PNB gets board go-ahead to tap market for raising Rs 10,000 crore

The Government of India currently holds 85.59 per cent stake in the bank.

State-owned Punjab National Bank (PNB) on Thursday said its board has approved a proposal to raise Rs 10,000 crore through a mix of both equity and debt.

Besides, the board has cleared opening balance sheet of the amalgamated bank as on April 1, which is post amalgamation of Oriental Bank of Commerce and United Bank of India into PNB, the bank said in a regulatory filing.

The board has given its nod for "raising of capital through issue of equity shares and Basel III-compliant tier-2 bonds by way of private placement, qualified institutional placement (QIP), further public offer (FPO), rights issue or any other mode or through a combination thereof up to an amount of Rs 10,000 crore".

The bank will seek shareholders' nod for raising of equity capital for an amount up to Rs 7,000 crore in the forthcoming annual general meeting.

The Government of India currently holds 85.59 per cent stake in the bank.

The country's second-largest lender PNB is planning to hit capital markets in the fourth quarter of this financial year to raise funds to help meet growth needs and regulatory requirements.

The bank has a capital adequacy ratio of 14.14 per cent at the end of March 2020.

The board also approved appropriation of accumulated losses of Rs 28,707.92 crore from the share premium account of the amalgamated bank.

Covid-19 crisis: Banks seek relaxed NPA norms, moratorium extension

Senior bank executives said the Indian Banks' Association (IBA) has already approached the Reserve Bank of India with a plea for easing regulatory norms.

Banks and financial institutions expect much heavy lifting through credit support, pegged at over Rs 11 trillion in FY21, in the days ahead. As a result, lenders have sought the easing of NPA norms, one-time restructuring, and extension of the moratorium till August-end for borrowers affected by the Covid situation.

Senior bank executives said the Indian Banks’ Association (IBA) has already approached the Reserve Bank of India with a plea for easing regulatory norms, so as to support borrowers hit by the outbreak.

The rule stating that loans unpaid for 90 days in a row will be categorised as non-performing assets (NPAs) needs to be relaxed. The IBA, a banking industry lobby group, has recommended that this period be extended from to 180 days for the current financial year.

In FY22, it could be restored to its original status in two stages. For first six months, loans due for 120 or more days and remaining unpaid for 90 days, will be treated as a bad loan. The RBI may announce its decision in the next few days.

This should also accompany the one-time restructuring of loans, given the concerns of borrowers go beyond liquidity. They now include viability and the capacity to change as well as survive in different business environments, in the post-Covid world, said bankers.

The three-month-moratorium is nearing its end (on May 31). This breathing space has been deemed inadequate and a further 90 days sought by the sector.

In addition, majority of government support under the Rs 20.97-trillion package, announced to deal with the adverse impact of the pandemic, is in the form of guarantees and interest subventions.

Lockdown 2.0: Coronavirus-hit units get Rs 10,000 crore from banks

Banks have built internal capacities for assisting companies, including micro, small & medium enterprises (MSMEs).

Ahead of finalising the package for industries hit by Covid-19, the Union finance ministry reviewed support extended by large public sector banks (PSBs), including via the emergency credit line, to affected firms. 

State Bank of India (SBI) and Bank of Baroda (BoB) have together sanctioned close to Rs 10,000 crore as immediate credit assistance to the affected units.

PSB executives said this was a regular review with top officials of large banks, including SBI. There was also discussion on working capital re-assessment.

ALSO READ: Over Rs 68,600-crore loans of wilful defaulters written off, says RBI

Banks have built internal capacities for assisting companies, including micro, small & medium enterprises (MSMEs). Feedback from interactions is expected to act as an input for policies that are in works.

However, it is not clear when the package would be finalised, officials said. A SBI executive said the bank is giving these emergency loans to those in need. It does not involve elaborate scrutiny. Only thing is that borrowers have to establish the Covid impact.

Indian Bank sees new opportunities with larger footprint after merger

Both the banks have come together amid the coronavirus (Covid-19) lockdown and started working as a single bank with a larger footprint.

After the merger of Allahabad Bank with it, Indian Bank sees growth in lending and deposits and new opportunities emerging despite the lockdown, according to Padmaja Chunduru, Managing Director & CEO of Indian Bank. Both the banks have come together amid the coronavirus (Covid-19) lockdown and started working as a single bank with a larger footprint.

Even during the lockdown period, both lending and deposits are growing. "We must be careful in assessing and giving the loans. We have been one of the earliest banks to announce emergency loans across the table. I think this opens up new opportunities. First of all we have to assess the risks because there are so many more sectors now and the whole paradigm is shifting," Chunduru said.

