the PCA framework may end up treatment of NPAs due to willful
bringing more and more PSBs under its defaulters and those where defaults are
ambit. The Committee would therefore because of extraneous reasons such as
urge both the RBI and the government to cancellation of coal blocks and policy
constantly monitor the situation for each interventions by the judiciary and
23 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

general policy changes in various sectors Rajiv Kumar mentioned that they will
such as coal, power, steel, telecom, ensure the merged entity is well-
roads. For this purpose, the concerned capitalized and would provide growth
RBI guidelines/circulars should be capital as well. The government had
reviewed noted in a statement that the
https://economictimes.indiatimes.com/industr amalgamation will help create a strong,
y/banking/finance/banking/ parliamentary- gl o b a l l y c o m p e t i t i ve b a n k w i t h
panel-asks-rbi-to-review-capital-needs-for-
economies of scale and enable
banks/articleshow/67364976.cms Dated: Jan
04, 2018
realization of wide-ranging synergies.
As per Finance Minister Shri Arun Jaitley,
GOVERNMENT, RBI IN TALKS government would invest 41,000 crore
in state-run lenders, over and above
OVER MERGER OF THREE PSU
what had been announced earlier, to
BANKS strengthen their capital base. This would
The government is in talks with the
enhance the total recapitalization in the
Reserve Bank of India on the details of
current financial year to 1.06 lakh crore
the first three-way merger among public
from 65,000 crore. This would augment
sector banks, which will create an entity
the lending capacity of public sector
that will become a 'systemically
banks and help them exit the RBI's
important financial institution.' The
Prompt Corrective Action framework,
Union Cabinet approved the
which imposes curbs on certain business
amalgamation of Dena Bank and Vijaya
operations.
Bank with Bank of Baroda. The merger
https://economictimes.indiatimes.com/industr
will come into force on April 1, 2019, y/banking/finance/banking/ government-rbi-
making the entity the country's second- in-talks-over-merger-of-three-psu-
largest public sector bank and third- banks/articleshow/67374848.cms Dated Jan
largest lender, with a combined business 04, 2019

of 14.8 lakh crore. The RBI has so far

identified the State Bank of India, the RBI PCA BANKS, QUEUE TO
largest lender, and privately owned ICICI CHECK OUT OF HOTEL
Bank and HDFC Bank as domestic CALIFORNIA IS SLOWLY
systemically important banks (DSIBs). FORMING
Banks designated as DSIBs have to Dena Bank will be the first lender to exit
provide for extra capital based on the the prompt corrective action (PCA)
RBI's assessment, in addition to meeting framework, the Reserve Bank of India's
regular capital norms. The additional (RBI) intensive care unit. But this exit is
Common Equity Tier 1 requirement for through death, as the lender would
DSIBs will become fully effective from cease to exist as an entity after April,
April 1, 2019. As per Financial services when its merger with Bank of Baroda
secretary Shri Rajiv Kumar, after the takes effect. It is hard to say when the
cabinet's approval that the key ratios of remaining 10 lenders still quarantined
the amalgamated entity are healthy. Shri under RBI PCA framework would come

24 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

out. But the recent commitment of the chance to exit PCA. Bank of India has the
government to infuse capital seems to lowest net bad loan ratio among PCA
suggest that the distance to the door just banks and also has a stronger capital
got reduced. At least, the investors adequacy ratio. A bank is dragged into
holding the scrips of these lenders seem PCA if it breaches thresholds for capital,
to think so, as six of them have surged bad loans, leverage ratio and return on
more than 10% in the last three weeks. assets. The Reserve Bank of India (RBI)
The optimism comes on reports that the looks into the performance of the
government will soon infuse about Rs. lenders on an annual basis to determine
27,000 crore into six PCA banks. It is whether they are strong enough for it to
also willing to pour in Rs. 41,000 crore remove restrictions imposed on them
over and above the original commitment under PCA. The government's capital
of Rs. 65,000 crore into 21 public sector infusion seeks to mend the capital ratios
banks as part of the bank of weak banks under PCA and also help
recapitalization plan. What investors are them make provisions to bring down the
betting on is that the government will be net bad loan ratio to below 6%. In a
the parent who gives the maximum nutshell, fresh money should enable
attention to the weakest child. Hence, banks to get the numbers to exit PCA. Of
the RBI PCA banks would receive the course, some relaxation of norms may
biggest chunk of funds. Indeed, in the still be required from the central bank,
previous round of infusion in fiscal year on parameters such as return on assets,
2018, the government did exactly that. since most state-owned lenders have
The fact that Bank of India received a been running losses. To be fair, some
whopping Rs.10,086 crore infusion last banks have shown marked improvement
month shows how serious the in strengthening their balance sheet, but
government is in putting life back into most others continue to lag. The
the lenders. According to analysts at government's principal economic
Kotak Institutional Equities, the lender adviser Shri Sanjeev Sanyal had chided
needed Rs. 4,100 crore additional capital RBI to have a Hotel California approach
in 2019-20 to offset provision to PCA. To borrow the reference to the
requirements. As of September, Bank of 1970s song of that title by American
India's common equity Tier-I ratio was rock band Eagles, the queue to check out
7.5%, far higher than the regulatory of the hotel is slowly forming.
minimum of 5.5% and the additional
capital infusion will boost this further.
Given the increased elbow room in
capital, the lender can write off loans to
bring down its net bad loan ratio below
the required threshold and exit PCA.
Analysts at Kotak believe that Bank of
India, Oriental Bank of Commerce and
Corporation Bank now have a strong

25 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

https://www.livemint.com/Money/b1qQ2NYdw total currency in circulation amounting

itA9M6OwQLK3H/RBI-PCA-banks-Queue-to- to Rs 18,037 billion at the end of March
check-out-of-Hotel-California-is-slo.html
2018, Rs 2000 notes accounted for 37.3
Dated: Jan 04, 2019
per cent, down from 50.2 per cent at the
PRINTING OF RS 2,000 NOTES
end of March 2017. The old Rs 500 and
NOT STOPPED, CLARIFIES Rs 1000 bank notes that were scrapped
GOVERNMENT in November 2016 accounted for around
Denying reports that the Reserve Bank of 86% of the total currency in circulation at
India (RBI) had stopped the production of the time.
Rs 2,000 currency notes, the finance https://www.livemint.com/Companies/dEB2b6
ministry mentioned that printing was MlHjRCPuJ18pMuyH/Rs-2000-currency-note-
planned according to the projected printing-stopped-government-rbi.html
requirement. Printing of notes is planned Dated: Jan 04, 2019
as per the projected requirement. As per
Economic Affairs Secretary Shri Subhash NAYARA ENERGY TAKES RBI,
Chandra Garg,more than adequate notes ED TO COURT OVER FEMA
of Rs 2,000 in the system with over 35% Nayara Energy, earlier known as Essar Oil
of notes by value in circulation being of Ltd, has moved the Bombay high court
Rs 2,000. He also mentioned that there seeking a stay on a Reserve Bank of India
had been no decision regarding Rs 2,000 (RBI) order fining it for alleged violation
note production recently. A media report of foreign exchange regulations and an
had earlier claimed the government had investigation launched by the
stopped the printing of the high-value Enforcement Directorate (ED) into the
currency note as it was being used for matter. RBI imposed a penalty of Rs. 4.96
“hoarding, tax evasion and money crore on the refiner after finding it guilty
laundering”. Another report, by PTI, of violating the Foreign Exchange
mentioned that printing of the Rs 2,000 Management Act (FEMA). According to
banknote, introduced post- the central bank, the company breached
demonetisationin November 2016, had the limit for transfer of foreign exchange
been brought down to a minimum. under the Liberalised Remittance
Immediately after the sudden decision to Scheme while issuing global depositary
ban old Rs 500 and Rs 1,000 currency shares in 2010. After the matter came to
notes by the government, the Reserve the attention of RBI, it imposed the
Bank of India had come out with the Rs penalty on 27 April 2017 and directed
2,000 note along with a new look 500 the ED to look into it in January 2018. The
rupee note as part of its remonetisation ED then initiated an investigation in
exercise. According to RBI data, there January 2018 and summoned the
were 3,285 million pieces of Rs 2,000 company's representatives to appear
notes in circulation at the end of March before it. Nayara Energy appealed RBI in
2017. A year later (on March 31, 2018), April 2018 to quash the penalty. This
there was only a marginal increase in the was, however, rejected by the central
number at 3,363 million pieces. Of the bank in May 2018. Nayara Energy, now

26 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

part of Russian energy major Rosneft https://www.livemint.com/Companies/dEB2b6

and Trafigura-United Capital Partners MlHjRCPuJ18pMuyH/Rs-2000-currency-note-
printing-stopped-government-rbi.html Dated
(UCP), said in its application to Bombay
Jan 04, 2019
high court: Pass an ad-interim order
SYNDICATE BANK MD DRAWS
staying the investigations being carried
UP GROWTH, CLEAN-UP PLANS
out by the Directorate of Enforcement,
Syndicate Bank MD Shri Mrutyunjay
Mumbai pursuant to the summons dated
Mahapatra has drawn up a multi-
January 11, 2018, issued by the
pronged plan to clean up bad loans,
Respondent No 3 (ED) to the Petitioner
improve advances and grow fee income.
No 1 (Nayara Energy). Holding that the
Shri Mahapatra is one of the six SBI
letter dated May 25, 2018, issued by the
deputy MDs chosen by the Centre to
General Manager, RBI, rejected the
head nationalized banks. The
application of Nayara Energy, invoking
government had decided to tap SBI with
the supervisory jurisdiction of RBI
the object of bringing some of the best
Governor is unreasonable, arbitrary,
practices of the country's largest bank
illegal and void as the same is in
into smaller nationalized banks. To
contravention of Rule 4(3) of Foreign
improve Syndicate Bank's Tier I capital
Exchange (Compounding Proceedings)
adequacy ratio well over the 6.7%
Rules 2000. The petition was filed on 2
prescribed by the regulator, its
August 2018 and there has been one
committee of directors will meet on
hearing so far, on 15 October. A division
January 7 to approve raising Rs 500 crore
bench of the Bombay high court,
by issuing equity shares to eligible staff
comprising Justices B.P. Dharmadhikari
members under an Employee Stock
and S.V. Kotwal, will hear the case again
Purchase Scheme. This capital-raising
on 25 January. Law firm Cyril Amarchand
exercise comes on the back of the
Mangaldas is representing Nayara
government investing Rs 2,460 crore in
Energy while law firm Udwadia & Co is
two tranches. As per Shri Mahapatra,
representing the central bank in the case
business plan is to build even as we are
A Nayara Energy spokesperson declined
repairing.As part of this mission, the
to comment on the ground that the case
bank has created a new stressed asset
was filed by the erstwhile management.
vertical. As a result, all troubled loans
In August 2017, Russian oil major
above this figure will be referred from
Rosneft and Kesani Enterprises (a
the branch to the head office directly
consortium of Trafigura group and UCP
without having to go to the zonal or
PE Investments) acquired a 49.13% stake
regional offices. To boost lending to
each in Nayara Energy Ltd (then Essar Oil
small businesses, the bank has taken
Ltd), along with captive port and power
two new initiatives. First, it is tying up
assets from the Essar group for $12.9
with FINTECHs to distribute loans. It has
billion. Nayara Energy operates a 20
already tied up with Atyati Technologies,
million tonne oil refinery at Vadinar in
a FINTECH with a technology platform
Gujarat and more than 4,473 petrol
'GANASEVA' to provide loans to hitherto
pumps across the country.
27 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

uncovered medium and small duly audited by the bank's statutory

enterprises for up to Rs 10 lakh. It has central auditors every year. PNB has also
also tied up with SREI Equipment apprised that no amount was taken back
Finance, which has a lion's share of the or withdrawn from the trusts' account.
infrastructure equipment finance market With regard to placement of the matter
in India. Under the partnership SREI will before the bank's audit committee of
originate loans for Syndicate Bank.The board (ACB), the bank has further
bank will do a proof of concept by selling apprised that the bank's annual financial
policies in three zones before taking up accounts for the financial year 2016-17
sales on an all-India basis. are audited by the bank's statutory
https://economictimes.indiatimes.com/industr central auditors and have already been
y/banking/finance/banking/ syndicate-bank- approved by the ACB and the board. The
md-draws-up-growth-clean-up-plans/
bank has also reported that it has
articleshow/67376741.cms Dated: Jan 04, 2019
initiated steps to further lay the reference
received as well before the ACB.
NO CASE OF PENSION,
https://economictimes.indiatimes.com
GRATUITY FUND DIVERSION
/industry/banking/finance/banking/no
AT PNB -case-of-pension-gratuity-fund-
As per Finance Minister Shri Arun Jaitley,
diversion-at-pnb-fm-arun-jaitley/
Punjab National Bank (PNB) did not
articleshow/67380433.cms Dated: Jan
engage in any misappropriation of
04, 2019
pension and gratuity funds in the past
and no amount was taken from the trusts'
NO JOB LOSSES DUE TO
account. The minister was responding to
a question asked by BJP MP Kirit Somaiya
MERGER OF PUBLIC SECTOR
if the government was aware of the BANKS
misappropriation of the Employees' As perFinance Minister Shri Arun Jaitley,
Pension Fund Trust and Gratuity Fund by there would be no loss of jobs due to
PNB in 2016-17, and, if so, the MP also merger of public sector banks. Earlier
sought details. PNB has informed that this week, the Cabinet approved merger
there is no misappropriation of funds, of Vijaya Bank and Dena Bank with Bank
and that the pension fund and gratuity of Baroda. As per Shri Jaitley, there would
fund trusts are separate entities and the be no job losses due to merger of the
bank is not authorized to operate the banks and that the move would create a
trusts' accounts or transfer any amount bigger entity like the State Bank of India
from the trust. The bank has further (SBI). The cost of lending could also
mentioned that adequate funds for become cheaper. During the Question
pension and gratuity are maintained as Hour, the minister mentioned that out of
per the actuarial valuation report without the 21 public sector banks, 11 are under
any exception that the same are in strict PAC (Prompt Corrective Action)
compliance of accounting standards. framework. PAC is initiated against
PNB has informed that these funds are banks that have high levels of Non-

28 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Performing Assets (NPAs). The curve of Those studying Nursing Courses formed
non-performing assets would go down the largest category that was unable to
and that the Insolvency and Bankruptcy repay their loans constituting 21.28% of
Code has helped in bringing back around the total education sector bad loan
Rs 3 lakh crore into the system. The State portfolio of banks. Engineering students
Bank of India (SBI) and other public stood third at 9.76% of the total bad loan
sector banks have been making portfolio till March 2018. Loans
operational profits. They incurred losses disbursed towards nursing course in
due to provisioning for non-performing 2017-18 stood at Rs 2,263 crore as
assets. With regard to recapitalization of compared to Rs 1,154 crore in the
Public Sector Banks (PSBs), the minister previous fiscal. RBI declines to share bad
mentioned that Rs 51,533 crore has loan data with SEBI. The Reserve Bank of
been infused into them in the current India has refused to share list of certain
financial year till December 31. In the corporate entities which have defaulted
budget estimates of FY 2018-19, Rs on their loans with market regulator,
65,000 crore has been allocated for Securities and Exchange Board of India
recapitalization of PSBs and an amount (SEBI). Minister of state for finance Shri
of Rs 51,533 crore has been infused in Pon Radhakrishnan informed Lok Sabha
PSBs till December 31, 2018. The in a written statement that SEBI had
minister also mentioned that in recent sought the information in order to
past, Rs 90,000 crore was allocated in enable it to assess the impact on
the Union Budget and infused in various investment vehicles which could have
PSBs by the government during financial invested in such entities. SEBI has further
year 2017-18 informed that, RBI had expressed its
https://economictimes.indiatimes.com/industr inability to share the list of such troubled
y/banking/finance/banking/no-job-losses- accounts primarily due to the reasons of
due-to-merger-of-public-sector-banks-
such defaults/ NPAs not being willful
finance-minister-arun-jaitley/articleshow/
67379951 .cms Dated Jan 04, 2019
defaults and the issue of customer
confidentiality. It was informed by SEBI
STEEP RISE IN BAD LOANS IN that the market regulator had sought
information from the Reserve Bank of
EDUCATION SECTOR
India (RBI) on list of certain corporate
Banks have reported a steep rise in
entities who have defaulted on bank
education loans going bad. As per data
credit and/or been classified as Non-
provided by 'Indian Banks Association
Performing Assets (NPA). In a separate
(IBA) non performing assets or NPA in
response the government informed the
education sector have risen to 8.97% at
lower house that as per data till August
the end of March 2018, as compared
2018, state run lenders have registered
with 7.29% in March 2016. The Lok
2,571 FIRs against willful defaulters,
Sabha was informed by the government
9,363 suits have been filed for recovery
that bad loans of PSBs in education
from them, and action has been initiated
sector were at 5.70% in March 2015.
under the Securitization and
29 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

Reconstruction of Financial Assets and strike call materialises, "the workmen of

Enforcement of Security Interest Act, our bank may take part in the proposed
2002 in respect of 7,616 cases of willful strike on the mentioned date, in which
defaulters occasion the normal working of the
https://economictimes.indiatimes.com/industr branches/offices of the Bank may get
y/banking/finance/banking/steep-rise-in- affected during the day". Ten central
bad-loans-in-education-sector/articleshow
trade unions- INTUC, AITUC, HMS, CITU,
/67383941.cms Dated: Jan 05, 2019
AIUTUC, AICCTU, UTUC, TUCC, LPF and
SEWA have also called for a nationwide
BANKING SERVICES MAY BE
general strike on January 8-9 against
HIT AS BANK UNIONS CALL what they call "anti-people" policies of
FOR STRIKE ON JANUARY 8-9 the Centre and have placed a charter of
Banking services are likely to be affected 12 demands before the central
on January 8-9 as a section of PSU bank government. Earlier on December 26,
employees would go on a two-day strike 2018, nine bank unions or close to 1
in support of the nation-wide strike call million employees of various banks,
given by 10 central trade unions against including private lenders, had observed
the government's alleged anti-worker a one-day strike to protest against the
policy. The All India Bank Employees proposed amalgamation of Vijaya Bank
Association (AIBEA) and Bank Employees and Dena Bank with Bank of Baroda
Federation of India has informed the https://economictimes.indiatimes.com/industr
Indian Banks' Association (IBA) of the y/banking/finance/banking/banking-services-
two-day nationwide strike on January 8- may-be-hit-as-bank-unions-call-for-strike-
9, 2019, IDBI Bank said in a filing to the on-january-8-9/articleshow/67397447.cms
Dated: Jan 05, 2019
BSE. In a stock exchange filing,
Allahabad Bank mentioned that the
issues and demands are of industry level
NEARLY 9 PERCENT OF
and strike call is also given at industry EDUCATION LOANS BY PSBS
level. Therefore, if the strike takes place, TURNED BAD IN FY 18
the functioning of branches of the bank Nearly 9 per cent of the education loans
may be affected. The bank is taking all extended by public sector banks (PSBs)
the necessary steps in terms of the were categorized as non-performing
existing guidelines for smooth assets in the last financial year,
functioning of bank's branches/offices according to the government. As per
on the day of strike(s), in the event the information provided by Indian Banks'
strike materializes. Public-sector Bank Association (IBA), NPAs of PSBs increased
of Baroda mentioned that in the event of from 7.29 per cent as on March 31, 2016
AlBEA and BEFI proceeding on strike on to 8.97 per cent as on March 31, 2018.
January 8-9, 2019, the functioning of Among the NPAs of PSBs under
bank's branches/offices in some of the education category, the highest 21.28
zones may be affected. Private sector per cent originated from nursing courses
Karur Vysya Bank mentioned that if the followed by engineering (9.76 per cent),

30 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

other professions (9.49 per cent), to reduce the wide gap in their
medical profession (6.06 per cent) and compensation package and that of the
MBA (5.59 per cent). As at March 31, private sector peers. Public sector banks
2015, education sector bad loans stood (PSBs) ought to step up hiring at junior
at 5.7 per cent. The banks received and middle levels to ensure there is no
repayment of education loans worth Rs vacuum following retirement of large
13,766.82 crore in 2017-18; Rs number of employees in the near future,
11,548.87 crore in 2016-17; Rs the lawmakers said in a report to
9,124.95 crore in 2015-16 and Rs 8,537 Parliament. In PSBs, 95 per cent of GM
crore in 2014-15. In a separate question level employees, 75 per cent of Deputy
about loans to micro, small and medium GM level employees, and 58 per cent of
enterprises (MSMEs), more than Rs 9.06 Additional GM level employees will retire
crore was disbursed during 2017-18 in 2019-20. The Standing Committee on
across all states and union territories. In Finance has observed there has been
2016-17, the MSME sector got loans of "strangely a discernible" fall in the
more than Rs 7.89 lakh crore from number of candidates registering for
banks, Rs 8.77 lakh crore in 2015-16 clerical, probationary officer and
and Rs 7.76 lakh crore in 2014-15. As specialist officer positions at PSBs as per
per the minister government and the data available from the Institute of
Reserve Bank have taken several steps to Banking Personnel Selection. The
ensure access of credit to MSMEs. He committee believes that while banks
also informed the House that the online reducing their recruitment could be a
lending portal with a majority ownership factor, undue stress and work pressure
of 6 PSBs and financial institutions, their from long hours and difficult working
associate companies have been conditions without commensurate
launched to provide loans of up to Rs 1 compensation/incentive package may
crore in 59 minutes. be discouraging prospective candidates.
https://economictimes.indiatimes.com/industr The panel headed by veteran Congress
y/banking/finance/banking/nearly-9-per- leader Shri M Veerappa Moily has
cent-of-education-loans-by-psbs-turned-
expressed apprehension that there
bad-in-fy18/articleshow/67381988.cms
could be "sudden vacuum" because of
Dated: Jan 06, 2019
large number of retirements in the near
future in state-owned banks at various
FAST-TRACK HIRING TO
levels. The committee desires that
OVERCOME MANPOWER proper manpower planning and human
SHORTAGE DUE TO resource development strategies should
RETIREMENTS: be put in place in PSBs, so that the
PARLIAMENTARY PANEL TO staff/officers groomed into the system,
PSBS remain motivated and a sudden vacuum
The committee has made a case for more is not created at the junior/middle levels
incentives and a better remuneration due to manpower shortage. Further, the
package for senior management of PSBs committee has made a case for more
31 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

incentives and a better remuneration banks, while ensuring the economic

package for senior management of PSBs viability of ATMs for all stakeholders, so
to reduce the wide gap in their that a forced cash crunch is not imposed
compensation package and that of the on the public. The panel headed by
private sector peers. As per the report, senior Congress leader Shri M Veerappa
the committee has desired that in case Moily also noted that RBI's
the lateral mobility policy of senior remonetisation drive has not
officers in PSBs at the Board level is being augmented/resolved the cash supply to
considered by the government by ATMs in rural/semi-urban areas, forcing
promoting DMDs of SBI, then the shutdown of many ATMs. The committee
"movement should be made both ways, has expressed concern that "there are
that is from SBI to PSBs and from PSBs to just not enough" ATMs being installed or
SBI" added to cater to the rising demand for
https://economictimes.indiatimes.com/industr cash in an expanding economy, even as
y/banking/finance/banking/fast-track-hiring- more and more debit cards are being
to-overcome-manpower-shortage-due-to-
issued and large number of Jan Dhan
retirements-par-panel-to-psbs/articleshow
/67404318.cms Dated: Jan 06, 2019
accounts opened by banks. ATMs have
become an important channel for
PARLIAMENT PANEL NUDGES withdrawing money even after the close
of banking hours. Digital transactions
RBI TO FIX THE PROBLEM
are also catching up. Besides ATMs,
A parliamentary panel has asked the
basic banking services are provided by
Reserve Bank to address the problem of
business correspondents through their
perpetually dysfunctional ATMs so as to
micro ATMs.
avoid any situation of forced cash
https://economictimes.indiatimes.com/industr
crunch.The Standing Committee on
y/banking/finance/banking/dry-atms-
Finance has also asked banks to install parliament-panel-nudges-rbi-to-fix-the-
adequate number of ATMs. As per a data problem/articleshow/67403917.cms Dated: Jan
of RBI, there were 2,21,492 Automated 06, 2019
Teller Machines (ATMs) in the country as
at September-end 2018. These include ANDHRA BANK TO DEPLOY
1,43,844 ATMs of public sector banks, OVER 1,600 BUSINESS
59,645 ATMs of private banks and CORRESPONDENTS TO BOOST
18,003 of foreign banks, payments
FINANCIAL INCLUSION
banks, small fiance banks and White
PROGRAMME
Label ATMs (WLAs), which are owned and
State-owned Andhra Bank will deploy
operated by non-bank entities. As
over 1,600 business correspondents to
digital transactions have not become
provide a host of services like account
anywhere near universal, the committee
opening, door-step banking, ATM
would urge upon RBI to pursue the
deployment and NPA recovery under its
lingering problem of dysfunctionality as
financial inclusion project. The bank will
well as shortage of ATMs vigorously with
deploy these business correspondents
32 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

mainly in Andhra Pradesh and expected to operate from different

Telangana. The lender has been locations in other states. Andhra Bank
implementing the financial inclusion will give priority to the authorized
project since 2010 through the business functionaries of well-run self-help
correspondent model with micro groups (SHGs) which are linked to banks
ATMs/kiosk banking technology. to act as BC agents. Besides, any
Among others, the business individual or entities approved by the
correspondents (BCs) may also be bank, individuals including retired bank
assigned with other financial and non- employees, retired government school
financial transactions like recovery of teachers, kirana shop owners, dealers
loans, enrolment of social security working in public distribution system,
schemes as well as mobilization of new retired government employees and ex-
business for the bank. They may also be servicemen may also be deployed. As per
required to carry on with all government the proposal document, the business
schemes including Aadhaar, mobile and correspondent agent's age should be
PAN seeding, insurance sales, banking preferably between 20 to 40 years, and
transactions and any new initiatives should not exceed 50 years. At present,
taken up by the bank from time to time. Andhra Bank uses separate Financial
The bank has invited bids from corporate Inclusion Gateway (FIG) solution
business correspondents (CBCs) or procured from a third-party vendor for
vendors, who will oversee the all financial inclusion transactions. The
deployment of business lender said it also proposes to deploy
correspondents, by January 31, 2019. 200-1,000 direct business
Andhra Bank invites proposals for correspondents over five years. The
selection of corporate business bank will procure the devices and the
correspondents (CBCs) for end-to-end selected bidder to provide application
implementation of financial inclusion software for deployed devices and also
project. As of now, the bank has facilitate end-to-end operations by
deployed about 2,200 BC agents acquiring the transactions.
through corporate business
correspondent (CBC) model across BANDHAN BANK SET TO
Andhra Pradesh, Telangana, Odisha and ACQUIRE GRUH FINANCE IN
some locations of Maharashtra, Tamil SHARE SWAP DEAL
Nadu, Chhattisgarh and Bihar. The Bandhan Bank Ltd is set to acquire
selected vendor will deploy all the mortgage lender Gruh Finance Ltd via a
banking applications on the micro share swap, a move aimed at cutting the
ATMs/ mobile devices/kiosk without any bank's promoter holding and expanding
extra cost to the bank. As per the project, its housing finance portfolio, two people
the bank wants to deploy 922 BC agents with direct knowledge of the
in Andhra Pradesh and 695 in Telangana development said. Shareholders of Gruh
by March 2019 apart from some mobile Finance, which is 57.83% owned by
business correspondent agents who are Housing Development Finance Corp.
33 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

