Reducing NPAs is Dena Bank’s first priority, says CEO

Reducing NPAs is Dena Bank’s first priority,The second priority is the tripartite merger with Bank of Baroda and Vijaya Bank and the third priority is improvement in CASA component, Karnam Sekar, MD & CEO, Dena Bank.

What would be your key focus areas over next one year?

Dena Bank is one of the 11 banks under prompt corrective action (PCA) list. We are in a very bad shape actually with respect to non-performing assets. We have a huge pileup of NPAs, both in the corporate sector and the retail sectors. That would be the first priority. The second priority is merger with Bank of Baroda and Dena Bank and improving the profitability by cutting down the overall cost of funds would be my second priority. We are in number three position as far as CASA percentage is concerned. A further improvement of CASA component in the overall deposit portfolio would be my third priority. 

The first priority continues to be containing the NPAs and do as much recovery as possible and control the credit cost because the bank is in deep trouble and incurring loss only because of this huge credit cost. Corporate credit is contributing significantly to our troubles but fortunately because of the NCLT cases which are being handled in the last 12 months, we are seeing some good progress there. If we are able to recover some of the corporate credit NPAs, then we will come out of this problem. 

Of course, second priority, apart from this business deals would be the amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank to form a fourth entity which would be the second largest public sector bank after State Bank of India. So that would be the second priority. Further, the Dena Bank board has passed a resolution last Monday. 

We will wait for the other banks too to pass the board resolutions respectively and after that we will chalk out a common plan. Maybe, we will form a coordinating committee of all these three banks and then set milestones -- what should we do going forward and how to harmonise HR, how to harmonise the systems and procedures, how to harmonise the product portfolio, how to harmonise the credit processes and how to harmonise the IT infrastructure as well. 

So harmonising these three -- IT, HR and the systems and procedures and product portfolio -- also would be our priority. The coordination committee of all the three bankers would take care of this. We have a timeline when that will be done and we will stick to the timeline that is being stipulated now. Maybe in the next two, three quarters we will try and complete the whole process of amalgamation. 

This would be unique amalgamation because three different banks are coming together and unlike State Bank of India associates where there were some similarities, here it will be three totally different banks and all three have to amalgamate and form a fourth body. That will be a unique experiment. Once this is done successfully, maybe the Government of India will think of some more. 

This consolidation was started in 2017. All the bank boards have given their view on this consolidation process and as a culmination of that, only last week we passed the board resolution and communicated to the government also. 

Could you give us a timeline for the merger to be completed?

We will get some clarity only after all three banks sit together. The first stage would be to pass the resolutions. The board has to approve the initial process. Our board has already approved and on 29th September, Vijaya Bank is meeting and in due course Bank of Baroda board will also meet. If all three boards approve this initial process, then we will sit together, form a committee and arrive at the correct timelines. 

Could you quantify the total stressed assets on the books and how much resolution do you see over FY19?

Out of almost total assets of around Rs 90,000 crore, both stressed NPAs and partially written off accounts account for Rs 19,000 crore. Out of Rs 19,000 crore, at least Rs 5000 crore will be resolved by March 2019. That means 25% of the existing portfolio would come down. That is our target for March 2019. So Rs 19,000 crore would come down to around Rs 14,500-15,000 crore. That is my estimate for the year FY19. 

Where would slippages stand and what would be the level of recoveries?

On repayment also, we are making progress in the retail slippages. We have stopped further slippages, The entire corporate credit has been recognised and there is no further slippage. As a PCA bank, we are not doing any further lending. 

What kind of capital infusion do you expect from the government?

The finance minister has been assuring that whatever capital is required for the regulatory compliance will be given. As a PCA bank, we are not growing much and so growth capital is not being discussed. But whatever is the regulatory capital requirement, we have been assured will be met by the government. 

Source- ET Now

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RBI withdraws new branch permission & freezes compensation of MD & CEO of Bandhan Bank

The Reserve Bank of India (RBI) has frozen the remuneration of Bandhan Bank chief executive officer and managing director Chandrashekhar Ghosh for not complying with the promoter shareholding norms. Bandhan Bank also cannot open new branches without the regulator's permission.

"RBI has communicated to us that since the Bank was not able to bring down the shareholding of Non Operative Financial Holding Company (NOFHC) to 40 percent as required under the licensing condition, general permission to open new branches stands withdrawn and the Bank can open branches with prior approval of RBI and the remuneration of the MD & CEO of the Bank stands frozen at the existing level, till further notice," Bandhan Bank informed the stock exchanges.

