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Govt Approves 12 Executive Directors For Several State-owned Banks

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On Saturday, the cabinet’s appointments committee confirmed the appointments of 12 EDs

 

Twelve general managers have been appointed as executive directors (EDs) of several public sector banks (PSBs) with the government’s approval. On Saturday, the cabinet’s appointments committee confirmed the appointments of 12 EDs.

Sanjay Rudra, general manager of the Bank of Maharashtra, has been appointed ED of the Union Bank of India under a government directive. Vijaykumar N Kamble, a different GM from the same bank, will take over as ED of UCO Bank.

While Ravi Mehra, general manager, was elevated to become ED of Punjab & Sind Bank, Bibhu Prasad Mahapatra, chief general manager of Punjab National Bank, was promoted to that position.

In March, Brajesh Kumar Singh, the chief general manager of Bank of Baroda, would join Indian Bank as ED, replacing Rajiv Mishra, the chief general manager of Union Bank of India.

In addition, Rohit Rishi, Chief General Manager of Indian Bank, would become Executive Director of Bank of Maharashtra starting next month.

The appointment of Lal Singh as ED of the Bank of Baroda, Shiv Bajrang Singh as ED of the Indian Bank, Mahendra Dohare as ED of the Central Bank of India, and Dhanaraj T as ED of the Indian Overseas Bank also approved by the government.

 

economy

Global Economy May Slowdown More In 2023, According To Big Banks

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The has been an increase in U.S. Federal Reserve’s interest rates by 375 basis points this year, ever since it rolled out its first hike in March. Many banks see a fall in the euro below parity to the dollar during the year, before clawing back by year-to-end

The largest investment banks in the world expects global economic growth to slow ahead in 2023 following a year affected by the RussiatoUkraine conflict and soaring inflation. It triggered one of the fastest monetary policy tightening cycles during recent times.

The has been an increase in U.S. Federal Reserve’s interest rates by 375 basis points this year, ever since it rolled out its first hike in March. Since then, a spark in worries about a recession existed. Even the central bank is expected to temper its pace of hikes.

Real GDP (annual Y/Y) forecasts for 2023 reads as follows:

Bank Global U.S. China Morgan Stanley 2.20 per cent 0.50 per cent 5 per cent Goldman Sachs 1.80 per cent 1 per cent 4.50 per cent Barclays 1.70 per cent to 0.1 per cent 3.80 per cent J.P.Morgan 1.6 per cent 1 per cent 4 per cent BNP Paribas 2.3 per cent to 0.10 per cent 4.50 per cent UBS 2.1 per cent 0.1 per cent 4.5 per cent BofA 2.3 per cent to 0.4 per cent 5.5 per cent Credit 1.6 per cent 0.8 per cent 4.5 per cent Suisse Deutsche Bank 2 per cent 0.8 per cent 4.5 per cent

U.S. inflation forecast for 2023 and Fed terminal rate forecast as follows:

Bank U.S. Inflation Fed Terminal Rate (annual Y/Y for 2023) Morgan Stanley Headline CPI: 3.3 per cent 4.625 per cent Core PCE: 3.8 per cent (by Jan ’23) Goldman Sachs Headline CPI: 3.2 per cent 5 to 5.25 per cent Core CPI: 3.2 per cent (by May ’23) Core PCE: 2.9 per cent Barclays Headline CPI: 3.70 per cent 5 per cent to 5.25 per cent (by March ’23) J.P.Morgan Headline CPI: 4.1 per cent 5 per cent Core CPI: 4.2 per cent (by Jan ’23) BNP Paribas Headline CPI: 4.40 per cent 5 per cent to 5.25 per cent (by Q1 ’23) UBS Headline CPI: 3.6 per cent 5 per cent BofA Headline CPI: 4.4 per cent 5 per cent to 5.25 per cent (by March ’23) Credit Suisse 4.75 per cent to 5 per cent Headline CPI: 3.8 per cent (by March ’23) Deutsche Bank Headline CPI: 4.3 per cent 5.125 per cent.

Morgan Stanley by March ’23 sees the Fed delivering its first rate reduced by December 2023, taking the benchmark rate to 4.375 per cent by the end of that year. Barclays foresees the rate between 4.25 per cent and 4.50 per cent by next year ending, whereas Deutsche Bank sees it at 4.625 per cent after a rate cut.

According to UBS, it expects the U.S. inflation to be “close enough” to the Fed’s 2 per cent target by the end of 2023 for the central bank to consider rate cuts. BofA sees the rate between 2.75 per cent and 3.00 per cent by the end of 2024.