(HDFC) Ltd, will receive three shares of Bandhan Bank. The proposed deal
Bandhan Bank for every five shares held entails HDFC emerging as a promoter for
in the home financier, the people said. Bandhan Bank, apart from being the
The swap is based on the six-month promoter of India's largest private lender
weighted average price of the shares of HDFC Bank, where it owns 19.72% as of
the two companies.As a part of the deal, 30 September. RBI also does not allow
HDFC will also cut its stake further by the promoter of one bank to hold more
around 5.5% (in the merged entity) by than 10% in another bank as a promoter.
selling shares to a clutch of public To meet this requirement, HDFC is in
institutional investors or in the talks with a clutch of institutional
secondary market so that HDFC's total investors to sell at least 5.5% in the
holding as a promoter in the combined combined entity. The report, however,
banking entity is brought down below did not specify any modalities of the
10%, which is in accordance with the deal. In regulatory filings in response to
bank ownership norms stipulated by RBI exchanges seeking clarification on the
(Reserve Bank of India).The merger could news report, the two companies had
be announced as early as this week declined to comment on what they
following board meetings of the two termed market speculation. In the
companies. RBI's banking license rules September quarter, Gruh Finance
required Bandhan Financial Holdings Ltd disbursed loans worth Rs. 2,738 crore.
to halve its stake from 82.3% to 40% The loan book stood at Rs. 16,663 crore
within three years of starting business. at the end of the quarter. The home
RBI had in September placed restrictions financier, which is primarily focused on
on Bandhan Bank for its failure to meet retail segment, recorded a net profit of
the rules by freezing branch expansion Rs. 220 crore for the first half of the
and remuneration of founder and chief current fiscal.
executive Shri Chandra Shekhar Ghosh. htps://www.livemint.com/Companies/ZdcrOpei
Bandhan Bank currently commands a vAwSFG7ntJpBlI/Bandhan-Bank-set-to-
acquire-Gruh-Finance-in-share-swap-
market value of around Rs. 63,000 crore,
deal.html Dated: Jan 06, 2019
while Gruh Finance has a market cap of
around Rs. 23,000 crore. The six-month
NPA LEVEL OF BANKS ON
volume weighted average prices of
Bandhan Bank and Gruh Finance are at
THE DECLINE, RBI GOVERNOR
Rs. 528.61 and Rs. 318.50, respectively, SHRI SHAKTIKANTA DAS
on BSE. On that basis, the merger will RBI's recent FSR report said stress tests
result in HDFC's ownership falling to suggest there would be further
15.44% in the merged entity and improvement in banks' asset quality in
Bandhan Financial's share dropping to the new year. Reserve Bank of India (RBI)
around 60.27%. Given that 'Bandhan Governor Shri Shaktikanta Das
Financials stake is still above the RBI- expressed satisfaction over
stipulated 40% norm, it will have to take performance of the banking sector
more steps to cut its ownership in saying bad loans have declined,

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 I N D I A

particularly of state-owned banks. The government bond yields, and quickening

RBI has also initiated stakeholder bad loan recoveries should buttress the
consultation on governance reform in profits at Indian lenders in the December
the banking sector. Various initiatives quarter. Bank credit growth has revived
taken by the government have yielded in the second half of the fiscal, helped by
results, with the bad loans of public a favorable base effect and demand from
sector banks (PSBs) declining by over Rs individuals to buy homes, cars and other
23,000 crore from a peak of Rs 9.62 lakh consumption goods and services.
crore in March 2018. There is Liquidity constraints at NBFCs have
considerable amount of improvements helped banks step up their lending in the
which have to be sustained if banks have fiscal third quarter. Bank credit growth
to fulfil their responsibility and if some improved to a year-on-year rate of 15%
of the banks have to become healthy. in the fortnight ended December 21, the
The RBI's recent FSR report said stress latest RBI data showed, compared with
tests suggest there would be further 10% growth recorded a year earlier.
improvement in banks' asset quality in Analysts said stronger demand for loans
the new year. In the baseline scenario, and better margins are likely to help
the gross NPA ratio might decline from banks in the third quarter. Jefferies
10.8 per cent in September 2018 to 10.3 expects an aggregate 28% on-year
per cent in March 2019 and 10.2 per cent increase in banking profits in the
in September 2019. After a prolonged quarter. Overall credit growth has picked
period of stress, the load of impaired up steadily for banks, although personal
assets was receding, with banks loans continue to grow strongly, credit
reporting their first half-yearly decline in to the services sector has picked up in
the gross NPA ratio since September the past few months. Large corporate
2015. On governance reform in the infrastructure credit has picked up over
banking sector, it is an important issue the past few months, albeit from a low
and the RBI has initiated consultation base. Trading income should provide
with various stakeholders as to what support to banks due to fall in yields. The
kind of reforms can be brought in. value of bonds rises when yields fall.
https://economictimes.indiatimes.com/industr Yields on the benchmark 10-year
y/banking/finance/banking/npa-level-of- government bond dropped to 7.36% at
banks-on-the-decline-rbi-governor-
the end of December from 8% at the start
shaktikanta-das/articleshow/67422586.cms
Dated: Jan 07, 2018
of the quarter, and that should help
banks make mark-to-market gains on
GOOD CREDIT GROWTH TO their investments. G-sec yields have
sharply declined versus the consensus
HELP BANKS' NUMBERS
view, two months ago, of rising interest
Higher credit demand, better pricing
rates. This entails positive earnings
power due to liquidity woes at
impact for banks in the form of higher
competing para banks, more trading
treasury gains, more so for PSU banks
income because of the decline in
than private. The recovery of bad loans is
35 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

another area benefitting lenders. Banks conform to RBI guidelines issued after
will benefit from the improvement in the Supreme Court's judgment on
recoveries by the upgradation of the Aadhaar that barred private companies
Jayaswal Neco, Binani Cements and from using the database for paperless
Uttam Galva loan accounts. Jayaswal verification of customers. There is no
Neco, a maker of cast iron pipes, was in eKYC, the RBI has not told us anything
the second list of loans referred to the clearly about the alternative KYC
bankruptcy court by RBI. It owed lenders mechanisms that they plan to approve.
Rs 3,522 crore. Last month, some The deadline is just a few weeks away
lenders led by SBI sold their loans to an and we cannot adhere to (it) with this rate
assets reconstruction company headed of progress.There have been discussions
by Bank of America. SBI has recovered around alternative KYC mechanism like
65% of its Rs 1,363 crore dues from the using video-based verification or XML-
company. based KYC, but neither has been
https://economictimes.indiatimes.com/industr formally approved by the banking
y/banking/finance/banking/good-credit- regulator. Mobile wallets kickstarted the
growth-to-help-banks-numbers/articleshow
Indian digital payment revolution about
/67430351.cms Dated: Jan 08, 2018
four years ago but now only a few such
companies remain in the fray. Most of
RBI KYC DEADLINE MAY the PPI license holders such as
PUNCH A HOLE IN WALLET MobiKwik, PhonePe and Amazon Pay are
COMPANIES PLANS either focusing on Unified Payments
As per payments industry executives, Interface business or have diverged into
most of India's mobile wallets may other fintech activities. A large chunk of
become non-operational by March, as the wallets which were used for
they fear companies will be unable to remittance have anyway moved to the
meet the central bank's deadline to business correspondent channels
complete verification of all customers by because of regulatory restrictions. Only
the end of February 2019. Prepaid standalone wallets will be directly
payment instruments (PPIs) or mobile affected by the (current impasse). As per
wallets were mandated by the Reserve Shri Sachin Seth, FINTECH leader for
Bank of India in October 2017 to capture India, Middle East and Africa for EY, only
all information required under the those mobile wallets that have
know-your-customer (KYC) guidelines. developed compelling use cases will be
So far, companies have been able to able to sustain. The entire proposition
verify just a fraction of their total user around ease of opening wallets is not
base, and are yet to complete biometric there anymore; hence it is now only
or physical verification of the majority of about use cases where wallets will be a
users. More than 95% of the mobile staging area where you can store money
wallets in the country could stop being and transact. After the central bank
operational by March. The payments directed wallets to become fully KYC
industry has been scrambling to compliant payment instruments in 2017,
36 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

companies like PhonePe, Amazon Pay Association (AIBEA) and Bank Employees'
and Paytm began asking customers for Federation of India (BEFI) have supported
identification documents. Paytm, which the strike, which has impacted banking
had received a banking license, went all operation where these two unions are
out to use biometric dongles and field strong. However, the operation in SBI
agents to convert its existing wallets into and private sector banks remained
full KYC ones and to also open bank unaffected as other seven unions in the
accounts. A company executive banking sector are not part of the strike.
estimates that Paytm has managed to Many public sector banks have already
convert 70% of its user base into full KYC informed their customers about likely
ones. But other payment companies impact on services if strike materializes.
have struggled. These companies are If the strike materializes, a section of the
hoping that Parliament approves bank's employees may take part in the
pending legislation, which allows proposed strike on the said dates, in
voluntary use of the Aadhaar number by which case, the normal functioning of
consumers for online as well as offline the branches/offices of the bank may get
verification. Looking at the convenience affected. A two-day strike on January 8
factor, consumers would opt for Aadhaar and 9 has been called by the central
verification, but it all depends on how trade unions against the alleged
the Act is passed, it would have helped if repressive policies for workers adopted
we could get some assurance from the by the government.
central bank https://economictimes.indiatimes.com/industr
https://economictimes.indiatimes.com/industr y/banking/finance/banking/banking-
y/banking/finance/banking/rbi-kyc-deadline- operations-partially-affected-due-to-trade-
may-punch-a-hole-in-wallet-companies- union-strike/articleshow/67432321.cms Dated
plans/articleshow/67430125.cms Dated Jan 08, Jan 08, 2018
2018
BANKS PROPOSE $900
BANKING OPERATIONS MILLION TURNAROUND PLAN
PARTIALLY AFFECTED DUE FOR JET AIRWAYS
TO TRADE UNION STRIKE Local lenders to Jet Airways (India) Ltd,
A two-day strike on January 8 and 9 has led by State Bank of India (SBI) proposed
been called by the central trade unions a $900 million resolution plan,
against the alleged repressive policies comprising fresh equity infusion and
for workers adopted by the government. restructuring of $450 million of its
Banking operations have been affected loans. The Jet Airways' turnaround plan,
in some parts of the country as a section if approved by all stakeholders, will
of employees refrained from work in trigger a change in Jet Airways'
support of the two-day strike call given shareholding, with founder chairman
by 10 central trade unions to protest Shri 'Naresh Goyals stake falling below
against alleged anti-labor policies of the the current 51%. The resolution plan was
government. All India Bank Employees' shared with Jet Airways' lessors and

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 I N D I A

vendors at a meeting chaired by SBI and December that Etihad Airways has
attended by the airline's senior offered to guarantee loans worth $150
management, including Goyal and a million for Jet Airways to keep the airline
representative of Etihad Airways PJSC, operational.According to estimates, Jet
which holds a 24% stake. While the finer Airways needs close to $500 million
details are still being worked upon, the between now and April to meet
broader contours entail that Shri Naresh repayment obligations and manage
Goyal and Etihad will together infuse operating expenses.There is a
$450 million in the company, while the possibility that Goyal may cede
Indian lenders will restructure another operational control to Etihad, which can
$450 million of the airline's debt, which increase its stake to 49% under the
is up for maturity between now and current regulation. Requests for
March this year. The final plan will be put comments sent to Jet Airways and SBI
in place by the end of January and the remained unanswered until publishing
lenders are hopeful that the resolution of this story.An Etihad Airways
plan will be in force by 31 March this spokesperson said the airline “does not
year, which is well before the 180-day comment on rumour or speculation”.Jet
period under the Reserve Bank of India's Airways, which has been facing financial
(RBI's) 12 February circular. The 12 turbulence for a while, has been in talks
February RBI circular relates to how with potential investors to raise fresh
lenders need to deal with stressed equity. The various fundraising options
assets. The circular said a resolution it has explored include a stake sale in its
professional should be appointed within loyalty programme, Jet Privilege Pvt. Ltd,
180 days for defaulting accounts with and a stake sale in the airline to the Tata
aggregate exposure of Rs. 2,000 crore group. While the stake sale in the loyalty
and above. Jet Airways defaulted on its programme drew interest from several
debt repayment on 1 January, following private equity funds, including TPG
which ratings agency ICRA Ltd cut from C Capital and Blackstone Group,
to D the long-term rating on loans and discussions with the Tata Group ended
bonds issued by the airline, which has over Goyal's future role at the airline.
reported three consecutive quarterly https://www.livemint.com/Companies/
losses of over Rs. 1,000 crore each since bxFwwHNTpH6sbmavKjoujK/Banks-
the quarter ended March 2018. The propose-900-million-turnaround-
lenders have also assured Jet Airways' plan-for-Jet-Airways.html
vendors and lessors that their dues will Dated: Jan 09, 2018
be cleared in three tranches till April, by
which time the lenders expect the BANKS UNCERTAIN ABOUT
payment cycle to become regular. As
RECOVERING THEIR DUES
part of the restructuring, the lenders
have also proposed a moratorium on
AFTER FEO TAG ON SHRI
repayments on loan facilities which are VIJAY MALLYA
due till April. Mint reported on 7 Lenders to Shri Vijay Mallya seem

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 I N D I A

uncertain about the fate of their dues say the new law would lead to some
after the beleaguered liquor baron was changes in the procedure for banks
declared a Fugitive Economic Offender making their claims. The FEO is a
(FEO) last week, with provisions of the completely different Act and banks will
new law allowing the government and its eventually have to file a separate
agencies to confiscate the defaulter's application in an appropriate forum to
assets. Confiscation makes the seized claim their dues.
assets the property of the government, https://economictimes.indiatimes.com/industr
leaving some bankers rather worried y/banking/finance/banking/banks-uncertain-
about-recovering-their-dues-after-feo-tag-
that they may lose the right to recover
on-vijay-mallya/articleshow/67450105.cms
their loans. Under the provisions of the
Dated Jan 09, 2019
Prevention of Money Laundering Act
(PMLA), the properties were attached and
ICICI'S SHRI SANDEEP
lenders could make an application for
the sale and release the assets to the new
BAKHSHI IS CLEARING
owners, helping recover their dues. The COBWEBS AS THE BANK
new act, however, is unclear on this CEO
provision. Top legal experts say the laws ShriBakhshi has started on a similar
applicable under PMLA are not note. If he pulls it off, he may well turn
applicable under FEO and bankers will out to be India's Gorman. The 11th floor
need further clarity before staking claim executive dining arena at the ICICI Bank
to the confiscated assets estimated at Towers in Mumbai's financial district had
Rs. 12,200 crore. The lenders, as an unwritten rule on who sits where on
interested parties, were part of the the table. That was mostly driven by
application filed by the Enforcement hierarchy. That has changed since Shri
Directorate (ED) to declare Mallya a Sandeep Bakhshi occupied the corner
fugitive. However, there is no clarity on office in October 2018. And that's just
how to make the claims. There is a the beginning. Succeeding someone as a
provision under this law for interested chief executive when the scenario is
parties like creditors and even unrelated normal is an ideal position to be in, but
parties, who could have purchased Shri Bakhshi does not have that luxury.
assets from Mallya that were later Even for troubled institutions, the
attached. Bankers say they hold the first challenge mostly would be either
right on pledged shares as a charge was financial or a tarnished public image. For
created while disbursing loans to Shri Bakhshi, after a tumultuous 2018 for the
Mallya and his companies. The ED is bank, it is both. As Shri Bakhshi sets out
compiling a list of immovable property to reinvent the institution that has
for confiscation. Bankers said under the played a role for over six decades in
PMLA, the ED could sell assets where different avatars, the job on hand is to
there is no charge, but banks held the remove the cobwebs that have grown
right to pledged shares where a charge over the years, project an image that's
has already been created. Top lawyers compliant and friendly, and also lay out a

39 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

path that would be less bumpy in the as the CEO. Enterprises evolve to survive
future. Along the way, there would be and thrive, else they perish. The Global
compromises and confusion though. Financial Crisis showed how giant
The intentions are right and the strategy financial services firms such as
is clear. But the more difficult part is to Citigroup, Morgan Stanley and JPMorgan
junk past priorities and direct staff to reoriented themselves to grow. In the
think and act differently. Now, they will local market, ICICI Bank is a standing
be averse to sectors where they have example of how reinvention helped it
burnt their fingers. Shedding the past is survive the onslaught of market
more important for a struggling economy in the 90s, when its peers of
institution than executing new ideas yesteryears such as IFCI and IDBI Bank
because the weight of the past if allowed struggle to stay afloat. Under the
to fester could leave any new initiative universal bank model spearheaded by
ineffective. In what could well be the Shri Kamath, it grew substantially in
most significant statement of his retail while still doing project funding.
stewardship, Shri Bakhshi has When the dependence on wholesale
mentioned no to project funding the funding got the bank into trouble, his
seed which was sown in 1994 as successor Ms. Kochhar fixed it by
Industrial Credit and Investment growing retail deposits aided by
Corporation of India that evolved into executive director Rajiv Sabharwal. When
ICICI Bank. The aversion to project even the state-run banks are struggling
funding is understandable. The banks' for low-cost deposits, ICICI Bank has
stressed assets bad loans plus the nearly half of its deposits in the low-cost
restructured loans is at 8.54% of total current and savings accounts. Just like
loans. The chunk of bad loans is because Shri Kamath's record Rs 25,000-crore
of lending to power projects and other equity helped it tide over the stress, the
infrastructure related ones. While that retail buffer built by Ms. Kochhar could
may be the way to go in an era when well be the springboard for the next take
individual consumers have become more off. With the buffer of low-cost funds, it
dependable than billionaire corporates is looking to expand the retail footprint
with stretched balance sheets and poor enabled by cost-effective technology
equity positions, every burnt lender is and into small and medium enterprises,
going the same way. But that means which have now become bankable
compromise on size. The days of heady because of the Goods and Services Tax.
assets growth may well be behind it. Retail, which comprises 57.3% of its
Under Ms. Chanda Kochhar, who quit last overall loans, may grow further in the
year amid a probe into her corporate next few years. SME which is at 4.6%, will
governance practices, the bank's assets also see a fresh boost with the its centres
grew 1.5 times to Rs 8.74 lakh crore in sanctioning loans nearly doubling to 70.
September 2018, from Rs 3.79 lakh Risk-adjusted profitability will go up.
crore in March 2009, the year when she Some of the mistakes of last time will not
was elevated to succeed Shri KV Kamath be repeated. Algorithms would get

40 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

bigger than humans at ICICI retail, as it the key functions of cost control and
pushes the 'insta' of everything. It will manpower allocations were determined
eliminate paper and human intervention at the head office, but that has since
to the last level. The direction on been given to local offices and branches
everything is insta. Cost of acquisition is with specific targets. This would enable
zero. No one questions decisions. more freedom to managers at midlevel
Conserve branch staff for advisory, and generate more involvement and
despite turning to technology, it would responsibility. Shri Bakhshi has been
net hire 3,500 staff this fiscal. Despite working towards easing internal
the well-meaning directional changes, processes and removing bottlenecks to
projects could falter if things on the enable faster turnaround time for
ground do not change. It could hold true customers.A shift to prudence always
for ICICI Bank as well. So, how is the leads to lower growth rate and investor
execution planned? Decongest.Cutting anxiety, but ultimately leads to
the clutter in the process is the priority sustained growth as seen with the likes
for Bakhshi. There is a lot of delegation of Morgan Stanley under James Gorman
that's going on at the front end. As an since the credit crisis. The most
insider, if a job took two days, now it important thing we are focused on is the
happens in less than half a day. culture of our management team to
Processes that have accumulated over never put our shareholders or society in
the years are getting weeded out. Earlier, the kind of jeopardy like in 2008.