The bank is taking necessary steps to comply with the licensing condition to bring down the shareholding of NOFHC in the Bank to 40 percent and shall continue to engage with RBI in this behalf, it added.

RBI’s licensing norms require a private sector bank to bring down its promoter shareholding to 40 percent within three years of operations.

Previously a microfinance institution, Bandhan Bank is one of the youngest private sector banks in India, completing three years on August 23. Bandhan went for an initial public offering (IPO) in March this year, which resulted in the promoter holding falling to 82.28 percent from 89.62 percent.

Recently, the bank failed in concluding talks to acquire PNB Housing Finance, which could have helped in bringing down the promoter holding.

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MD of HDFC Life appointed as CEO & MD of Axis Bank

Ending the speculation around the appointment of its next head once Shikha Sharma demits office, Axis Bank today chose Amitabh Chaudhry, 54, as the next CEO. 

Chaudhry, who is currently the managing director of HDFC Life was widely speculated to take over as the next boss at Axis. 

He will take over as MD & CEO for 3 years from January 1, 2019 and will remian in office till December 31, 2021. 

"We wish to inform you that the Board of Directors (the Board) of the Bank at its meeting held today has taken on record the approval granted by the Reserve Bank of India (RBI) to the appointment of Shri Amitabh Chaudhry as the Managing Director & CEO of the Bank. for a period of 3 years. with effect from 1 January, 2019 up to 31 December, 2021 (both days inclusive) and the terms and conditions relating to the said appointment, including remuneration," Axis Bank said in a notice to the BSE.

The Axis board will now meet to approve the appointment of Chaudhry as additional director. 

"After an extensive search, my fellow directors and I are pleased to welcome Amitabh as the Bank's MD & CEO. Amitabh has a proven track record and is well-equipped to lead Axis Bank in pursuing its growth ambitions balanced with a strong emphasis on risk and compliance management," said Sanjiv Misra, chairman, Axis Bank. 

Chaudhry has been with HDFC Standard Life since January 2010 and is widely credited for the insurance company's sucessful IPO earlier this year. 

He started his career in the corporate banking with Bank of America in 1987, where before moving to CALYON Bank as its managing director, head south east Asian investment banking and Head technology investment banking. 

He also worked for Infosys BPO between 2003 and 2006. He is a B. Tech in (Electronic & Electricals) from the Birla Institute of Technology & Science, Pilani and is an alumnus of Indian Institute of Management, Ahmedabad. 

"I would like to thank the RBI and the Axis Bank Board for the privilege and honor given to me to lead this great institution. Axis Bank is amongst the leading private sector banks in the country. Together, with the support of the Board and the Axis team, I am confident of continuing the bank's remarkable journey these past 25 years and to contribute to its future growth," Chaudhry said in a press release. 

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We don't want sarkari culture in our bank: Kishor Kharat, CEO, Indian Bank

On Indian Bank making a profit amid the banking gloom

This bank was in trouble in the mid-1990s. The government rescued it by infusing capital, and we survived. From then, our approach has remained conservative. We have the lowest non-performing assets (NPA) in the industry because we did not lend carelessly. While many banks were caught in problematic sectors such as road, power, cement, textiles, etc, we were better off as our exposure to those sectors was very low. Hence we could make a decent profit. 

On competition with private banks

We are raising our bar now. We will now aggressively compete with private banks. We don’t want a sarkari culture in our bank. We are increasing our level of services and efficiency to the level of a good private bank. Analysts have already started saying how Indian Bank is becoming a public sector bank with private sector characteristics. In the past one year, the look and feel of our corporate office has changed. We are changing the environment at our branches, too. There are private banks like HDFC bank, ICICI bank and Axis Bank that have large balance sheets and, hence, are not comparable with us. But we can surely compete with those having a similar size. We want to take on banks like Kotak Mahindra Bank, IndusInd Bank, Yes Bank, etc. Their businesses are growing over 20% (Yes Bank’s business, for example, grew over 46%, against Indian Bank’s 17% in FY18). If a bank like us, with good financial health, doesn’t aspire to catch up with private banks, who will do it? 

