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Our heartiest greetings to all on the 69th Independence Day of

our beloved country. This political freedom was achieved

after great sacrifices and struggles by our forefathers. Let us preserve this freedom as the apple of our eyes. Let us also fight for economic equity and social justice for all our people. Let us strive hard to build the India of our dreams.

A small body of determined spirits fired by an unquenchable faith in their mission can alter the course of history - Mahatma Gandhi

Banking News

Estd. 20-4-1946

NEWS BULLETIN from ALL INDIA BANK EMPLOYEES’ ASSOCIATION

14, 15 AUGUST, 2015

Press Information Bureau Government of India Ministry of Finance

14-August-2015

FM: For Some Years, Banks Are Facing Challenging Time But No Cause of Panic

Government Announces Public Sector Banks’ (Psbs) Revamp Plan;

Announces Appointment of MD and CEO Of Five(5) Psbs As Well As Non-

Executive Chairman of Five (5) PSBs ; Specific Capital Allocation of

Rs. 20,088 Crore to be Made Within a Month as Part of Tranche 1 and

Tranche 2 to Thirteen (13) PSBs; Bank Board Bureau (BBB) to be Set-

up Replacing the Appointments Board for Appointment of Whole-Time

Directors and Non-Executive Chairman of PSBs and will Start Functioning

From 01st April, 2016; a New Framework of Key Performance Indicators

(Kpis) to be Measured for Evaluating the Performance of Psbs Also

Announced Among Others

The Union Finance Minister Shri Arun Jaitley said that for some years, banks are facing

challenging time but there is no cause for panic. Shri Jaitley said that the Government

has taken various new initiatives and policy decisions to revamp the Public Sector

Banks(PSBs) and improve their overall performance. The Finance Minister was

addressing a Press Conference regarding action taken/to be taken to revamp the PSBGs

here today. The Conference was also attended by the Minister of State for Finance Shri

Jayant Sinha, Secretary, Department of Financial Services (DFS), Dr. Hasmukh Aadhia

and Chief Economic Adviser Dr. Arvind Subramanian and senior officers of the Ministry

of Finance among others. Later Dr Aadhia made a comprehensive and self-contained

presentation highlighting the various policy initiatives taken by the Department in last

one year and perspective decisions to be taken in near future to overall improve the

performance of the PSBs.

Details of the presentation made on the occasion is as follows:

The Public Sector Banks (PSBs) play a vital role in India’s economy. In the past few

years, because of a variety of legacy issues including the delay caused in various

approvals as well as land acquisition etc., and also because of low global and

domestic demand, many large projects have stalled. Public Sector Banks which have

got predominant share of infrastructure financing have been sorely affected. It has

resulted in lower profitability for PSBs, mainly due to provisioning for the restructured

projects as well as for gross NPAs.

The present Government has put in place a comprehensive framework for improving

PSBs. Most recently, we have made the announcement of capital allocation by

Government for PSBs in the next four years. Announcement of capital plans for the

PSBs is only one of the many steps taken by the Government. The other steps taken

by Government are as follows:-

A) Appointments:

The Government decided to separate the post of Chairman and Managing Director by

prescribing that in the subsequent vacancies to be filled up the CEO will get the

designation of MD & CEO and there would be another person who would be appointed

as non-Executive Chairman of PSBs. This approach is based on global best practices

and as per the guidelines in the Companies Act to ensure appropriate checks and

balances. The selection process for both these positions has been transparent and

meritocratic. The entire process of selection for MD & CEO was revamped. Private

sector candidates were also allowed to apply for the position of MD & CEO of the five

top banks i.e. Punjab National Bank, Bank of Baroda, Bank of India, IDBI Bank and

Canara Bank. Three stage screening was done for the MD’s position culminating into

final interview by three different panels.

Five MD & CEOs were appointed earlier. Appointments of MD & CEOs of five more

banks - Bank of Baroda, Bank of India, Canara Bank, IDBI Bank and Punjab National

Bank and Non-executive Chairman of 5 banks are announced today, as per the list

below:

MD & CEOs

Name of the Bank

Name Age Present Position

Bank of Baroda P S Jayakumar 53 yrs

MD & CEO of VBHC Value Homes Pvt Ltd.