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 I N D I A

https://economictimes.indiatimes.com/industr people, and Suryoday 200-250 people.

y/banking/finance/banking/icicis-sandeep- Other small-finance banks are also
bakhshi-is-clearing-cobwebs-as-the-bank-
expanding their networks. With 464
ceo/articleshow/67464881.cms Dated:
Jan 10, 2019 branches, Ujjivan has hired 5,729 people
SMALL BANKS TO HIRE 5,000 in the last nine months to take the
MORE STAFF IN 3 MONTHS current staff strength to 14,304. The
Banking in India is spreading beyond its diversification at these smallfinance
urban bailiwick, and small banks are banks into areas such as two-wheeler
taking something more durable than just financing, affordable homes, and SME
loan funds to the hinterland – financing requires a new talent pool.
jobs. AU, Ujjivan, Utkarsh, Suryoday and Smallfinance banks have intensified
ESAF, the leading names in India's small- their recruitment drive creating job
finance banking business, are set to hire opportunities in smaller towns and
about 4,000-5,000 people in smaller cities. AU Small Finance Bank's human
towns between January and March, resource head Shri Manoj Tibrewal
executives heading the expansions at mentioned that the bank would recruit
the lastmile lenders to the around 500 people every month
underprivileged told ET.While hiring has between January and March for branch
been a continuous process in the banking business to add to the current
fledgling small-finance banks, the pace strength of 13,000 people. This hiring is
is quickening as all these lenders are in part of our preparation for next year as
the final lap of opening branches in line this is the season for campus
with their initial plans.Larger branch placements. Small-finance banks, as a
footprint is leading to more job creation group, have total loans outstanding of Rs
and relocation opportunities for people 24,972 crore as on Septemberlast year
to want to move to their home-towns. with a share of 17% in the country's Rs
AU Small Finance Bank is looking to hire 1,46,741-crore microfinance portfolio.
about 1,500 people in the next three These banks are hiring both fresh
months, while Ujjivan would add about graduates and experienced bankers.
600 people. ESAF wants to hire 500 Talent with experience at overseas
lenders wants to work in these banks
42 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

that have a restricted lending mandate. related parties as a condition for fund
According to TeamLease, the jobs on based working capital finance by way of
offer include those in analytics, investor pre-shipment or packing credit in
relations, operational risk, and branch foreign currency. Also, all existing
management. borrowers with outstanding of Rs 50
https://economictimes.indiatimes.com/industr crore or more would have to convert
y/banking/finance/banking/small-banks-to- partnership firms into corporates by
hire-5000-more-staff-in-3-months/
December 2019 - a move that would
articleshow/67464600.cms Dated Jan 10, 2019
increase their tax liability. Diamond
houses that are unable to transform into
STRICT BANK RULES FORCE
corporates would have to bring in
CHANGES IN DIAMOND additional collateral and pay half a
TRADE PRACTICES percentage point higher interest on
A year after the Nirav Modi-Mehul Choksi loans. SBI's policy, which could be
scam rattled the nation, diamond houses emulated by some state-owned banks,
in India are being pushed to change the follows instances of frauds, money-
way they have been doing business for laundering and sharp practices that few
many decades. Harsh new rules laid diamond houses indulged in. Some
down by large banks would force them to restrictions have put a question mark on
restructure their entities, change the way they function. Introducing
business associates and spend more. restrictions based on geography would
The largest lender to diamantaires, State hurt the trade badly. One can understand
Bank of India, has imposed funding the exclusion of Dubai. But a quarter of
restrictions on borrowers for exports to polished stone exports is to Hong Kong,
countries other than USA and Europe, with China, along with Hong Kong,
capped exposure at Rs 1,000 crore per emerging as one of the largest
borrower, and set stiff credit rating manufacturing centre for studded
condition on diamond houses for jewellery. Today, Belgium and Hong
additional finance. In its credit policy for Kong are the largest centres for
diamond houses, finalized in 2018-end, distribution and trade. The curbs on
the bank has stipulated that borrowers dealings with related parties would
would have to give an undertaking that compel many diamond houses to rejig
rough or cut and polished stones are not themselves in a trade that is known for its
procured from associate concerns or secrecy and dealings among community
43 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

members. As per the latest rules by SBI, incremental credit expansion of Rs. 6.3
advance payments for procurement of trillion in the current fiscal, Rs. 4.8
rough diamonds will be permitted to only trillion was in the last four months ended
mining companies as per the list December. The divergence between
approved by the RBI and Gems & credit growth and deposit growth has
Jewellery Export Promotion Council. widened to 600 bps (basis points), as per
While diamond traders validate some of the RBI data. This means a few banks
the safeguards that SBI is putting in have become more aggressive in lending
place, they feel some conditions could be post the liquidity tightness for NBFCs
stifling. A corporate, unlike a (non-banking financial companies).
partnership, would have to disclose to Several small NBFCs with lower credit
the Ministry of Corporate Affairs the ratings have been curtailing
charges on assets against loans. So, disbursements for want of adequate
there would be greater disclose, they funds. The good thing is that
agree. They also admit that the incremental credit growth that had
restriction on advance payment probably slowed down in October has again
follows a few parties making multiple picked up robust pace in November. This
remittances from different banks. is encouraging and clearly evident
https://economictimes.indiatimes.com/industr across retail loans, including housing
y/banking/finance/banking/strict-bank-rules- and personal loans (loans to salaried
force-changes-in-diamond-trade-
class, etc) and industry. One of the
practices/articleshow/67465635.cms
reasons for the widening gap between
Dated: Jan 10, 2019
credit and deposit growth could be the
flow of funds from the bond market to
BANK LOAN GROWTH PICKS
the credit market. Over the last one year,
UP PACE EVEN AS DEPOSITS bond yields have climbed up from 6.48%
STAGNATE on 1 September 2017 to 8.18% by 9
The loan-to-deposit ratio, or how much November 2018. Also, the recent
a bank lends out of its deposits, touched liquidity squeeze because of defaults by
a 47-year high in December as IL&FS led to a disruption in the
companies approached banks for funds commercial paper market, resulting in a
after defaults by Infrastructure Leasing boost to credit growth. Deposit growth
and Financial Services Ltd (IL&FS) dried has been stagnating over the last few
up demand for commercial papers. months and credit growth has been
According to a 7 January report by JM pushing up. With elections approaching,
Financial, banks' credit-to-deposit (C- currency leakage could continue and
D) ratio rose to 78.6% in December, the slow down deposit accretion to banks.
highest since March 1971, when it was That could weigh on credit growth over
79.3%. Credit grew 15.1% from a year the next two months. According to
earlier in December, while deposits grew brokerage JM Financial, banks are likely
9.2% in the same period, Reserve Bank of to raise deposit rates if the high C-D
India (RBI) data showed. Of the total ratio persists. SBI's analysis says
44 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

incremental retail credit expansion in YES BANK DIDN'T CONSULT

the three months to November at Rs. SHRI RANA KAPOOR, MS.
73,800 crore was the highest in a MADHU KAPUR ON CEO
decade. It also mentioned credit to
NAMES
industry picked up in November, with
The board of Yes Bank Ltd has
food processing, fertilizer, cement and
independently shortlisted two potential
infrastructure leading the way.
successors to its managing director (MD)
Incremental credit to NBFCs fell further
and chief executive officer (CEO) Shri
to Rs. 3.7 trillion from Rs. 16.5 trillion in
Rana Kapoor without the consent of the
October and Rs. 56.5 trillion in
two estranged promoters of the bank-
September, while that to MSMEs showed
Ms. Madhu Kapur and Shri Rana Kapoor.
negative growth. Despite all this, credit
Private lender Yes Bank's knotty articles
to NBFCs and retail account for 45% of
of association (AoA), which was
incremental credit expansion for the
registered with the ministry of corporate
three months till November.
affairs in 2005, states that the
https://www.livemint.com/Industry/1urZtxOI7
appointment of any whole-time director
7iSqYlL2B83UI/Bank-loan-growth-picks-up-
pace-even-as-deposits-stagnate.html of the bank will require the joint approval
Dated: Jan 10, 2019 of the two promoters. The board has
shortlisted the names after the
nomination and remuneration
committee of the bank approved the
names according to the
recommendations of the search and
selection committee and the appointed
leadership advisory firm Korn Ferry. The
two promoters have not been asked for
their recommendations or consent in
this entire process. This is significant
because the bank's AoA states that
without the approval of the promoters
and the Reserve Bank of India (RBI), a
whole-time director cannot be
appointed. A managing director is a
whole-time director. The Bombay high
court ruled in 2015 that the bank must
follow the AoA. Section 127A of Yes
Bank's AoA mentions that to appoint any
whole-time director, the board shall
follow the recommendation made by the
promoters. It also says that the board
may appoint one of its members as a

45 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

whole-time director, but even that BIMAL JALAN

would be subject to the AoA and RBI Shri Jalan went on to voice hope that
approval. The conflict between Yes differences with the government would
Bank's promoters began in 2009, a year be settled. The Reserve Bank of India is
after co-founder Shri Ashok Kapur was accountable to the government and
killed in the 2008 terrorist attack in should make policies within the
Mumbai. The board declined to appoint framework set by the government,
Ms. Shagun Gogia, daughter of Shri according to a former central bank chief
Ashok Kapur, as a director because it now heading a panel tasked with framing
was felt she might not meet RBI's fit- guidelines for the transfer of the RBI's
and-proper criteria. In 2013, Ms. Madhu surplus funds to the government. Shri
Kapur (widow of Shri Ashok Kapur) and Bimal Jalan, the 77-year-old ex-
her daughter Ms. Gogia approached the bureaucrat, was appointed to chair the
Bombay high court seeking greater say panel late last month, just weeks after a
in appointing directors and wanted the fierce row over central bank
court to uphold their right to jointly independence led to a change at the top
nominate directors. In case Yes Bank of the RBI. Having clashed with the
wants to appoint a whole-time director, government over policy issues for
joint approval of the promoters will be several months, Shri Urjit Patel resigned
required. On 21 November, Mint as governor on Dec. 10, and was swiftly
reported that the bank's promoters were replaced by a former finance ministry
seeking a mutual resolution to ensure official, Shri Shaktikanta Das. One of the
better support and coordination for most contentious issues between the RBI
outstanding issues. Despite the two and Prime Minister Narendra Modi's
promoters initiating talks to settle their government was how much of the profit
family feud, over the past two weeks, Yes made from central bank's trading in
Bank's shares have fallen almost 50% bonds and currencies should be
from its peak in the past year on BSE. The transferred to the government, and how
bank has recently taken measures to much should be retained to build up
improve its corporate governance, reserves. Shri Modi faces an election by
accounting and audit processes. The May and his government is urgently
bank has sent a report on the recent seeking extra funds to finance populist
measures in this regard to RBI in measures like financial aid to farmers
October. and tax cuts for small businesses and the
https://www.livemint.com/Companies/dA27vX middle class. Shri Jalan, who was the
Xdx1tk0hwrHs0gfM/Yes-Bank-didnt-consult- RBI's governor between 1997 to 2003,
Rana-Kapoor-Madhu-Kapur-on-CEO-
declined to comment on his committee's
name.html Dated Jan 10, 2019
recommendations, but he set out his
view on the relationship between the
RBI ACCOUNTABLE TO
government and the central bank. The
GOVERNMENT, SAYS RBI is accountable to the government for
RESERVES PANEL CHIEF SHRI executing the kind of monetary policy
46 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

that has been announced. There may be RBI TO SCAN Q3 RESULTS

differences of views between the BEFORE DECIDING ON RELIEF
autonomous institution and the FOR PCA BANKS
government. In this case, the Eleven Indian state-owned banks will
government should take a larger view have to wait for about a month before
depending on what the political situation knowing which of them will have lending
is, what is actually happening on the curbs eased after a Reserve Bank of India
ground. On the other hand, the (RBI) panel reviews their December
autonomous institution has to deliver quarter results. The government has
the services that the government has been pressuring the central bank to ease
approved as part of policy framework. the curbs on at least some of the banks in
Shri Jalan went on to voice hope that an attempt to boost lending and the
differences with the government would economy ahead of a general election due
be settled, now that the central bank was to be held by May. The RBI's Board for
under new management. Soon after Financial Supervision (BFS), chaired by
taking office on Dec. 12, Shri Das the central bank's new Governor Shri
mentioned that he would consult more Shaktikanta Das, met and looked at
closely with the government on policy estimates for the financial performance
issues. Under Shri Das, the central bank of the banks in the October-December
is likely to transfer an interim dividend of quarter. Based on those estimates, about
300-400 billion rupees ($4.32 billion- three to four of these banks, which in
$5.8 billion) to the government by recent years were targeted by the RBI for
March, Reuters reported earlier citing tough lending restrictions because of a
three sources with direct knowledge of surge in bad loans, capital depletion and
the matter. Shri Das has also struck a mounting losses. However, the panel will
dovish tone on prospects for inflation wait to examine audited results of banks,
and the economy, hinting that the RBI before making a final decision, the
might adopt a more growth-friendly source said. The results are due by the
monetary framework under his watch, as end of the month but it is unclear when
desired by the government. The the next panel meeting will be. The
government also wants the RBI to release government has infused capital in some
more liquidity to the shadow banking of the banks to help them to adhere to
sector and relax its provisioning norms the central bank's capital ratios.
for banks. The RBI was open to infusing However, the panel would like to be sure
"need-based" liquidity into the financial which of the banks will be able to
system, noting that the shadow banking maintain minimum capital ratios under
sector was facing a funding crunch scenarios such as a delay in the recovery
https://economictimes.indiatimes.com/industr of bad loans in bankruptcy cases. There
y/banking/finance/banking/rbi-accountable-
are 21 listed state-run banks in India
to-government-says-reserves-panel-chief-
bimal-jalan/articleshow/67471721.cms that provide about two-third of the total
Dated Jan 10, 2019 loans in the economy. With nearly half of
them under a PCA plan and the rest

47 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

cautious due to a record $150 billion in the appointment of the new MD and CEO
bad debt, the government is keen the of Yes Bank. On receipt of the RBI
curbs be relaxed to boost their ability to approval, the bank shall duly make the
lend. The government is anxious to woo requisite disclosures to the stock
voters especially farmers and small exchanges, in terms of 'Regulation 30 of
businesses that were hit hard by a high- the Listing Regulations'. There has been
value currency note ban in late 2016 and widespread speculation on Shri Rajat
the introduction of a goods and services Monga, Senior Group President -
tax in mid-2017. However, the RBI was Financial Markets, Yes Bank and former
reluctant to ease the curbs, triggering a MD and CEO of Max Life Insurance Shri
bitter public war of words between the Rajesh Sud as being the front-runners
government and the central bank that for the post. An IANS story on had
ended with former governor Shri Urjit incorrectly referred to Shri Rajat Monga
Patel. as the Executive Director of Yes Bank.
https://www.livemint.com/Industry/3jtHiFRPle The SSC was set up to find a successor to
XZnJefxw8IXI/RBI-to-eye-December-quarter- the company's MD and CEO Shri Rana
results-before-easing-lending-cu.html Dated:
Kapoor. It had been mandated to
Jan 10, 2019
evaluate both internal and external
candidates and make suitable
YES BANK SUBMITS
recommendations to the Board of
SHORTLISTED NAMES FOR Directors within stipulated timelines for
MD, CEO POST TO RBI the RBI's final approval. In October 2018,
Mumbai, Lending major Yes Bank has the RBI had reaffirmed that a successor
submitted the names of the potential to Yes Bank's MD and CEO Shri Kapoor
candidates for its Managing Director and should be appointed by February 1,
Chief Executive post to the Reserve Bank 2019.
of India (RBI). According to the bank, the https://economictimes.indiatimes.com/industr
Board has submitted an application to y/banking/finance/banking/yes-bank-
the RBI to seek its approval for the names submits-shortlisted-names-for-md-ceo-post-
of the selected candidates. The bank in a to-rbi/articleshow/67472854.cms Dated: Jan
10, 2019
regulatory filing after its Board meeting
it has finalized the names which it will
disclose only after the RBI's approval.
SYNDICATE BANK HINTS
According to the bank, the candidates THAT LOAN WAIVER MAY
were finalized on the basis of CHALLENGE NPA REDUCTION
recommendations made by the Search EFFORTS
and Selection Committee (SSC) and the Syndicate Bank has hinted that the spate
Nomination and Remuneration of farm loan waivers by several states in
Committee (NRC). As mandated under the recent times may challenge its
the extant RBI norms, the Bank's Board efforts to reduce NPA. The bank, which is
will submit an application to the RBI on hoping to break even at the end of this
January 10, 2019, seeking approval for fiscal year, has taken a series of

48 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

measures to bring down NPA level. The recommendation on the managing

bank has sizeable NPA exposure in director and chief executive to the
corporate and agriculture sectors. The Reserve Bank of India (RBI) after its board
farm loan waiver is a matter of concern meeting on January 9. Names were
for us and could make recovery difficult. shortlisted by a search and selection
The bank has started seven stress asset committee, which had the mandate to
management branches in the country evaluate both internal and external
with instructions to recover NPA above candidates and make suitable
Rs 5 crore. The stress asset management recommendations to the board within
branch usually deals with NPA of Rs 50 the stipulated timelines for RBI's final
crore and above. The bank is expecting a approval. In October, RBI had mentioned
growth of 3 to 5% in the current year. The that a successor to Yes Bank's MD and
bank recently proposed to raise Rs 500 CEO Shri Kapoor be appointed by
crore by issuing stock to its members February 1, 2019. The two estranged
under the ESPS scheme. It is also looking promoters, Ms. Madhu Kapur and Shri
at other avenues like rights and bond Rana Kapoor, have been holding
issues to raise capital. conversations to settle the CEO and
https://economictimes.indiatimes.com/industr chairman selections.
y/banking/finance/banking/ syndicate-bank- https://economictimes.indiatimes.com/industr
hints-that-loan-waiver-may-challenge-npa- y/banking/finance/banking/rajesh-sud-pulls-
reduction-efforts/articleshow/ 67475472.cms out-of-race-for-ceos-post-at-yes-bank/
Dated: Jan 10, 2019 articleshow /67480391.cms Dated Jan 11, 2019

SHRI RAJESH SUD PULLS OUT

OF RACE FOR CEO'S POST AT
YES BANK
next Chief Executive, has pulled out of
the race for the top job, leaving insider
Shri Rajat Monga as the sole
recommendation for the regulator to
approve. Shri Sud pulled out of the race
after having shown interest earlier. Shri
Sud was reportedly in the reckoning,
along with Yes Bank veteran Shri Monga,
to head the private sector lender. The BANDHAN BANK CLEANSED
central bank has cut short the executive ITSELF OF IL&FS BEFORE GRUH
tenure of Shri Rana Kapoor to January 31. MERGER
Shri Monga has been with the bank since Microlender-turned-universal bank
its inception in 2004. He serves as senior Bandhan Bank Ltd seems to have realized
group president of financial markets at its folly of venturing too far into non-
Yes Bank and also been its chief financial microloans. Its exposure to beleaguered
officer. The bank has sent its Infrastructure Leasing and Financial

49 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Services Ltd (IL&FS) has sucked out Rs. rewards. But as this column pointed out
385 crore from its profits in the earlier this week, the acquisition was
December quarter (Q3) by way of expensive, valuing Gruh Finance at
provisions. That amounts to nearly 13% almost 14 times its net worth. Needless
of the bank's trailing 12-months pre-tax to say, Bandhan Bank has to work extra
profit. The lender has provided for all of hard to make the acquisition accretive in
its exposure to IL&FS, even as other terms of earnings per share. The 'banks
banks continue to dither on this. As per stock has lost 11% since the merger
Bandhan Bank's chief Shri Chandra announcement as a result of the high
Shekhar Ghosh he has learnt his lesson share dilution. Despite the Gruh Finance
from believing in AAA-rated paper. merger, Bandhan Bank still has to bring
Indeed, small microloans are where his down promoter stake by another 20% to
strength is. The exposure has worsened meet regulatory requirements, which
the bank's NPA ratio to 2.4% for means investors may be staring at
December from 1.67% a year ago. Had it another large dilution. The stock trades
not been for IL&FS, Bandhan Bank's gross at four times its estimated book value for
bad loan ratio would have been 1.3%, fiscal year 2020. For it to be taken
according to Ghosh. But that is about it seriously by investors, it will have to fix
as far as the bad news for the lender its promoter stake to meet regulatory
goes. Bandhan Bank's third quarter approval.
metrics were encouraging if one ignores https://www.livemint.com/Money/xJnBBKO7wZ
the IL&FS debacle. Credit growth came at j7tq5SJq2zbN/Bandhan-Bank-cleansed-itself-
of-ILFS-before-Gruh-merger.html Dated: Jan
a brisk 46%, led by 27% growth in
11, 2019
microloans and 35% growth in non-
microloans. The robust disbursements
RBI SLAPS RS 3 CRORE
led to a core income growth of 54% and a
net profit growth of 10% for the quarter.
PENALTY ON CITI BANK
The Q3 results were impressive enough INDIA
for investors to forgive the lender for its The Reserve Bank of India (RBI) has
IL&FS mistake, as was evident from the imposed a penalty of Rs 3 crore on
3.8% rise in the stock after the earnings Citibank India for not complying with
declaration. Now that Bandhan Bank has directions regarding the 'fit-and-proper
put that mistake behind, it would have to criteria' for directors of the bank. The RBI
make sure the merger with Gruh Finance in a statement, however, added that the
Ltd is smooth. Considering Gruh action is based on deficiencies in
Finance's pristine asset quality, Bandhan regulatory compliance and is not
Bank would not have to worry about toxic intended to pronounce upon the validity
loans. That Shri Ghosh is aware of the of any transaction or agreement entered
bank's strengths in small-ticket loans is into by the bank with its customers. The
what makes investors confident that the Reserve Bank of India (RBI) has, by an
entry into affordable housing through order dated January 4, 2019, imposed a
the Gruh Finance merger will reap monetary penalty of Rs 30 million on

50 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Citibank NA India (the bank) for founder and chairman of Capital First
deficiencies in compliance with the RBI Ltd, as managing director and chief
instructions on 'Fit and Proper' criteria executive officer of the merged entity.
for directors of banks," it said. In July The combined entity will serve 7.2
2013, the RBI had issued a "cautionary million customers through 203 bank
letter" to Citibank for violations of branches, 129 ATMs and 454 rural
instructions regarding know your business correspondent centers.
customer or anti-money laundering. The https://economictimes.indiatimes.com
US-based Citibank has been operating in /industry/banking/finance/banking/idf
India for over 115 years. The bank has 35 c-bank-re-named-idfc-first-
branches in India and a network of 541 bank/articleshow /67502933.cms
ATMs, according to the latest RBI data. Dated Jan 12, 2019
https://economictimes.indiatimes.com
/industry/banking/finance/banking/rbi RBI CAUTIONS GOVERNMENT
-penalises-citigroups-india- OVER NPA SPIKE IN MUDRA
unit/articleshow/ 67491639.cms
LOANS:
Dated: Jan 11, 2019
The Reserve Bank of India (RBI) has raised
a red-flag on the spike in non-
IDFC BANK RE-NAMED IDFC performing assets (NPAs) under the
FIRST BANK government's flagship scheme to
The combined entity will serve 7.2 support micro enterprises in the
million customers through 203 bank country- the Pradhan Mantri Mudra
branches, 129 ATMs and 454 rural Yojana. According to Finance Ministry
business correspondent centers. Private sources, RBI has cautioned the ministry
sector lender IDFC Bank mentioned its that the scheme might turn-out to be the
name has been changed to IDFC First next big source of NPAs, which have
Bank Ltd with effect from Saturday. The plagued the banking system. The central
name of the Bank has been changed from bank has flagged that bad loans under
IDFC Bank Ltd to 'IDFC First Bank Limited' PMMY have risen to Rs 11,000 crore. As
with effect from January 12, 2019 by per the annual report of PMMY, 2017-
virtue of 'Certificate of Incorporation 18, total disbursements under the
pursuant to change of name' issued by scheme stood at Rs 2.46 trillion in FY 18.
the Registrar of Companies, Chennai". Out of this, 40 per cent were disbursed
IDFC Bank and non-banking financial to women entrepreneurs and 33 per cent
company Capital First had announced to social categories. More than 4.81
completion of their merger on December crore micro borrowers have benefited
18, creating a combined loan asset book through PMMY during the year FY2017-
of Rs 1.03 lakh crore for the merged 18. The PMMY was launched on April 8,
entity. Following the merger, the board 2015. Under the scheme, banks are
of IDFC Bank had approved the required to finance micro and small
appointment of Shri V Vaidyanathan, entrepreneurs for up to Rs 10 lakh.

