Estd AUGUST, For a greener planet, please don't print this unless necessary. All major bank unions to join September 2 strike

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1 Banking News Estd AUGUST, 2015 For a greener planet, please don't print this unless necessary NEWS BULLETIN from ALL INDIA BANK EMPLOYEES ASSOCIATION All major bank unions to join September 2 strike There s a continuous attempt to privatise and merge banks, says C H Venkatachalam KOCHI, AUGUST 19: All the leading unions across the banking sector will join in the pan-india bank strike on September 2, said CH Venkatachalam, General Secretary, All-India Bank Employees Association. The strike is to protest against the anti-labour and anti-people policies of the Centre and in support of the call given by the Central trade unions. There are open attempts to amend the various labour laws in favour of the employers and to the detriment of the workers, he said in a statement. The neo-liberal economic policies are aggravating the problems of the workers and common masses. The labour-law changes were to empower the employers with unfettered hire and fire rights and to strip the employees and their unions of their rights.

2 Venkatachalam alleged that there were continuous attempts at privatisation of banks as well as for consolidation and merger of banks. More and more private capital and FDI were being encouraged. Regional rural banks are sought to be privatised, and urban co-operative banks are under threat of de-licensing. Several government schemes were being passed on to public sector banks without giving them proper infrastructure and manpower, causing harassment to the bank staff. Venkatachalam said members of the All-India Bank Officers Association, Bank Employees Federation of India, Indian National Bank Officers Congress, National Organisation of Bank Workers, Indian National Bank Employees Federation, National Organisation of Bank Officers, All-India Co- Operative Bank Employees Federation, All-India Gramin Bank Employees Association, All-India Gramin Bank Officers Association, All-India RRB Employees Association, All-India Reserve Bank Employees Association and All-India Reserve Bank Workers Federation would go on strike on September 2. FinMin notifies second and fourth Saturday as public holiday for banks OUR BUREAU MUMBAI, AUG 20: The Finance Ministry, in exercise of powers conferred under the Negotiable Instruments Act, 1881, on Thursday issued a notification declaring the second and fourth Saturday of every month as public holiday for banks in India, with effect from September 1. What this means is that the first Saturday holiday for banks will be on September 12, which is a second Saturday. Second and fourth Saturday holiday for banks is as per the 10th bipartite wage settlement between the Indian Banks' Association and banking sector trade unions

3 RBI gives licence for 11 payments banks Vodafone, Airtel and Reliance on the list; Kishore Biyani, Videocon d2h miss out BUSINESSLINE, MUMBAI, AUG 19: Paving the way for revolutionising cashless payments services in the country, the Reserve Bank of India on Wednesday granted payment bank licences to 11 firms. This includes telecom companies Vodafone and Airtel; non-banking financial company Cholamandalam Distribution Services Ltd; large conglomerates Reliance Industries and Aditya Birla Nuvo; and individuals Vijay Shekhar Sharma, founder of Paytm, and Dilip Shanghvi, Managing Director of Sun Pharmaceuticals. The Department of Posts, Fino Paytech, Tech Mahindra and National Securities Depository Ltd also made the cut.

4 Of the 41 entities that applied for a licence, the prominent names that did not make it in this round include Future Group Founder Kishore Biyani, Videocon d2h and MG George Muthoot. Payments banks differ from conventional banks as they are not allowed to lend to customers or issue credit cards. They can, however, accept deposits of up to 1 lakh and can offer current and savings account deposits. They can also issue debit cards and offer internet banking. Rollout plan While the 11 companies have been given 18 months to comply with all the conditions laid out by the RBI, most of them have already put in place a robust roll-out plan. Telecom operators with their vast retail presence would be the first off the block. Sunil Sood, Managing Director & CEO, Vodafone India, said, The payment bank licence will enable us to offer a more comprehensive portfolio of banking and financial products and services, accelerating India s journey into a cashless economy. Norwegian telecom company Telenor announced that it was partnering Dilip Shanghvi along with IDFC. Reliance Industries and Aditya Birla Nuovo will ride on their respective telecom ventures Reliance Jio and Idea Cellular. They would also leverage their existing businesses in retail and financial services to quickly roll out payment bank services. For entities like Paytm, Fino PayTech and Cholamandalam, this is a natural progression of what they are already doing. Vijay Shekhar Sharma, founder and CEO of Paytm, said: It is truly a privilege to be one of the youngest ones in this lot of 11. We believe that led by mobile and data analytics technology, we will be able to change the face of financial inclusion opportunity in India. It is about bringing half a billion Indians to the main stream of economy. Vellayan Subbiah, MD, Cholamandalam Investment and Finance, said, This is a transformative step in fulfilling the financial inclusion goal of the government and the RBI. We currently have over 534 branches spread across the country and a captive base of over 7.5 lakh customers, which is an immediate opportunity that can be tapped into. I am very happy to learn that the Postal Department has been given a payment banking permission. I have been trying since I became the Minister