Bank of India M.O. Rego 56 yrs

Deputy Managing Director, IDBI Bank

Canara Bank Rakesh Sharma 57 yrs

MD & CEO, The Laxmi Vilas Bank Ltd

IDBI Bank Ltd Kishore Kharat Piraji 56 yrs

Executive Director, Union Bank of India

Punjab National Bank

Smt. Usha Ananthasubramanian

56 yrs

CMD, Bhartiya Mahila Bank

Non-Executive Chairman

Name of the Bank

Name Age Present/Last Position held

Bank of Baroda Ravi Venkatesan 51 yrs

Independent Director, Infosys

Bank of India G Padmananbhan 60 yrs

Retired ED of Reserve Bank of India

Canara Bank T N Manoharan 59 yrs

Director, Tech Mahindra, Public Health Foundation

Vijaya Bank G Narayanan 66 yrs

Retired ED, Indian Overseas Bank

Indian Bank T C V Subramainian 66 yrs

Retired CMD, Exim Bank

The process of selection of Non-official / Independent Directors has been revamped and

made transparent.

There are some vacancies of Non-Official Directors on the Boards of PSBs and

we would like to complete the selection process in the next three months. The selection

of non-executive Chairman in the remaining six PSBs will also be completed in next

three months. Also the appointment of MD & CEO in two other banks will also be done

as early as possible

B) Bank Board Bureau:

The announcement of the Bank Board Bureau (BBB) was made by Hon’ble Finance

Minister in his Budget Speech for the year 2015-16. The BBB will be a body of eminent

professionals and officials, which will replace the Appointments Board for appointment

of Whole-time Directors as well as non-Executive Chairman of PSBs. They will also

constantly engage with the Board of Directors of all the PSBs to formulate appropriate

strategies for their growth and development. The structure of the BBB is going to

be as follows; the BBB will comprise of a Chairman and six more members of which

three will be officials and three experts (of which two would necessarily be from the

banking sector). The Search Committee for members of the BBB would comprise of the

Governor, RBI and Secretary (FS) and Secretary (DoPT) as members. The BBB would

broadly follow the selection methodology as approved in relevant ACC guidelines. The

members will be selected in the next six months and the BBB will start

functioning from the 01st April, 2016.

C) Capitalization:

As of now, the PSBs are adequately capitalized and meeting all the Basel III and RBI

norms. However, the Government of India wants to adequately capitalize all the banks

to keep a safe buffer over and above the minimum norms of Basel III. We have,

therefore, estimated how much capital will be required this year and in the next three

years till FY 2019. If we exclude the internal profit generation which is going to be

available to PSBs (based on the estimate of average profit of the last three years), the

capital requirement of extra capital for the next four years up to FY 2019 is likely

to be about Rs.1,80,000 crore. This estimate is based on credit growth rate of 12%

for the current year and 12 to 15% for the next three years depending on the size of

the bank and their growth ability. We are also presuming that the emphasis on PSBs

financing will reduce over the years by development of vibrant corporate debt market

and by greater participation of Private Sector Banks.

Out of the total requirement, the Government of India proposes to make available

Rs.70,000 crores out of budgetary allocations for four years as per the figures given

below:

(i) Financial Year 2015 -16 - Rs. 25,000 crore

(ii) Financial Year 2016-17 - Rs. 25,000 crore

(iii) Financial Year 2017-18 - Rs. 10,000 crore

(iv) Financial Year 2018-19 - Rs. 10,000 crore

Total - Rs. 70,000 crore

We estimate that PSB’s market valuations will improve significantly due to (i)

far-reaching governance reforms; (ii) tight NPA management and risk controls; (iii)

significant operating improvements; and (iv) capital allocation from the government.

Improved valuations coupled with value unlocking from non-core assets as well as

improvements in capital productivity, will enable PSBs to raise the remaining Rs.

1,10,000 crore from the market. Moreover, the government is committed to

making extra budgetary provisions in FY 18 and FY 19, to ensure that PSBs remain

adequately capitalized to support economic growth.

In the Supplementary Demand passed by parliament recently, an amount

of Rs.12,000 crore has already been provided, in addition to Rs.7,940

crores already provided in the budget of FY 2015-16. The remaining Rs.5,000 crore

would be provided in the second Supplementary later this year. The manner of

allotting Rs.25,000 crore capital this year, as announced earlier, is as follows:

Tranche 1:

About 40% of this amount will be given to those banks which require support, and

every single PSB will be brought to the level of at least 7.5% by Financial Year 2016.

Tranche 2:

40% capital will be allocated to the top six big banks viz. SBI, BOB, BOI, PNB, Canara

Bank, and IDBI Bank in order to strengthen them to play a vital role in the economy.

Tranche 3

The remaining portion of 20% will be allocated to the banks based on their

performance during the three quarters in the current year judged on the basis of

certain performance. This will incentivize them to improve their performance in the

current year. Eight banks which did not get any money in first two tranche will get

preference.

As per the calculations done for Tranche 1 and Tranche 2, the specific capital allocation

for each Bank is worked out as follows. This amount would be released soon.