51 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Loans can be granted under three STATE BANK OF MAURITIUS

categories - up to Rs 50,000 under FILES COMPLAINT WITH
'Shishu'; Rs 50,001-Rs 5 lakh under SINGAPORE POLICE TO TRACK
'Kishore' and between Rs 5,00,001 and
DOWN HACKERS
Rs 10 lakh under 'Tarun' category. In
The State Bank of Mauritius (SBM) has
addition, RBI's caution comes at a time
filed a complaint with the Singapore
when the country's financial system in
police to track down unknown hackers
reeling under sevier stress due to the
who allegedly withdrew Rs 19 crore from
IL&FS crisis which continues to hurt
its branch in Mumbai. A complaint about
banks with impairments, the most recent
the hack was first filed with the Mumbai
case being IndusInd Bank. On January 9,
police in November 2018. SBM had
IndusInd Bank in its latest quarterly
alleged then that its SWIFT payment
earnings result statement without
gateway had been hacked on October 2
naming the IL&FS Group mentioned,
in an attempt to transfer Rs 147 crore.
Advances granted to various companies
Although the attempt was stopped after
and SPVs belonging to a Group in the
one of the four remitting foreign banks
infrastructure sector against certain
raised queries about the transaction with
identified cash flows and pertaining to
SBM, the bank had lost close to Rs 19
specific assets are 'Standard' as at
crore by then. Bank officials have
December 31, 2018 on the basis of the
intimated us about lodging a complaint
conduct of the accounts till date. Since
with the Singapore police, mentioned
October 1, 2018, certain governance and
police inspector Shri Kishore Parab, who
management changes have taken place
is in charge of the bank fraud
in the Group and measures to turn it
department of the Economic Offences
around through a Resolution Plan are
Wing (EOW), a specialized unit of the
underway. The bank mentioned it was
Mumbai Police that probes financial
monitoring the developments and
frauds. Since the company in whose
implications of the 'Resolution Plan'. In
account the funds were transferred is
the interim, as a prudential measure, the
registered in Singapore, the bank has
bank has made a contingent provision of
lodged a complaint with them. The FIR
Rs 255 crore on these 'Standard' assets
copy of the complaint lodged with the
during the quarter ended on December
Mumbai police has been shared with the
31, 2018, in addition to an amount of Rs
Singapore police. Bank has filed
275 crore made during the quarter
complaints with the Singapore Police and
ended on September 30, 2018. Total
Mumbai Police, EOW on the cyber
provisions attributable to this exposure
hacking incident. The hack at SBM's
are Rs 600 crore.
Nariman Point branch was stopped after
https://economictimes.indiatimes.com/industr
a London bank got suspicious when
y/banking/finance/banking/rbi-cautions-
go ve r nme nt -o ve r -np a -sp i k e -i n-mud r a - multiple remittance requests were raised
loans/articleshow/67511045.cms Dated: within the span of a few hours on an
Jan 13, 2019 Indian bank holiday. The requests

52 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

exceeded the amount typically raised on salary, performance bonus and stock
a single working day and that prompted options to the senior most executive.
the London bank to immediately raise a The regulatory guidance that exists
query with SBM, after which the process today is a general directive on the
was stopped. The bank found that the remuneration of senior officials in broad
email requests to release the amounts functions like 'business', 'control' and
were sent from an email ID similar to the 'risk'. What is being considered is one
one used by the in-charge of SWIFT that specifically relates to CEO
transactions at its Nariman Point branch. compensation. Even today RBI clears the
The bank managed to stop most of the remuneration of a bank CEO and has the
transactions. The Mumbai Police found powers to claw back a slice of it in case of
that the amount of Rs 19 crore was non-performance or governance lapses.
routed to an account in a Hong Kong However, a framework would ensure that
based bank in the name of a Singapore the board does not have to shoot in the
company. The Hong Kong bank had also dark while approving the package for the
figured in a case involving Pune-based CEO and referring it to RBI for its
Cosmos Bank, which had been hacked in clearance. Though such a framework
a similar manner in August 2018. would be significant for private banks, it
According to sources, the amount was would also hold relevance for PSU banks
further transferred from the Hong Kong which are considering incentives and
bank to several other accounts, some of ESOPs for employees. Central bank
them in Nigeria. The EOW now plans to officials have shared the idea with senior
send Letters Rogatory (LRs) to tie up the bankers in the course of conversation. In
investigation. the wake of instances of large non-
https://economictimes.indiatimes.com performing assets, sharp practices like
/industry/banking/finance/banking/st inadequate provisioning of sticky loans,
ate-bank-of-mauritius-files- air-brushing financials to prop up
complaint-with-singapore-police-to- profitability, and evidence of fiduciary
track-down-hackers/articleshow/ negligence by board of directors, the
67519597.cms Dated: Jan 14, 2018 regulator is bringing about finer changes
in its supervision style some of which are
RBI TO FRAME RULES FOR aimed at assessing the performance of
BANK CEOS' PAY bank boards. For instance, RBI
The Reserve Bank of India (RBI) is inspectors are beginning to ask banks
working on a set of rules that would link whether any of the independent
remuneration of banks CEOs to directors have given a dissent on certain
parameters like balance sheet size of a proposals which a board and the
bank, loan delinquency, profits and management may have eventually
governance record. The proposed passed; whether such dissent notes have
framework is expected to provide a been properly recorded. Also, in some
broad template to the board of directors RBI has insisted that the non-executive
of banks while approving increase in chairman and the head of bank audit

53 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

committee are present in the meeting by inducting specialists from the private
that follows the completion of the annual sector. The government is looking at
inspection of a bank by the regulator. RBI how the bank boards can be empowered
wants to know whether these external to rate the performance of the MDs and
directors have been kept in the loop on EDs, which will require KRAs to be
certain decisions and what they think reworked on the basis of EASE, or
about these decisions. More than ever, Enhanced Access & Service Excellence
the regulator is keen to know about the the road map for re-orienting banks that
quality of debate within bank boards, was implemented last year. The
and the involvement of independent department of financial services is in the
directors. In other words, a non- process of rating banks on the basis of
executive chairman or other outside compliance of the 60 parameters listed
directors cannot get way easily. under EASE. While the government has
https://economictimes.indiatimes.com/industr undertaken consolidation in PSBs by
y/banking/finance/banking/rbi-to-frame- merging SBI associates with the parent,
rules-for-bank-ceos-pay/ articleshow/
and Bank of Baroda, Vijaya Bank and
67519638.cms Dated: Jan 14, 2018
Dena Bank, Kumar indicated that further
steps will have to wait as the government
GOVERNMENT TO REWARD
is also pushing other banks to focus on
TOP PERFORMERS IN PSBS niches. Over the last few years, the
The government is readying steps to
government has been focusing on
reward top-performing employees of
revamping state-run lenders that have
Public Sector Banks (PSBs), apart from a
been weighed down by non-performing
board-driven appraisal of the top
assets, which Shri Kumar mentioned is
management and governance reforms,
now fully recognized and loan recoveries
while identifying lenders such as Indian
have been impressive so far this year.
Overseas Bank and Punjab & Sind Bank
https://economictimes.indiatimes.com/industr
for focus on niche banking. The y/banking/finance/banking/ government-to-
government will slowly reduce its stake reward-top-performers-in-psbs/articleshow/
in PSBs to 52% in the coming months 67521854.cms Dated: Jan 14, 2019
after a series of recapitalization pushed
up its shareholding. While the next STAGE SET FOR RBI RATE
round of capital will be given after the CUT AS RETAIL INFLATION
parliamentary sanction for disbursal of FALLS TO 2.19%
additional funds is received, the sale of India's retail inflation and wholesale
non-core business and closing down of inflation fell to multi-month lows in
overseas operations of some of the December amid signs of weakening
banks will help them meet funding economic recovery, creating wiggle
requirements. As per financial services room for the Reserve Bank of India's (RBI)
secretary Shri Rajiv Kumar, banks are monetary policy committee to cut
being asked to bolster treasury, risk interest rates at its meeting on 7
management and technology functions February. Data released by the Central

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 I N D I A

Statistics Office (CSO) showed consumer Bank, expects the RBI's monetary policy
price index (CPI) based inflation at an committee to change the stance to
18-month low of 2.19% in December neutral in the February policy and remain
against 2.33% a month ago, as food on an extended pause on policy rates.
prices continued to slide. The wholesale Despite the sharp fall in petrol and diesel
price index (WPI) data released earlier by prices in December, the core inflation
the Department of Industrial Policy and (CPI) was elevated. This was due to the
Promotion showed that wholesale price high sequential inflation seen in health
inflation decelerated to an eight-month and education sub-groups. CPI
low of 3.8% from 4.64% the previous trajectory is likely to remain benign till
month, on the back of softening inflation H1 FY20, after which it may show an
for fuel as well as manufactured items. uptick. Ms. Shubhada Rao, chief
With crude oil prices falling 40% in past economist at Yes Bank, going forward,
three months, higher oil production in she expects further downside in her
the US and weakening oil demand, average inflation projection of 4% in
analysts do not expect oil prices to rise FY19, closer to the 3.5-3.7% band. This
further. While the Indian crude basket paves way for the MPC to not just change
declined to $57.8 billion per barrel in its stance to neutral but also mull over a
December from $65 billion per barrel a possible rate cut. However, Shri Sunil
month ago, the rupee appreciated to Kumar Sinha, principal economist at
70.72 per dollar in December from 71.79 India Ratings, mentioned RBI may watch
per dollar in the previous month, slowing out for the fiscal deficit target of 3.3% of
fuel inflation. Slower-than-expected GDP in 2018-19 which may be missed.
economic growth projection and a Finance minister Shri Arun Jaitley will
benign inflation scenario may force RBI present his Interim Budget on 1 February
under its new governor Shri Shaktikanta ahead of the general elections due in
Das to change its stance and cut rates to April-May. The government has already
support growth. India's factory output exhausted 112% of the full-year fiscal
growth measured by an index and deficit target in the first eight months
industrial production (IIP) crashed to its (April-November) of the fiscal year.
lowest in 17 months at 0.5% in Subdued collections in goods and
November, the outcome of an services tax (GST) and slow progress in
unfavorable base effect as well as its disinvestment programme have put
contraction in manufacturing, data pressure on the government's fiscal
released by CSO on Friday showed. The math for the current year. RBI governor
CSO's full-year growth estimate Shri Shaktikanta Das, who took charge
suggests that in the second half last month, mentioned at his first press
(October-March) of 2018-19, the conference that inflation remained
economy may slow down to grow at within RBI's target and its outlook was
6.75% compared to 7.65% in the first half benign. Principal economic adviser in the
(April-September). Shri B. Prasanna, finance ministry Shri Sanjeev Sanyal had
head, global markets group at ICICI in an interview mentioned that RBI needs
55 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

to structurally reduce interest rates as denied another three-year term in

the government has anchored inflation September last year by the RBI. The bank
to a lower level. has until January 31 to find a
https://www.livemint.com/Politics/U4w4XXdot replacement, according to a timeline set
4oaF9lVmEgzPK/Indias-retail-inflation-falls- by the banking regulator. Executive
to-219-in-December-2018.html Dated: Jan 14,
search firm Korn Ferry was appointed to
2018
help the search panel, which included
DEUTSCHE BANK'S SHRI former Insurance Regulatory and
RAVNEET GILL LEADS INSIDER Development Authority chairman Shri TS
SHRI RAJAT MONGA IN RACE Vijayan and three members of the
FOR YES BANK CEO board's nomination and remuneration
Deutsche Bank's India CEO Shri Ravneet committee- Brahm Dutt, Mukesh
Singh Gill is the frontrunner in a two- Sabharwal and Subhash Kalia. The panel
horse race for the chief executive's post had initially shortlisted eight names
at Yes Bank. Shri Gill and Yes Bank CFO including a CEO from an insurance
Shri Rajat Monga were the two company, present and former executives
recommended by the board of the bank from HDFC Bank and also some Indian
for the position to the Reserve Bank of expat CEOs from abroad. Many of them
India (RBI). These two names have gone declined any interest in the bank and
to the RBI and Shri Gill, by virtue of being these two names have finally made the
an outsider along with his experience as cut. Among the people who were
CEO of a bank, is the frontrunner. Yes approached but mentioned they weren't
Bank has been on the hunt for a new CEO interested were Shri Rajesh Sud, Vice
since founder Shri Rana Kapoor was Chairman at Max Life Insurance. Another

56 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Dubai-based foreign banker of Indian https://economictimes.indiatimes.com/industr

origin also confirmed that he had y/banking/finance/banking/ deutsche-banks-
ravneet-gill-leads-insider-rajat-monga-in-
declined an offer. With Shri Gill and Shri
race-for-yes-bank-ceo/articleshow/
Monga in the fray, the bank board thinks 67534587.cms Dated: Jan 15, 2019
they have two strong candidates. Shri CENTRAL BANK OF INDIA CEO
Monga has been with the bank almost
MOVES TO TURN AROUND
since inception and is ready to take over
from tomorrow. Shri Gill has been
LENDER
Shri Pallav Mohapatra, the new managing
Deutsche India CEO since 2012 and has
director and chief executive officer at
been granted an all-clear by RBI just in
loss-making Central Bank of India,
July 2018. His experience and pedigree
prefers to take a hands-on approach in
cannot be ignored. Shri Gill has spent his
running the bank. His 10am meeting
32-year banking career at the German
with the bank's executive directors and
lender and taking over as India chief
general managers for risk and treasury
executive in July 2012. Shri Gill has
sets the tone for the day. Shri Mohapatra,
handled capital markets, treasury,
who was at State Bank of India (SBI) till
structured finance, foreign exchange,
September, has initiated steps to turn
transaction banking, risk management
around Central Bank, which has been
and private banking.
reporting losses for the last 12 quarters
since December 2015. One of the
changes is to take a bullish approach
toward the commercial paper market
(CP), instead of letting excess liquidity
idle away in Statutory Liquidity Ratio
(SLR) holdings. The bank is trying to
lower its SLR holdings from the current
29% to around 23% gradually, by moving
the excess liquidity to the commercial
paper market. The bank has been under
the Reserve Bank of India's (RBI) prompt
corrective action framework since 14
June 2017 which curtails its lending
power in favour of conserving capital.
Every day, for the treasury operations, he
devote half-an-hour to my treasury
team. He looked at how things are
moving and he tells them from which
sources they should pull out and where
should they invest in. He added that by
doing so, the bank is attempting to
reduce the volatility associated with the

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 I N D I A

bond market. Instead of this, if he sees a not worsen any further. At the end of
better yield in a CP, he would like to September quarter of FY19, the bank's
reduce the excess SLR investment. Since gross bad loans stood at Rs. 37,411
there is a risk associated with CPs, he crore and slippages stood at Rs. 2,611
have done a risk assessment to decide in crore. Their plan for the current year is to
which CPs he should invest in, in case of not have more than Rs. 1,500-2,000
lack of good CPs to invest in, the bank crore in slippages every quarter of FY19.
will go into high-yielding treasury bills Next year, he want to contain slippage to
or in the state development loans (SDLs) less than Rs. 1,000 crore per year, this
rather than the overnight market. That will restrict the interest reversal on
apart, Shri Mohapatra is putting in place account of slippages.
a structure where a couple of corporate https://www.livemint.com/Companies/avLjE7c
loan branches will be created to handle EgwQgXkkLNyJvhK/Central-Bank-of-India-
CEO-moves-to-turn-around-lender.html
loans of Rs. 50 crore and above. These
Dated: Jan 15, 2019
branches will directly report to the
general manager for credit at the head
office. Similarly, the bank is creating a
MUDRA NPAS NO ISSUE,
vertical for stressed assets and has FINANCIAL SERVICES
received board approval for it. In the SECRETARY SHRI RAJIV
earlier structure, branch managers KUMAR
reported to regional managers, who The government is not worried over
reported to field managers, who delinquencies in Mudra Yojana, its
reported to vertical heads and who in flagship scheme for promoting
turn, reported to executive directors. entrepreneurship and small businesses
Now, when the credit and stressed assets as most of the loans are securitized.
are taken out from the field, the focus of Financial Services Secretary Shri Rajiv
the field GMs will be on retail deposits Kumar mentioned that small borrowers
and loans. As of today bank has around are far more responsible and responsive
13 zonal offices and we will be than large corporate borrowers. Mudra
consolidating them, although they have loans are a transformative and a
not decided into how many, this directional shift in the entire Indian
streamlining would cut down the banking system which will strengthen
turnaround time. The bank is also the Medium and Small Enterprises
planning to shut 20 branches in metro (MSEs). As per Shri Kumar, there is a case
and semi-urban areas and has also for relaxation of capital norms and for
identified some currency chests to them aligning with the international
surrender to the RBI. It has also identified Basel III norms, considering the steps the
some high-rental metro and urban government has taken to adequately
branches from where it wants to exit. capitalize lenders. According to reports,
With more than 21% of its loans having around Rs 11,000 crore of lending under
turned bad, the bank wants to contain Mudra has gone bad. But as per Shri
slippages so that the asset quality does Kumar, most of the loans below Rs 1

58 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

crore are securitized. In corporate loans, separate vertical comprising around

however, in many cases, it is secured 1,200 of its existing staffers to recover
against the future earnings. If you look at its Non-Performing Assets (NPAs)
the cases in Debt Recovery Tribunals, amounting to around Rs 27,000 crore.
most loans below Rs 1 crore are The 'Stressed Asset Management (SAM)'
securitized,such loans are also the way vertical would comprise legal as well as
forward, given the economy is getting credit experts who would help branch
formalized and you want the youth and managers to device plans to recover
unfunded to get out of money lenders' dues from NPAs , including large
clutches. As on December 2018, there corporates, mentioned executive
are 29.972 million loan accounts with Rs director of the PSU bank Shri Ajay K
1.51 lakh crore disbursed under the Khurana. Out of Rs 27,000 crore which
Pradhan Mantri Mudra Yojana (PMMY). have been declared as NPAs, the share of
Around 74% of the beneficiaries under large corporates is around Rs 14,000
the scheme are women. Mudra has given crore. The team members of SAM have
support to these smaller entrepreneurs been given training regarding the
which are a necessity for social security functioning of National Company Law
and social inclusiveness. The Medium Tribunal(NCLT) and various aspects of
and Small Enterprises (MSEs) form the insolvency, and will be deployed in all the
'missing middle' which needs to be regions depending on the number of
strengthened if India Inc. needs to gain NPA accounts. The PSU bank is now
momentum. Around 11 crore people are focusing more on giving loans to MSME
dependent on self-enterprises or in the and retail sector rather than large
MSME space as per the latest surveys. An corporates. Syndicate Bank aims to give
entire digital pipeline has been created loans worth Rs 10,000 crore to MSMEs
through opening of accounts, linking during the next two months. In coming
them with the GeM portal, with financial months, Syndicate Bank is planning to
institutions on the other end. A borrower introduce a system of giving in-principle
at the lower end is far more responsive, approval for MSME loans up to Rs 5 crore
responsible and concerned about his within just 15 minutes.
reputation in the society and therefore, https://www.livemint.com/Politics/3FEsadloz
does not want to deliberately default.
https://economictimes.indiatimes.com/industr LARGE BORROWERS FALL IN
y/banking/finance/banking/mudra-npas-no-
LINE AFTER RBI'S ONE-DAY
issue-financial-services-secretary-rajiv-
kumar/articleshow/67532207.cms DEFAULT NORM
Dated: Jan 15, 2019 A central bank rule mandating disclosure
of loan default even if it is just by a day is
SYNDICATE BANK CREATES putting the fear of god in big borrowers.
VERTICAL TO RECOVER RS Borrowers, who owe more than Rs. 5
crore, are gradually regularizing
27,000 CRORE NPAS
repayments following the 'Reserve Bank
The Syndicate Bank has created a

59 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

of Indias (RBI) 12 February circular longer want any stressed asset on their
asking banks to disclose any payment books and, subsequently, the amount of
default. Responding to a Right to loans under special mention accounts
Information (RTI) query from Mint, RBI (SMA) has also dropped. To some extent,
mentioned the total outstanding loans of the introduction of the Insolvency and
borrowers, who defaulted on bank loans Bankruptcy Code (IBC) had also helped,
(under the one-day default norm), has he added. Asset quality of banks
declined more than 60% to Rs. 55,070 improved in Q2 FY19, with gross NPAs as
crore on 30 September 2018 from Rs. a percentage of total loans declining
1.53 trillion on 30 June. To be sure, these from 11.5% in March 2018 to 10.8% in
are not soured assets, but loans where September 2018. The one-day default
borrowers did not pay instalments on norms were initially not received well by
time. However, the data also shows that the industry and a section of lenders. So
one-day defaults dipped to a low of Rs. much so that in April last year, RBI
50,306 crore on 31 August from Rs. deputy governor Shri N.S. Vishwanathan
91,280 crore on 31 July and rose 9% in explained in a speech that the revised
September. There is a clear change in framework tries to reduce the arbitrage
borrowers' behavior and banks are also borrowers are currently enjoying while
more alert in taking up these incidents. A raising funds through borrowing from
message has been sent to errant banks, as against raising funds from the
borrowers that defaults would not be capital markets. If a borrower delays
tolerated. Large borrowers, experts coupon or principal payment on a
mentioned having started paying up on corporate bond even for a day, the
time due to fears of their companies market would penalize the borrower
being referred to the bankruptcy court heavily, but defaults in bank borrowings
and eventually losing control of their have not led to a similar reaction. There
assets. In its circular, the central bank is a need to change this and restore the
asked lenders to institute a board- sanctity of the debt contract, lest bank
approved policy for resolution of debt becomes subordinate even to
stressed assets. Banks were told to start equity. According to RBI data, the top
the resolution process as soon as a 100 large borrowers accounted for 16%
borrower defaults on a term loan and of gross loans and 21.2% of gross NPAs
were given 180 days to cure it, failing of banks at the end of the September
which the account would have to be quarter of FY19. For large borrowers, the
referred to the National Company Law proportion of outstanding loans with any
Tribunal (NCLT). Under previous signs of stress (including SMA 0, 1, 2,
guidelines, lenders had the freedom to restructured loans and NPAs) has come
initiate the resolution process after 60 down from 30.4% in March 2018 to
days of default. Earlier, only the NPA 25.4% in September 2018. Some experts
(non-performing asset) classification say the one-day default norms are hard
was taken seriously by borrowers, not on some borrowers, who default due to
defaults. That has changed as banks no genuine business concerns. Former RBI
60 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

deputy governor Shri S.S. Mundra sZYsMBsQPLtlK/Large-borrowers-fall-in-line-

mentioned that while it is critical to keep after-RBI-one-day-default-norm.html
Dated: Jan 16, 2018
strict timelines for monitoring credit
quality, it has burdened bankers who are
already pressed for time. In some cases, BANKS SEEK QUICK RELEASE
where the defaults occur owing to OF VIJAY MALLYA ASSETS FOR
genuine cash flow issues, banks LIQUIDATION
nonetheless have to start the resolution A 12-bank consortium led by State Bank
process, arrange meetings and look for of India (SBI) has moved a Mumbai court
revival plans. This has to be done each seeking the release of Vijay Mallya's
time a borrower defaults and it has to be assets that the Enforcement Directorate
stopped as soon as they repay, leading (ED) has attached so that these can be
to an exercise that could have been sold “immediately” to realize the best
avoided had there been a buffer period. value. The banks urged the court hearing
However, the former RBI deputy the Prevention of Money Laundering Act
governor added that not only has IBC (PMLA) case that the assets be restored
changed the way a borrower looks at the to them so that they can “appropriate the
system, but bankers also have begun proceeds” without delay. The banks
timely stress assessment exercises. contended that the attached assets were
“amenable to market fluctuations and
any delay in liquidating those assets may
reduce their value”. Hence, there is a
“need for immediate and speedy
disposal of the assets to realize their
best value”. The lenders urged the court
to allow their request “in the interest of
economy and the banking system, which
face dire circumstances due to
unrecovered NPAs (Non-Performing
Assets). They added that the “rights of
the banks, which are second creditors to
recover their dues, would take
precedence over the state's right to
attach the assets of Mallya after being
declared a proclaimed offender”. The
application mentioned if the court lifts
the attachment order, banks will be able
to liquidate the assets through the Debt
Recovery Tribunal (DRT), Bengaluru, and
recover their money. The “amounts
sought to be recovered is public money”
https://www.livemint.com/Industry/4qEIqln9Q
and in initiating this action, the banks
61 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

are “only safeguarding public interest”. December 21, 2010. They have already
The court had attached the assets on sought to assert their rights but are
November 11, 2016, at ED's request. unable to proceed due to the court's
Banks have claimed a “legitimate attachment order of November 2016,
interest” in all properties belonging to they said. Apart from SBI, the parties to
Kingfisher Airlines (KAL), United the case are Bank of Baroda, Corporation
Breweries Holdings (UBHL), Mallya, and Bank, Federal Bank, IDBI Bank, Indian
Kingfisher Finvest India (KFIL), including Overseas Bank, Jammu & Kashmir Bank,
movable and immovable properties. Punjab & Sind Bank, Punjab National
Banks claim Mallya owes them over Rs Bank, UCO Bank, United Bank of India
6,230 crore with an interest of 11.50%, and JM Financial Asset Reconstruction.
as held by DRT in February 2017. The lenders provided both fund and
Inclusive of interest and other penalties, non-fund based working capital
the banks have said Mallya owes Rs facilities and rupee term loan facilities
9,000 crore as repayments for loans to including short-term loans to KAL
Kingfisher Airlines. Mallya, who is starting 2005. However, KAL failed to
fighting extradition from the UK, adhere to the terms of the loan pacts,
recently became the first person to be they said. ED had passed an attachment
declared a fugitive economic offender in order on September 3, 2016, attaching
India under the provisions of the Fugitive several of Mallya's assets. The court's
Economic Offenders Act, which came November order followed this.
into effect in August last year. Wanted
for questioning about money
laundering, criminal conspiracy and
fraud charges over Kingfisher Airlines'
loan defaults, Mallya has denied
accusations of wrongdoing and
mentioned he wants to settle with the
banks. The ED plans to auction Mallya's
equity holdings attached by the agency
once the PMLA court passes its order on
confiscating his assets, likely in the
second week of February. The PMLA
court will decide next month if the
attached properties are free of
encumbrances. If the court does not
detach the properties allowing the banks
to liquidate them and recover their dues,
the rights of banks will “suffer
irreparable loss and injury. The banks
have staked their claim by virtue of
Mallya's personal guarantee dated https://economictimes.indiatimes.com/industr