The merger was a big task in front of the bank, but when confronted with the Covid-19 issue, the whole bank came together and the safety of the employees became paramount. Safety measures have been implemented across the bank. On April 24, it was Allahabad Bank's Foundation Day, but the amalgamated entity could not celebrate due to the lock-down.

ALSO READ: Axis Bank reports Rs 1,878-crore pre-tax loss in Q4 on Covid-19 provisions

The bank has also launched an online learning management solution for the staff. The best the welfare measures that were offered by the two banks have been made applicable to all the employees and all of them have been well received. In terms of alignment of products of both the banks, especially those related to housing loans, Indian Bank had certain products which were more attractive to the customers and they were launched across the country.

Coronavirus outbreak: Consolidation in PSB space now a reality

Each of the amalgamated entities with scale and national reach would have a business of over Rs 8 trillion.

The landscape of the Indian banking will see a change with the consolidation of 10 public sector banks (PSBs) into four, effective April 1. The mega exercise comes at a time when the country and financial system is grappling with adverse fallout of the Covid-19 pandemic.

Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will merge into Punjab National Bank. Mumbai-headquartered Union Bank will absorb Hyderabad-headquartered Andhra Bank and Mengaluru- headquartered Corporation Bank. Bengaluru-headquartered Canara Bank will take Syndicate Bank and Indian Bank will acquire Kolkata-headquartered Allahabad Bank.

Each of the amalgamated entities with scale and national reach would have a business of over Rs 8 trillion.

The consolidation is expected to help create banks with scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy through consolidation would lead to cost benefits, which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system.

The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through a wider reach.

Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.

Statsguru: How PSBs deal with integration in a challenging biz environment

The RBI in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19.

The announcement of swap ratios for the combination of 10 public sector banks (PSBs) into four has put the spotlight on such unions, and how they have fared before. Analysts would be keenly watching as to how the entities deal with the integration in a challenging business environment.

Each of the 10 banks participating in the process has more bad loans than it did five years ago, though much of it is to do with better disclosures. The slowing economy has reduced credit offtake. Bad loan ratios are expected to largely worsen for the anchor banks, though net non-performing assets show a decline for some. This also holds true for capital adequacy. The anchor banks will see their capital cushion decline in at least two instances, show analyst estimates.

However, this is not unique to the latest exercise. Previous attempts of bringing together PSBs may have helped the weaker ones, but tended to weigh on the anchor banks. The State Bank of India saw its net non-performing assets go up after its 2017 merger with its associate banks and the Bharatiya Mahila Bank.

This was also true for Bank of Baroda’s 2019 merger with Dena Bank and Vijaya Bank The capital adequacy ratio also declined in both instances

The latest set of mergers is likely to take time to iron out the kinks, suggest analysts. The Reserve Bank of India in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19. They also had a similar share in deposits. It remains to be seen if bigger PSBs would be able to protect market share.

Retail, telecom help RIL beat Indian Oil to be number one player by revenue

Fortune India list shows RIL as India's top firm in FY19.

Reliance Industries (RIL) has emerged as the number one company in terms of revenue in the Fortune India 500 list for 2019, pipping Indian Oil Corporation (IOC). RIL revenues crossed Rs 5.81 trillion in FY19 against IOC’s Rs 5.36 trillion.

Since it was first published in 2010, IOC has been topping the list.

RIL’s race to the top was powered by consumer-facing businesses like organised retail and telecom.

In terms of profits too, Mukesh Ambani-led RIL’s FY19 net profit was ahead at Rs 39,588 crore against IOC’s Rs 17,377 crore.

Over the past 10 years, RIL’s profit has been an average 3.01 times higher than that of IOC. The highest this went was up to 4.8 times in FY15.

Another interesting aspect of the 2019 list is the divergence in the fortunes of the public and private sector banks as 14 of the 22 public sector banks reported cumulative losses of Rs 74,253 crore, while the cumulative profit of 24 of the total private sector banks (including foreign banks and cooperative banks) touched Rs 60,747 crore — 6.16 per cent higher than FY18.

Just two private sector banks posted losses with IDFC First Bank reporting a loss of Rs 1,908 crore and Lakshmi Vilas Bank at Rs 894 crore.

The public sector banks made huge losses after several companies in the roads, power and steel sector failed to repay their loans. Many of these companies are now facing bankruptcy proceedings in courts across the country.

The top 500 list also showed that the combined revenue and profit of the companies in 2019 grew by 9.53 per cent and 11.8 per cent, respectively, even as 57 companies dropped off for reasons, including consolidation within the public sector banks and public sector undertakings space. The top 500 companies reported profit of Rs 4.55 trillion and revenues of Rs 91.7 trillion in the FY19 (see chart).

