Banking in General SBI in Particular an Economy and Banking Update
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A quarterly newsletter Banking in General SBI in particular An economy and Banking update Compiled by: Pramod Kumar Mishra Chief Manager (Trg.) SBLC Purnea [email protected] [email protected] 09431814448/09430856523 Dec.’2013 Qtr. Contents: Page No. State Bank of India 03 Banking & Finance 05 General Awareness /Policy matters 10 Data Corner 54 DISCLAIMER: This Quarterly Newsletter is a voluntary effort, not a priced publication. All the sections / data/ information are based on press reports, journals, news clippings, reading materials published by different institutions, web sites and no responsibility is accepted for the accuracy of facts and figures contained in them. The opinion expressed is of the author and not of the Bank or its Subsidiaries. Regarding products and Circulars, it is requested to refer to the original circular for any clarification & act as per original circular. We have taken every care to provide correct information; we believe to be accurate and reliable. However we do not assume responsibility of any kind nor shall be liable for losses and consequences arising from uses thereof. 2 State Bank of India Ms. Arundhati Bhattacharya has taken over charge as the first woman Chairman of State Bank of India. Provide interest subvention on term loans to farmers: SBI chief- The Capital formation in agriculture sector can be even more if the Government were to provide interest subvention on term loans to farmers, SBI Chairman Ms. Arundhati Bhattacharya has said. The current interest subvention facility is confined to short-term crop loans and not for term loans availed by farmers. SBI has suggested to the Government that the latter should provide interest subvention on term loans to farmers rather than confining it to cash credit (short-term loans) alone. SBI allows cash withdrawal to debit card holders: State Bank of India (SBI) has opened a new channel to 14 Crore Debt Card Holders. In a First-of-its kind initiative, SBI is allowing cash withdrawal of up to Rs.1000 from any shop/ trader with a Point-of sale (POS) terminal. A fee of Rs.7.50 will be charged to the customer, a part of which goes to the trader. While buying something on debit card, the card holder may also withdraw petty cash. SBI is the Leader among Public Sector Banks by having about one Lakh terminals. Govt. gives nod to SBI's plan to raise Rs. 9,576 crore via QIP- SBI has received government approval to raise Rs 9,576 crore through Qualified Institutional Placement (QIP) in FY14, on condition that government holding shall not come down below 58%. Raising of the capital will subject to requisite approvals from RBI and shareholders. The government will infuse Rs 2,000 crore in the SBI this year and towards this it will issue preferential shares worth the same quantum to the government. In October, SBI's board had approved infusion of Rs. 2,000 crore by allotting preferential equity shares to the government. SBI's capital adequacy ratio stands at 11.69%, with Tier-I capital of 8.73% under the Basel-II norms. SBI has appointed five Foreign Banks- Bank of America-Merrill Lynch, Morgan Stanley, Citi, JPMorgan and UBS to manage its qualified institutional placement (QIP) worth about Rs 10,000 crore as it aims to boost its capital base. The government’s stake in the bank is expected to decline to 54-56% after the QIP, from the present 62%. In addition to the QIP, the bank will receive about Rs 2,000 crore from the government, which is infusing capital into all state-owned lenders. Both the fund infusions are aimed at boosting SBI’s capital adequacy ratio (CAR), which is at 11.69%. However, the bank’s Tier-I capital of 8.73% is below the Basel- II norms. SBI plans study on customer experience: In a bid to assess the current level of customer satisfaction and experience, SBI is planning to conduct a study across key areas such as products, channels and processes. To be conducted across all 14 circles, the study will identify opportunities to improve customer experience across various areas and benchmark SBI’s processes and service against best-in-class banks in India and overseas. The bank expects actionable plans emerging from the 3 study, which will cover about 600 branches and about 300 ATMs including 100 off site ATMs, to help improve customer satisfaction, leading to growth in its business. The study will assess the quality of customer service and experience at the branches, ATMs and at CPCs (for retail and liabilities), across the customer lifecycle and identify the major improvement areas. Besides assessing product knowledge / communication skills of the branch staff while dealing with customers, the study will assess the bank’s