5 to energise and make the vast network of Postal Department for financial digital inclusion and e-commerce activity. I would expect the Postal Department to prepare itself properly and effectively for this, said Telecommunications and IT Minister Ravi Shankar Prasad. Payments banks: RBI Governor, SBI chief not on the same page RBI Governor Raghuram Rajan. Rajan sees a connect, Bhattacharya espies a threat MUMBAI, AUGUST 20: Reserve Bank of India Governor Raghuram Rajan and State Bank of India Chairman Arundhati Bhattacharya on Thursday took opposing stands on the impact of payments banks on the traditional lenders. On Wednesday, the RBI gave in-principle approval to 11 entities, including large conglomerates in the energy, telecom and finance sectors, including Reliance Industries, Vodafone, Airtel and Aditya Birla Nuvo, to start payments banks. While Rajan sought to allay fears of competition from payments banks, Bhattacharya said they were worrisome. Why this payments bank is a little worrisome is because they will be allowed to have savings deposits. What if they go for poaching rates, then many of the commercial banks could lose a portion of the deposits which are relatively lower priced so that will take away the ability to transmit rates and

6 give further loans at lower rates, Bhattacharya said in a conversation with the RBI Governor at the SBI Banking & Economic Conclave. Rajan, on the other hand, saw no threat to the banking system and said the payments banks will serve as a feeder for the existing banks. I don t think these 11 new banks are a threat to the existing banks. These new banks will complement the existing system by traversing the last mile. The reason for this is that there is nothing the universal banks cannot do that the payments banks can do. But there are some of the things that the payments banks can t do which the universal banks can, he said. The bank branch can become a centre of activity, helping with cash handling or do some completely new work There is a lot of scope for everyone not everybody will succeed but this is a revolution which can happen, he added. Meanwhile, a report from Fitch Ratings said the focus of payments banks on smaller deposit holders and mobile banking will add to competitive pressures for public banks, and could potentially pose risks to their market share over the long term. Rajan said that he doesn t see payments banks transforming into universal banks. Small finance banks, which are still to be licensed, may have an easier path to transition into universal banks, he said. The RBI Governor added that payments banks will also help increase the utility of new bank accounts opened under the Prime Minister s Jan Dhan Yojana. No incentives for banks to tackle NPAs: SBI chief BEENA PARMAR BUSINESSLINE MUMBAI, AUG 20: State Bank of India Chairman Arundhati Bhattacharya

7 Most banks don t have any incentives to do anything about an account once it is treated as a non-performing asset, according to State Bank of India Chairman Arundhati Bhattacharya. In conversation with the RBI Governor at SBI s second banking conclave, Bhattacharya said, The moment you declare an account NPA, giving further money to it (and very often this is required for stressed assets) becomes almost impossible for two reasons. One of course is the fact that you will actually be bloating your NPA book further by giving it more money. Second, if you look at the kind of questioning (by the authorities) that we have to go through, with full 20/20 hindsight, is that if it is NPA why did you give money? What is the reason that you have given money? Bankers can say that the regulators allowed it, that it was required in order to revive the project. But the questioning will be very difficult to manage. As a result, most banks don t have any incentives once an account is treated as an NPA to do anything about it, said the SBI chief. All government owned entities are subject to interrogation from Central Vigilance Commission, which in many cases has created fear psychosis among PSU banks. Rising NPAs has been a major block to the profitability of most Government banks. As a consequence, the RBI has allowed banks to form joint lenders forum when the borrower does not pay between 60 days to 90 days of due date. Further, RBI has allowed banks to take 51 per cent stake in the defaulting company not meeting the bank demands. Banks can also extend the tenure of projects loans up to 25 years with a clause to refinance them every five years under. However, Bhattacharya pointed out that even as there is revival in SME (small and medium enterprise) loans, those below Rs. 10 crore are still under stress and they need small amount of funding for revival. "Once you call it as NPA, its dead. When people ask why are we trying so hard, I would say you have to take instances like Ebola. We know Ebola has high mortality, say 40 per cent plus, but that does not mean that if a person gets Ebola we don t try to resuscitate that person," she said. On the sidelines, she added that banks asked for one more year of forbearance because the economy is not firing on all cylinders. I don t see any way out. I don t see banks have any appetite to lend to NPAs.