A total of 65 companies posted a cumulative loss of Rs 1.67 trillion, as compared to last year’s Rs 2 trillion racked up by 79 firms.

The list does not take into account subsidiaries of companies, hence many of the takeovers resulted in the acquired companies being excluded such as Hindustan Petroleum Corporation, which was acquired by Oil and Natural Gas Corporation, Rural Electrification Corporation acquired by Power Finance Corporation, Vijaya Bank and Dena Bank (merged into Bank of Baroda).Keep Reading : Stock Market News

Banks' FY19 retail loan growth slipped to 12%, slowest in 5 years: CRISIL

Adjusted for securitisation, loan book grows at 12% as against 16% in FY18.

Business Standard : While private consumption decelerated to 4.1 per cent in the first half (H1FY20), the data suggests that retail lending of banks grew 16.6 per cent, which is twice the rate at which overall bank credit is growing. However, there’s catch.

According to CRISIL, a large chunk of the incremental retail loans disbursed by banks was used to buy retail loan portfolios of non-banking financial companies (NBFCs), which have been struggling for over a year to raise funds.

Therefore, if we exclude loans disbursed to buy off pooled assets of NBFCs, the growth in retail lending of banks is actually slower than it has ever been in the last five years. “The slowdown in retail credit growth reflects both macroeconomic challenges, which have constrained loan demand, and fewer loan sanctions by banks because of risk aversion,” said CRISIL.

Growth in lending after deducting securitisation flows shows a fall from 16 per cent in FY18 to around 12 per cent in FY19 and H1FY20. This is the slowest in the last five years, said CRISIL.

H1FY20, retail securitisation volume grew 39 per cent, while it had doubled in FY19. With the shadow banking sector facing scarce liquidity, NBFCs and HFCs have been increasingly relying on securitisation to be in the game. While the banks turned cautious in lending to NBFCs via the traditional route, they were more than happy to buy good retail assets of the NBFCs, HFCs.

According to CRISIL, overall bank lending for securitisation rose to 31 per cent of incremental bank credit in FY19, compared to 17 per cent in FY17 and 11 per cent in FY15. In H1FY20, this climbed to 37 per cent. About half of the securitisation transactions was for home-loan receivables, while a quarter was for vehicle-loan receivables and around 11 per cent for microfinance receivables.

“The public sector banks depend on securitisation much more than private sector banks do. The private banks have their own risk management systems that may not be available to all PSBs,” said Ashvin Parekh, managing director of Ashvin Parekh Advisory Services.

Analysts believe that the deceleration in retail bank lending is not sharper for large lenders such as HDFC Bank. However, if the overall economy continues to remain under pressure for long, then even large banks could see moderation in growth.

Some experts do not see this as a major challenge in terms of stock performance. In a downturn situation such as this, maintaining asset quality is more important than aggressive growth.

PSBs have reported Rs 95,700-crore frauds in first 6 months of FY20: FM

FM Sitharaman says 5,743 incidents in govt banks from April to September this year.

Public sector banks (PSBs) reported frauds of over Rs 95,700 crore in the first six months of the current financial year, Parliament was informed on Tuesday.

Finance Minister Nirmala Sitharaman said that according to the Reserve Bank of India (RBI), PSBs reported 5,743 incidents of fraud involving a total amount of Rs 95,760.49 crore from April 1 to September 30 (based on the date of reporting). She said based on the date of occurrence of frauds, during the same period, the number of frauds was 1,007, involving a total amount of Rs 2,509.86 crore.

In a written reply to another question, Minister of State for Finance Anurag Thakur told the Rajya Sabha that government-owned banks reported 26.1 per cent of all frauds worth over Rs 1 lakh brought to notice during 2018-19, while their lending share was 63.81 per cent in the aggregate gross advances of scheduled commercial banks.

“On this basis, the (average) number of incidents of frauds reported (based on the date of occurrence) per lakh crore advances for PSBs (11.3) is about 79 per cent lower than that for non-PSB lenders (53.7),” Thakur said. ICICI Bank reported 374 instances of frauds, followed by Kotak Mahindra Bank (338), HDFC Bank (273), State Bank of India (236) and HSBC (178).

In reply to a question by the Congress’ M V Rajeev Gowda on the status of cases investigated by the Enforcement Directorate, Thakur said that as on September 30, the agency was conducting investigations in 963 cases under the Prevention of Money Laundering Act (PMLA) and 7,393 cases under Foreign Exchange Management Act (FEMA).

