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Sunday, July 6, 2014

Dena Bank seeks Rs 1,200 crore fresh capital from government

State-run lender Dena BankBSE -0.24 % has sought Rs 1,200 crore capital infusion from government in the current fiscal, a top bank official has said.

In the interim Budget, the government had earmarked Rs 11,200 crore for capital infusion in public sector banks during 2014-15 and the new government has ruled out allocating more funds this fiscal for banks.

"We have asked for Rs 1,200 crore capital from the government but how much we will get we don't know," bank's executive director R K Takkar said.

The bank's total capital adequacy ratio stands at 11.14 per cent while the tier-I capital adequacy ratio stands at 7.43 per cent.

Last year, the government had infused Rs 700 crore into the Mumbai-based mid-sized lender as part of the overall Rs 14,000-crore recapitalisation of state-run banks.

In FY14, the bank deferred its plan to raise nearly Rs 570 crore through qualified institutional placement, owing to the weak market condition.

Takkar said that once the bank gets funds from the government, it may look at raising funds from other options such as a rights issue, qualified institutional placement, Esops or through tier II bonds.

"Currently, the government's holding in the bank is 58 per cent. Once the fresh capital comes in their share will increase to over 65 per cent and we will also have more room to raise funds," Takkar added.

Dena Bank had posted a net profit of Rs 187.28 crore for the March quarter up from Rs 125.67 crore a year ago.

Source: Economic Times
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Sunday, June 1, 2014

Bad loans a cause of concern: RBI Deputy Governor R Gandhi

Reserve Bank Deputy Governor R Gandhi expressed concern over bad loans and said banks should strengthen their internal credit appraisal systems to minimise the risk of default.

"The final (NPA) figure for March 2014 is yet to be known; while some may view this ratio as reasonable, given the economic conditions prevalent in the country and elsewhere, the total stressed assets in the banking system (including restructured standard assets) as at December 2013 was 10.13 per cent of the gross advances of the banks, which is a cause of concern for the Reserve Bank," he said.

However, he said early indications are that the figures for the fourth quarter are better than the third quarter.

The gross non-performing assets (NPAs) or bad loans of the domestic banking system was 4.4 per cent of gross advances, he said at an event organised by Assocham here.

To minimise the risk of default, he said, "There is a growing need for banks to strengthen their internal credit appraisal system that is on their credit assessment and risk management mechanisms."

At the same time, he said, banks should consider using external credit appraisals in conjunction with their own assessment.

"This would mean getting the house in order and at least on this score, banks would be on stronger ground. Banks would still be vulnerable to other factors, such as economic slowdown or policy changes or wilful defaults. But, one area of concern would be plugged," he said.

"We can see that among the proactive steps that a bank can take to stem the problem of increasing level of NPAs and stressed assets, use of credit ratings is an important one," he added.

However, he said, banks need to balance the use of external ratings, as the recent financial crisis has highlighted the dangers of overdependence on ratings.

Noting that growing NPAs are the biggest challenge for the banking industry, he said a slowing economy is bound to see an increase in bad loans.

"Notwithstanding the economic weakness, NPAs of banks have registered increase since 2011-12, which is a cause of concern for us," he said, adding that the rise is more pronounced in the case of public sector banks.

The gross NPAs of public sector banks rose to Rs 2.03 lakh crore at the end of September from Rs 1.55 lakh crore on 31 March, 2013.

Source: Economic Times
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Canara Bank aims to reach aggregate biz of Rs 8.50 lakh crore

Public sector lender Canara Bank is targetting to reach an aggregate business of Rs 8.50 lakh crore during this fiscal with plans to add 1,250 branches, a top official today said.

"The bank was aiming to reach an aggregate business figure of Rs 8.50 lakh crore with a deposit growth of 16-17 per cent and advances growth of 19-20 per cent by March 2015," bank's Chairman and Managing Director R K Dubey told reporters here.

During 2013-14 fiscal, the bank's business had touched Rs 7.22 lakh crore. Last year the GDP growth had dipped, there was slow down in economy and raising capital was a problem.

But the bank registered a 20.7 per cent growth, opened 1,027 branches of which 80 per cent was in rural and semi urban areas, he said.

The public sector lender will be adding 1250 branches this year, including 100 in Kerala, to increase its branch strength from 4,755 to 6,000 and ATMs from 6,312 to 10,000 by March next year, he said.

The bank was planning to raise capital of Rs 3,000 crore this fiscal to meet its capital requirement. "We may raise capital from government or from market or from bonds. As market improves, we will go for the best option subject to government and RBI approval," he said.

The bank has five overseas branches -- London, Leicester, Hong Kong, Manama and Shanghai and had plans to open 20 more branches abroad. Total business of the foreign branches reached Rs 43,0450 crore during the previous fiscal, he said.