processes / layouts affecting customer service and delivery of services and products and identify improvement opportunities. It will recommend possible changes in the product and service offerings SBI expects to assess the usage of other channels such as debit card /POS/mobile banking, internet banking, call centre and the customer experience with different channels. The study will analyse the current complaints management process and the customer grievance redressal mechanism. SBI sponsored ‘Bhaag Bengaluru Bhaag’ marathon- Around 10,000 men and women participated in the "Bhaag Bengaluru Bhaag" marathon in the city's upscale eastern suburb of Whitefield. Organised by Rotary Bangalore IT corridor and sponsored by the SBI, the event's seventh edition witnessed about 1,500 participants in the full marathon (42 km) and 1,200 in the half marathon (21 km). SBI Q2 net sinks 35% on higher provision for bad loans- Higher provisioning for rising bad loans saw SBI post a 35% slump in net profit at Rs 2,375 crore in the second quarter ended September 30. In the July-September period last year, the bank made a profit of Rs 3,658 crore. SBI Chairperson Ms. Arundhati Bhattacharya said: “There is more pain ahead for the bank.” The bank set aside Rs 2,645 crore during the quarter as a cover against potential bad loans. For the same period last year, it had set aside Rs 1,837 crore. The MCG & SME segments accounted for about 63% of the bank’s NPAs. NPAs rose 30% to Rs 64,206 crore (Rs 49,202 crore) during the quarter under review. Gross NPAs as a percentage of total advances rose to 5.64% from 5.15% a year ago. Accounts slipping into NPAs increased by Rs 3,315 crore on a net basis during the quarter. Most were from the power, infrastructure and iron and steel segments. “We are trying to capture early- warning signals and push these accounts into restructuring to ensure that these do not lead to more trouble,” said Ms. Bhattacharya. SBI will raise Rs 8,000-9,000 crore during the year through qualified institutional placements(QIP). This is in addition to the Rs 2,000-crore capital infusion the Government has agreed to make. 4 Banking & Finance : Recommendations of the Financial Sector Legislative Reforms Commission (FSLRC): It is proposed to implement the following recommendations of the FSLRC pertaining to consumer protection and capacity building: • All instructions relating to consumer services/consumer protection would be consolidated and will be placed on the Reserve Bank’s website as a single group of instructions by end-March 2014 and they will be examined for gaps, if any. • A Committee will be set up by the Reserve Bank to examine capacity building, including basic and job specific knowledge requirements and examine whether a system of formal certification is warranted for certain job descriptions within the Reserve Bank and in the financial entities and market segments regulated by it. • The Reserve Bank will examine its own public facing services and institute time-bound response guidelines where feasible and not already in place. Such guidelines will be placed on the Reserve Bank’s website by January 2014. Rising bad loans to cut govt’s earnings from PSBs by 30%- Public sector banks will see a further surge in bad loans which will dent their earnings and shrink the government’s dividend earning from these banks by around 30%, according to ICRA, a rating agency. In a report on the banking sector, the rating agency said that more loans will turn bad in the medium term, resulting in gross non-performing assets (NPAs) of public sector banks rising from 4.5% in September 2013 to 4.8-5% by March 2014. Supreme Court judgement on bounced Cheque: The Supreme Court has said in its judgment on the Bounced Cheques issue that “Once the amount in a dishonoured cheque is paid with interest and compensation, the payee can not insist on criminal prosecution of the directors of a firm who issued the cheques”. The object of Section 138 of the Negotiable Instruments Act, which makes issuing of cheques without sufficient balance in the account an offence, is meant to inculcate faith in the efficacy of banking operations and credibility of transactions. It is not meant only to punish the guilty. RBI extends deadline for banks to shift to new messaging standards ISO – 20022 to 31.03.2014- A new RTGS system was put in place in October this year that required banks to adopt ISO 20022 standard messaging formats. Banks didn't take enough measures to handle the ISO 20022 standard messages and are still relying on temporary solution provided by their IT and service providers for conversion of messages. RBI said that it received 5 requests from banks to allow them to continue with the present arrangement till the required modifications were made at the CBS at banks' end.