Business Standard

Fresh funds likely to help housing projects move out of 'stuck' status

The completed and sold projects will start the repayment cycle, reducing bad loans.

The permission to use the Rs 25,000-crore fund for the real estate sector announced by the Union government on Wednesday to revive projects declared non-performing assets or even sent to the National Company Law Tribunal (NCLT) is likely to reduce the stress on the books of lenders.

Senior officials of public sector banks said the fine print was still awaited, but the new fund will help move projects out of the “stuck” status.

The completed and sold projects will start the repayment cycle, reducing bad loans. Bankers said while lenders were getting repaid, clear rules should be in place about who gets paid first.

Amit Goenka, managing director and chief executive officer at Nisus Finance, said the alternate investment fund proposed by the government should have a bottoms-up approach.

The affordable housing projects stuck or delayed should get priority in funding, as that would bring in a large number of competed dwellings in the market.

Along with the AIF, the regulator and the government need to work on a one-time restructuring scheme for good projects which are stuck or delayed for want of funding and approvals.

This will unclog many problem accounts and lead to substantial reduction of stress for banks and NBFCs, said a source who did not want to be named.

Business Standard

Finance ministry dept's fine on banks an afterthought: Delhi High Court

The appellate tribunal for PML held that though banks had not reported the matter to the authorities.

The Delhi High Court has rejected 15 appeals by the Financial Intelligence Unit (FIU) of the finance ministry against an order of the appellate tribunal of the Prevention of Money Laundering (PML), which set aside the fine imposed on banks for failing to report suspected transactions.

In its order upholding the judgment of the appellate tribunal for PML, a single-judge Bench of Justice Vibhu Bakhru said as the FIU had already warned banks in writing about their failure to report suspected transactions, the fine imposed on them was an afterthought and, therefore, rightly set aside.

The case dates back to 2013, when a sting operation was conducted by a media outlet on various banks, which showed them to be favouring money laundering operations by sidestepping the know-your-customer (KYC) norms set by the Reserve Bank of India (RBI). The sting operation showed 23 public sector banks (PSBs) as well as private sector lenders' employees agreeing to launder money for a minister without asking for details. Based on the sting operation, the FIU had started investigation.

In September 2014, the FIU wrote to these banks, asking them to be more vigilant about reporting such suspicious transactions. However, later the agency also imposed a fine on these banks, including Corporation Bank, Federal Bank, Punjab National Bank, Axis Bank, Canara Bank, Kotak Mahindra Bank, YES Bank, Indian Bank, Allahabad Bank, IndusInd Bank, Bank of Maharashtra, Bank of India, State Bank of India, ICICI Bank, and HDFC Bank.

The FIU contended that the banks should have reported to the authorities when they were approached during the sting operation. The banks, meanwhile, said they had not offered any services and the employees involved in the sting had been sacked. The banks also contended that the transcript of the alleged sting operation that FIU put before them did not present the full picture, as “they have been edited and extracted in a manner so as to feed the perception that the respondent banks are complicit in money laundering”. The banks challenged the fine as well as the observation that they had not reported suspicious transactions deliberately.

The appellate tribunal for PML held that though banks had not reported the matter to the authorities, the director, FIU, should not have imposed the maximum penalty for the offence. While it reduced the penalty imposed on most banks, it set aside a penalty of Rs 300,000 imposed on Kotak Mahindra Bank (then ING Vysya Bank).

Business Standard

Bank of Baroda plans to raise capital up to Rs 3,000 cr via tier-II bonds

BOB is amongst the better capitalised PSBs, with a common equity tier I capital of 8.49% in 1QFY20.

Public sector lender Bank of Baroda (BoB) plans to raise capital up to Rs 3,000 crore through tier-II bonds for meeting capital adequacy norms for the merged entity (integration of Vijaya and Dena Bank with BoB).

Rating agency India Ratings has assigned “AAA” stable rating to proposed bond offering by the PSB. Ratings for state-owned lender factors in large franchise, a pan-India presence, adequate funding base and liquidity. BOB is amongst the better capitalised PSBs, with a common equity tier I capital of 8.49 per cent in 1QFY20 (June 2019) and a capital adequacy ratio of 11.50 per cent.

The amalgamation has led to dilution of capital ratios as expected. However, the recent announcement of capital infusion of Rs 7,000 crore should add to the bank’s capital buffers (CET I could increase by about 120 basis points). The capital available with the merged entity will be sufficient to support its targeted level of growth for FY20, rating agency said in a statement.

Meanwhile, the agency has flagged concern over appointment of New Managing Director and Chief Executive (MD&CEO). P S Jayakumar has been heading BOB as MD& CEO since October 2015.

