RBI imposes penalties on BoI and Federal Bank

Reserve Bank of India (RBI) on Friday said it has imposed a penalty of Rs 5.72 crore on Federal Bank for deficiencies in regulatory compliance.

A  penalty of Rs 70 lakh has also been imposed on Bank of India for non-compliance with certain provisions of Know Your Customer (KYC) norms and instructions on 'compliance function in banks' issued by RBI, it said in a statement.

About Federal Bank, RBI said the bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/corporate agency services by the insurance company, according to a separate statement.

RBI had carried out Statutory Inspection for Supervisory Evaluation (lSE) of the bank with reference to its financial position as on March 31, 2020.

In another statement, RBI said a fine of Rs 7.6 lakh has been imposed on Dhani Loans and Services Limited, Gurugram for non-compliance with KYC norms.

RBI said the penalities are based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the two banks and Dhani Loans and Services with their customers.

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Expected DA for bank employees from August-2022

  

The Dearness allowance to bank employees is paid under the 11th bipartite settlement between bank unions and IBA (Indian Bank’s Association) signed on 11th November 2020. The settlement is effective from November 1, 2017. The dearness allowance is paid based on the Consumer Price Index (CPI) number published by the Labor Bureau of India.

The Dearness Allowance (DA) for bankers for the period from August 2022 shall be based on CPI(IW) numbers from April 2022 to June 2022. The latest CPI(IW) data with the base year 2016 is as under.

April 2022- 127.70

May 2022- 129

June 2022- to be declared

If CPI (IW) remains at the same level during June 2022 as in May 2022, the DA to bank employees shall be payable for 525 DA slabs as against the existing 472 DA slabs i.e. an increase of 53 DA slabs.

Based on the above, the Expected DA from August 2022 is 36.75%. The existing DA rate for the period of May 2022 to July 2022 is 33.04% Hence there shall be an increase of 3.71% in dearness allowance for the period from August 2022 to October 2022.

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RBI imposes monetary penalty on this PSU bank for non-compliance

 

Before the penalty, RBI had conducted a statutory inspection for supervisory evaluation of the bank regarding its financial position as of March 31, 2020, and the examination of the Risk Assessment Report, Inspection Report, and all related correspondence about the same.

The Reserve Bank of India (RBI) on Friday imposed a monetary penalty of Rs.57.50 lakh on the government-owned Indian Overseas Bank for non-compliance with certain directions. The penalty was related to the directions issued by RBI on Frauds – Classification and Reporting by commercial banks and select FIs.

RBI said, "This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers."

Before the penalty, RBI had conducted a statutory inspection for supervisory evaluation of the bank regarding its financial position as of March 31, 2020, and the examination of the Risk Assessment Report, Inspection Report, and all related correspondence about the same.

As per the central bank, the inspection revealed non-compliance with the directions issued by RBI, inter-alia, to the extent the bank (i) failed to report certain instances of frauds involving ATM card cloning/skimming, to the RBI within three weeks from the date of detection, (ii) failed to ensure integrity and quality of data when it did not report credit information in CRILC on certain borrowers having aggregate exposure of Rs.5 crore and above, and (iii) linked certain floating rate loans to Micro and Small Enterprises, extended by it on or after October 01, 2019, to MCLR/Base Rate instead of an external benchmark.

Following this, RBI had issued a notice to the bank advising it to show cause as to why the penalty should not be imposed on it for failure to comply with the directions issued by the central bank.

After considering the bank’s reply to the notice and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.

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Why PSU bank employees strike on 27th June defer

In a significant move, bank unions on Thursday agreed to drop their earlier announced all-India strike call for June 27. The decision came during a conciliatory meeting held in the Capital under the chairmanship of the Chief Labour Commissioner S C Joshi, on Thursday.

The conciliatory meeting held on June 21 had remained inconclusive and the unions stood by their strike call. The CLC had called for another conciliatory meeting on June 23 to prevent the strike.

There was a change of stance by the bank unions at Thursday’s conciliatory meeting after the IBA agreed to commence negotiations on their demands from July 1.

“Another round of conciliation meetings was held today in Delhi by CLC. We reiterated our demands. IBA agreed to commence negotiations on our demands on July 1. Hence, it is decided to defer our agitation and strike on June 27,” C H Venkatachalam, General Secretary, All India Bank Employees’ Association (AIBEA), told BusinessLine after the meeting.  