S.No Name of Bank

Capital Allocation

(Rs. in Crore)

1 State Bank of India 5531

2 Bank of India 2455

3 I.D.B.I. 2229

4 Bank of Baroda 1786

5 Punjab National Bank 1732

6 Canara Bank 947

7 Indian Overseas Bank 2009

8 Union Bank of India 1080

9 Corporation Bank 857

10 Andhra Bank 378

11 Bank of Maharashtra 394

12 Allahabad Bank 283

13 Dena Bank 407

Total 20088

Govt unveils 7-point plan to revive PSBs; to inject Rs 20,000 cr in a month

OUR BUREAU BUSINESLINE, 15 8 15

Banking on change: Finance Minister Arun Jaitley addresses a press meet in

New Delhi along with his deputy Jayant Sinha. KAMAL NARANG

Private sector professionals will be appointed to top posts as needed

In an effort to breathe new life into public sector banks, the government has

announced a seven-pronged strategy, called Indradhanush, to tackle

challenges in the sector. Among other things it will involve appointing

private sector professionals to lead these institutions, recapitalising the

banks and distressing them.

Sharing details of the strategy, touted as the most comprehensive reform

since Indira Gandhi nationalised private banks in 1970, Finance Minister

Arun Jaitley acknowledged that a “challenging situation does exist, but there

is no cause for panic or pressing the alarm button”.

Jaitley was making an obvious reference to the high bad debts and lower

profit margins of PSBs, besides the need for more support from the

government.

Though the reform measures were announced after trading hours, the

market appears to have got an inkling of the development as all PSB stocks

closed with handsome gains.

Addressing the media, Jaitley said the measures include appointing people

from the private sector to head PSBs, for the first time. Accordingly, 53-

year-old P S Jayakumar, Managing Director & CEO, Value Home Private Ltd,

has been appointed as the new chief of Bank of Baroda. Similarly, Rakesh

Sharma Managing Director & CEO of Laxmi Vilas Bank will head Canara

Bank.

The appointments are subject to the outcome of a writ petition filed in the

Supreme Court.

The government has also made three other appointments at the MD & CEO

level and five at the non-executive Chairman level. In the wake of the

Syndicate Bank bribery case, the posts of Chairman and Managing Director

had been separated.

Bank Board Bureau

As a first step towards setting up a bank holding company, the government

has announced the setting up of a Bank Board Bureau (BBB) that will be

operational from April 1, 2016. A Budget announcement, the Bureau will

replace the Appointment Board of Banks. The Bureau will engage with the

boards of various banks to formulate appropriate strategies for their growth

and development. “It is an interim arrangement towards setting up a bank

holding company,” said Jaitley. Government holdings in PSBs will be

transferred into this. Subsequently, the company will raise money to provide

additional capital to banks. He said the Bureau will take over supervisory

activities.

Jaitley, however, clarified that there will be no conflict with the Reserve Bank

of India as the proposed structure will take over only the government’s role

as principal shareholder.

While there will be greater flexibility in hiring, banks will not be able to go

for direct campus placements from IITs or IIMs due to legal hurdles. They

will be empowered to make middle-level appointments.

There will also be a new framework of key performance Indicators. These

indicators will include efficiency of capital use, diversification of business,

NPA management and financial inclusion. A higher index will lead to a higher

performance bonus for MDs & CEOs. The Government is also considering

ESoPs for the top management of PSBs.

Tackling bad debts

To help banks tackle bad debts, the Centre has come out with a de-stressing

plan. Jaitley said five sectors: steel, power, highways, power distribution

utilities and sugar (to an extent) are responsible for most bad debts.

Jaitley said that situation in the highways sector is improving while steps are

being taken for the steel sector. A package (soft loan of ₹6,000 crore) for

the sugar sector has also been announced. He made it clear that “banks

cannot support discoms (power distribution utilities) indefinitely”.

GOVT’S DECISION ON BANKING SECTOR – A

STEP TOWARDS BUILDING SUPERSTRUCTURE FOR

PRIVATE SECTOR WITH INFRSTRUCTURE OF

PUBLIC SECTOR - AIBEA

The appointment of private sector Executives as Chairman and MD/CEOs of

various Public Sector Banks, though not surprising going by the policy

approach of the BJP/NDA Government, is a definite step towards diluting

the public sector character of our Banks. Public Sector Banks are huge

financial institutions dealing with massive and precious public savings. The

total Deposits of public sectors today are more than Rs. 66 lacs crores.

Public Sector Banks have clear objectives to subserve the basic needs of our

developing economy. PSBs have the special role and responsibility to cater

to the needs of the priority sectors of the economy.