62 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

y/banking/finance/banking/banks-seek- 2,000 crore. The society registered

quick-release-of-vijay-mallya-assets-for- under the Multistate Co-operative
liquidation/articleshow/67549955.cms
Societies (MSCS) Act 2002 is
Dated: Jan 16, 2019
headquartered in Ahmednagar,
RS 2,000 CR. HAWALA SCAM, Maharashtra. The society got the license
ENFORCEMENT to extend its area of operation to
DIRECTORATE TO SEEK Gujarat, Madhya Pradesh, Andhra
DETAILS FROM AXIS BANK Pradesh, Karnataka and Delhi in
The bank has been working closely with December 2012. Sources said the
the authorities concerned on this issue society flouted MSCS norms.
and shall fully cooperate with them in https://economictimes.indiatimes.com/industr
this regard. The Mumbai wing of the y/banking/finance/banking/rs-2000-cr-
Enforcement Directorate (ED) will soon hawala-scam-enforcement-directorate-to-
seek-details-from-axis-bank/articleshow
seek details from Axis Bank as part of the
/67550093 .cms Dated: Jan 16, 2019
probe into a Rs 2,000-crore hawala scam
centered on an Ahmednagar-based
SPEED UP 59-MINUTE LOAN
urban credit cooperative society. The
SANCTION, GOVERNMENT
society had its account with the private
bank. The central agency will seek to TELLS PSU BANKS
know if the bank verified KYC details of Amid criticism of its promised 59-
the credit society, if there were any minute loan scheme for micro, small and
transaction of suspicious nature, and medium enterprises (MSMEs), the
whether any alerts were raised and the finance ministry is pushing state-run
accounts into which monies were banks to bridge the gap between
credited were checked. The case proposals that receive preliminary
pertains to the predicate offence approval and final sanction. Since its
registered by the Mumbai Police against formal launch by PM a little over two
Yogeshwar Diamonds Pvt Ltd, Charbhuja months ago, around 60% of the
Diamonds Pvt Ltd and Kanika Gems Pvt preliminary approvals done online have
Ltd for allegedly routing Rs 2,000 crore been converted into formal sanctions,
overseas through shell companies by with the total loan amount adding up to
submitting forged bills with IndusInd over Rs 24,000 crore. This has raised
Bank (Opera House branch). Following questions over the effectiveness of the
this, the ED registered an Enforcement scheme, where loans up to Rs 1 crore are
Case Information Report (ECIR) and last available to MSMEs that have a credit
week arrested Machindra Khade, a history, pay income tax and are part of
former manager with the Nagpur branch the GST network. The quick loan-
of the Renukamata Multistate sanction scheme was part of the
Cooperative Urban Credit Society on the government's outreach to the MSME
allegations of laundering Rs 120 crores. sector, which was complaining about
The scam involving the Mumbai liquidity shortage due to RBI's policies
companies is estimated to be worth Rs and adverse impact of demonetization
and GST on a segment that is a
63 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

significant contributor to GDP, jobs and But, the government appears satisfied
exports. Officials said part of the reason with the initial response, with some
for the conversion rate hovering around officials saying that some of the private
the 60% mark is the absence of lenders too wanted to join the 59-
documents. While basic documents are minute loan-sanction scheme, since it
available, banks do undertake due was meant for those with a prior credit
diligence since everyone is answerable in and tax history.
case something goes wrong. The https://economictimes.indiatimes.com/industr
exercise requires things like the cash y/banking/finance/banking/speed-up-59-
minute-loan-sanction-government-tells-psu-
flow statement. Often the loan applicant
banks/articleshow/67551962.cms Dated:
takes time to furnish papers. Banks have Jan 16, 2018
also been advised to be proactive and
reach out to those who do not come SBI PUTS ON SALE ESSAR
back. Besides, the lenders have been told
STEEL LOAN OF RS 15,431
that there has to be a valid reason for
rejecting a loan proposal and it cannot
CRORE
With last minute-litigation delaying
be whimsical. This will also require a
recovery of Essar Steelloan, State Bank
change in the mindset, which will not
of India (SBI) has put on sale its Rs
happen overnight. The government had
15,431-crore exposure to the
steelmaker on a full-cash basis. In the
sale notice on its website, the aggregate
reserve price for the bidding has been
set at Rs 9,588 crore. These include
categories like working capital, term
loan, corporate loan, export
performance bank guarantee (EPBG) and
standby letter of credit (SBLC). The bank
mentioned that the loans may be
assigned in whole or in part to buyers
and all the security in relation to that will
be transferred and shared pari-passu to
the extent of the amount sold. As per SBI
the loan could be sold to asset
reconstruction companies (ARCs), other
banks and non-banking financial
companies (NBFCs). This is SBI's second
attempt to sell its Essar Steel exposure
after it withdrew from the process in
September last year. Other lenders like
promised to process the loan application
HDFC Bank, Axis Bank, ICICI Bank and
using technology in a time-bound
Federal Bank have sold their exposures,
fashion but did not guarantee a loan.
64 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

either partly or in full, over the last few about Rs 54,389 crore. In October last
years. Essar Steel owes more than Rs year, the Supreme Court allowed
49,000 crore to over two dozen banks ArcelorMittal and Numetal Mauritius to
led by State Bank of India. It runs a 10- bid for Essar Steel, provided they paid
million-tonne steel mill at Hazira in the dues of defaulters connected to them
Gujarat, which is involved in ore within two weeks. At Ahmedabad NCLT,
beneficiation, pellet-making, iron- CoC and the resolution professional
making, steel-making, and downstream have opposed ESAHL's debt recast plan
facilities. The committee of creditors claiming it was against the apex court's
(CoC) of Essar Steel, on 25 October, order and was also against the
2018, voted in favour of handing over insolvency law and that such proposals
the debt-laden company to ArcelorMittal by Essar Steel shareholders have been
after it cleared pending dues of Uttam rejected by them in the past. While
Galva and KSS Petron. ArcelorMittal's ArcelorMittal and the lenders have been
resolution plan envisages an upfront seeking nod of the tribunal for
payment of Rs 42,000 crore to lenders completion of the debt resolution
and an additional Rs 8,000 crore towards process, Essar Steel Asia Holdings,
capital expenditure. SBI mentioned that Standard Chartered Plc and several
the resolution plan has been approved operational creditors have objected to
and filed in NCLT Ahmedabad. As per the ArcelorMittal's proposal.
approved resolution plan of https://www.livemint.com/Companies/aPnvjLp
ArcelorMittal, minimum recovery to SBI Z1VDkBT5vv22esI/SBI-puts-on-sale-Essar-
Steel-loan-of-Rs-15431-crore.html Dated: Jan
is Rs 11,313.42 crore and the reserve
16, 2019
price of Rs 9588 crore is on the basis of
net present value (NPV) of minimum
RBI GOVERNOR SHRI
recovery discounted at 18%. Earlier this
month, the Ahmedabad bench of the
SHAKTIKANTA DAS TO MEET
National Company Law Tribunal (NCLT) INDUSTRY CHAMBERS
said it will pronounce before 31 January TOMORROW
its order on a petition filed by Essar Steel Reserve Bank of India (RBI) Governor Shri
shareholders for submission of its Shaktikanta Das will meet industry
proposal to settle dues worth Rs 54,389 chambers to understand their issues and
crore. The pronouncement came after concerns. After his taking over as 25th
observations made by the National Governor of the RBI last month, he has
Company Law Appellate Tribunal been holding consultations with various
(NCLAT), which had asked NCLT stakeholders including banks, non-
Ahmedabad to expedite the insolvency banking financial companies and micro,
case filed against Essar Steel (India) Ltd. small and medium enterprises. Will meet
Essar Steel Asia Holdings Ltd (ESAHL), the apex chambers/associations of
which holds 72% of shares in Essar Steel, industry and commerce tomorrow (17th
has submitted to NCLT Ahmedabad a January). The meeting comes ahead of
proposal for settling the entire debt for the sixth bi-monthly monetary policy

65 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

statement for 2018-19 scheduled to be and is not intended to pronounce upon

announced on February 7. Industry has the validity of any transaction or
been pitching for the rate cut amid agreement entered into by the bank with
falling inflation and factory output. its customers. Last year, the RBI had
Continued decline in food prices pulled imposed a penalty of Rs 1 crore on BoM
down retail inflation to an 18-month low on account of delay on the part of the
of 2.19 per cent in December 2018. bank to detect and report fraud in an
Another set of official data showed that account
the wholesale inflation also eased to an https://economictimes.indiatimes.com/industr
eight-month low of 3.80 per cent in y/banking/finance/banking/rbi-slaps-rs-1-
c r o r e - f i n e - o n - b a n k - o f -
December on softening fuel and food
maharashtra/articleshow/67560312.cms
prices. The inflation based on the Dated: Jan 16, 2019
Consumer Price Index was 2.33 per cent
in November and 5.21 per cent in BOMBAY HIGH COURT GIVES
December 2017. The RBI, which mainly
A LEEWAY TO HSBC BANK
factors in retail inflation, has been
tasked by the government to maintain
(MAURITIUS) IN
the inflation near 4 per cent. The factory REASSESSMENT DISPUTE
output based on movement in the Index WITH INCOME TAX
of Industrial Production (IIP) slumped to In what could benefit several companies
a 17-month low of 0.5 per cent in tackling disputes with the income tax
November on account of contraction in department, the Bombay High Court has
the manufacturing sector, particularly said that re-assessment cannot be
consumer and capital goods. carried out beyond four years. The court
https://www.livemint.com/Politics/Wx4 was ruling in the case of HSBC Bank
8OlzNQJ1dzPkn6Yr40H/RBI-governor- (Mauritius) and the income tax
Shaktikanta-Das-to-meet-industry- department. The bank was assessed for
chambers-tomor.html Dated: Jan 16, 2011/12. In the original scrutiny the tax
2019 officer had allowed the bank to claim
interest income on external commercial
borrowings (ECB) of Rs 143 crore.
RBI SLAPS RS 1 CRORE FINE ON
However, the tax officer at a later stage
BANK OF MAHARASHTRA
scrutinized the transaction and said this
The Reserve Bank of India(RBI) has
transaction would not be allowed. The
imposed a Rs 1-crore penalty on state-
tax officer claimed that the bank had
owned Bank of Maharashtra (BoM) for
failed to satisfy some criteria and hence
non-compliance of Know Your Customer
the transaction would not be allowed.
guidelines and fraud-classification
The court rejected the tax officer's action
norms. This penalty has been imposed
of disallowing the ECB transaction in re-
taking into account the failure of the
assessment proceedings. The bank had
bank to adhere to directions issued by
claimed that it should get benefits of
the RBI. This action is based on
India-Mauritius tax treaty and the
deficiencies in regulatory compliance

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 I N D I A

transaction should not be taxed trillion over two fiscal years to its
domestically. The court ruled that even struggling lenders under the PSU bank
during the original scrutiny the tax recapitalization plan. In December, it
officer had examined the transaction upsized its commitment by another Rs.
and allowed it. The court observed that 41,000 crore, considering PSU banks
the tax officer's stance in the weren't able to raise money from the
reassessment was a “change of opinion.” markets. One may argue that the centre
Tax experts mentioned that the ruling can't be blamed, considering it did its job
would impact several companies where of helping the banks as the largest
the tax officers have changed opinions in shareholder by infusing money. But from
the reassessment. The ruling would also a minority shareholders' perspective, the
impact on the time period in which the equity dilution has been immense in
reassessment can be carried out by the these banks, with the government
income tax officers. having waited far too long to act on bank
https://economictimes.indiatimes.com/industr recapitalization. While the government
y/banking/finance/banking/bombay-high- dragged its feet over recapitalization,
court-gives-a-leeway-to-hsbc-bank-
there was an erosion of market value and
mauritius-in-reassessment-dispute-with-
income-tax/articleshow/67574474.cms
net worth of these banks. It too suffered
Dated: Jan 17, 2019 as a shareholder due to the erosion.
Now, it also finds itself in a situation
FORGET PRIVATIZATION, where coming down to the desired 52%
stake looks like a pipe dream. Another
GOVT HAS HUGGED ITS
fallout of the increase in government
BANKS TIGHTER
ownership is that these banks are now
A stitch in time saves nine. The
flouting minimum public shareholding
government has, over the years, received
norms set by the capital market
advice from numerous quarters to
regulator. This, in turn, has led to a slew
reduce its stake in Public Sector Banks
of announcements by public sector
(PSU banks) to below 51%, so that these
banks to make large issuances under the
lenders have sufficient capital for
employee stock option mode, with a view
growth. While the government has
to meet these norms. Syndicate Bank, for
rejected this line of thought, it had itself
instance, will issue as many as 300
talked of reducing its stake from existing
million shares to employees, on an
levels to around 52% by allowing banks
equity base of 1.6 billion shares. Part of
to raise equity capital from other
the capital infusion in FY18 was done
sources. But things have gone in the
through recapitalization bonds. In this
opposite direction, as the chart below
route, the government issues bonds to
shows, with the government's stake
banks and uses the proceeds to buy their
rising above 95% in one case. This is a
shares to infuse capital. This route was
direct outcome of the unprecedented
frowned upon since the banks ended up
capital infusion the government has
shifting money from their investment
done after it committed to give Rs. 2.11
book to their capital base. The
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 I N D I A

government in its rescue mission has constant growth witnessed in the

increased its hold on banks in direct economy, RBI Governor Shri Shaktikanta
contrast to what it had promised in Das mentioned that India's growth story
2014. Recall that when the current is backed by strong domestic
government was formed a slew of fundamentals. efforts are being made to
banking reforms were promised, one of strengthen corporate governance in the
which was to bring down the center's public sector banks to effectively check
stake in the banks it owns. incidence of financial frauds. In his first
public speech after assuming the charge
as RBI Governor in December, Shri Das
also flagged challenges that Indian
companies may face on account of
developments around the Brexit.
Speaking at the 9th Vibrant Gujarat
Global Summit 2019, the RBI chief
mentioned that the central bank is
committed to play its role as the
monetary authority for maintaining
mandated price stability objective while
keeping in mind the objective of growth.
As the regulator and supervisor of the
banking sector as also payment systems,
the Reserve Bank "will take necessary
steps to maintain financial stability and
facilitate enabling conditions for
sustainable and robust growth. The RBI
governor further mentioned that the
growing size and complexity of the
Indian financial system warrants
strengthening of corporate governance
https://www.livemint.com/Money/86BDC9r6zq systems in banks. Citing incidence of
gl995QQ7qJiL/Forget-privatisation-govt-has- financial frauds in recent times, he
hugged-its-banks-tighter.html Dated: Jan 18, mentioned that such cases further
2019 underscore the significance of sound
corporate governance standards in
COMPLEXITY OF INDIAN banks. The government, the Banks Board
FINANCIAL SYSTEM Bureau and the Reserve Bank are
WARRANTS ROBUST CORP currently engaged in developing an
GOVERNANCE IN BANKS, objective framework for performance
SHRI SHAKTIKANTA DAS evaluation and this should redefine the
Commenting on the reasons behind the contours of corporate governance in the
Public Sector Banks (PSBs) with a focus
68 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

on transparency, accountability and economies are on the path of monetary

skills. The PSBs have been hit by a series policy normalization, there has been
of frauds in the recent past, including the global portfolio rebalancing away from
much-talked about Rs 14,000 crore emerging market economies, including
fraud at Punjab National Bank. Referring India. Another factor that has
to the problems being faced by the non- repercussions for India's external sector
banking financial sector, the RBI chief is the recent developments around
mentioned that the debt default of a Brexit, there are consequential policy
systemically important NBFC highlighted challenges for India which enjoys strong
the vulnerab ility and need fo r trade and investment relations with the
strengthening regulatory vigil on the UK and the EU. RBI will carefully weigh
sector in general and on asset liability the challenges and opportunities that lie
management (ALM) framework in ahead and undertake appropriate policy
particular. The Reserve Bank intends to responses. Indian companies may face
strengthen the ALM framework for pertains to developments around Brexit,
NBFCs and harmonies it across different Indian companies and policy makers
categories of NBFCs with the objective of need to suitably weigh all opportunities
enabling the NBFCs to play a vital role in and challenges, and accordingly re-
our economy. In order to allow additional strategise to respond appropriately. On
access to funding for the NBFC sector in his appointment as RBI Governor, Shri
the wake of the recent crisis, the Reserve Das mentioned that he had no clue that
Bank has relaxed the norms for NBFCs to he would get the job at the central bank.
securities their loan books, he added. On Months before his appointment, he had
challenges before the economy, Shri Das in October tweeted 'central banks across
mentioned that the foremost priority is countries have a very critical role at the
to preserve domestic macroeconomic current juncture. The challenge is to try
and financial stability, especially in a and read the situation and take decisive
global environment that is clouded by steps in pursuit of their multiple
high uncertainty. Not only downward responsibilities'.
risks to global growth, trade and https://economictimes.indiatimes.com/industr
investment have risen, but also the y/banking/finance/banking/indias-banking-
system-is-on-the-cusp-of-a-transformation-
spillover effects on emerging markets
shaktikanta-das/articleshow/67591553.cms
due to increase in global interest rates
Dated: Jan 18, 2019
could be profound. RBI therefore, need
to brace ourselves for any sudden bout
GOVERNMENT SACKS TWO
of global financial market turbulence
that domestic economy and financial
PUNJAB NATIONAL BANK
markets may face in the period ahead. In EXECUTIVES FOR ALLEGED
such a milieu, domestic macroeconomic LAPSES IN $2 BILLION FRAUD
policy framework needs to be supported India has sacked two senior executives
by sound financial supervision and of state-run Punjab National Bank (PNB)
regulation. As a few advanced for allegedly failing to prevent a $2

69 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

billion fraud, nearly a year after the MD, DMDS

country's biggest bank scam came to IDBI Bank, which has becomes a
light. The firing of the two executive subsidiary of LIC, has decided to
directors, whom the federal police have continue with the existing top
accused of breaching central bank management, including Shri Rakesh
guidelines, is the first instance of Sharma as the managing director of the
sacking of the bank's employees since it bank. Insurance giant LIC has completed
mentioned that billionaire diamond acquisition of 51 per cent controlling in
jeweller Shri Nirav Modi and his uncle the bank. However, the bank's board also
had for years fraudulently raised billions approved the appointment of Shri Rajesh
of dollars in foreign credit by conspiring Kandwal as an additional director and
with staff at the bank. Shri Modi and his LIC's nominee director on the board of
uncle Shri Mehul Choksi, who left India IDBI Bank. Shri Kandwal is the director
before the fraud was discovered, have and the chief executive officer of LICHFL
denied the accusations. In a stock Care Homes Ltd. The board of IDBI Bank
exchange filing late on Friday, the has in its meeting held on January 21
country's second-biggest state bank approved continuation of office of Shri
mentioned that the government had Rakesh Sharma, Shri K P Nair and Shri G
removed Shri K. Veera Brahmaji Rao and M Yadwadkar as directors and as MD &
Shri Sanjiv Sharan "from the office of CEO and DMDs (Deputy Managing
executive director" with immediate Director), respectively, of the bank till
effect. The filing did not give a reason. such time as the board approves
The government then fired them appointment of" new management
because "they failed to use global following the due process". Consequent
payments network SWIFT to detect the to the allotment of shares under final
fraud", declining to be identified Tranche II to LIC, amendment in the
because the reasons for the sacking have bank's Articles of Association has come
not been made public. They were not into effect.
able to supervise and there was https://economictimes.indiatimes.com
dereliction of duty on their part. Phone /industry/banking/finance/banking/id
calls to PNB Chief Executive Shri Sunil bi-bank-decides-to-continue-with-
Mehta as well as to Shri Rao and Shri existing-md-dmds/articleshow/
Sharan went unanswered. 67622499.cms Dated: Jan 21, 2019
https://economictimes.indiatimes.com/industr
y/banking/finance/banking/indian-
government-sacks-two-punjab-national-
CBI REGISTERS CRIMINAL
bank-executives-for-alleged-lapses-in-2- CASE AGAINST MS. CHANDA
billion-fraud-sources/articleshow/ KOCHHAR
67610035.cms Dated: Jan 20, 2019
In a move that spells trouble for former
ICICI Bank Chief Executive Officer (CEO)
IDBI BANK DECIDES TO Ms. Chanda Kochhar, the Central Bureau
CONTINUE WITH EXISTING of Investigation registered a criminal case

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 I N D I A

against her along with her husband and owned by Shri Deepak Kochhar for Rs. 9
NuPower Renewables founder Deepak lakh, six months after receiving the loan
Kochhar and Videocon group managing from ICICI Bank an allegation that
director (MD) Shri Venugopal Dhoot. With Kochhar had earlier denied to Mint.
the probe agency naming Kochhar as an https://www.livemint.com/companies/news/cb
accused in a loan fraud case at a time i-registers-fir-in-icici-bank-videocon-loan-
case-1548309939916.html Dated: Jan 24, 2019
when she was at the helm of affairs at the
bank, the case brings back the spotlight
on financial crimes involving the top PNB'S $45 MILLION FRAUD
brass of the banking sector. Punjab CLAIM DISMISSED BY ENGLISH
National Bank MD and CEO Ms. Usha COURT
Ananthasubramanian is under The High Court of England and Wales
investigation by the CBI for her alleged dismissed a USD 45-million deceit claim
involvement in the Rs. 14,356 crore brought by the UK subsidiary of Punjab
scam. Earlier in the day, the CBI carried National Bank (PNB) against seven
out searches at four locations in Mumbai individuals and two companies, based in
including the Mumbai offices of Videocon India and the US. London-based Punjab
and NuPower. The FIR and the raids are in National Bank International Limited's
connection with the ICICI-Videocon loan (PNBIL) claim concerned eight loans it
case, an alleged case of quid-pro-quo. made between March 29, 2011, and
While Shri Deepak Kochhar declined December 1, 2014, for oil re-refining
comment on the matter, calls and and wind energy generating projects in
messages to Shri Venugopal Dhoot the US. PNBIL had accused the
remained unanswered. In March, the CBI individuals and companies in question of
registered a preliminary enquiry against breach of contract, misrepresentation
Shri Deepak Kochhar and Shri Venugopal and deceit. In his judgment at the High
Dhoot, chairman of Videocon group, to Court's Chancery Division, Chief Master
investigate irregularities in the Rs. Marsh concluded that the bank had
40,000 crore loan made by a consortium failed to make an "arguable case in
of lenders. It pointed to an alleged deceit against the defendants". "The core
conflict of interest in a Rs. 3,250-crore components of a claim in deceit are
loan grant to Videocon group by ICICI absent; or if they are present, they are
Bank. The amount was granted as part of provided as such a high level of
a Rs. 40,000-crore loan by a consortium abstraction as to be totally inadequate,"
of 20 banks in 2012. Dhoot allegedly he notes. Referring to the case as having
gave Rs. 64 crore in 2010 through a fully "an unfortunate history", the judge also
owned entity to NuPower Renewables Pvt pulls up PNBIL for a lack of "frankness"
Ltd, which he had set up with Shri Deepak with the court. "It is disturbing that the
Kochhar and two of his relatives. It was US claim was not brought to the
alleged that Dhoot transferred attention of the court in a plain and
proprietorship of the company to a trust direct manner from the outset. It is