It would be opening a branch at Johannesburg in South Africa and has plans to open branches at New York by June this year and 8 other international centres, including Dubai, Qatar, Frankfurt, Sao Paulo, Dar-es-Salaam and Tokyo, by march next.

On recruitments, he said 9,000 persons were recruited in various categories last year and 8,000 would be taken this year. The total staff strength of the bank was 50,000.

Asked about media reports that government wanted commercial banks to offer interest free loans of up to Rs 50,000 to victims of loan sharks, Dubey said "under no scheme loans can be given at zero rate of interest. Loans cannot be given as doles. Interest can be subsidised by the government", he said.

Source: Economic Times
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Monday, May 26, 2014

Finance Ministry may pitch for stricter norms for non-performing assets

The banking division of the finance ministry is likely to pitch for stricter measures to deal with non-performing loans and suggest consolidation of public sector banks to create stronger lenders in its presentation to Narendra Modi, who is set to take over as prime minister on Monday.

"We will present all options which can be used to strengthen banks, including consolidation," said a finance ministry official, requesting anonymity. Cabinet secretary Ajit Seth had earlier asked all departments to prepare presentations to apprise Modi of their achievements and plans.

Another official said that the presentation will include a blueprint on the proposed banking captialisation programme, steps towards financial inclusion and measures that can be taken to arrest bad loans at staterun banks.

"Consolidation in PSBs can be looked at if there is a political will. We have to present all options," he added.

Finance Ministry may pitch for stricter norms for non-performing assetsThe ministry will also make a case for early release of Rs 8,000 crore as part of plans to infuse additional capital in the stateowned lenders. The 26 state-run banks will together need about Rs 4.15 lakh crore in capital infusion to be able to maintain lending growth under the Basel guidelines.

The government is unable to meet this demand because of its own weak fiscal position and has allocated just Rs 11,200 crore towards bank capitalisation in the current fiscal year, substantially lower than the amount infused in previous years.

"The banks have also presented various options to raise capital. All these measures will be a part of the presentation," the official said.

Some of these options include allowing banks to set up holding companies that will include all totheir subsidiaries. The holding company will raise money on behalf of these subsidiaries.

Other measures include focused special purpose vehicles (SPVs), such as the one Allahabad Bank has proposed, to monetise real estate assets and raising capital by allowing banks to issue shares to employees.

Some of these proposals are already being discussed with the Reserve Bank of India, the Securities and Exchange Board of India ( Sebi) and the Insurance Regulatory and Developmental Authority ( IRDA), said the official cited above.

The finance ministry has already directed banks to improve their CASA (current and savings accounts) ratio to up to 40% and focus on recoveries. Gross nonperforming assets (NPAs) of state-run banks improved to 4.44% in the quarter to March from 5.07% in the previous quarter.

"We will push for stricter measures which include attaching viable assets of promoters to recover loans," said the finance ministry official, signalling the continuation of the approach that founders be held accountable for the performance of companies they run.

Source: Economic Times
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Sunday, May 25, 2014

India Post needs to apply afresh to Reserve Bank of India for bank licence

India Post will have to apply afresh to the Reserve Bank under differential licence guidelines if it wishes to start banking operations. According to sources, aspirants, including the Department of Post, will have to apply once again after guidelines on differential bank licences are issued in the next few months.

India Post was one among the 25 unsuccessful contenders for new bank licences. The Reserve Bank of India (RBI) last month granted licences only to IDFC and Bandhan Financial Services Pvt Ltd.

The applicants also included state-run IFCI and private sector Anil Ambani group and Aditya Birla group, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital. Recently, RBI Governor Raghuram Rajan had said it is committed to freeing entry in banking.

"We just announced two new commercial bank licences after a rigorous vetting process. We are examining this experience, and after making appropriate changes, will announce a more regular process of giving licences - what has been termed licenses on tap," he had said At present, there are 27 public sector banks and 22 private sector lenders in the country.

"The RBI can take more of a chance with new players if they get the licence to open only a small bank or to conduct only one segment of banking business. Such differentiated licences - licences with restrictions on the geographical reach or the products offered by a new bank - can generate more organisational variety and efficiency," Rajan had said.

Small banks tend to be better at catering to local needs, including needs of small and medium businesses, he had said. A payments bank, which will take deposits and offer payment and remittance services but be constrained to invest all its funds in safe instruments such as government securities, could be very synergistic with other existing services, he had said.

"For example, the proposed Post Bank could start as a payment bank, making use of post office outlets to raise deposits and make payments," he had said. New bank licences were issued by RBI in April to IDFC and Bandhan after a decade. Before this, the central bank had awarded licences to Kotak Mahindra Bank and Yes Bank in 2003-04.

Source: Economic Times
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