On bankers’ fear of being investigated at a later stage

Yes, this continues to be a concern. As bankers, we take decisions on the basis of today’s circumstances. The situation may change in 4-5 years. None of the bankers, for example, could anticipate the cancellation of coal blocks or the 2G telecom spectrum licences. The banking industry is such that there will be some deviation from rules on a case-to-case basis. So, if there is any deviation, it must be justified and recorded. But who knows, an investigator at a later date may say ‘we don’t accept that justification’. 

On the lessons learnt from diamond merchant Nirav Modi’s bank scam

This fraud has exposed some of the flaws in India’s banking system. More checks and balances are needed. All transactions must reflect on the books. And more so, people executing transactions and those checking these need to be different. 

Source- Economic Times

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Just when they need leaders, Indian state banks are headless

                                

India’s government-owned banks are becoming increasingly rudderless, just when they most need a firm hand at the top. 

Four of the country’s 21 state banks have yet to appoint replacements for departed chief executive officers, and another has seen its CEO stripped of her powers due to fraud charges. Over the coming months, nine more of the lenders are due to lose their top executives, at a time when spiraling bad loans and an intensified crackdown on financial sector-corruption make the jobs less appealing than ever. 

“Attracting top talent to lead many of these state-run banks has become tough as an environment of fear is created,” said Hemant Kanoria, chairman of SREI Infrastructure Finance Ltd., a non-bank company that lends to infrastructure projects in India. 

While it isn’t the first time that top spots are empty at Indian banks, these vacancies come at an inflexion point in the nation’s $210 billion bad-loan clean up, a crucial step to boost investment in Asia’s No. 3 economy. Lack of leadership leaves these lenders struggling to formulate strategies and meet government conditions to win more funds under a record public bailout. 

Andhra Bank, Dena Bank and Punjab & Sind Bank have had no CEOs since the start of this year, while the head of IDBI Bank. -- which has the highest bad-loan ratio among Indian lenders -- was named as deputy governor of the central bank on Monday. Allahabad Bank is effectively headless as it stripped CEO Usha Ananthasubramanian of her powers after she was formally charged last month over alleged involvement in a $2 billion fraud at a previous employer, Punjab National Bank. 

Bank of Baroda, Canara Bank, UCO Bank, Indian Bank, United Bank of India and Corporation Bank are among lenders where the incumbent’s tenure will end by March. 

Poor Pay, More Scrutiny 

Another challenge in finding replacements is the low salaries on offer at state banks, when compared with their private sector peers. Ananthasubramanian earned about 3 million rupees ($45,000) at PNB in the year ended March 2017, about 5 percent of the 60 million rupees earned by Chanda Kochhar, the CEO of the country’s second-largest private lender ICICI Bank. While this massive discrepancy was always the case, Kanoria said intensified scrutiny of state bankers has eroded the appeal of the jobs. 

Current and former top executives at at least four banks are being investigated by federal authorities for allegations of impropriety. 

Moreover, the government has said state banks will have to show that they’re cleaning up their act if they want to win fresh capital injections. These reforms include selling non-core assets and setting up separate units to manage stressed assets, steps that would need top executives to sign off on them. 

About 30 top-level vacancies exist at state banks, including executive directors, the Press Trust of India reported last week citing people it didn’t identify. Meanwhile, several government-controlled banks reported losses last quarter as bad loans surged. The Finance Ministry’s spokesman didn’t reply to a phone call seeking comment. 

While the government used to directly appoint CEOs of state banks, triggering accusations of cronyism, in 2016 it created a Bank Board Bureau to independently handle top recruitment. When naming the new head of the bureau in April, the government pledged its commitment “not to interfere” in senior level appointments. CEOs are typically selected from among their peers for a term of three years. 

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Bank of India(BoI) may get new MD soon

State Bank of India (SBI) managing director B Sriram is likely to be appointed to the same position in Bank of India (BoI) while BoI managing director Dinabandhu Mohapatra may be asked to move to Allahabad Bank, said sources.

The buzz over these appointments were triggered by Bank of India's disappointing quarterly results on Monday. The bank reported a fourth-quarter net loss of Rs 3,969.27 crore, more than double of the Rs 1,045.52 crore loss posted in the same quarter last year.

The bank's asset quality worsened and its provisions increased in the March quarter, ending the fiscal of 2017-2018. The Bank of India posted their total provisions at Rs 6,674.12 crore from the Rs 4,736.21 crore a year ago in the corresponding quarter. The share for non-performing assets, out of the provisions, was Rs 6,699.23 crore in the fourth-quarter, weakened as compared to the year-ago period.

