Chapter 8 CONCLUSION AND SUGGESTION

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1 Chapter 8 CONCLUSION AND SUGGESTION The state department of cooperatives is trying hard to ensure the banks survival, but it is dependent on the courts for relief. It plans to move the high court seeking relief, especially to get access to funds earmarked for teachers salaries and farmers compensation. A petition will be filed jointly with the depositors association,. The Reserve Bank of India has put 42 cooperative banks under a revival programme that involves a thorough scrutiny after the lenders failed to meet critical parameters on minimum capital and net worth. Rajbank Penalised The Reserve Bank of India has imposed a monetary penalty of 5.00 lakh (Rupees five lakh only) on The Rajkot Nagrik Sahakari Bank Ltd., Rajkot, in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for doing activities akin to travel agent, letting out its premises to shops, doll museum etc., not adhering to clean note policy and not preparing the balance sheet in the format meant for co-operative banks as prescribed under Banking Regulation Act, 1949 (AACS). 255

2 CHAPTER 8. CONCLUSION AND SUGGESTION 256 The Reserve Bank of India had issued a show cause notice to the bank in response to which the bank submitted a written reply. After considering the facts of the case and the bank s reply as also personal submissions in the matter, the Reserve Bank of India came to the conclusion that the violations were substantiated and warranted imposition of the penalty. Kolhapur District Central Co-operative Bank Ltd. - Penalised The Reserve Bank of India has imposed a monetary penalty of 5.00 lakh (Rupees five lakh only) on Kolhapur District Central Co-operative Bank Ltd., Kolhapur, Maharashtra in exercise of powers vested in it under the provisions of Section 46 read with Section 47A of the Banking Regulation Act, 1949 (AACS) for violating guidelines issued by the Reserve Bank on Know Your Customers (KYC) norms / Anti Money Laundering (AML) standards. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. After considering the facts of the case, bank s reply and personal submissions in the matter, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty. The Makarpura Industrial Co-operative Bank Ltd., Vadodara - Penalised The Reserve Bank of India has imposed a monetary penalty of 5.00 lakh (Rupees Five lakh only) on The Makarpura Industrial Co-operative Bank Ltd., Vadodara in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of Reserve Bank of India directives/guidelines on advances to directors and their relatives, single borrower exposure ceiling, the donation ceiling of 1percent, non-implementation of KYC norms and non submission of CTR/STR in respect of cash transactions

3 CHAPTER 8. CONCLUSION AND SUGGESTION 257 in excess of lakh, as required under AML guidelines and submission of wrong compliance to Reserve Bank of India s previous inspection report. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. After considering the facts of the case and the bank s reply in the matter, the Reserve Bank came to the conclusion that the violations were substantiated and warranted imposition of the penalty. Finally based on research work carried out it is concluded that private banks like ICICI, HDFC,Axis bank, Federal Bank etc should be preferred more than cooperative banks. Though cooperative banks like Abhyudaya Co-operative Bank Ltd., Shamrao Vithal Bank Ltd. Co-operative are very good and trustworthy also. But relying on cooperative bank can be more risky than private banks comparatively. The Surat People s Cooperative Bank The Reserve Bank of India has imposed a monetary penalty of 5.00 lakh (Rupees five lakh only) on The Surat People s Cooperative Bank Ltd., Dist. Surat (Gujarat), in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (AACS) for violation of Reserve Bank of India s instructions on director related loan accounts. The Reserve Bank of India had issued a show cause notice to the bank in response to which the bank submitted a written reply. After considering the facts of the case and the bank s reply as also personal submissions in the matter, the Reserve Bank of India came to the conclusion that the violations were substantiated and warranted imposition of the penalty. Ajit Prasad, Assistant General Manager

4 CHAPTER 8. CONCLUSION AND SUGGESTION 258 The Baroda City Cooperative Bank The Reserve Bank of India has imposed a monetary penalty of 1.00 lakh (Rupees one lakh only) on The Baroda City Cooperative Bank Ltd., Vadodara, in exercise of powers vested in it under the provisions of Section 47(A)(1)(b) read with Section 46(4) of the Banking Regulation Act, 1949 (As applicable to Cooperative Societies), for non-adherence to Know Your Customers (KYC) norms and incorrect compliance certificate furnished for the earlier inspection report. The Reserve Bank of India had issued a show cause notice to the bank, in response to which the bank submitted a written reply. After considering the bank s reply in the matter and submission made during the personal hearing, the Reserve Bank of India came to the conclusion that the violation was substantiated and warranted imposition of the penalty. Ajit Prasad, Assistant General Manager Press Release : /698 HDFC Bank Q2 profit rises 20percent on higher NII, other income GOPIKA GOPAKUMAR Correspondent, CNBC-TV18 India s second largest private sector lender HDFC Bank met street expectations with the second quarter net profit rising 20.1 percent to Rs 2,380 crore compared to Rs 1,982 crore in same quarter last year supported by higher other income and net interest income by impacted by higher provisions. Kotak Mahindra Bank Q2 profit jumps 26percent on other income Private sector lender Kotak Mahindra Bank s second quarter standalone profit after tax beat street expectations, rising 26 percent year-on-year to Rs crore led by strong other income and lower provisions. Profit in the year-ago period was Rs crore.