8 She also raised the issue of not having enough liquidity to lend as Liquidity Coverage Ratio (LCR) requirement is leading banks to invest more in government bonds. Given that we have so much pre-emption, the LCR is making us keep govt paper at 28% and therefore there is no extra liquidity to lend for the credit growth as CRR, SLR and PSL are taking away liquidity. Hardly 40 of 100 (per cent) is available to lend for commercial purpose, she said. FinMin issues norms for appointment of MDs & CEOs in 17 public sector banks Officers will be selected from PSBs after interactions, appraisal reports NEW DELHI, AUGUST 20: A week after appointing two private sector executives as Managing Directors and Chief Executive Officers in government-owned banks, the Finance Ministry has now come out with guidelines for the selection of such officers for the remaining 17 public sector banks (PSBs). These officers will be selected from within PSBs only. It is expected that Indian Bank, Andhra Bank and UCO Bank will be first set of PSBs to have MDs on the basis of the new guidelines. A Finance Ministry statement said that the selection process based on the new guidelines is to be initiated in the next month. The top post of Bharatiya Mahila Bank (BMB) is also lying vacant after its CMD Usha Ananthsubramanian moved to PNB last week, raising questions on the continuation of BMB. The Appointments Committee of the Cabinet has approved the guidelines for selection of MD sand CEOs in PSBs other than the five large public sector banks. Executive Directors of nationalised banks, Deputy Managing Directors of IDBI Bank and Managing Directors of associate banks of SBI who have risen from the Associate Bank Services, with one year of service as ED/DMD/MD and who have two years remaining service are eligible for consideration as MD & CEO, a Finance Ministry statement said. Existing methodology The guideline says that the selection will be made by the Appointments Board according to the existing methodology of interaction of the candidates with three panels of the Sub-committee of the Board. The candidates will be

9 rated out of 100 marks with 50 marks to be awarded for Annual Performance Appraisal Reports (APARs) of five years and 50 marks assigned for performance during the interaction with the sub-committee. The guidelines also state the eligibility criteria for the post of EDs of nationalised banks. General Managers of nationalised banks and Chief General Managers of associate banks of SBI who have risen from the Associate Banks Service, and who have completed two years of service are eligible for consideration for the post of ED. Bank of Maharashtra plans to sell Rs. 500-cr worth NPAs in Q2 ABHISHEK LAW Sushil Muhnot, Chairman and Managing Director, Bank of Maharashtra, at the 12th banking conclave in Kolkata on Wednesday. KOLKATA, AUG 19: Bank of Maharashtra is planning to sell close to Rs.500 crore worth bad loans to asset reconstruction companies (ARCs) in the second quarter (ending September 30, 2015), Sushil Muhnot, Chairman and Managing Director of the bank, said here on Wednesday. This first tranche of Rs. 500 crore is expected to be put on the block in September. According to him, the bank is targeting a sale of another Rs. 1,000-1,500 crore of non performing assets (NPAs) by the end of this fiscal. Depending on the success of the sale of this first tranche, we will take a call on the additional amount of NPAs to be sold, he told reporters on the sidelines of the FICCI Banking Conclave. New Model According to Muhnot, the bank is also looking at a new incentive scheme for the ARCs. Under the scheme it will pass on the additional benefits to these companies if they are able to make faster recoveries. This new scheme will be put to

10 test during the bidding process when the first tranche of NPAs will be put on the block. Headquartered out of Pune, the Bank of Maharashtra had sold NPAs worth Rs crore last fiscal ( ). However, it did not sell any bad loans in the first quarter of this fiscal. Gross NPAs in the first quarter of stood at Rs. 7, crore; while fresh slippages during the period was Rs. 1,400 crore. Capital Infusion Meanwhile, the bank is expecting a capital infusion of Rs. 394 crore from the Centre for Asked about raising money from the market, Muhnot said: Post the capital infusion our capital adequacy ration (CAR) will be 12 (per cent) and I don t think there is any need to opt for market borrowings at this stage. CAR for Q1 stood at per cent. Growth While Bank of Maharashtra expects a 12 per cent overall growth in business in (total business last fiscal stood at Rs. 221,000 crore); advances and deposits are expected to by 12 per cent and 15 per cent, respectively. According to Muhnot, it will also look to have its own mobile wallet app in the coming days. The mobile wallet is in the process of development and it should be ready in the next three to six months. We are in discussion with the channel partners, he added. ALL INDIA BANK STRIKE ON 2 nd Sept AIBEA-AIBOA-BEFI-INBOC-NOBW-INBEF-NOBO AICBEF-AIRBEA-AIRBWF-AIRRBEA-AIGBEA-AIGBOA ALL INDIA BANK EMPLOYEES' ASSOCIATION Central Office: PRABHAT NIVAS Singapore Plaza, 164, Linghi Chetty Street, Chennai Phone: , & Fax: , e mail ~ chv.aibea@gmail.com