Forecasts for currency pairs, yields on U.S. 10 to year Treasuries, S&P 500 target by the end of 2023: Bank EUR/U USD/C USD/J S&P 500 U.S. SD NY PY Target 10 to year yield Morgan Stanley 1.08 6.8 140 3,900 3.50 per cent Goldman Sachs 1.05 6.9 140 4,000 4.34 per cent Barclays 1.05 7.3 131 3.75 per cent J.P.Morgan 1.0 7.2 133 3.4 per cent BNP Paribas 1.06 6.9 128 3,400 3.50 per cent UBS 1.04 6.9 135 3,700 3 per cent (by June 2023) BofA 1.1 7 137 4,000 3.25 per cent 1.02 7.3 135 4.10 per cent Credit Suisse Deutsche Bank 1.1 6.8 125 4,500 3.65per cent.

Many banks see a fall in the euro below parity to the dollar during the year, before clawing back by year-to-end. As of 1317 GMT on Nov. 28, 2022: EUR/USD: 1.045 USD/CNY: 7.197 USD/JPY: 138.50 U.S. 10 to-year Treasury yield: 3.67per cent S&P 500 level (as of close on 25 November): 4,026.12

CFO World

Maximum Tenure Of PSU Banks’ CEO Increases To 10 Years: Govt Notification

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Previously, the eligibility criteria for the MD or any executive director of a public sector undertaking (PSU) bank was a maximum tenure of five years or 60 years, whichever was earlier.

The government through a notification dated 17 November 2022, has extended the term for the appointment of CEO (Chief Executive Officer) and MD (Managing Director) of public sector banks to 10 years, from the earlier 5 years, subject to superannuation age of 60 years. This move will help the government to retain the best talent in the banking sector, suggest media report.

Previously, the eligibility criteria for the MD or any executive director of a public sector undertaking (PSU) bank was a maximum tenure of five years or 60 years, whichever was earlier. The change is also applicable to the whole-time directors of all Central Public Sector Enterprises (CPSEs).

The notification said “A whole-time Director, including the Managing Director, shall devote his whole-time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding ten years, as the Central Government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment.”

“This Scheme may be called the Nationalised Banks (Management and Miscellaneous Provisions) Amendment Scheme, 2022,” it added.

The central government holds right to terminate the term of office of a whole-time director, along with the managing director, any time before the expiry of the term mentioned by serving a three-month notice in writing or giving three months’ salary and allowances in lieu of notice.

The government’s decision would help banks to retain the talent who rise to the ladder of whole-time directors at early age of 45 to 50 years.

At present, there are many young age whole-time directors of PSU banks who entered the board. This amendment would benefit them.

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ED Freezes 80 Bank Accounts With Chinese Links: Report

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An alleged money-laundering case related to ‘Super Like Online Earning Application (part-time job scam)’ has been registered. The application is the one in which the customer gets money as profit subject to them sharing photos and videos of celebrities by investing some money

The Enforcement Directorate (ED) said that after conducting searches on payment gateways and banks, it froze the balances worth Rs 1 crore which belonged to the accused persons in an online ponzi scheme containing Chinese links, on 17 November.

In total 16 locations of the banks and payment gateways along with Phonepay, Paytm, Googlepay, Amazonpay etc. and few banks such as HDFC Bank, ICICI Bank, Dhanalakshmi Bank, were searched between 14 and 15 November. According to the agency, an alleged money-laundering case related to ‘Super Like Online Earning Application (part-time job scam)’ has been registered.

The agency said that while conducting the said search proceedings, nearly 80 bank accounts having Rs 1 crore balance, have been frozen which belongs to the accused persons.

The Bengaluru police registered the ED’s case is based on the predicate offence against M/s Super Like Online Earning Application and other accused persons.

The application called “Super Like,” is the one in which the customer gets money as profit subject to them sharing photos and videos of celebrities by investing some money.

The application witnessed heavy investment from the common public by getting attracted towards this lucrative scheme. Also, after sharing videos of celebrities, customers received some money as profit for some time, said the statement while explaining the modus operandi.

After some time, however, the customers were unable to either reap any profit or the money they invested and the amount was blocked by the said application. Thus, the accused persons collected huge amounts of funds by cheating the common public, it added.

A chargesheet has been filed by the local police in the said matter against a total 50 accused persons. It includes two Chinese nationals Shen Long and Himani.

CFO World

Govt Asks Its Nominees On PSB Boards To Review Reform Path

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Mostly senior officials from the finance ministry, being the government nominees on bank boards, will give suggestions regarding course correction and periodically review and if required. Further, information to Public Sector Banks (PSBs) will be provide in order to build partnerships and achieve synergistic outcomes. The formation of a common talent pool along with senior level domain experts from all PSBs is also being worked out.