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 I N D I A

equally disturbing that the claimant's actions of the defendants following the
intention to bring proceedings in granting of loans amounting to USD 45
Chennai was not investigated and details million to companies in the US and India
of the claim was not revealed to the controlled by the individual defendants.
court," the judgment order states. The The bank also alleged that money had
judge further observed that the failure to been siphoned off and payments due
draw to the attention of the court the had not been made under the loan
existence of the foreign claims was a facilities and guarantees. All the
"serious breach" of the claimant's duty to defendants, except one who is US-
the court. UK-based law firm Zaiwalla & based, are resident in India and PNBIL,
Co represented eight of the defendants represented by UK-based Cubism Law,
against PNBIL – Ravi Srinivasan, Trishe had served the proceedings by email on
Resources INC (USA), Vathsala the defendants in India and the US. PNBIL
Ranganathan, Pesco Beam is the wholly-owned subsidiary of
Environmental Solutions INC (USA), Punjab National Bank (PNB) in India,
Pesco Beam Environmental Solutions which started its UK operations in 2007
Private Limited, Anantharaman Shankar, and operates through seven branches
Luke Staengl and Anantharam around the country. It is yet to officially
Subramamium. The court noted that it comment on the ruling.
was common ground that none of the https://economictimes.indiatimes.com/industr
defendants have any connection with y/banking/finance/banking/pnbs-45-million-
fraud-claim-dismissed-by-english-court
England. However, the contracts were
/articleshow/67676191.cmsDated: Jan 24, 2019
executed in England, the loans were
negotiated here and the loan accounts
CBI BOOKS FORMER ICICI
are all held and operated in London.
PNBIL had relied on these facts and the
BANK CHIEF MS. CHANDA
willingness of the borrowers and their KOCHHAR FOR CRIMINAL
directors to travel to London for the CONSPIRACY
purposes of arranging the loans as part The CBI has booked former ICICI Bank
of its case. The decision serves as a head Ms. Chanda Kochhar on charges of
reminder that serious allegations of criminal conspiracy, cheating and abuse
fraud have to be supported by cogent
facts and evidence: speculative claims
will not be permitted to proceed to trial.
The decision of the court has saved
everyone concerned a great deal of time
and money by being dismissed at an
early stage, although the bank will still
face claims for substantial costs as well
as having to pay its own costs. PNB
International Ltd had claimed that it had
been misled and defrauded by the
72 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

of official position for “dishonestly which the CBI is expected to soon

sanctioning loans to the Videocon summon Chanda and Deepak Kochhar as
Group”. Ms. Kochhar, who was the MD of well as Dhoot for further questioning.
ICICI Bank until last October, is accused Sources added that Shri Dhoot was in his
in the CBI FIR of allegedly receiving Mumbai office when the searches took
“illegal gratification through her place. He was quizzed by the CBI sleuths.
husband, Shri Deepak Kochhar, from This was just preliminary questioning.
Videocon MD Shri VN Dhoot for He will be summoned on a later date to
sanctioning a term loan of Rs 300 crore be confronted with the seized items. An
to Videocon International Electronics individual close to Ms. Chanda Kochhar,
Ltd”. This apart, her alleged role in however, claimed the FIR is technically
influencing disbursal decisions in flawed. Eight ICICI Bank executives
relevant committees of the bank has also besides Ms. Chanda Kochhar have been
been brought under the scanner. The CBI named in the FIR. If this is a case of quid
has also registered a case against Shri pro quo, then how do you prove that for
Deepak Kochhar and Shri VN Dhoot. It these executives? This is a basic flaw in
has also mentioned unknown public the FIR and while we will cooperate with
servants in the FIR. The agency is the authorities, we will also fight this
probing allegations of 'quid pro quo' in FIR.” According to the FIR, ICICI Bank
the loans granted to Videocon by ICICI disbursed six “high-value loans”
Bank. As per the FIR, role of senior bank between June 2009 and October 2011.
officials, including former chairman Shri “On August 26, 2009, a rupee term loan
KV Kamath (currently president of New of Rs 300 crore was sanctioned to
Development Bank, formerly BRICS Videocon International Electronics Ltd
Bank), current ICICI Bank MD Sandeep (VIEL) in contravention of rules and
Bakhshi, K Ramkumar, Sonjoy Chatterjee policy by the sanctioning committee. Ms.
(CEO, Goldman Sachs India), NS Kannan, Kochhar was one of the members of the
Zarin Daruwala (CEO, Standard sanctioning committee, who in criminal
Chartered India), Rajiv Sabharwal (CEO, conspiracydishonestly by abusing her
Tata Capital) and Homi Khusrokhan, official position sanctioned this loan in
might also be probed. These individuals favour of VIEL,” the FIR mentioned. On
were part of the sanctioning committee September 7, 2009, this loan was
that cleared loans amounting to Rs transferred to VIEL, On September 8,
1,575 crore. The CBI conducted searches 2009, Dhoot transferred Rs 64 crore to
at the Nariman Point offices of Shri NuPower Renewables, managed by Shri
Deepak Kochhar's company NuPower Deepak Kochharthis was the first major
Renewables Limited (NRL), the Videocon capital received by NRL to acquire its first
Group and Supreme Energy Pvt Ltd power plant. The allegation against Ms.
(SEPL). Videocon's offices in Aurangabad Chanda Kochhar is that she received
were also searched. Sources told ET the “illegal gratification through her
raids have led to seizure of what they husband from Dhoot for sanctioning the
described as key documents based on Rs 300 crore loan”. The FIR further
73 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

mentioned that ICICI Bank also which was incorporated in December

sanctioned loans in violation of its credit 2008. Dhoot allegedly allotted
policy to the Videocon Group to help it 1,997,500 warrants to Deepak Kochhar
repay unsecured loans. Loans to at the rate of 10 per warrant, on an initial
Videocon Industries Ltd (VIL) and its payment of Re 1 per warrant. In June
group of companies were declared non- 2009, shares of NRL held by Dhoot and
performing assets (NPAs) on June 30, Kochhar's Pacific Capital Services Pvt Ltd
2017. On the role of other senior were transferred to Supreme Energy Pvt
officials, most of whom have left ICICI Ltd, which became a 95% shareholder of
Bank, the agency mentioned that NR L. Dho o t resigne d fro m the
between June 2009 and October 2011, directorship of SEPL in January 2009 and
loans amounting to Rs 1,575 crore were subsequently transferred control of the
sanctioned by various committees company to Deepak Kochhar by
having senior officials of the bank as selling/transferring his shares to
members. These loans included: Rs 175 Pinnacle Energy Trust managed by
crore to MillenniumAppliance India Ltd Kochhar. All these entities- VIEL, VIL,
on June 30, 2009; Rs 240 crore to Sky NRL and SEPL have been identified as
Appliances Ltd and Rs 110 crore to accused in the FIR. Amid these
Techno Electronics Ltd on November 17, allegations and probes by multiple
2010; Rs 300 crore to Applicomp India agencies, ICICI Bank appointed a
Ltd on May 30, 2011; and Rs 750 crore to committee under former Supreme Court
VIL on October 31, 2011.These loans Justice BN Srikrishna to investigate
have turned NPAs resulting in wrongful allegations of conflict of interest and
loss to ICICI Bank and wrongful gain to quid pro quo against Ms. Chanda
the borrowers and accused persons. The Kochhar. She stepped down last
role of these senior officials may also be October.
investigated,” the FIR mentioned. The https://economictimes.indiatimes.com/industr
CBI's case is that Ms. Chanda Kochhar, y/banking/finance/banking/cbi-files-case-
against-former-icici-bank-chief-chanda-
who took over as MD of ICICI Bank in May
kochhar/articleshow/67671367.cms Dated Jan
2009, was one of the key committee 25, 2019
members. Credit limits to the above-
mentioned group companies were INDIA POST PAYMENTS BANK
sanctioned after she took over the
CROSSES 1.25 LAKH
charge of the bank as MD, these loans
were sanctioned by different sanctioning
BRANCHES, SOON TO HIT 1.5
committees. Ms. Kochhar was one of the LAKHS
committee members which sanctioned As per communications minister Shri
RTL of Rs 300 crore to VIEL and Rs 750 Manoj Sinha, the government has
crore to VIL,” the FIR mentioned. On the opened around 1.25 lakh branches of
alleged role of her husband, the FIR India Post Payments Bank and soon, it
mentioned Deepak Kochhar, Dhoot and will have operations across over 1.5 lakh
Saurabh Dhoot were directors of NRL, locations. Department of Posts (DoP) has

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 I N D I A

opened India Post Payments Bank for meet the CEOs of public sector banks to
unbanked and underbanked people. take a stock of the banking sector, and
There are lump sum 1.25 lakh branches. discuss ways to improve their financial
Shortly, it will have 1.5 lakh branches. health. The meeting assumes
Prime Minister has launched IPPB on significance as it comes just three days
September 1 last year with an aim to take ahead of the Budget 2019-20, the last
banking services to the doorstep of every from this government before the general
citizen by arming three lakh postmen elections expected to be held in April-
and 'Grameen Dak Sewaks' with digital May. The full-day meeting is likely to be
aids to deliver financial services. The attended by Reserve Bank of India
payments bank can accept deposits of Governor Shri Shaktikanta Das, who is
up to Rs 1 lakh, offer remittance going to announce his first monetary
services, mobile payments/transfers/ policy review on February 7. Shri Goyal,
purchases and other banking services who was given additional charge of the
such as ATM/debit cards, net banking finance ministry as Shri Arun Jaitley is
and third-party fund transfers. However, away to the US for a treatment, is his
it cannot offer loans directly, or issue expected to discuss a host of issues
credit cards. "Since the time of including credit offtake and bad loan
independence, there were around 1.3 position of lenders. Among the key
lakh bank branches, we are going to issues, sources mentioned that the
provide more bank branches than that. meeting will review progress of various
Talking about the stamp launch, the schemes of the government being
minister mentioned that earlier, it was a implemented through the government.
trend in this country that post stamps of It will also review the credit flow to
only special people from prime families MSMEs, agriculture and retail sectors.
were issued.After 2014, under the Besides, the meeting will also review
direction of Prime Minister, Department financial performance of the banks for
of Posts had a mandate to issue post the nine months ended December 2018.
stamps of people of eminence who made Non-performing assets (NPAs) would
special contribution at national and also come up for deliberation, they
international level. added. Public sector banks (PSBs) have
https://economictimes.indiatimes.com/industr seen decline in bad loans by over Rs
y/ bank ing/finance/bank ing/india-post- 23,000 crore from a peak of Rs 9.62 lakh
payments-bank-crosses-1-25-lakh-branches-
crore in March 2018 due to various
soon-to-hit-1-5-lakh-manoj-sinha/
articleshow/ 67689557.cms Dated: Jan 25, 2019
initiatives taken by the government. At
the same time, PSBs have also made a
record in recovery of Rs 60,726 crore in
FINANCE MINISTER SHRI
the first half of the current financial year,
PIYUSH GOYAL TO MEET which is more than double the amount
HEADS OF PSU BANKS ON recovered in the corresponding period
MONDAY last year. According to the latest finance
Finance Minister Shri Piyush Goyal will ministry data, non-NPA accounts
75 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

overdue by 31 to 90 days (Special or fraudster if they think the person may

Mention Accounts 1 & 2) of PSBs have flee the country. The CMDs and CEOs of
declined by 61 per cent over five PSU banks can now ask the Home
successive quarters - from Rs 2.25 lakh Ministry, Ministry of External Affairs,
crore as of June 2017 to Rs 0.87 lakh Customs and Income Tax Departments,
crore in September 2018. In his first stint Directorate of Revenue Intelligence, CBI,
as finance minister for 100 days last regional passport officers and police to
year, Shri Goyal was instrumental in issue an LOC to alert immigration check
setting up a committee headed by non- posts to stop anyone leaving India. The
executive chairman of Punjab National SFIO and PSU banks can initiate the
Bank Shri Sunil Mehta to examine process if they suspect that the defaulter
whether creation of an asset may leave the country to escape the law.
reconstruction company or asset Earlier, investigating agencies would
management company to help in faster request LOCs in cognizable offences
resolution of stressed assets. under the IPC or other laws in case the
https://economictimes.indiatimes.com/industr
accused evaded arrest or did not appear
y/banking/finance/banking/finance-minister- before court despite issuance of non-
piyush-goyal-to-meet-heads-of-psu-banks- bailable warrants and other coercive
on-monday/articleshow/67707986.cms measures and there was a likelihood of
Dated: Jan 27, 2019 the accused leaving the country to
escape arrest. An LOC is valid for a year
GOVERNMENT EMPOWERS unless its duration is specified. The
PSU BANKS TO SEEK govt's fresh move came after three high-
LOOKOUT CIRCULARS profile escapes involving liquor baron
AGAINST WILFUL Shri Vijay Mallya and diamantaires Shri
Nirav Modi and Shri Mehul Choksi rocked
DEFAULTERS
the country, inviting embarrassment for
In a bid to prevent big economic
the government. Shri Mallya left India on
offenders like Shri Vijay Mallyaand Shri
March 2, 2016 after defaulting on loan
Nirav Modi from fleeing the country, the
amounting to Rs 9,000 crore he had
government has empowered PSU banks
taken for his now-defunct Kingfisher
to request lookout circulars (LOCs)
Airlines. Jewellery designer Shri Modi
against wilful defaulters and fraudsters.
and his uncle Shri Choksi, managing
The Home Ministry has also authorized
director of Gitanjali Gems Ltd, fled the
the Serious Fraud Investigation Office
country in January 2018. They are
(SFIO), a statutory corporate fraud
accused of cheating the state-run
investigation agency, to request LOCs if
Punjab National Bank to the tune of Rs
it feels the suspect may escape from
13,000 crore. The government had last
India. The ministry issued two circulars
year brought the Fugitive Economic
recently, authorizing chairman-cum-
Offenders Act, empowering the
managing directors or chief executive
authorities to attach and confiscate the
officers of public sector banks and the
proceeds of crime and properties of
SFIO to request designated authorities to
economic offenders, like bank
issue LOCs against any wilful defaulter
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 I N D I A

fraudsters or loan defaulters who fled new rule came into effect. The idea is to
the country. The law is aimed at quickly place the facts before everyone at a time
recovering losses to the exchequer or when the industry associations are
PSBs in cases of frauds. putting forward their views against the
https://economictimes.indiatimes.com/industr February 12 circular before the new
y/banking/finance/banking/ government- governor. Mint Street memos, released
empowers-psu-banks-to-seek-lookout-
by RBI from time to time, are brief
circulars-against-wilful-defaulters/
articleshow/67711663.cms Dated: Jan 28, 2019 reports and analyses on contemporary
topics. The documents are prepared by
the staff of RBI and Centre for Advanced
RBI HAS A MEMO THAT
Financial Research & Learning (CAFRAL),
COULD PERMANENTLY
an independent body set up by the
SILENCE DOUBTERS OF ITS central bank. Among other things, RBI's
NPA MOVE February 12 notification directed banks
The Reserve Bank of India (RBI) is to classify loans as 'special mention
weighing a plan to release data that accounts' immediately on default, and
would demonstrate that the number of file insolvency application (in case of
corporates defaulting on bank loans borrowers having outstanding debt of Rs
have dipped following the central bank's 2,000 crore or more) if the debt
stern directive on February 12 last year resolution plan to revive the company is
that had rattled large, influential not implemented within 180 days from
borrowers and irked many within the the date of default. The notification has
government. The regulator is been legally challenged with several
understood to have sounded out the borrowers taking a stand that the
government on the proposed move that decision to invoke the 'Insolvency and
could counter arguments of industry Bankruptcy Code 2016' should be left to
lobbies and defend the directive at a time lenders and not directed by the banking
it has been challenged in the court of regulator. “Even though the subject is
law. There is a proposal to come out with sub judice (with the petitions against the
a 'Mint Street Memo' that will show circular lying before the Supreme Court),
improvement in default data since the the regulator can always come out with

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 I N D I A

reports based on facts which are not itself. However, of close to 250 operators
classified. Indeed, according to data employed with these agencies, nearly
compiled by India's largest credit rating half were penalized in the last two
agency Crisil, the number of defaults is months and were either deactivated or
the lowest in the first half of 2018-19 blacklisted. This brought SBI's Aadhaar
compared with the corresponding enrolments to a halt at many branches,
period of FY14, FY15, FY16, FY17 and causing the bank to fail to meet targets
FY18. It is a common knowledge that and face penalties. One of those
there was a time when some of the senior penalised was 40-year-old Vikram, who
government functionaries were against worked for a monthly salary of Rs 10,000
the February 12 circular and former as an Aadhaar operator at the SBI branch
governor Shri Urjit Patel had faced the in a small village called Uchana in
pressure. The message sent out by the Haryana's Jind district. On December 26,
February 12 circular is that the outcome 2018, UIDAI fined him more than Rs 33
of default should be automatic, lakh. According to UIDAI, Vikram had
immediate, and transparent. The used his operator ID to generate Aadhaar
directive, say people in banking circles, cards using fraudulent documents
comes across as harsh because it marks between November 9 and November 17,
a shift to an inflexible, rule based system 2018. It was done using “multiple station
in dealing with NPAs and recovery.
https://www.livemint.com/Politics/3FEsadloz

SBI ALLEGES AADHAAR

DATA MISUSE, UIDAI
RUBBISHES CHARGE
Officials ofSBI have alleged that data of
the Unique Identification Authority of
India (UIDAI) has been misused. Logins
and biometrics of their Aadhaar
operators have been misused to
generate unauthorised Aadhaar cards,
bank officials informed UIDAI.
Countering the charge, UIDAI mentioned
that Aadhaar database is fully secured
and no security breach, biometric or
otherwise. SBI, like other banks, was
given an Aadhaar enrolment target for
which it selected vendors FIA
Technology Services Pvt Ltd and Sanjivini
Consultants Pvt Ltd in the Chandigarh
region which covers Haryana, Punjab,
Himachal, J&K and the UT of Chandigarh
78 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

IDs” in Vikram's name, which allowed January 9, the authority finally

Aadhaar cards to be made from multiple introduced an additional step in the
devices 143, to be precise. Every device, registration of Aadhaar operators as an
like a laptop, desktop or tablet, used for extra security measure. Also, some
Aadhaar enrolment is registered with unscrupulous elements have been
UIDAI and identified by the “station ID”. attempting to register multiple
SBI officials pointed out that as machines but UIDAI has an inherent
“registrar” (as all banks entrusted with system in place to detect any such
Aadhaar enrolment are), only they could attempt and appropriate action is taken
have approved multiple station IDs but on a daily basis on operators who err.
they had not done so. The bank's UIDAI imposes financial disincentives
officials in Chandigarh wrote to their and blacklists errant operators.
corporate office in Mumbai to raise the However, it relooks into the issue if
issue with UIDAI, saying they did not someone is wrongly penalised. It would
create these multiple station IDs and be pertinent to mention here that
there must have been lacunae in UIDAI's divulging details of any specific case
security system that allowed “someone under inquiry would not be appropriate
to hack the system and generate in the interest of the case.
multiple station IDs” in Vikram's name. https://economictimes.indiatimes.com/industr
Even more baffling was the misuse of y/banking/finance/banking/sbi-alleges-
aadhaar-data-misuse-uidai-rubbishes-
Vikram's personal biometrics
charge/articleshow/67734688.cms
(fingerprints in this case) to generate
Dated: Jan 29, 2019
Aadhaar cards, carry out unexplained
transactions at places like the I-T
YES BANK CO-PROMOTERS
department, Maharashtra government,
MP government, National Informatics
AGREE TO NOMINATE ONE
Centre and various banks, and even DIRECTOR EACH ON BOARD
withdraw money from his personal Yes Bank promoters Shri Rana Kapoor
accounts. All this time, UIDAI did not act and Ms. Madhu Kapur have agreed to
against any bank official, which would nominate one representative director
have been the case had there been a each on the bank's board as part of truce
lapse or wrongdoing by SBI officials. SBI under the works. The bank in November
deputy general manager Shri B Rajendra had said that efforts were underway for
Kumar confirmed that he was aware of mutual resolution and truce between
the “misuse of the biometrics” of Vikram Shri Rana Kapoor group and Ms. Madhu
and problems facing their sub- Kapur and her family, the two co-
vendors.In its reply, sent January 18, promoters groups of the private sector
UIDAI refused to share the details of the lender. Yes Bank recently selected senior
case but admitted that an inquiry was on. board of directors of the bank had
Meanwhile, almost all the operators, interacted with Ms. Kapur and her family.
except Vikram, were cleared by UIDAI Shri Madhu Kapur Group and Ms. Rana
and allowed to return to work. On Kapoor Group have agreed to nominate

79 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

one representative director each on the sister of Shri Rana Kapoor's wife Ms.
bank's board, subject to the completion Bindu and the two co-promoters of the
of the necessary documentation. The bank have been working towards
two new directors will be announced at reaching a settlement.
the next scheduled board meeting in https://economictimes.indiatimes.com/industr
April 2019. This is intended to ensure y/banking/finance/banking/yes-bank-co-
promoters-agree-to-nominate-one-director-
better coordination and support by the
each-on-board/articleshow/67742675.cms
two promoter groups with the new MD &
Dated: Jan 29, 2019
CEO and the board of directors of the
bank. Yes Bank also mentioned that its
TAXMAN TARGETS BANKS
board approved and recommended the
name of a senior board member of the
FOR FREE LOGO USE BY
bank to the Reserve Bank to temporarily SUBSIDIARIES
hold the office of the MD&CEO as an The tax department has started issuing
interim special duty officer. The senior notices to banks that allow subsidiaries,
official will hold the position as "Board such as mutual fund and insurance units,
Director on Interim Special Duty (MD & to use their logos for free. The tax
CEO's responsibilities)' from Feb 1, 2019 department wants the banks to pay 18%
till such date Shri Ravneet Gill assumes GST on the “deemed” value of such
office in March, 2019," it said. Last week, transactions and has even calculated
Yes Bank had appointed Deutsche Bank how much these are worth. State Bank of
India head Shri Ravneet Singh Gilll as its India, Citibank, ICICI Bank, Bank of
Managing Director & Chief Executive Baroda, Kotak Mahindra Bank and others
Officer (MD&CEO) as incumbent Shri have received show-cause notices or are
Rana Kapoor is required to step down on being scrutinized and could soon be
January 31. The bank has named Shri getting them. Subsidiaries use logos for
Ajai Kumar, the non-executive non- the promotion of related products with
independent director on its board to be the understanding sometimes included
acting an interim MD&CEO for the RBI's in a contract that no fees have to be paid.
recommendation. In September, the The tax department says these are
Reserve Bank had asked Kapoor to find a “related party transactions” and hence
replacement for himself. Shri Kapoor had should be subjected to valuation
co-founded the bank in 2004 along with regulations as per the GST framework.
his late brother-in-law Shri Ashok This follows banks being asked last year
Kapur, who died in the 2008 Mumbai to cough up taxes on services provided
terror attacks, post which his wife Ms. free to customers. The department has
Madhu Kapur became the co-promoter arrived at a value for such transactions
of the bank. Shri Kapoor and Ms. Kapur and imposed GST on that. As per Tax
have been caught-up in a legal battle experts nothing under the GST
since 2015 on some issues including framework is considered free.
nominating members of their choice on Everything has a value and hence tax has
the board of the bank. Ms. Madhu is to be paid on the amount. Under GST, a

