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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 ~ [email protected]