The government directed its nominees to actively review the three-year business reform roadmap of their respective banks. Those nominees are on the boards of state-run banks. This move aim is to make sure that big lenders support smaller banks in certain key areas like loan underwriting, information technology and human resource development. 

According to an official. banks have also been asked to set up cross-functional teams to enable faster implementation of the reform agenda.

Mostly senior officials from the finance ministry, being the Government nominees on bank boards, will give suggestions regarding course correction and periodically review and if required. In addition to that the Indian Banks’ Association has also identified representatives who will oversee bank-specific roadmap. 

Further, information to Public Sector Banks (PSBs) will be provide in order to build partnerships and achieve synergistic outcomes. The lenders will look at operationalising co-lending partnerships, keeping a focus on priority sector areas like home loans and other retail portfolios. This come from the plan discussed during PSB Manthan, held earlier this year.

The co-lending disbursements surged 4.5 times to Rs 2,901 crore during last quarter of 2021-22 from Rs 643 crore a year ago, as per a report submitted by the banks.

The formation of a common talent pool along with senior level domain experts from all PSBs is also being worked out. Whereas the Indian Bank will lead this initiative for Chennai-Bengaluru banks and the Punjab National Bank will be the head for Delhi-Kolkata banks, and for Mumbai-Pune banks. The State Bank of India and Bank of Baroda will spearhead the programme together.

accounting

India Inc Credit Demand Softens As Banks Witness Retail Boom

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According to the sector-wise data available till September, the industries witnessed a surge in credits to 12.6 per cent year-on-year, along with small and mid-sized corporates recording stronger growth

With the sudden growth in retail credit, the corporates too have increased their credit demand however it still remains as half that of retail credit growth. The credit offtake boosted at 17.9 per cent on year-on-year, being a decadal high mark, reported a robust growth for the fortnight ending 7 October 2022.

The retail credit, higher working capital demand amidst high inflation, and lower funds raised in the capital market, drove the growth.

According to the sector-wise data available till September, the industries witnessed a surge in credits to 12.6 per cent year-on-year, along with small and mid-sized corporates recording stronger growth.

Due to the festive season, the retail credit demand almost doubled the corporate credit growth to 19.6 per cent year on year in September. In the industry cohort, credit to large industry went up to 7.9 per cent as against the contraction of 2.1 per cent from last year.

Whereas medium industries witnessed a credit growth of 36.2 per cent in September 2022 in comparison with 37.1 per cent from a year ago. The credit to micro and small industries also surged by 27.1 per cent against 13.1 per cent from last year.

In the past few years, Indian companies have deleveraged their balance sheets to a great extent by raising equity and refinancing high-cost debt. This has enabled banks who witnessed growth through retail lending route in recent years. 

However, according to bankers, sectors such as cement, steel, renewable energy, roads, and chemicals, which are seeing some capacity creation, shows corporate demand the most. The companies optimised their borrowing cost due to hardening of bond yields, which led them to shift from the capital market to bank borrowings.

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NHAI To Accept Electronic Bank Guarantees, Digitise Existing Ones

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A Bank Guarantee (BG) being a commercial instrument is used as a legal contract. NHAI have already been issued some of the E-BGs by the Banks. The NHAI would be using the E-BG services of National e-Governance Services Limited (NeSL), to facilitate reduced physical paper movement, eliminate physical storage needs and provide easy access for Bank Guarantee life cycle events

The National Highways Authority of India (NHAI) digitalising all its existing Bank Guarantees, it is now accepting Electronic Bank Guarantees (E-BGs). In order to boost the efficiency and transparency of internal processes and take the adoption of digital technology ahead, this is being done, said an official statement.

A Bank Guarantee (BG) being a commercial instrument is used as a legal contract. Under this, a bank acts as a guarantor and undertakes an obligation to pay the beneficiary a certain amount of money in case the original debtor from the contract defaults on contractual terms and obligations. 

The NHAI would be using the E-BG services of National e-Governance Services Limited (NeSL), to facilitate reduced physical paper movement, eliminate physical storage needs and provide easy access for Bank Guarantee life cycle events such as invocation, renewal and closure. NHAI have already been issued some of the E-BGs by the Banks.

The Secretary, Ministry of Road Transport and Highways and Chairperson, NHAI, Alka Upadhyaya said that, in line with the spirit of Digital India, we motivate the concessionaires to adopt E-BGs. Bank guarantees are required by NHAI to ensure faithful fulfilment of contractual obligations.

“The physical form of the BG presents challenges like time consuming verification process and possibility of frauds,” the statement added.

