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Tag: public sector banks

  • Public sector banks have not recovered even Re 1 against Rs 5 written off in last 9 years: Lok Sabha

    Public sector banks have not recovered even Re 1 against Rs 5 written off in last 9 years: Lok Sabha

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    PSBs could not recover even Re 1 as against Rs 5 written-off during nine fiscal years starting 2014-15, data presented in the Lok Sabha on Monday showed.

    “Public sector banks have written-off an aggregate loan amount of Rs 10.42 lakh crore and recovered an aggregate amount of Rs 1.61 lakh crore from written off loans, from the financial year 2014-15 to financial year 2022-23,” Minister of State in the Finance Ministry, Dr Bhagwat Karad, said in a written response, quoting Reserve Bank of India (RBI) data,

    Public sector bankers to get 17 per cent wage hike 

    The recovered amount is 15.45 per cent of the total written-off amount during the said period. Though the government maintains that a write-off does not mean loan waiver, banking industry sources say considering the hair cut ratio after a compromise or long-drawn legal battle, actual recovery from written-off accounts is low and the latest data proves that.

    According to RBI guidelines and the policy approved by bank boards, NPAs, including those in respect of which full provisioning has been made on completion of four years, are removed from the balance-sheet of the bank concerned by way of a write-off. Last week, in a written response to a similar question, Dr Karad had said: “Such write-offs do not result in waiver of liabilities of borrowers to repay.” Further, the process of recovery of dues from the borrower in written-off loan accounts continues, write-off does not benefit the borrower, Karad added.

    Recovery from written-off accounts are initiated through various mechanisms, including filing of civil suits or in the Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, 2016, through negotiated settlement/ compromise, and sale of non-performing assets. “Government does not spend any amount on write-offs of corporate loans,” he said.

    The Minister did not name individual borrowers whose accounts have been written off citing the RBI Act. Quoting RBI, he said Scheduled Commercial Banks (SCBs) have collected an aggregate amount of Rs 5,309.80 crore as penal charges, including penalty charges against delay in payment of loans, during the financial year 2022- 23.

    Banks can also negotiate settlements or compromise or even sell non-performing assets. Further, in line with the RBI’s Framework for Compromise Settlements and Technical Write-offs on June 8, 2023, compromise settlements are undertaken by lenders in respect of wilful defaulters without prejudice to criminal proceedings underway against such debtors, he said.

    The Minister also clarified that the primary regulatory objective behind allowing wilful defaulters to enter into compromise settlement is to enable multiple avenues for lenders to recover money in default without delay. Apart from the time value loss, inordinate delays result in asset value deterioration, and hampers ultimate recoveries, he said.

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  • FSIB firms up Panel for ED appointments in Public Sector Banks

    FSIB firms up Panel for ED appointments in Public Sector Banks

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    Financial Services Institutions Bureau (FSIB), a single autonomous professional body, has recommended the names of as many as 16 candidates to form part of the Panel for FY24 from which executive directors’ vacancies will be filled in public sector banks (PSBs).

    Between July 1-15, FSIB had interfaced with as many as 72 candidates from various PSBs.

    Also read: FSIB recommends MDs for Bank of Baroda and Bank of India

    The names recommended in the order of merit are Sanjay Rudra, Lal Singh, Bindu Prasad Mahapatra, Shiv Bajrang Singh, Ravi Mehra, Rajiv Mishra, Balwinder Kumar, Brijesh Kumar Singh, Rohit Rishi, Mahendra Dohare, S.K. Majumdar, Dhanraj T, Vijay Kumar Nivrutti Kamble, Pankaj Dwivedi, Mukul N Dandge, and Amit Kumar Srivastava.

    It may be recalled that FSIB was set up as a single autonomous professional body tasked to search and recommend high-calibre persons for appointment as Wholetime directors (WTDs) and non-executive Chairpersons in public sector banks, public sector insurers, and financial institutions. FSIB had subsumed the Banks Board Bureau, which now ceases to exist.

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  • 12 PSBs cross ₹1 lakh crore profit mark in 2022-23 aided by lower credit cost, strong recoveries

    12 PSBs cross ₹1 lakh crore profit mark in 2022-23 aided by lower credit cost, strong recoveries

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    Top public sector banks have come out all guns blazing when it came to year-on-year bottom line growth in the just-ended March 2023 quarter, an analysis of results declared by these lenders showed. 

    Led by banking major State Bank of India, which saw its Q4 profits surge 83 per cent to ₹ 16,695 crore, the large PSBs such as  Punjab National Bank, Bank of Baroda, and Canara Bank have all reported buoyant increases in year-on-year growth rates in Q4 profits.

    For the fiscal year 2022-23, SBI recorded a profit of ₹ 50,232 crore, up from ₹ 31,675 crore in 2021-22. This is SBI’s, highest-ever quarterly and yearly profit.

    While PNB’s Q4 profits grew 477 per cent to ₹ 1159 crore (₹201 crore),  Bank of Baroda’s net profit in the fourth quarter surged 168 per cent to ₹4,775 crore (₹ 1,779 crore). 