80 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

“supply of brand” is deemed to have and interest on free services offered to

taken place from the bank to the customers. The demand was
subsidiaries, which are related parties. retrospective with a 12% service tax
Logos and trademarks are licensed by claimed since 2012, 18% interest on the
the bank that holds them to its amount and a 100% penalty. This issue
subsidiaries. This didn't attract attention could also come to haunt the banks
previously because there were no again under the GST regime.
regulations that dealt with free supply of https://economictimes.indiatimes.com/industr
services between related parties. The y/banking/finance/banking/taxman-targets-
banks-for-free-logo-use-by-
critical aspect to be considered is
subsidiaries/articleshow/67748885.cms
whether there is a supply and if there is a
Dated: Jan 30, 2019
supply only then consider the valuation
of the supply. It needs to be appreciated
JUSTICE SRIKRISHNA PANEL
that neither service tax legislation or
state VAT (value added tax) legislation
INDICTS CHANDA KOCHHAR,
contained conditions that mandated an ICICI BANK SACKS HER
arm's length pricing of supplies between The Srikrishna committee that was
related parties this was on account of the tasked to probe the quid-pro-quo
extreme difficulty in complying with transactions in ICICI Bank submitted its
such provisions as also administrating report, mentioning that Ms. Chanda
the same. The incremental revenue on Kochhar violated the banks code of
this count would be nominal in the conduct. Post these findings, the bank
overall scheme of things, he said, adding mentioned that it would treat Kochhar's
that the government should consider exit as 'Termination for Cause' under the
simplifying the valuation rules. As Bank's internal policies. This essentially
receipt of consideration was a means revocation of all her existing and
prerequisite for an activity to qualify as a future entitlements such as any unpaid
service, taxability of free-of-cost amounts, unpaid bonuses or
services was not an issue in the erstwhile increments, unvested and vested &
service tax regime. However, the GST unexercised stock options, and medical
regime contemplates tax on free benefits), and require the claw back of all
supplies between related parties. Banks bonuses paid from April 2009 to March
may not be able to claim input tax credit 2018. Responding to the findings of
on this count.Where the GST paid is Srikrishna committee, Chanda Kochhar
available as a pass-through, there are no mentioned that she is utterly
concerns. However, this may create disappointed, hurt and shocked by the
disruptions where credit cannot be decision. Certain that truth will
offset in its entirety by the recipient. This ultimately prevail, mentioned Ms.
is the second big issue banks are facing Chanda Kochhar. The enquiry report also
with the indirect tax department. In concluded that she failed to discharge
notices served in April last year, all banks her fiduciary functions to rescue herself
were asked to pay service tax, penalties to avoid any conflict of interest. The

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 I N D I A

Central Bureau of Investigation has respect to annual disclosures as required

already named Ms. Chanda Kochhar her by the Bank in terms of its internal
husband Shri Deepak Kochhar and policies, the ICICI Bank Code of Conduct
Videocon group managing director Shri and applicable Indian laws, rules and
Venugopal Dhoot for criminal conspiracy regulations on her interests (direct or
and cheating. Ms. Chanda Kochhar was indirect) towards avoidance of conflict of
on the bank's credit committee that interest, when considered that the
sanctioned a loan of Rs 3,250 crore to Bank's processes were dependent solely
the Videocon Group in 2012. Videocon's on the directors discharging their
promoter Shri Venugopal Dhoot was one fiduciary duty to recuse themselves and
of the first investors in NuPower avoid conflict, implies that the Bank's
Renewables promoted by Shri Deepak processes were rendered ineffective by
Kochhar, Ms. Chanda Kochhar's her approach to such disclosures and
husband, in 2008. The Audit Committee avoidance of conflict. The Bank notes
of the Bank had on June 6, 2018 that there are no implications of the
appointed former Supreme Court judge, Enquiry Report on its published financial
Hon'ble Mr. Justice (Retd.) B. N. statements (Indian or US GAAP) for the
Srikrishna as the Head of Enquiry (HOE) relevant periods. Following the receipt of
to undertake a comprehensive enquiry the Enquiry Report, and due
on allegations against Ms. Chanda consideration of the Enquiry Report and
Kochhar. The HOE was assisted by a law the conclusions thereat, after due
firm, and a forensic and investigative deliberations, the Board of Directors
services firm for the conduct of the decided to treat the separation of Ms
enquiry. The Bank has received the Chanda Kochhar from the Bank as a
Enquiry Report from HOE, and the Board 'Termination for Cause' under the Bank's
of Directors considered the same at the internal policies, schemes and the Code
Board Meeting held on January 30, 2019. of Conduct, with all attendant
The Enquiry Report, with the scope consequences (including revocation of
period of April 1, 2009 to March 31, all her existing and future entitlements
2018 (unless specific information such as any unpaid amounts, unpaid
required enquiry into transactions or bonuses or increments, unvested and
facts of an earlier period), concluded, vested & unexercised stock options, and
primarily on account of ineffectively medical benefits), and require the
dealing with conflict of interest and due clawback of all bonuses paid from April
disclosure or recusal requirements, that 2009 until March 2018, and to take such
Ms Chanda Kochhar was in violation of further actions as may be warranted in
the ICICI Bank Code of Conduct, its the matter. Certain statements in this
framework for dealing with conflict of release relating to a future period of time
interest and fiduciary duties, and in (including inter alia concerning our
terms of applicable Indian laws, rules future business plans or growth
and regulations. The Enquiry Report also prospects) are forward-looking
concluded that her lack of diligence with statements intended to qualify for the
82 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

'safe harbor' under applicable securities is possibly trying to align itself to the
laws including the US Private Securities new generation and positioning the
Litigation Reform Act of 1995. Such organization for the next 5-6 years.
forward-looking statements involve a Organizations move to role-based
number of risks and uncertainties that designations from level/grade- based
could cause actual results to differ designations when they want to move
materially from those in such forward- away from hierarchical thinking to
looking statements. functional thinking focusing on the
https://economictimes.indiatimes.com/industr accountability of the role. HR experts
y/banking/finance/banking/justice-srikrishna- mentioned that the challenge is to have
report-indicts-chanda-kochhar-says-she-
the culture to pull it off. That could be
violated-banks-policies/articleshow/67758632
.cms Dated Jan 31, 2019
the conceptual anchor for such a move
but the question is whether you have the
SENIOR MANAGEMENT AT culture to pull it off and that is the
challenge.My guess is ICICI will manage
ICICI BANK TO HAVE NO
to make it work.
TITLES https://economictimes.indiatimes.com/industr
India's second largest private lender y/banking/finance/banking/senior-
ICICI Bank has decided to scrap management-at-icici-bank-to-have-no-
designations at senior management titles/articleshow/67765816.cms Dated: Jan 31,
level to inspire more efficient teamwork 2019

by making the processes less

hierarchical. Designations at the bank INDIA'S FOREIGN TRADE:
will now be indicative of the function or DECEMBER 2018
the job that a person is expected to India's overall exports (Merchandise and
perform. Executives at the senior Services combined) in April-December
management level will have the job title 2018-19* are estimated to be USD
of 'head' followed by their function or 396.73Billion, exhibiting a positive
department, they said. Grades such as growth of 13.79per cent over the same
assistant general manager, deputy period last year. Overall imports in April-
general manager, senior general December2018-19* are estimated to be
manager, and general manager will be USD 479.46Billion, exhibiting a positive
removed from the title and will be used growth of 14.63per cent over the same
only for internal annual appraisals for period last year.
increase in salary and allowances. These *Note: Services data pertains to April-
role-based designations are being November 2018-19 as November 2018
aligned with appropriate decision- is the latest data available as per RBI's
making powers so that we can respond Press Release dated 15th January 2019.
to market opportunities in a faster It is arrived at by adding Month-wise QE
manner. Shri K. Ramkumar, former dataof RBI's press release for April to
executive director and head of human November 2018-19. This data is
resources at ICICI Bank mentioned, ICICI provisional and subject to revision by

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 I N D I A

RBI. In addition, it may be noted that data Imports: Imports in December 2018
for December 2018 is estimated and were US $ 41.01 Billion (Rs. 2,90,032.95
added to the April-November 2018-19 Crore), which was 2.44 per cent lower in
data of RBI to calculate the Overall Trade Dollar terms and 7.41 per cent higher in
Deficit for April-December 2018-19. It Rupee terms over imports of US $ 42.03
will be revised based on RBI's next press Billion (Rs.2,70,015.44Crore) in
release for December 2018. December 2017. Cumulative value of
imports for the period April-December
Merchandise Trade 2018-19 was US $ 386.65 Billion
o xports (Including Re-Exports): (Rs.26,97,306.82 Crore), as against US $
Exports inDecember 2018 were US $ 343.34 Billion (Rs.22,14,370.92 Crore)
27.93 Billion, as compared to US $ 27.83 during the period April-December
Billion in December 2017, exhibiting a 2017-18, registering a positive growth
positive growth of 0.34per cent. In of 12.61 per cent in Dollar terms (21.81
Rupee terms, exports were Rs. per cent in Rupee terms). Major
1,97,535.86 Crore in December 2018, commodity groups of import showing
as compared to Rs. 1,78,802.77 Crore in high growth in December 2018 over the
December 2017, registering a positive corresponding month of last year are:
growth of 10.48 per cent. In December
2018, major commodity groups of o Crude Oil And Non-Oil Imports:Oil
export showing positive growth over the imports inDecember 2018 were US $
corresponding month of last year are 10.67 Billion (Rs. 75,486.52 Crore),
Cumulative value of exports for the which was 3.16 percent higher in Dollar
period April-December 2018-19 was US terms (13.58 percent higher in Rupee
$ 245.44 Billion (Rs.17,11,905.60 Crore) terms), compared to US $ 10.35 Billion
as against US $ 222.77 Billion (Rs. 66,458.79 Crore) in December
(Rs.14,36,614.25 Crore) during the 2017. Oil imports in April-December
period April-December 2017-18, 2018-19 were US $ 108.10 Billion (Rs.
registering a positive growth of 10.18 7,55,255.78 Crore) which was 42.85 per
per cent in Dollar terms (19.16 per cent cent higher in Dollar terms (54.73
in Rupee terms). Non-petroleum and percent higher in Rupee terms)
Non Gems and Jewellery exports in compared to US $ 75.67 Billion (Rs.
December 2018 were US $ 21.11 Billion, 4,88,125.91 Crore), over the same
as compared to US $ 20.88 Billion in period last year. In this connection it is
December 2017, exhibiting a positive mentioned that the global Brent price
growth of 1.08 per cent. Non-petroleum ($/bbl) has decreased by 12.07 % in
and Non Gems and Jewellery exports in December 2018 vis-à-vis December
April-December 2018-19 were US $ 2017 as per data available from World
177.66 Billion, as compared to US $ Bank (Pink Sheet). Non-oil imports
164.66 Billion for the corresponding inDecember 2018 were estimated at US $
period in 2017-18, an increase of 7.90 30.33 Billion (Rs.2,14,546.43 Crore)
per cent. which was 4.27 per cent lower in Dollar
84 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

terms (5.40percent higher in Rupee Trade Balance

terms), compared to US $ 31.69Billion o Merchandise: The trade
(Rs. 2,03,556.65 Crore) in December deficit for December 2018 was
2017. Non-oil imports in April- estimated at US $ 13.08Billion as against
December 2018-19 were US $ 278.54 the deficit of US $ 14.20Billion
Billion (Rs.19,42,051.04 Crore) which inDecember 2017.
was 4.06per cent higher in Dollar terms o Services: As per RBI's Press
(12.50percent higher in Rupee terms), Release dated 15th January 2019, the
compared to US $ 267.66 Billion (Rs. trade balance in Services (i.e. Net
17,26,245.01 Crore) in April- Services export) for November, 2018 is
December2017-18. Non-Oil and Non- estimated at US $ 6.57Billion.
Gold imports were US $ 27.76 billion in o Overall Trade Balance: T a k i n g
December 2018, recording a negative merchandise and services together,
growth of 1.86per cent, as compared to overall trade deficit for April-December
Non-Oil and Non-Gold imports in 2018-19* is estimated at US $ 82.72
December 2017. Non-Oil and Non-Gold Billion as compared to US $ 69.63Billion
imports were US $ 253.89 billion in in April-December 2017-18.
April-December 2018-19, recording a *Note: Services data pertains to April-
positive growth of 5.32per cent, as November 2018-19 as November 2018
compared to Non-Oil and Non-Gold is the latest data available as per RBI's
imports in April-December 2017-18. Press Release dated 15th January 2019.
Trade In Services It is arrived at by adding Month-wise QE
o Exports (Receipts):E x p o r t s i n data of RBI's press release for April to
November 2018 were US $ 16.68 Billion November 2018-19. This data is
(Rs.1,19,831.25 Crore) registering a provisional and subject to revision by
negative growth of 0.82per cent in dollar RBI. In addition, it may be noted that data
terms, vis-à-vis October 2018. (as per for December 2018 is estimated and
RBI's Press Release for the respective added to the April-November 2018-19
months). data of RBI to calculate the Overall Trade
o Imports (Payments): Imp o rts Deficit for April-December 2018-19. It
inNovember2018 were US $ 10.11Billion will be revised based on RBI's next press
(Rs.72,637.41Crore) registering a release for December 2018.
positive growth of 0.10per cent in dollar
terms, vis-à-vis October 2018. (as per
RBI's Press Release for the respective
months).

85 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Merchandise Trade
Exports & Imports: (US $ Billion)
December April-December
Exports (Including Re
-Exports)
2017-18 27.83 222.77
2018-19 27.93 245.44
%Growth2018-19/ 2017-18 0.34 10.18
Imports
2017-18 42.03 343.34
2018-19 41.01 386.65
%Growth 2018-19/ 2017-18 -2.44 12.61
Trade Balance
2017-18 -14.2 -120.57
2018-19 -13.08 -141.2
Exports & Imports (Rs. Crore)
December April- December
Exports(Including Re
-Exports)
2017-18 178802.77 1436614.25
2018-19 197535.86 1711905.6
% Growth 2018-19/ 2017-18 10.48 19.16
Imports
2017-18 270015.44 2214370.92
2018-19 290032.95 2697306.82
% Growth 2018-19/ 2017-18 7.41 21.81
Trade Balance
2017-18 -91212.68 -777756.67
2018-19 -92497.09 -985401.22

Services Trade
Exports & Imports (Services) (US $ Billion)
Nov-18 April-November 2018-19
Exports (Receipts) 16.68 134.56
Imports (Payments) 10.11 82.78
TRADE BALANCE 6.57 51.78
Exports & Imports (Services) (Rs. Crore)
Nov-18 April-November2018-19
Exports (Receipts) 1,19,831.25 9,36,338.94
Imports (Payments) 72,637.41 5,75,771.15
Trade Balance 47,193.84 3,60,567.79

Note: Services data pertains to April-November 2018-19 as November

2018 is the latest data available as per RBI's Press Release dated
15thJanuary 2019. April-November 2018-19 data is arrived at by adding
Month-wise QE data. This has been used along with the estimate of
service exports and imports for December 2018, as explained in page-1
for the purpose of this Press note.

86 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Quick Estimates For Selected Major Commodities For

December 2018 Trade: Export

S. No. Commodities (Values in Rs. crores) % Change

Dec'17 Dec'18 Dec'18
1 Tea 584.82 572.82 -2.05
2 Coffee 486.79 346.55 -28.81
3 Rice 4089.11 4562.55 11.58
4 Other Cereals 106.37 170.75 60.53
5 Tobacco 543.08 630.83 16.16
6 Spices 1780.06 1874.5 5.31
7 Cashew 535.06 506.48 -5.34
8 Oil Meals 914.87 1367.62 49.49
9 Oil Seeds 918.11 737.86 -19.63
10 Fruits & Vegetables 1342.91 1285.9 -4.25
11 Cereal Preparations & Miscellaneous 850.43 904.81 6.39
Processed Items
12 Marine Products 4214.13 4294.81 1.91
13 Meat, Dairy & Poultry Products 3251.48 2698.63 -17
14 Iron Ore 926.95 862.12 -6.99
15 Mica, Coal & Other Ores, Minerals 2097.52 2479.73 18.22
Including Processed Minerals
16 Leather & Leather Products 3032.97 3092.13 1.95
17 Ceramic Products & Glassware 1229.89 1940.3 57.76
18 Gems & Jewellery 20761.8 18467.2 -11.05
19 Drugs & Pharmaceuticals 10735.1 11739.7 9.36
20 Organic & Inorganic Chemicals 12229.1 14205.1 16.16
21 Engineering Goods 47493.5 50658.4 6.66
22 Electronic Goods 3555.42 5903.51 66.04
23 Cotton Yarn/ Fabs./ Made-Ups, 6055.88 6301.07 4.05
Handloom Products etc.
24 Man-made Yarn/Fabs./ Made -Ups etc. 2682.88 2915.4 8.67
25 RMG Of All Textiles 8590.47 9720.59 13.16
26 Jute Mfg. including Floor Covering 200.83 217.57 8.33
27 Carpet 807.08 944.11 16.98
28 Handicrafts Excl. Handmade Carpet 946.49 1071 13.15
29 Petroleum Products 23883.9 29762.1 24.61
30 Plastic & Linoleum 4035.19 5339.28 32.32
Sub Total 168882 185573 9.88
Grand Total 178803 197536 10.48

Note 1: Grand total is inclusive of component 'Other'.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and
subject to change

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 I N D I A

Note 1: Grand total is inclusive of component 'Other'.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and
subject to change

Quick Estimates For Selected Major Commodities For December 2018

Trade: Export

S. Commodities (Values In Million %

No USD) Chang
. e
Dec'17 Dec'18 Dec'18
1 Tea 91.03 80.99 -11.03
2 Coffee 75.77 49 -35.33
3 Rice 636.51 645.06 1.34
4 Other cereals 16.56 24.14 45.77
5 Tobacco 84.54 89.19 5.5
6 Spices 277.09 265.02 -4.36
7 Cashew 83.29 71.61 -14.02
8 Oil Meals 142.41 193.35 35.77
9 Oil seeds 142.91 104.32 -27
10 Fruits & Vegetables 209.04 181.8 -13.03
11 Cereal preparations & miscellaneous processed 132.38 127.92 -3.37
items
12 Marine Products 655.97 607.2 -7.43
13 Meat, dairy & poultry products 506.13 381.53 -24.62
14 Iron Ore 144.29 121.89 -15.52
15 Mica, Coal & Other Ores, Minerals including 326.5 350.59 7.38
processed minerals
16 Leather & leather products 472.11 437.17 -7.4
17 Ceramic products & glassware 191.44 274.32 43.29
18 Gems & Jewellery 3231.8 2610.9 -19.21
19 Drugs & Pharmaceuticals 1671.04 1659.76 -0.68
20 Organic & Inorganic Chemicals 1903.58 2008.32 5.5
21 Engineering Goods 7392.87 7162.11 -3.12
22 Electronic Goods 553.44 834.64 50.81
23 Cotton Yarn/ Fabs./ Made-Ups, Handloom 942.66 890.85 -5.5
Products Etc.
24 Man-made Yarn/ Fabs./ Made -Ups Etc. 417.62 412.18 -1.3
25 RMG of all Textiles 1337.2 1374.3 2.77
26 Jute Mfg. including Floor Covering 31.26 30.76 -1.6
27 Carpet 125.63 133.48 6.25
28 Handicrafts excl. handmade carpet 147.33 151.42 2.78
29 Petroleum Products 3717.79 4207.78 13.18
30 Plastic & Linoleum 628.12 754.87 20.18
Sub Total 26288.3 26236.5 -0.2
Grand Total 27832.6 27927.7 0.34

Note 1: Exports include Re-Exports.

88 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and
subject to change
Note 3: Grand total is inclusive of component 'Other'.

Quick Estimates For Selected Major Commodities For December 2018

Trade: Import

S. Commodities (Values In Rs. Crores) %

No Change
. DEC'17 DEC'18 DEC'18
1 Cotton Raw & Waste 158.51 181.16 14.29
2 Vegetable Oil 5432.96 5103.64 -6.06
3 Pulses 1357.44 976.37 -28.07
4 Fruits & vegetables 1329.03 1309.25 -1.49
5 Pulp and Waste paper 616.16 744.19 20.78
6 Textile yarn Fabric, made -up articles 1061.83 1094.1 3.04
7 Fertilisers, Crude & manufactured 2642.42 5234.35 98.09
8 Sulphur & Unroasted Iron Pyrites 143.43 123.39 -13.97
9 Metalliferous ores & other minerals 4992.61 5069.53 1.54
10 Coal, Coke & Briquettes, etc. 13046.1 15999.9 22.64
11 Petroleum, Crude & products 66458.8 75486.5 13.58
12 Wood & Wood products 3164.15 3517.68 11.17
13 Leather & leather products 548.25 597.03 8.9
14 Organic & Inorganic Chemicals 11218.5 12688 13.1
15 Dyeing/tanning/colouringmtrls. 1604.94 1725.01 7.48
16 Artificial resins, plastic materials, etc. 7363.96 8546.31 16.06
17 Chemical material & products 4057.29 4665.07 14.98
18 Newsprint 357.8 620.22 73.34
19 Pearls, precious & Semi -precious stones 22564.5 17868.4 -20.81
20 Iron & Steel 7935.85 10101.6 27.29
21 Non-ferrous metals 7097.44 8806.02 24.07
22 Machine tools 2081.96 2878.08 38.24
23 Machinery, electrical & non -electrical 18264.2 21793.8 19.33
24 Transport equipment 14271.5 13405.8 -6.07
25 Project goods 1222.74 2041.82 66.99
26 Professional instrument, Optical goods, etc. 2765.41 3385.6 22.43
27 Electronic goods 30022.7 30062.5 0.13
28 Medicinal. & Pharmaceuticalproducts 3496.63 3797.87 8.62
29 Gold 21805.7 18166 -16.69
30 Silver 1267.33 2078.42 64
Sub Total 258350 278068 7.63
Grand Total 270015 290033 7.41

Note 1: Grand total is inclusive of component 'Other'.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and
subject to change

89 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

Quick Estimates For Selected Major Commodities For December 2018 Trade: Import

S. Commodities (Values in Million USD) %

No Chang
. e
Dec'17 Dec'18 Dec'18
1 Cotton Raw & Waste 24.67 25.61 3.81
2 Vegetable Oil 845.7 721.56 -14.68
3 Pulses 211.3 138.04 -34.67
4 Fruits & vegetables 206.88 185.1 -10.53
5 Pulp and Waste paper 95.91 105.21 9.7
6 Textile yarn Fabric, made-up articles 165.28 154.68 -6.41
7 Fertilisers, Crude & manufactured 411.32 740.04 79.92
8 Sulphur & Unroasted Iron Pyrites 22.33 17.44 -21.9
9 Metalliferous ores & other minerals 777.15 716.73 -7.77
10 Coal, Coke & Briquettes, etc. 2030.77 2262.07 11.39
11 Petroleum, Crude & products 10345 10672.3 3.16
12 Wood & Wood products 492.53 497.33 0.97
13 Leather & leather products 85.34 84.41 -1.09
14 Organic & Inorganic Chemicals 1746.28 1793.84 2.72
15 Dyeing/tanning/ colouring mtrls. 249.83 243.88 -2.38
16 Artificial resins, plastic materials, etc. 1146.28 1208.28 5.41
17 Chemical material & products 631.56 659.55 4.43
18 Newsprint 55.69 87.69 57.46
19 Pearls, precious & Semi-precious stones 3512.41 2526.25 -28.08
20 Iron & Steel 1235.3 1428.17 15.61
21 Non-ferrous metals 1104.79 1245 12.69
22 Machine tools 324.08 406.9 25.56
23 Machinery, electrical & non-electrical 2843.02 3081.22 8.38
24 Transport equipment 2221.51 1895.31 -14.68
25 Project goods 190.33 288.67 51.67
26 Professional instrument, Optical goods, etc. 430.47 478.66 11.19
27 Electronic goods 4673.36 4250.25 -9.05
28 Medicinal. & Pharmaceutical products 544.29 536.94 -1.35
29 Gold 3394.28 2568.32 -24.33
30 Silver 197.27 293.85 48.96
Sub Total 40215 39313.3 -2.24
Grand Total 42030.8 41005 -2.44

Note 1: Imports include Re-Imports.

Note 2: The figures for DECEMBER'18 and DECEMBER'17 are provisional and subject to
change.
Note 3: Grand total is inclusive of component 'Other'.