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Tata In Talks With Banks For Rs 15,000 Cr Loan For Air India’s Revival

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The funds be will allocated to cater daily air operations and losses and restore the fleet, pay aircraft rentals and overhauling IT systems, as per the report. The tenure of loan will three-year with an annual reset ranging between 7.5 and 8 per cent

The Tata group is in talks with banks to acquire working capital loans around Rs 15,000 crore for Air India. It purchased the airline from the government last year and is now making a valiant move to revive it, reported a media house.

The funds be will allocated to cater daily air operations and losses and restore the fleet, pay aircraft rentals and overhauling IT systems, as per the report.

The tenure of loan will three-year with an annual reset ranging between 7.5 and 8 per cent, informed an official.

In 2021, State Bank of India (SBI), HDFC Bank, and Bank of Baroda had provided a Rs 23,000 crore, unrated, unsecured loan to Talace which is a Tata Sons company. It then had won the bid for Air India, at a rate of 4.25 per cent. The same loan stands due for renewal, at January end.

As per a bank official, surge in interest rates and low cash in the system will hike borrowing costs. The Reserve Bank of India website has listed 6.91 per cent as the cut-off for 364-day Treasury Bills.

The acquisition of Air India was made by Tata Sons through Talace in October during last year for Rs 18,000 crore. For around 69 years after the government nationalised the airline in August 1953, the ownership of carrier came back with Tatas in January 2022.

IBA RBI

Strict Rules For Uncovered Foreign Currency Exposures: RBI Circular

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If at all banks face a potential loss or take hit on earnings before interest and depreciation (EBID) for more than 15 per cent but less than 30 per cent, it will be mandatory for lenders to increase provisioning by 20 basis points, said the apex bank

The Reserve Bank of India made strict changes in the rules for unhedged foreign currency exposures of companies where banks have lent to raise capital and fulfil provisioning requirements on 11 October.

Unstable exchange rate may result in loss for companies which did not cover their currency risk against offshore payables. As a consequence, this in turn will decrease their ability to repay bank loans.

Normally, all the companies cover their risk of currency against their overseas payables via currency derivatives market.

The RBI in an explanation through a circular said, “Banks shall consider the items maturing or having cash flows over the period of next five years.” Derivative transactions have been excluded from Unhedged Foreign Currency Exposure (UFCE) rules. And now this exemption has been extended to factoring transactions a part of it.

The incremental capital requirement for exposures which fell in last bucket was recorded as 25 per cent hike in risk weight. The incremental provisioning requirement is in the bracket of 20-80 basis points.

If at all banks face a potential loss or take hit on earnings before interest and depreciation (EBID) for more than 15 per cent but less than 30 per cent, it will be mandatory for lenders to increase provisioning by 20 basis points, said the apex bank.

To derive at entities’ foreign currency exposure, their all sources of borrowings which includes foreign currency borrowings and External Commercial Borrowings must be taken into consideration. This would result in pinching their ability to repay offshore loans.

Entities which refrain from hedging their foreign currency exposures, may incur significant losses during the period of sharp volatility in foreign currency exchange rates, according to the RBI.

“For the purpose of assessing the effectiveness of hedge, guidance may be taken from the applicable accounting standards and the relevant guidance notes of the Institute of Chartered Accountants of India on the matter,” said the RBI.

start-up

Finance Ministry Examines Performance Of PSU Banks

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Sanjay Malhotra presided over the meeting, in which financial inclusion and cutting non-performing assets were also discussed

Public sector banks (PSBs) were reviewed by the Finance Ministry on Tuesday in light of first-quarter numbers and asked to increase lending to productive sectors.

Sanjay Malhotra presided over the meeting, in which financial inclusion and cutting non-performing assets were also discussed.

The meeting instructed all public-sector bank executives and managing directors to prioritise credit growth during the holiday season, starting from September. It was also reported that progress has been made on a number of government schemes, which included Kisan Credit Card, Pradhan Mantri Suraksha Bima Yojana, StandUp India, Pradhan Mantri Jeevan Jyoti Bima Yojana, and Pradhan Mantri Mudra Yojana,

As part of the review, the secretary analysed the performance of banks in lending to the animal husbandry, dairy, and fishery sectors.

Despite a persistent decline in bad loans, PSBs made more profit in the three months ended June, suggesting a positive outlook for their balance sheets.

Regarding gross and net non-performing assets (NPAs),  Bank of Maharashtra and the State of India were in the bottom quartile, based on an analysis of quarterly financial data published by public sector lenders.

For the three months ended June, all 12 public sector banks registered a profit of Rs 15,306 crore, representing an annual growth of 9.2 per cent. The June quarter saw lower profits for SBI and PNB, two of the largest public sector lenders. 

There was a total profit of Rs 14,013 crore achieved by state-owned banks during the April-June period of the previous fiscal.

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