Cabinet approves merger of 10 public sector banks into 4 entities - Pragnya IAS Academy - News Analysis.

Cabinet approves merger of 10 public sector banks into 4 entities.

• The date of implementation of the merger is 1 April
• There will be 12 public sector lenders post the merger
The Union Cabinet on Wednesday approved the merger of 10 public sector banks (PSBs) into four entities, aimed at having fewer but stronger lenders in India.
“Banks have submitted the scheme of amalgamation, which the Cabinet has approved today," finance minister Nirmala Sitharaman told reporters, adding that every bank service will remain intact after the merger.
The date of implementation of the merger is 1 April.
Currently, there are 18 PSBs compared with 27 in 2017. There will be only 12 public sector lenders post the merger.

In August, the finance ministry had announced the consolidation of 10 public sector lenders. Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank will be brought together to form the second largest public sector bank in the country, after State Bank of India (SBI).
The other merger will be between Canara Bank and Syndicate Bank, which will make it the fourth-largest public sector lender, while Union Bank of India will be merged with Andhra Bank and Corporation Bank to build India’s fifth-largest lender. In addition, Indian Bank will be merged with Allahabad Bank to make India’s seventh-largest PSB.
In April 2019, Bank of Baroda (BoB) became the country’s third largest lender after its merger with Dena Bank and Vijaya Bank. In 2017, five associate banks and Bharatiya Mahila Bank merged with State Bank of India (SBI).
Sitharaman also said the government has looked at BoB’s merger with Dena Bank and Vijaya Bank to understand if any lesson has to be learnt from that.
“The average retail loan sanctioning time has come down from 23 days to 11 days, operating profit is up by 11.4%in Bank of Baroda," she said, adding that the government had kept key financial parameters in mind before the announcement of the merger.
In the current financial year, the government had infused ₹40,000 crore in these banks, information and broadcasting minister Prakash Javadekar said. (Source: Livemint)


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Cabinet approves merger of 10 public sector banks into 4 entities.

Money in Swiss banks: India moves to 73rd place, UK remains on top - Pragnya IAS Academy - News Analysis.

Money in Swiss banks: India moves to 73rd place, UK remains on top.

India has moved up to 73rd place in terms of money parked by its citizens and companies with Swiss banks, while the UK remains on the top.
India had slipped to 88th place with a 44 per cent plunge in such funds during 2016, but the latest data from the Swiss National Bank (SNB) shows an increase of over 50 % during 2017 to CHF 1.01 billion (about Rs 7,000 crore).
Pakistan is now placed one place higher than India at 72nd position, down one slot, after 21 % dips in funds from that country in Swiss banks during 2017.
The funds, described by SNB as ‘liabilities’ of Swiss banks or ‘amounts due to’ their clients, are official figures disclosed by Swiss authorities and do not indicate to the exact quantum of the much-debated alleged black money held in famed safe havens of Switzerland.
The official figures, disclosed annually by Switzerland’s central bank, also do not include the money that Indians, NRIs or others might have in Swiss banks in the names of entities from different countries.
It has been often alleged that Indians and other nationals seeking to stash their illicit wealth abroad use multiple layers of various jurisdictions, including tax havens, to shift the money in Swiss banks.
Also, with Switzerland putting in place an automatic information exchange framework with India and various other countries, the famed secrecy walls of Swiss banks are said to have crumbled. India will start getting this automatic data from next year, while it has already been getting information on accounts where proof of illicit funds can be furnished.
However, the increase in Indians’ money in Swiss banks has already triggered a sharp opposition attack on the government, which in turn has said that it would be wrong to assume that all funds deposited in Swiss banks were ‘black money’ and strong action would be taken against wrongdoers.
The funds officially held by Indians with banks in Switzerland now accounts for only 0.07 %, though up from 0.04 % a year ago, of the total funds kept by all foreign clients in the Swiss banking system, as per an analysis of the latest figures compiled by the SNB (Swiss National Bank) as on 2017-end.
India was placed at 75th position in 2015 and at 61st in the year before, though it used to be among top-50 countries in terms of holdings in Swiss banks till 2007. The country was ranked highest at 37th place in the year 2004.
The total money held in Swiss banks by foreign clients from across the world rose by about 3 per cent to CHF 1.46 trillion (about Rs 100 lakh crore) in 2017.
In terms of individual countries, the UK continued to account for the largest chunk at about CHF 403 billion (over 27 %) of the total foreign money with Swiss banks. The UK saw an increase of over 12 % in such funds.
The U.S. remains on the second position despite a dip of about 6 % in such funds to CHF 166 billion (11 per cent share of all foreign funds). No other country accounted for a double-digit percentage share, while others in the top-ten included West Indies, France, Hong Kong, Bahamas, Germany, Guernsey, Luxembourg and Cayman Islands.
Among BRICS countries, India remains to rank the lowest -- China at 20th place (CHF 160 billion with an increase of 67 per cent during 2017), Russia at 23rd (CHF 135 billion after 13 per cent fall), Brazil 61st (CHF 1.9 billion after 28 per cent fall) and South Africa 67th (CHF 1.5 billion after 31 per cent dip). Among these five, only China and India saw an increase in their funds.
Others ranked higher than India are: Singapore, UAE, Saudi Arabia, Panama, Japan, Jersey, Australia, Netherlands, Italy, Belgium, Cyprus, Israel, Mexico, Bermuda, Turkey, Kuwait, Marshall Islands, Canada, Thailand, South Korea, Malaysia, Belize, Isle of Man, Indonesia, Seychelles, Gibraltar, Samoa, New Zealand, Philippines, Iran, Kazakhstan and Ukraine.
Those ranked below India were Mauritius (77th place), Bangladesh (95th), Sri Lanka (108th), Nepal (112th), Vatican City State (122nd), Iraq (132nd), Afghanistan (155th), Burkina Faso (162nd), Bhutan (203rd), North Korea (205th) and Palau was last at 214th place.
The total money belonging to the developed countries rose 10 per cent to CHF 876 billion, while those from developing nations rose marginally to CHF 209 billion. The offshore financial centres actually saw a dip of 3 per cent to CHF 378 billion.
India was ranked in top-50 continuously between 1996 and 2007, but started declining after that -- 55th in 2008, 59th in 2009 and 2010 each, 55th again in 2011, 71st in 2012 and then to 58th in 2013.
In terms of percentage increase, India’s 50 % rise was 23rd highest. The maximum increase of as much as 4,000 % was seen by Solomon Islands, followed by over 2,200 % for Faroe Islands and 1,200 % for British Indian Ocean Territory.
The increase was more than 100 % for Maldives, Grenada, Turkmenistan, Laos, Lesotho, Qatar, Bonaire, Sint Eustatius and Saba, Federated States of Micronesia, Equatorial Guinea; and Sao Tome and Principe.
Others with higher increase than India’s were Guyana, Mongolia, Barbados, Cote d’Ivoire, South Sudan, Bahrain, Kuwait and Ireland.
The jurisdictions that saw the maximum decline in such funds included Palau, St Helena and Gambia, while North Korea, Bhutan, Macao, Burkina Faso and Iraq also recorded significant dips. (Source: The Hindu)