ALSO READ: Customer to IT integration, banks to follow BoB's footsteps during merger

While he was initially appointed for a three-year term, he received a one-year extension from the government in October 2018. His term will end on 12 October 2019. The Banks Board Bureau has invited applications for the positions of MD & CEO of four PSBs in August 2019, which includes BOB.

The limited clarity regarding the appointment of the new MD and CEO could have a bearing on the bank’s near-to-medium term performance, especially since the amalgamation has become effective recently.

BOB maintained a relatively high provision coverage ratio (PCR) of 64.1 per cent on an amalgamated basis in 1QFY20 (excluding technical write-offs). The ratio, however, declined from 67.6 per cent in 4QFY19 (on pre-amalgamation basis) due to the amalgamation. While slippages declined on a year-on-year basis in FY19, it will remain a key monitorable in the near term.

BOB’s amalgamation with Dena Bank and Vijaya Bank became effective from 1 April 2019. The completion of the integration will take another 15-16 months, with the integration of the IT systems requiring the longest time.

Public sector banks merger: Modi govt to announce big bang plan soon

Finance ministry has called a meeting with chief executives of ten public sector banks, on Friday.

The National Democratic Alliance (NDA) government has readied its mega plan for merging multiple set of public sector banks (PSB) and is set to make an announcement anytime soon, according to multiple sources.

The department of financial services in the finance ministry has called a meeting with chief executives of ten public sector banks, which are seen as top contenders for merger, on Friday.

The banks invited for consultations on Friday are: Union Bank of India, Canara Bank, Punjab National Bank, United Bank, Oriental Bank of Commerce, United Bank, Allahabad Bank, Corporation Bank, Syndicate Bank and Andhra Bank.

“The PSB merger will be announced anytime soon as part of the government's reforms agenda,” said a top source familiar with the development.

Punjab National Bank, Union Bank of India and Canara Bank might be banks which will be subsuming other PSBs.

“It looks like PNB will be merged with three more banks, including Andhra Bank and Oriental Bank of Commerce,” another source said.

In her press briefings recently, Finance Minister Nirmala Sitharaman has been dropping hints of two more set of reform measures that the government is set to announce.

For the first time, under the Narendra Modi government’s tenure, two set of PSB mergers took place — One, five associate banks and Bharatiya Mahila Bank merged with State Bank of India (April 2017), and two, Dena Bank, Vijaya Bank merged with Bank of Baroda which came into effect from April 1 this year.

The central government has to consult the RBI before formulating a plan for PSB merger, according to the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980.

Sources said the central government has already consulted the RBI regarding its merger plans earlier this year.

The plan for PSB merger has to be approved by a group of ministers, known as the alternative mechanism. Sitharaman and commerce and industry minister Piyush Goyal are a part of it.

Business Standard

For agricultural loans, bankers call for longer repayment period

There were also suggestions to have an agriculture credit guarantee scheme, and a stronger institutional network to prevent multiple lending in the agriculture sector.

In view of the significant stress in the agriculture sector, bankers at the state-level consultancy meet in Kolkata have called for longer repayment periods for loans under Kisan Credit Card (KCC) from 12 months to 36 or 48 months.

There were also deliberations on allowing farmers to take fresh loans even if they fail to repay the entire loan, as long as they service the interest.

Based on direction from the department of financial services, public sector banks started a three-stage consultation process last week.

They focused on nine issues, including digital banking, credit to micro, small and medium enterprises (MSMEs), and agriculture sectors, direct transfer of benefits as well as education loans, among other issues.

This month has seen intra-bank as well as inter-bank meetings to discuss key issues. The final set of suggestions from all the meetings will be sent to the Centre, which will organise a meeting with banks in the first week of September.

“Stress in the agriculture sector is touching double digits and is a phenomenon visible across the banking sector. Bankers are really concerned about the issue,” said Ashok Kumar Pradhan, managing director and chief executive officer (MD & CEO) of United Bank of India, at a press meet in Kolkata last week.

There were also suggestions to have an agriculture credit guarantee scheme, and a stronger institutional network to prevent multiple lending in the agriculture sector.

Some of the suggestions at the branch level also included the need to press the government for digitisation of land records, failing which there had been instances of multiple borrowings.

At the branch-level meet, Rajnish Kumar, chairman, State Bank of India, too, stressed the need to revamp agriculture and MSME lending practices, given the high stress in these sectors.

Bankers have also suggested the need to have a credit guarantee mechanism for the Pradhan Mantri Mudra Yojana (PMMY), the government’s flagship credit scheme for micro and small enterprises. It is another source for a big chunk of the non-performing assets or NPAs.

Business Standard