The Prime Minister, Shri Narendra Modi, today called upon India’s banking sector to establish banks which rank among the top banks of the world.
He was speaking at Gyan Sangam – the Bankers’ Retreat in Pune. He said it was perhaps the first time that banks had given tasks to the Prime Minister through a presentation. He said the Gyan Sangam reflected team spirit and a collective will to address issues. He described Gyan Sangam as a unique initiative.
He said the objective in this bankers’ retreat was to find solutions to problems, and this was the first step towards catalyzing transformation. He said informal discussions helped achieve meeting of minds, which in turn enabled strategic goal setting.
The Prime Minister appreciated the efforts of the banks in successfully implementing Pradhan Mantri Jan Dhan Yojana. He said this is going to have multiple effects. He said the Jan Dhan Yojana would help redefine goal setting among banks, due to enhanced confidence levels following the success of the programme.
The Prime Minister said 7 crore families had benefited from direct cash transfers of LPG subsidy in just three days since January 1st. He said this represented one-third of all families India. He said such achievements should boost confidence.
The Prime Minister said the banking sector of a country mirrors its economic rise. Japan and China had banks in the top ten banks of the world during their economic rise.
The Prime Minister said banks would be run professionally, and there would be no interference. But accountability was essential. He said the Government had no vested interest, and public sector banks can derive strength from this fact.
However, the Prime Minister said India is a democracy. He said he is against political interference, but supports political intervention, in the interest of the people. He said political intervention will enable the voice of the common man to reach such institutions.
The Prime Minister said this also highlighted the issue of poor financial literacy in the country. He said today even the common man needed financial literacy. He called upon banks to take the lead in encouraging competitions on financial literacy in schools, much like mock Parliament competitions.
The Prime Minister said banks should develop dedicated teams to fight cyber crime.
The Prime Minister said that with 81% of branches and 77% of deposits, the net profits should improve from current levels of 45%.
The Prime Minister called for developing common strengths among the 27 public sector banks. He suggested this could be done in areas such as software, and advertising. He gave the example of number portability in the telecom sector in this regard. He said this would improve the customer-centric focus of banks. The Prime Minister said public sector banks, as a team, should also be conscious of the direction in which the country is moving, and work towards simplifying procedures to facilitate the common man.
The Prime Minister also called upon banks to trust the common man.
The Prime Minister said the Swachhta Abhiyan has caught the imagination of the younger generation. He called upon each public sector bank to help develop 20,000 to 25,000 Swachhta entrepreneurs. He also asked banks to prioritize loans to students as this would be a very productive investment for the country. He said the country needs skill development for its youth in a big way, and banks need to take the lead in this.
The Prime Minister asked public sector banks to set goals for the 75th anniversary of independence in the country in 2022. He said he had resolved to provide housing for all by 2022, and banks had a huge opportunity here, as 11 crore houses were required.
The Prime Minister said banks should redefine parameters for success. For instance, let them prioritize loans to enterprises which will generate more employment, he said.
The Prime Minister called for an end to lazy banking, and asked banks to take on a proactive role in helping the common man.
The Prime Minister said that as part of Corporate Social Responsibility, banks should take up one sector each year to play a positive role.
Governor of Maharashtra Shri Vidyasagar Rao, Chief Minister of Maharashtra Shri Devendra Fadnavis, Finance Minister Shri Arun Jaitley, MoS Finance Shri Jayant Sinha, RBI Governor Shri Raghuram Rajan, and Secretary Financial Services Shri Hasmukh Adhia were present on the occasion.
United Bank of India (UBI) declared Kingfisher Airlines, Mallya himself and three directors of the company – Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly – as wilful defaulters.
Kingfisher Airlines in July 2014 moved the Calcutta High Court, two months after the bank had in May 2014 identified it and Mallya as wilful defaulters. The court last week dismissed the plea, paving the way for UBI to declare the company and its chairman wilful defaulters.
Here we will examine the Identifying and declaration of wilful defaulters by Bankers and the various penal measures imposed against such declared “Wilful Defaulter”.Read More
ICRA an independent investment information and credit rating agency estimates that public sector bank’s gross non-performing assets (NPAs) to stand at up to 4.7 per cent at the end of this financial year, compared with 4.4 per cent at the end of FY14 it expects public sector banks’ gross NPAs to be at 4.4-4.7% as on March 31, 2015.Read More
The government is planning legislative changes to enable secured creditors having first right over defaulters’ assets to exercise the same, without being interrupted by the Income Tax Departments. The idea is to make use of the overriding nature of the Sarfaesi Act to virtually ensure that a lender gets to recover dues from a defaulter before others.
The proposed amendments include a provision to classify central and state authorities handling income tax, excise and value added tax as well as municipal corporations as secured creditors, so that the moment a taxpayer defaults, the authorities would need to register their charge on the assets. However, if the company has already taken a loan, the lender would have already registered his charge on the assets, giving the tax authorities only second charge on the assets.Read More
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By SANETTE TANAKA June 5, 2014 9:11 p.m. ET
The Gujarat High Court has restored the Reserve Bank of India’s power to decide the period after which a bad loan can be called a non-performing asset (NPA).
Till 2004, RBI had set the NPA period for banks at 90 days, and at 180 days for Non Banking Financial Companies. But with the amendment, the financial institutions became free to have their own regulations for NPA. The NPA period was decided separately byeach firm.
The High Court’s ruling came on petitions filed by several defaulters of banks and NBFCs who had questioned every institution deciding its own NPA period, calling it violation of right to equality.
The bench of Chief Justice Bhaskar Bhattachrya and Justice J B Pardiwala said that the Section 2(1)(o) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act is held unconstitutional.
The High Court also observed that Parliament was wrong in taking the power to decide NPA guidelines away from the RBI. Before the amendment in 2004 to the Act, the RBI was the regulator for the banking, non-banking institutions and securitization agencies for deciding the period after which the loans can be treated as the NPA.
Further Reading – MoneyControl
The finance ministry has asked public sector banks (PSB) to increase the usage of Sarfaesi Act provisions to quickly recover bad loans.
Data for 2012-13 showed that out of the three methods for NPA recovery — Sarfaesi Act, Debt Recovery Tribunals (DRT) and Lok Adalats – Sarfaesi Act route was the most effective. In 2012-13, around Rs 18,500 crore was recovered through the Sarfaesi Act route, while DRTs helped in the recovery of just Rs 4,400 crore and Lok Adalats only Rs 400 crore.
Under the Sarfaesi Act, lenders have the power to enforce the security interest by taking possession of the assets from the defaulting borrower without court intervention, following the expiry of a 60-day notice period on the loan being classified an NPA.
The ministry has now said wherever possible the PSBs must exercise their rights under Section 13(4) of the Sarfaesi Act, which empowers the lenders to take possession of the secured assets of the borrower (whose accounts have turned NPA) and sell the assets before their value deteriorates. The section also empowers lenders to takeover the management of the business of the borrower and sell the assets if needed.
It also wants PSBs to adopt the latest sophisticated risk management tools (RMT) to effectively measure risks in lending and price loans accordingly so that there is an improvement in the asset quality. These were measures suggested by the new financial services secretary GS Sandhu to the PSB chiefs in a recent letter, banking industry sources told FE.
The ministry also wants PSBs to ensure that the companies do not divert loans for purposes other than the one for which the loans was taken. It has also pointed out the need to have separate RMTs for retail, wholesale, infrastructure and big-ticket loans.
The concern is because of the many instances of ‘quick mortality’, where within six months of the bank extending the loan, the company has become sick.
Further Reading – The Ffinancial Express