90 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

TOP BANKING APPOINTMENTS

RBL BANK APPOINTS SHRI part-time chairman of Yes Bank's board
PANKAJ SHARMA AS ITS up till July 4, 2020 as Shri Dutt attains the
CHIEF OPERATIONS OFFICER age of 70 years. Shri Dutt has been on
Private sector lender RBL Bank has the board of the bank since July 2013 as
appointed Shri Pankaj Sharma as its chief an independent director, and has
operations officer to mainly overlook the contributed to almost all the sub-
corporate services function and the committees of the board over the past
bank's overall operations. Shri Sharma 5.5 years, Yes Bank mentioned in a
who was previously with Axis Bank where regulatory filing. He is currently also the
he was heading retail operations. He had Chair of the Nomination and
spearheaded the ATM channel, phone Remuneration Committee. During his
banking and branch automation and career in the IAS for 37 years, he held
digital initiatives at Axis Bank. He several posts in Karnataka government
previously worked with GE countrywide, as well as in the Central Government.
ICICI Bank and ICICI Prudential Life Before retirement from the service, he
Insurance worked as Secretary in the Cabinet
https://economictimes.indiatimes.com/industr Secretariat and in the Ministry of Road
y/banking/finance/banking/rbl-bank- Transport and Highways for over three
appoints-pankaj-sharma-as-its-chief- and half years. Yes Bank's board also
operations-officer/articleshow/67347137.cms includes Mukesh Sabharwal, Subhash
Dated: Jan 02, 2019
Kalia, Ajai Kumar, Pratima Sheorey,
Uttam Prakash Agarwal, TS Vijayan, and
YES BANK APPOINTS SHRI Rana Kapoor (Managing Director and
BRAHM DUTT AS NON- CEO). Meanwhile, Yes Bank executive
EXECUTIVE PART-TIME Rajat Monga and a CEO of a foreign bank
CHAIRMAN have been shortlisted to succeed long-
Yes Bank's board also includes Mukesh serving Managing Director and Chief
Sabharwal, Subhash Kalia, Ajai Kumar, Executive Officer Rana Kapoor at the
Pratima Sheorey, Uttam Prakash bank, sources had said Friday. Earlier
Agarwal, TS Vijayan, and Rana Kapoor this week, the bank informed stock
(Managing Director and CEO). Yes Bank, exchanges that it has shortlisted the
India's fourth largest private sector names of potential candidates to
bank, has appointed Shri Brahm Dutt as succeed Kapoor, who is to demit office
non-executive part-time chairman to by month-end.
the board. In a statement, Yes Bank https://economictimes.indiatimes.com/industr
mentioned, "Vide its letter dated January y/banking/finance/banking/yes-bank-
appoints-brahm-dutt-as-non-executive-part-
11, 2019, the Reserve Bank of India,
time-chairman/articleshow/67499732.cms
pursuant to the provisions of the
Dated Jan 12, 2019
Banking Regulation Act, 1949has
approved his (Dutt's) appointment as
91 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

ICICI BANK APPOINTS SHRI B was the founder and chairman of Capital
SRIRAM, SHRI RAMA First
https://economictimes.indiatimes.com/industr
BIJAPURKAR INDEPENDENT
y/banking/finance/banking/rbi-approves-
DIRECTORS appointment-of-v-vaidyanathan-as-md-ceo-
Private sector ICICI Bank has inducted of-idfc-first-bank/articleshow/67591410.cms
former SBI Managing Director Shri B Dated Jan 18, 2019
Sriram on its board as independent
director. Besides, management SHRI RAVNEET GILL TO
consultant Shri Rama Bijapurkar was also REPLACE RANA KAPOOR AS
appointed director. Both were appointed YES BANK CEO
for 5 years, subject to the approval of Yes Bank has appointed veteran banker
shareholders. Shri Sriram retired as the Shri Ravneet Singh Gill as its new MD &
managing director of IDBI Bank in CEO and the lender has also received the
September 2018. Prior to IDBI Bank, he RBI's approval. Shri Gill, currently the
was the managing director of SBI. chief of Deutsche Bank's India
https://economictimes.indiatimes.com/industr operations, will replace Shri Rana
y/banking/finance/banking/icici-bank-
Kapoor. In September last year, RBI had
appoints-b-sriram-rama-bijapurkar-
independent-directors/articleshow/
asked Shri Rana Kapoor, Managing
67530915.cms Dated Jan 14, 2019 Director & CEO of Yes Bank, to step down
by the end of January, sending its stock
RBI APPROVES plunging and causing several
APPOINTMENT OF SHRI V resignations from its board. The central
bank had asked the lender to find a new
VAIDYANATHAN AS MD, CEO
CEO by February 1. The Bank has
OF IDFC FIRST BANK received RBI approval for its new MD &
Prior to this, Shri V Vaidyanathan was the
CEO, Shri Ravneet Singh Gill for him to
founder and chairman of Capital First.
join on or before March 1, 2019. Shri Gill
The Reserve Bank has approved the
joined Deutsche Bank in 1991 and has
appointment of Shri V Vaidyanathan as
worked across different businesses
MD and CEO of IDFC First Bank for a
including corporate banking, capital
period of three years, according to a
markets and wealth management. The
regulatory filing. His tenure is effective
private sector bank posted a 7% fall in
from December 19, 2018. Last month,
third-quarter net profit as it set aside
IDFC Bank and non-banking financial
higher provisions. Net profit fell to Rs.
company Capital First completed their
1,002 crore in the three months to
merger, creating a combined loan asset
December 31 from Rs. 1,077 crore a year
book of Rs 1.03 lakh crore for the
earlier. That missed analysts' average
merged entity IDFC First Bank. Following
estimate of Rs. 1,060 crore according to
the merger, the board of IDFC First Bank
Reuters estimate. Commenting on the
approved the appointment of Shri
results and financial performance, Shri
Vaidyanathan as MD and CEO of the new
Rana Kapoor mentioned that Yes Bank
entity. Prior to this, Shri Vaidyanathan
92 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

has once again delivered satisfactory Systems), bill payments recharges and
performance across income growth, even undertake remittance activities
margins, profitability and capital across different bank branches.The
accretion, despite the recognition and pioneering ePDS digital initiative has
provision impact from a stressed helped us eliminate more than 10 lakh
Infrastructure conglomerate. Retail bogus ration cards in Maharashtra and
Assets growth momentum continues, made the inventory management for
while growth in Corporate business government and shop owners fully
segments has been rebalanced after digital. ePDS initiative will also
witnessing strong market share driven significantly boost the livelihood of shop
growth over the last few preceding owners by giving them additional
quarters. revenue through the various services
https://www.livemint.com/companies/people/ they can now offer to the citizens.The
yes-bank-ceo-ravneet-gill-appointment-rana- government is hoping to get Jan Dhan
kapoor-managing-director-md-1548323
account holders to use this service for all
047040.html Dated: Jan 24, 2019
their financial requirements. The Bank
remains committed to improving last
TOP BANKING DEVELOPMENTS mile inclusion and translating financial
access into enhanced convenience &
usage for smoother delivery of
YES BANK PARTNERS WITH Government to Citizen (G2C) services
MAHARASHTRA
through simple digital solutions.
GOVERNMENT FOR
https://economictimes.indiatimes.com/industr
ELECTRONIC PDS
y/banking/finance/banking/yes-bank-
Private sector lender Yes Bank has partners-with-govt-of-maharashtra-for-
partnered with Government of electronic-pds/articleshow/67644049.cms
Maharashtra to onboardPDSshops which Dated: Jan 22, 2019
are popularly referred to as ration shops
onto the electronic PDS initiative through TOP EXPERT REPORTS
which they can become agents of the
bank. Under the partnership, Yes Bank PAYMENTS BANKS SEE
will empower more than 20,000 ration SECOND STRAIGHT YEAR OF
shops which can offer last mile basic LOSSES (RESERVE BANK OF
banking services to more than seven INDIA)
lakh beneficiaries. The bank will cover According to RBI's trends and progress
almost 40% of all the PDS shops across report, Payments banks, launched to
locations like Palghar, thane, Kolhapur, make the country more financially
Latur, Pune and others. Customers at inclusive, seems to be giving the
these shops will be able to make regulators and investors a cause for
payments using Aadhaar Pay, small concern as they continue with their
value cash deposit or withdraw cash second straight year of losses with little
using AePS (Aadhaar enabled Payment signs of turning the corner. The

93 - ASSOCHAM Banking e-Bulletin - Volume - 45

 I N D I A

consolidated balance sheets for the These include Aditya Birla Payments
operational payments banks showed net Bank, Airtel Payments Bank, India Post
losses of Rs 516.5 crore for the fiscal Payments Bank, Fino Payments Bank, Jio
year 2018, almost double that of the Payments Bank and Paytm Payments
fiscal year 2017 when they lost Rs 242.2 Bank.
crore,. The losses of payments banks are https://www.livemint.com/Companies/rgl4JNp
attributed to high operating expenses as nGsE7rKerrpaNJJ/RBI-issues-norms-for-
restructuring-loans-to-MSMEs.html
large capital expenditure had to be
Dated: Jan 02, 2019
incurred in setting up initial
infrastructure. It may take some time for
payment banks to break even as they
BANKS EXPECTED TO
expand their customer base by offering REPORT HIGHER CREDIT
their unique banking products.The GROWTH, MARKET SHARE
operating profits of these banks also (RESERVE BANK OF INDIA)
remained negative with a loss of Rs Citing Reserve Bank of India (RBI) data,
522.1 crore for fiscal 2018, up from Rs the report mentioned systemic credit
240.7 crore a year before. High growth in November was highest since
operational costs due to March 2014, mainly led by services at
infrastructuresetup required by these 28.1 per cent (YoY) and personal loans at
banks to tap the underpenetrated 17.2 per cent (YoY). Given the upturn in
markets in the country are the prime non-food and industrial credit as
reason for their financial weakness. reported by the RBI, banks are expected
Things are showing no signs of to report higher credit growth and
improvement with even the regular market share at the cost of non-banking
banks ramping up their technology finance companies (NBFCs) and housing
initiatives. In the first half of this fiscal finance firms. Centrum Broking
they were making losses and it may well mentioned in a report that with the
continue for many quarters. While current slowdown in the NBFC segment
financial metrics remained weak, there and non-performing assets (NPAs or bad
was hope in other with the share loans) issues stabilizing for banks, the
deposits of these banks marginally latter are expected to report higher
rising from 5.7% to 9% during this credit growth, resulting in a further
period. The net interest income also boost to overall credit growth. According
improved from Rs 151.1 crore to Rs 30.7 to the RBI credit data on sectoral
crore and the total liabilities/assets rose deployment for November 2018, overall
to Rs 4,891.6 crore from Rs 1,193.9 non-food credit grew 13.8 per cent YoY
crore. About 81% of the business the (year-on-year) to Rs 80.9 trillion (80
payments bank made was on account of lakh crore), the highest since March
inward and outward transactions 2014. This growth was again led by
through mobile and ewallets, according services and personal loans, mentioned
to the central bank. The RBI as of date the report titled "RBI sectoral credit -
has given licences to 11 payments bank trajectory intact for November 2018",
of which six are currently operational. authored by Shri Aalok Shah and Shri
94 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

Gaurav Jani. The uptrend in industrial CIBIL)

credit continues, reporting the highest A study by credit bureau Trans Union
level since February 16. On a MoM CIBIL notes that millennial and
(month-on-month) basis, NBFC credit Generation X consumers are driving
growth faced headwinds and credit to much of this growth and comprise well
housing inched up. The momentum in over half of all retail accounts and
agriculture credit continues. Citing balances. In 1985, a survey by the
Reserve Bank of India (RBI) data, the government supported think tank
report mentioned systemic credit growth NCAER estimated that the size of the
in November was highest since March Indian middle class, which had a
2014, mainly led by services at 28.1 per promising potential to spend on
cent (YoY) and personal loans at 17.2 per consumer goods, was bigger than the US
cent (YoY). Given the slowdown in the economy then. This report attracted the
NBFC segment and the NPA cycle attention of global consumer goods
peaking, we expect overall credit growth companies. With the progressive
to remain high. In contrast to NBFC opening of the economy, India's growth
credit, banks' housing credit has risen story has become consumption-driven
MoM. and more than 25 years since the
https://economictimes.indiatimes.com/industr liberalization in 1991, the Indian
y/banking/finance/banking/banks-expected- consumer has gone a step further and
to-report-higher-credit-growth-market-
does not hesitate to borrow to meet its
share-report/articleshow/67542408.cms
consumption aspirations. This trend in
Dated Jan 15, 2019
consumer behavior has resulted in an
opportunity for banks to lend outside
NPA-HIT BANKS FIND NEW
their traditional constituency businesses
LOVE IN MIDDLE CLASS AND
and large corporates. In the last four
IT MAY REVIVE INDIAN years, with corporate lending becoming
ECONOMY (TRANSUNION
95 - ASSOCHAM Banking e-Bulletin - Volume - 45
 I N D I A

unviable due to the rise in defaults and somewhat safer as banks are heavily
losses, the push toward retail lending relying on credit bureaus that help them
has become even stronger. An with the credit history of borrowers and
international comparison shows that also help assess default risks. Another
India's retaliation of bank credit is the factor that has brought about a growth in
lowest among peers. Household credit the retail loan book is that more people,
as a percentage of GDP was 11.2% as of especially those below 40, are now
June '18, compared with the average of coming to banks and shifting from
36% in emerging economies and 72% for informal channels, particularly in the
advanced markets. But India may have to hinterland. A study by credit bureau
look internally to justify the surge in Trans Union Cibil notes that millennial
retail loans. Any loan by an individual and Generation X consumers are driving
impacts his savings and, hence, local much of this growth and comprise well
money available for investments. Over over half of all retail accounts and
the 10 years since the global crisis, fresh balances. It is (also) more to do with the
financial savings of Indian households fact that financial inclusion has
have more than doubled. But their net expanded with Jan Dhan accounts, etc,
financial liabilities have risen at double and BoB is are going to see more of that.
that pace, leaving less for investments. Also, semi-urban and rural India's GDP
This means India may have to rely on distribution has changed over the last 8-
overseas money to fund growth. India's 10 years. There is tremendous amount
current account deficit, which is of self-employment. There is a change,
vulnerable to global oil prices, is at 2.9% which HDFC is betting on. The use of
of GDP. Still, even corporate-focused technology has also helped deepen the
banks are keen on retail loans. Over the customer reach for banks. HDFC Bank is
past few years, there has been a using virtual robots to substitute
structural shift in banks' loan books. The repetitive functions and save time. HDFC
share of the retail portfolio has risen will distribute digitally. It is giving loans
from 18.3% in 2013 to 24.8% in March in 10 seconds. It delights customers and
2018 and the latest data for October put changes my cost dynamics. The bank's
this share at 25.5%. For the country's personal loans are done in 10 seconds
three largest lenders State Bank of India, and 50-60% credit cards are done within
HDFC Bank and ICICI Bank retail accounts 10 seconds. In semi-urban and rural
for more than half of their loan books. areas, all its products are available in
Even for some private banks like Axis feature phone in 11 languages. Most
Bank and Kotak Mahindra Bank, retail retail loan products, excluding home
accounts for almost half of their loan loans, earn banks a wider margin
books. What is driving the retail push in compared to corporate loans. The rate of
the last four years is a combination of interest on unsecured loans will be more
factors. Banks have turned cautious on than what you lend to Levers (Hindustan
their traditional constituency. Also, Levers). Besides, bad loans are also now
lending to retail has now become lower than 3%, which has given banks
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more confidence to focus on retail. SBI (WWF) report released mentioned water
expects retail portfolio to constitute 60% risks could pose further "liquidity
of loans by the end of this fiscal because constraints" on the strained balance
the corporate demand is still very-very sheets of banks. Launched with the
muted. But it is not picture perfect for Indian Banks' Association(IBA), the WWF-
banks. Delinquency rates increased India report 'Hidden Risks and Untapped
year-over year for both home loans and Opportunities: Water and the Indian
credit cards by 22 and 28 basis points, Banking Sector' provides evidence for
respectively, to 1.73% and 1.78%, why water presents a material risk for
according to a study by credit bureau banks in India, particularly how water
TransUnionCibil. In case of loans against risks could lead to stranded assets in the
property, it increased 73 bps year-over- power and agriculture sectors, two
years to 3.03% in CYQ3 2018. Lenders sectors that account for the highest
must judiciously monitor their risk gross credit exposure of Indian banks.
management processes. For example According to the report, close to 40 per
the loan against property, at the same cent of the gross credit exposure of
time, delinquency rates for these loans Indian banks is in sectors where water
have now crossed 3% for the first time in risks are significant. Reeling under a
several years. Lenders must now crisis of non-performing loans with
determine if the rapid demand for these close to 10 per cent of gross-advances
loans, which are an excellent revenue of the Indian banks facing a risk of non-
generator, outweighs the recent payment from debtors, these risks can
delinquency increases. place further liquidity constraints on the
https://economictimes.indiatimes.com/industr already stressed balance sheets of banks
y/banking/finance/banking/retail-loans-may- in India. Citing NITI Aayog's observation,
revive-indian-economy-banks/articleshow
it mentioned that the current water crisis
/67550031.cms Dated: Jan 16, 2019
in the country is its worst ever. With
water being a shared resource, what the
WATER CRISIS IN INDIA
country requires is a comprehensive and
COULD FURTHER WORSEN sustainable water management plan by
BANK NPA PROBLEM (WORLD various stakeholders. While banks are
WILDLIFE FUND) exposed to the risks of water as lenders
With water being a shared resource, what to businesses, it also places them in a
the country requires is a comprehensive unique position to influence businesses
and sustainable water management plan to proactively handle various water
by various stakeholders. Water problems related risks, including using WWF's
could push the non-performing assets Water Risk Filter and enabling flow of
of banks higher as many lenders have capital towards solutions which address
loan exposure in sectors where there are such risks.
risks to water resources. At a time when https://economictimes.indiatimes.com/industr
the banking sector is grappling with y/banking/finance/banking/water-crisis-in-
mounting NPAs, the World Wildlife Fund india-could-further-worsen-bank-npa-

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TOP RBI CIRCULARS

Circular Date Of Department Meant For

Number Issue
RBI/2018- 28.1.2019 Internal Debt All Scheduled Commercial Banks All
2019/111 Management State Co-operative Banks/All Scheduled
Ref.No.IDMD/2 Department Primary (Urban) Co-operative Banks
050/08.02.032/2 /All Financial Institutions/ All Primary
018-19 Dealers.
RBI/2018- 21.1.2019 Internal Debt All Scheduled Commercial Banks All
2019/110 Management State Co-operative Banks/All Scheduled
Ref.No.IDMD/1 Department Primary (Urban) Co-operative Banks
958/08.02.032/2 /All Financial Institutions/ All Primary
018-19 Dealers
RBI/2018- 16.1.2019 Foreign All Category-I Authorised Dealer Banks
2019/109 Exchange
A.P. (DIR Department
Series) Circular
No. 17
RBI/2018- 14.1.2019 Internal Debt All Scheduled Commercial Banks All
2019/108 Management State Co-operative Banks/All Scheduled
Ref.No.IDMD/1 Department Primary (Urban) Co-operative Banks
824/08.02.032/2 /All Financial Institutions/ All Primary
018-19 Dealers
RBI/2018- 11.1.2019 Department of All Scheduled Commercial Banks
2019/107 Banking (excluding RRBs) Small Finance Banks
DBR.Dir.BC.No Regulation and Primary (Urban) Cooperative Banks
.22/04.02.001/2
018-19
RBI/2018- 10.1.2019 Department of All ScheduledCommercial Banks
2019/106 Banking (Excluding RRBs and LABs)
DBR.BP.BC.No Regulation
.20/21.06.201/2
018-19
RBI/2018- 10.1.2019 Department of All Scheduled Commercial Banks
2019/105 Banking
DBR.No.Ret.BC Regulation
.21/12.16.091/2
018-19
RBI/2018- 09.1.2019 Department of All Scheduled Commercial Banks
2019/104 Banking (excluding RRBs)
DBR.IBD.BC.1 Regulation
9/23.67.001/201
8-19
RBI/2018- 08.1.2019 Department of The Chief Executive Officer / President
2019/103 Payment and All authorised card payment networks
DPSS.CO.PD Settlement
No.1463/02.14.0 Systems

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Circular Number Date Of Department Meant For

Issue
RBI/2018 -2019/99 31.12.2018 Internal Debt All Scheduled Commercial Banks All State
Ref.No.IDMD/1669/08 Management Co-operative Banks/All Scheduled Primary
.02.032/2018 -19 Department (Urban) Co-operative Banks /All Financial
Institutions/ All Primary Dealers.
RBI/2018 -2019/98 28.12.2018 Department of All Scheduled Commercial Banks (Excluding
DBR.BP.BC.No.17/21. Banking RRBs) & Small Finance Banks (SFBs)
04.098/2018 -19 Regulation
RBI/2018 -2019/97 27.12.2018 Department of All Scheduled Commercial Banks
DBR.No.Ret.BC.16/12 Banking
.06.152/2018 -19 Regulation
RBI/2018 -2019/96 27.12.2018 Department of All Scheduled Commercial Banks ( Including
DBR.Leg.No.BC.15/0 Banking RRBs), Small Finance Banks, Local Area
9.08.020/2018 -19 Regulation Banks, All Co -operative Banks, All NBFCs
and All India Financial Institutions
RBI/2018 -2019/95 27.12.2018 Internal Debt The Chairman & Managing Director State
IDMD.CDD.No.1637/ Management Bank of India & 18 Nationalised Banks Axis
13.01.299/2018 -19 Department Bank Ltd., ICICI Bank Ltd., HDFC Bank Ltd.,
Stock Holding Corporation of India Ltd.
(SHCIL)
RBI/2018 -2019/94 24.12.2018 Internal Debt All Scheduled Commercial Banks All State
Ref.No.IDMD/1631/08 Management Co-operative Banks/All Scheduled Primary
.02.032/2018 -19 Departm ent (Urban) Co -operative Banks/All Financial
Institutions/ All Primary Dealers.
RBI/2018 -2019/93 17.12.2018 Internal Debt All Scheduled Commercial Banks All State
Ref.No.IDMD/1548/08 Management Co-operative Banks/All Scheduled Primary
.02.032/2018 -19 Depar tment (Urban) Co -operative Banks /All Financial
Institutions/ All Primary Dealers
RBI/2018 -2019/92 06.12.2018 Foreign Exchange All Category – I Authorised Dealer Banks
A.P. (DIR Series) Department
Circular No.16
RBI/2018 -2019/91 06.12.2018 Department of All Scheduled Commercial Banks
DBR.No.Ret.BC.14/12 Banking
.16.006/2018 -19 Regulation
RBI/2018 -2019/90 06.12.2018 Department of All Scheduled Commercial Banks
DBR.No.Ret.BC.13/12 Banking
.06.071/2018 -19 Regulation
RBI/2018 -2019/89 06.12.2018 Financial The Chairman/ Managing Director & CEO All
FIDD.GSSD.CO.BC.N Inclusion and Scheduled Commercial Banks & Small
o.11/09.16.03/2018 -19 Development Finance banks
Department
RBI/2018 -2019/88 06.12.2018 Department of The Chairman/Managing Director/Chief
DGBA.GBD.No.1397/ Government and Executive Officer/ Agency Banks Handling the

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RBI/2018 -2019/88 06.12.2018 Department of The Chairman/Managing Director/Chief

DGBA.GBD.No.1397 Government and Executive Officer/ Agency Banks Handling
/15.01.001/2018 -19 Bank Accounts the Special Deposit Scheme 1975
RBI/2018 -2019/87 05.12.2018 Department of All Scheduled Commercial Banks Small
DBR.BP.BC.No.12/2 Banking Finance Banks
1.04.048/2018 -19 Regulation
RBI/2018 -2019/86 05.12.2018 Department of All Scheduled Commercial Banks (including
DBR.No.Ret.BC.10/1 Banking Regional Rural Banks) Local Area Banks,
2.02.001/2018 -19 Regulation Small Finance Banks, Payments Banks
Primary (Urban) Co -operative Banks (UCBs)
State and Central Co -operative Banks (StCBs
/ CCBs)
RBI/2018 -2019/85 03.12.2018 Internal D ebt All Scheduled Commercial Banks All State
Ref.No.IDMD/1359/0 Management Co-operative Banks/All Scheduled Primary
8.02.032/2018 -19 Department (Urban) Co -operative Banks/All Financial
Institutions/ All Primary Dealers

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100 - ASSOCHAM Banking e-Bulletin - Volume - 45