The breakthrough is significant as the IBA has not been communicating with the bank unions for the last one-and-a-half years, sources said. 

The Indian Banks’ Association (IBA) was represented by Brajeshwar Sharma, Senior Advisor (HR & IR), at today’s meeting, while the Department of Financial Services (DFS) was represented by Deputy Secretary Kul Bhushan Nayyar. Representatives of both Catholic Syrian Bank and Singapore-headquartered DBS Bank were also present at the meeting. 

The United Forum of Bank Unions (UFBU), a representative body of nine bank unions, had given the strike call for June 27. The All India Bank Employees’ Association (AIBEA) is one of the nine unions which form part of the UFBU.

The main demands of the unions include introduction of five-day banking (all Saturday and Sundays  to be holidays) and scrapping of NPS for post April 2010 employees/officers and implementation of the old pension scheme for them. 

One other demand is to extend wage revision in CSB Bank (Catholic Syrian Bank ) and DBS Bank (formerly Lakshmi Vilas Bank), sources said. 

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IDBI Bank Privatisation: Govt Likely to Invite EoIs in July-End After Discussions with RBI

The central government has been mulling the privatisation of IDBI Bank for quite some time now, and has kept the lender in its list of companies for divestment. The Department of Investment and Public Asset Management (DIPAM) is currently holding roadshows in the US for the sale of the bank, which is set to be another important landmark in reaching India’s divestment targets. The actual quantum of government stake sale at the IDBI Bank will be known once the roadshow is over, the Centre had said earlier in April.

Currently, the government is in the process of holding roadshows in the US, an official was quoted by PTI as saying, on June 10, Friday. After a few more such investor meets, it will finalise the contours of the IDBI Bank stake sale, the official added.

“We may need one more round of discussion with RBI on IDBI strategic sale. The expression of interest (EoI) may be invited by July-end," the official said. It was earlier confirmed by sources that the government may invite EoIs in May for selling its stake in IDBI Bank and expects to complete the disinvestment process in the current financial year 2022-23.

The official said while the quantum of stake dilution of both the government and LIC is yet to be decided, the management control in IDBI Bank will be transferred in the strategic sale.

DIPAM secretary Tuhin Kanta Pandey had in April also said that the EoIs will be invited once the meetings with investors were over. “The quantum of exit will be known post roadshow and then the structure of Expression of Interest will be finalised. One thing is very sure that management control will be passed on. Currently, it is with LIC. But, management control at what level of equity will have to be decided when we have decided the structure of EoI,” Pandey had said in Delhi during an event on LIC IPO roadshow.

The government holds 45.48 per cent stake in the bank, while LIC owns 49.24 per cent. Necessary amendments to the IDBI Bank Act have already been made through the Finance Act 2021, and transaction advisors have been appointed.

The Cabinet Committee on Economic Affairs had given in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May last year. “CCEA has given an in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd”, a government had statement said.

In January 2019, IDBI Bank became a subsidiary of LIC, following the acquisition of additional 8,27,590,885 equity shares. In December 2020, IDBI Bank was classified as an associate company due to the reduction of LIC shareholding to 49.24 per cent. The IDBI Bank privatisation efforts come during a time when the government has put off similar plans for Bharat Petroleum.

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Six Indian banks sue GVK for Rs 12,114 crore: Report

Six Indian banks are reportedly suing the GVK Group for $1.5 billion or Rs 12,114 crore, according to the Times of India. The six banks include Bank of Baroda, Bank of India, Canara Bank , Icici Bank , Indian Overseas Bank, and Axis Bank.

According to the report, GVK defaulted on a $1-billion loan and a $35-million letter of credit facility given by banks in 2011, and a $160-million loan lent in 2014.

GVK Coal Developers (Singapore) and nine other GVK Group companies are being sued in the case which opens Monday.

As per the banks, GVK failed to make repayments as they fell due and failed to obtain a mining lease in the Alpha project in Queensland, Australia by December 31, 2012, which was a project milestone that had to be satisfied. The banks reportedly asked GVK in November 2020 to cancel the agreement and requested repayment. But neither GVK nor its guarantors has paid any of the sums owed, the banks claimed.

On the other hand, GVK argued that "the loans was to provide part funding for the acquisition of the Hancock companies in Australia to develop their assets — including the Alpha project — into working coal mines".

“The deterioration in the market for coal, the lack of third-party investment, legal challenges to the mining projects in the courts of Queensland, meant that very little progress was made to develop the mining assets,” GVK states. GVK states it could not obtain the mining lease owing to litigation by environmental groups but denies this was a “default”.