Public Sector Banks are not merely profit making machines but they have a

broad social orientation. While there cannot be two opinions that our public

sector banks have to be more efficient and vibrant, appointment private

sector executives to head our public sector banks will not serve the purpose.

Rather it would be counter-productive. On the one hand, the social

orientation of PSBs will be undermined as their total outlook would be only

on maximising profit.

On the other hand, the dedicated in-house senior officers of the Public

Sector banks will be deprived of their entitled career opportunities and

would be totally frustrated. Appointment of private sector Executives as

Chief of PSBs is no remedy to ills of the Banks.

The main ill facing the Banks today is the mounting bad loans and non-

performing assets and it is no secret that the main contributor for this

problem is the private sector. We have experienced how some of the private

sector executives have messed up some of the private Banks which later had

to be salvaged by taker over by the Public sector Banks.

Private sector and private sector banks have their own sphere of working

and operation and mixing up with PSBs will be in the wrong direction. The

physics of private sector banking will not tally with the chemistry of public

sector banks.

Similarly, while the decision to subscribe to the capital of some of the public

sector banks is a welcome step, it is highly discriminatory and unjustified

that many of the Banks have been left out for capitalisation. Government

should come forward to capitalize all the PSBs without any discrimination or

exception. Otherwise it will amount to pressuring these Banks to

desperately go for private capital and ultimately get privatised.

While so much has been talked about by the Government on increasing bad

loans, there is no concrete measures to recover the same through stringent

measures. From AIBEA we have been demanding criminal action on willful

defaulters but no decision has been announced by the Government in this

regard which is very disappointing. As on 31-3-2015 there are 7035 cases of

will defaulters involving bad loans of Rs. 58,792 crores.

The bad loans in the Banks as on 31-3-2015 has risen to 2,97,000 crores

excluding another Rs.4,03,004 crores of bad loans of 530 corporate

companies shown as rescheduled and restructured loans under CDR scheme.

Bad loans struck up in top 30 borrowal accounts of PSBS as on 31-3-2015 is

Rs. 1,21,162 crores. All these are private corporate companies who had

defaulted and it is an irony that the Government is trying to make the

executives of the private sector to head the glorious public sector Banks. It

is nothing but an attempt to build a private sector superstructure with the

help of the public sector infrastructure.

AIBEA will be organising protest programmes against these policies

of the Government.

GROSS NPAs IN BANKS

31 3 12 31 3 13 31 3 14 31 3 15

Punjab National Bank 8690 13255 18611 22888

Bank of Baroda 3882 6551 9894 13615

Indian Overseas Bank 3554 5621 7838 13589

Bank of India 5170 7152 10274 13533

IDBI Bank Limited 4551 6450 9949 12488

Union Bank of India 5422 6143 9142 12149

Central Bank of India 7273 8456 11500 12127

UCO Bank 4020 6905 6275 11041

Canara Bank 3890 5786 7371 10634

Allahabad Bank 2056 4962 7961 8107

Oriental Bank of Commerce 3580 4184 5618 7716

Corporation Bank 1274 2048 4737 7100

Andhra Bank 1798 3714 5858 6784

United Bank of India 2176 2964 7118 6471

Bank of Maharashtra 1297 1138 2860 6258

Syndicate Bank 3051 2816 4264 6088

Indian Bank 1672 3255 4284 5125

Dena Bank 957 1452 2616 4272

Punjab & Sind Bank 763 1537 2554 3019

Vijaya Bank 1718 1533 1986 2204

Bharatiya Mahila Bank - - - 0

Nationalised Banks 66795 95922 140709 185209

State Bank of India 37156 48378 57819 53575

State Bank of Hyderabad 2007 3186 5824 4846

State Bank of Patiala 1888 2453 3758 4360

State Bank of Bikaner & Jaipur 1651 2119 2733 2898

State Bank of Travancore 1489 1750 3077 2156

State Bank of Mysore 1503 2081 2819 2136

SBI group 45698 59967 76030 69971

Public Sector Banks 112489 155890 216739 255180

Old Private Sector Banks 4200 5210 5907 9041

New Private Sector Banks 14115 14776 16831 22413

Private Sector Banks 18321 19992 22744 31461

Foreign Banks 6292 7972 11577 10989

Local Area Banks 6 6 6 8

Scheduled Commercial Banks 137102 183854 251060 297631

ALL INDIA BANK EMPLOYEES' ASSOCIATION

Central Office: PRABHAT NIVAS Singapore Plaza, 164, Linghi Chetty Street, Chennai-600001

Phone: 2535 1522, 6543 1566 & Fax: 2535 8853, 4500 2191 e mail ~ chv.aibea@gmail.com