    For the fourth quarter ended March 31, 2023, Canara Bank reported a net profit of ₹3,175 crore, up 91 per cent over a net profit of ₹1,666 crore in the same quarter last fiscal. 

    The aggregate profits of 12 PSBs surpassed the ₹ 1 lakh crore mark (₹1.05 lakh crore mark, to be precise in 2022-23), data showed.

    This growth occurred  after these 12 banks posted a net loss of ₹85,390 crore in 2017-18.

    These 12 PSBs witnessed a 57 per cent increase in total profit compared to ₹66,539.98 crore earned in 2021-22.

    PNB posted a 27 per cent decline in annual net profit from ₹3,457 crore in 2021-22 to ₹2,507 crore in the year ended March 2023.

    The PSBs that reported an annual profit over excess ₹10,000 crore in 2022-23 are Canara Bank (₹10,604 crore) and Bank of Baroda (₹14,110 crore).

    WHAT ARE THE REASONS 

    The main factors behind this strong performance of all PSBs, including large ones, are the decline in credit cost for banks and focused efforts to improve recoveries. Credit cost is different from “cost of funds”.  Credit cost is the cost incurred by a lender for providing credit to a borrower.  

    “Major reason not only for our bank (PNB) but also for all public sector banks is credit costs have been reduced drastically. Gross NPA, Net NPA, aging provision has also reduced. This is reason why profitability has improved across the board”, Atul Kumar Goel, Managing Director & CEO, PNB, told businessline.

    He highlighted that credit costs have been coming down quarter after quarter for PNB. In the case of PNB, the credit cost was 2.05 per cent in 2022-23, and for the current fiscal it is being estimated at 1.5-1.75 per cent, Goel said.

    Goel also noted that PNB has substantially improved its underwriting standards over the last two years. Out of the total disbursement level of ₹ 5.18 lakh crore last one and a half years, the NPA amount has been a meagre ₹ 178 crore.

    “Lot of initiatives have been taken by the bank (PNB) for improving asset quality. This is reason recovery is increasing and addition is declining. Last year was a good year for PNB. This year will be one of the best for us”, Goel added.

    Srinath Sridharan, Policy Researcher, said, “Surely most of the banks have benefited from scaling their credit outreach in the past year, as well as managing their costs – especially the interest spread management and staff productivity”.

    He said these have contributed to increased profitability, adding that the market would be keen to watch if they can maintain the growth and profitability momentum next few quarters as well.

    Krishnan ASV, Lead – BFSI Analyst, HDFC Securities, said, “FY23 has emerged as a blockbuster year for PSBs with ROAs trending ~30-40bps higher through the year (Q1 through Q4). A lion’s share of the ROA reflation was driven by two parameters: Net Interest Margins (accounting for 80-90% of the reflation) and credit costs (<10% of the ROA reflation). Of these two major variables, we believe that the gains from Net Interest Margin (NIM) will partly reverse themselves through FY24 as deposit re-pricing continues to catch up with a lag. Also, despite a benign credit environment prevailing currently, PSBs may witness higher credit costs as they spruce up their balance sheet for the impending ECL norms – in select cases, we expect credit costs for PSBs may not sustain at such abnormally low levels.”.

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  • 50 defaulters defrauded banks of ₹92,000 crore, says Finance Ministry data

    50 defaulters defrauded banks of ₹92,000 crore, says Finance Ministry data

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    Top 50 defaulters have frauded ₹92,000 crore from banking system, information provided by Finance Ministry in Lok Sabha revealed. This list is led by Gitanjali Gems with over ₹7,800 crore of fraud. Meanwhile, the Ministry also said that public sector banks have recovered over ₹1-lakh crore from the written-off amount.

    In response to a question, Minister of State in Finance Ministry, Bhagwat Karad furnished the list, as a part of written reply, which has fugitive economic offender Mehul Choksi’s firm Gitanjali Gems on top while his relative and another economic offender, Nirav Modi’s firm Firestar is at the 49 th place with ₹803 crore of amount owned to banks. Both are accused in PNB scam related with fraudulent letter of undertaking worth ₹10,000 crore issued by the bank. 

    Among top ten defaulters, other prominent names include Era Infra (₹5,879 crore), Rei Agro (₹4,803 crore), ABG Shipyard (₹3,708 crore), Winsome Diamonds (₹2,931 crore) and Rotomac Global (₹2,893 crore).

    “Comprehensive steps have been taken by the Government to deter defaulters, to take effective action against them and to recover the default amount from them, including recovery from written off loans. It has enabled PSBs to recover an aggregate amount of ₹4,80,111 crore during the last five financial years, of which ₹1-lakh crore is from written-off accounts,” Karad said.

    He also informed the House that as per RBI instructions, wilful defaulters are not sanctioned any additional facilities by banks or financial institutions, and their unit is debarred from floating new ventures for five years. Such people and companies with wilful defaulters as promoters/directors have been debarred from accessing capital markets to raise funds.

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    Shishir Sinha

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