5 CHAPTER 8. CONCLUSION AND SUGGESTION 259 Axis Bank Q2 profit rises 18.3percent, asset quality stable Private sector lender Axis Bank met street expectations on Friday with the second quarter net profit rising 18.3 percent year-on-year to Rs 1,611 crore led by higher other income and net interest income but impacted by higher provisions. Profit in the year-ago period was Rs 1,362 crore. IndusInd Bank Q2 profit up 30percent to Rs 430 cr on other income Private sector lender IndusInd Bank s net profit grew by 30.3 percent to Rs crore (beating street expectations) in the quarter ended September 2014 led by strong other income and lower provisions. Profit in the year-ago period was Rs crore. ICICI Q1 net beats estimates; up 17percent on NII, other income India s largest private sector lender ICICI Bank beat street expectations with the first quarter (April-June) net profit rising percent at Rs 2, crore compared to Rs 2, crore in the year-ago period driven by higher other income and net interest income but impacted by higher provisions and tax cost. ING Vysya Bank Q1 profit slips 18percent on higher provisions Private sector lender ING Vysya Bank s first quarter (April- June) net profit slipped 18 percent to Rs crore versus Rs crore in same quarter last year on account of higher provisions. Suggestions Reserve Bank of India (RBI) is the central banking and monetary authority in India. RBI manages the countrys money supply and foreign exchange and also serves as a bank for the Government of India and for the country s commercial banks. Banks can be broadly categorized into commercial banks, public sector

6 CHAPTER 8. CONCLUSION AND SUGGESTION 260 banks, regional rural banks, private sector banks, foreign banks, co-operative banks, and term lending institutions, non-banking finance companies / housing finance companies. Public sector banks make up the largest category of banks in the Indian banking system. There are 28 public sector banks in India. After bank nationalization was completed in 1969 and 1980, the majority of Indian banks were public sector banks. In July 1993, as part of the banking reform process and as a measure to induce competition in the banking sector, RBI permitted entry by the private sector into the banking system. This resulted in the introduction of nine private sector banks. The Government of India permits foreign banks to operate through branches; a wholly owned subsidiary; or a subsidiary with aggregate foreign investment of up to 74percent in a private bank. Banks have to maintain certain percentage of deposit with Reserve bank of India (RBI) as CRR (Cash Reserve Ratio) on which they earn lower interest. The Second part of regulatory requirement is to invest in G-Securities, which is called as statutory liquidity ratio (SLR). The banks revenue is basically derived from the interest it earns from the loans it gives out as well as from the fixed income investments. Liquidity Adjustment Facility- Repo and Reverse Repo rates. It is a tool used in monetary policy that allows banks to borrow money through repurchase agreements. It is used in resolving any short term cash shortages during period of economic instability or from any other form of stress caused by forces beyond their control. Repo is a form of short term borrowing for dealers in government securities. For the party selling the security (and agreeing to repurchase it in the future) it is repo; for the party on other end of transaction (buying the security and agreeing to sell in future) it is reverse repo. Prime lending rate is the interest rate charged by banks to their most credit worthy customers. Adequate capital helps financial intermediaries to survive even during substantial losses. It gives time to re-establish the business and avoid any break in operations. This requirement is called Capital Adequacy, and is specified for banks and Non Banking Financial Corporations (NBFCs). Two types of capital are measured: tier

7 CHAPTER 8. CONCLUSION AND SUGGESTION 261 one capital is core capital; this includes equity capital and disclosed reserves. Tier two capital is secondary bank capital that includes item such as undisclosed reserves, general loss reserve and subordinated term debt. According to the present norm, and with the Basel II deadline fast approaching, banks have to maintain Capital Adequacy Ratio of at least 10percent. The net interest income (NII) is the revenue on the assets and the cost of servicing the liabilities. In other words, the NII is the difference between the interest payments to the bank on loans and the interest payments by the bank to the customers on the deposits.

SUGGESTIONS ARE INVITED FOR IMPROVING PERFORMANCE OF PUBLIC SECTOR BANKS

SUGGESTIONS ARE INVITED FOR IMPROVING PERFORMANCE OF PUBLIC SECTOR BANKS N.B: The information provided below highlights the performance of Public Sector Banks vis-à-vis Old Private Sector Banks and New