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Public sector banks to pay record Rs 7,867 crore dividends to government this year | See Which banks give how much dividends

 State-owned banks will give the government a record Rs7,867 crore in dividends this year, an indication of better profitability and capital position, largely driven by the falling stock of non-performing assets (NPAs).

Nine out of 12 public sector banks (PSBs) have paid dividends for the fiscal year ended March 2022, led by the country's largest lender State Bank of India (SBI) with Rs3,616 crore followed by Union Bank of India(UBI) with Rs1,084 crore.

This is a big improvement from FY21 when only SBI and Indian Bank gave any dividend to the government.

Krishnan Sitaraman, senior director at rating agency Crisil said the dividend numbers show that PSBs are now back to business as usual after being bowed down by high provisions against rising NPAs since fiscal 2016.

"The capital adequacy of all PSBs is now 100 basis points higher than the minimum required; just four years ago, only 20% of PSBs were this comfortable," he said. "This is the best capital position in five years and is now backed by loan growth, which augurs well for these banks."

Improved recoveries, which led to falling provisions and lower NPAs, have been key reasons for the PSB recovery.

At its peak, the Indian banking system had 11.2% NPAs at the end of March 2017 and those of PSBs were much higher at 15%. Gross NPAs for PSBs have since declined to 7.9% at the end of December 2021.

Sitaraman said the fall in NPAs has been backed by higher credit growth, improving profitability. Crisil expects bank credit growth to improve to 11-12% in fiscal 2023 from 9.6% in fiscal 2022 and 5% in fiscal 2021.

The higher dividend from PSBs is a minor relief for the government, which is staring at a gap in its balance sheet after the Reserve Bank of India said it will transfer Rs30,307 crore to the government as surplus, lower than the Rs74,000 crore budgeted.

Expectations are that PSBs will continue to pay dividends to the government as business prospects improve. Consistent dividend payments will also improve these banks' prospects before investors.

"PSBs now have a good capital cushion and can now say have turned around," said Karthik Srinivasan, group head, financial sector ratings, at rating agency ICRA. "It is fair to assume they will remain profitable in the short term and continue offering dividends."

Among the banks that have not announced dividends are UCO Bank , Central Bank of India and Indian Overseas Bank, which are all profitable at the end of March 2022. Regulations prevent them from declaring dividends because either their accumulated losses are high, their reserves are negative, or they are under RBI restrictions.

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Privatisation Of Bank: Two banks to be sold in the country, centre to speed up law change process

 

The Centre speed up the process of privatising two State-owned banks. News agency PTI quoted a source from the Centre as saying on Wednesday. The Modi government at the Centre had earlier amended the 'Banking Regulation Act' to pave the way for private investment in State-owned banks. According to sources, the Centre wants to pass a bill in this regard in the upcoming monsoon session of Parliament.

Union Finance Minister Nirmala Sitharaman had said last year that the Centre wants to start the process of privatising some state-owned banks. Therefore, the Bank Nationalization Acts of 1970 and 1980 will be amended and the Bank Control Act of 1949 will be amended. According to finance ministry sources, the process has begun. The government has also started preparing the draft of the 'Banking Regulation Act'. If all goes well, the amendment will be passed in the monsoon session. Of course, there is a good chance of the opposition being hindered. However, due to the majority, the government should not have any problem in passing this law.

The amendment has been passed in parliament and there will be no bar on the privatization of State-owned banks. Only then will the process of privatization of state-owned banks begin. Initially, two state-owned banks have also been listed for disinvestment. The name of which two banks will be privatised is yet to be announced by the Centre. According to sources, the Modi government initially chose four medium-sized banks for privatisation. The four banks that were placed in the initial list for privatisation are Bank of Maharashtra (BoM), Bank of India (BoI), Indian Overseas Bank(IOB) and Central Bank of India. Later, niti aayog proposed that most of the shares of Indian Overseas Bank and Central Bank of India be sold. The Modi government can go ahead with the NITI Aayog's proposal.

This is not the end of it, the government also wants to complete the privatization process of the tate-owned company BPCL quickly. Sources claim that only 52.3 per cent stake in BPCL held by the Centre will be sold. Earlier, the Modi government had taken the initiative to sell the shares of BPCL. Initially three companies showed interest in buying bpcl shares. But in the end, only one company survives in the race, the sources claim.

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