The bank's income in the fourth quarter slipped to Rs 2,563.85 crore from the Rs 3,469 crore in the year-ago period.India's banking sector has been facing the NPAs problem at large. The Reserve Bank of India (RBI), last year, had released a list of large defaulters, in which state-run banks were among those that lent the maximum to such defaulters.

The debt-laden companies are still facing their insolvency procedures under the Insolvency and Bankruptcy Code (IBC). The State Bank of India, though posted a major loss in the March quarter, posted a guidance that it is on a recovery path from the banking sector's bad loan mess - making it a plausible reason for the government to choose the SBI chief to head the NPA-stricken state-run bank.

SBI, in its media briefing, said the recognition of the NPA has been completed and that the bank is fully compliant with RBI's February 12 circular.The coverage ratio for National Company Law Tribunal's (NCLT) second list, the bank claims, stands at 75% and the lender is not expecting the loss to exceed 53% for the first list of defaulters. The bank expects the haircut to be 52% for the first NCLT list.

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New Chairpersons appointed for three PSU banks

The Narendra Modi government today appointed non-executive chairpersons for three state-run banks.

Charan Singh, the RBI chair professor at the Indian Institute of Management, Bangalore, has been appointed as the non-executive chairman of Punjab & Sind Bank, Financial Services Secretary Rajiv Kumar tweeted.

Anjali Bansal, the former managing director of TPG Private Equity, has been appointed at Dena Bank, while Tapan Ray, the former corporate affairs secretary, will take charge at Central Bank of India. The three appointees will be part-time non-official directors on the boards of the three public sector banks.

The appointments have been made based on the suggestions of Banks Board Bureau headed by Bhanu Pratap Sharma, Kumar tweeted.

The government has been experimenting with appointing experts from a variety of fields as chairpersons of public sector banks. In 2015, Ravi Venkatesan had been appointed as the non-executive chairperson of Bank of Baroda. In the same year, G Padmanabhan, former executive director of the RBI had been appointed as chairperson of Bank of India.

This is a move towards separating the responsibility between chairman and managing directors for better functioning of public sector banks, Kumar said while announcing the fresh appointments on Thursday.

Each of the three banks where new chairpersons have been appointed are grappling with stress.

Dena Bank, for instance, was recently told to stop fresh lending by the RBI. The bank reported a gross non performing assets ratio of 22 percent as of March 2018. Central Bank of India, too, had a bad loan ratio close to that of 21 percent. Punjab and Sind Bank is in a marginally better position with a bad loan ratio of 11 percent.

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Allahabad Bank chief relieved of CEO duties

Public sector lender Allahabad Bank May 15 relieved its Managing Director and Chief Executive Officer Usha Ananthasubramanian of her post with immediate effect.

“The Board of Directors of the Bank in its meeting held on the date has decided that Usha Ananthasubramanian, MD & CEO be divested of all functional responsibilities of the Bank with immediate effect,” said the bank in a statement to the exchanges.

The bank also requested the Finance Ministry to make suitable arrangements for its smooth functioning after this decision. She is set for superannuation on September 30, 2018.

Central Bureau of Investigation (CBI) filed a chargesheet against current and former officials of Punjab National Bank (PNB) and  Allahabad Bank, the Finance Ministry has directed both the banks’ boards to 'divest' these officials of their powers.

The chargesheeted officials include Usha Ananthasubramanian, who was also the former chief of Punjab National Bank. She has been named by the CBI in the charge sheet relating to the Rs 14,000 crore-plus fraud at PNB unearthed in mid-February.

Who is Usha Ananthasubramanian?

Ananthasubramanian (57), was at the helm of PNB from August 2015 to May 2017 after serving as its Executive Director from July 2011 to November 2013.

She took charge of PNB at a time when the bank was struggling under a heap of bad loans while being under the RBI’s scrutiny for deterioration in asset quality.

At that time, Ananthasubramanian took an aggressive stance on PNB’s non-performing assets (NPAs) and wilful defaulters. She also refused to take a haircut on loans to the notorious Vijay Mallya’s Kingfisher Airlines.

Later, she was moved to lead Bharatiya Mahila Bank, India’s first and only government-owned women’s bank, which got merged with State Bank of India in April 2017.

After that, in May she was moved to Allahabad Bank as the MD and CEO and completed a year at the state-owned bank on May 5.

Source- Moneycontrol

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