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Money in Swiss banks: India moves to 73rd place, UK remains on top.

11 public sector banks now on RBI watchlist, small firms face credit crunch - Pragnya IAS Academy - News Analysis

11 public sector banks now on RBI watchlist, small firms face credit crunch.

At present, 11 weak PSBs out of the 21 State-owned banks are under the PCA, which kicks in when banks breach regulatory norms on issues such as minimum capital, amount of non-performing assets and return on assets.

Lending to the corporate sector, particularly small and medium enterprises, is becoming increasingly difficult with more than half the country’s public sector banks (PSBs) now under the RBI’s Prompt Corrective Action (PCA) framework, which restricts lending activities of the banks, government sources said.
Government sources also confirmed that at least three-four more banks are expected to be brought under the PCA framework because of deteriorating performance.
“Since the PCA framework restricts the amount of loans banks can extend, this will definitely put pressure on credit being made available to companies especially the MSMEs. Large companies have access to the corporate bond market so they may not be impacted immediately,” a senior banker said.
At present, 11 weak PSBs out of the 21 State-owned banks are under the PCA, which kicks in when banks breach regulatory norms on issues such as minimum capital, amount of non-performing assets and return on assets. The RBI enforces these guidelines to ensure banks do not go bust and follow prompt measures to put their house in order.
In a report last month, rating agency ICRA said that five more banks could be brought under the PCA. These include Canara Bank, Union Bank, Andhra Bank, Punjab National Bank, and Punjab & Sind Bank.
The 11 banks already under the NPA framework are IDBI Bank, Bank of India, UCO Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank, Bank of Maharashtra, United Bank of India, Corporation Bank and Allahabad Bank.
Sources said it may take these banks at least another 6-9 months before they report any noticeable improvement in the key regulatory indicators, which will help them come out of PCA.
The RBI tightened its PCA framework in April 2017 to turn around lenders with weak operational and financial metrics, and since then 11 banks have been moved to PCA.
Depending on the risk thresholds set in PCA rules, the banks are restricted from expanding the number of branches, staff recruitment and increasing the size of their loan book. Other restrictions include higher provisions for bad loans and disbursal only to those companies whose borrowing is above investment grades.
The government in January had allocated a bigger chunk of capital of Rs 52,311 crore to 11 weak banks to maintain their minimum capital requirement while nine strong banks were given Rs 35,828 crore. Last October, the Finance Ministry had announced plans to inject Rs 2.11 lakh crore of equity in PSBs – comprising Rs 1.35 lakh crore through recapitalisation bonds, Rs 18,000 crore from budgetary resources and Rs 58,000 crore to be raised by the banks from the market.
While RBI data shows credit off-take for micro and small enterprises and medium-scale companies deteriorated significantly post demonetisation, micro and small scale industries have seen some improvement in demand for credit from scheduled commercial banks over the last 5-6 months.
While credit growth to micro and small scale industries contracted by 7.7 per cent and 8.2 per cent in November 2016 and December 2016, it remained negative or mildly positive till August 2017. The growth rates in November 2017, December 2017 and January 2018 were better and stood at 4.6, 7.2 and 6.9 per cent.
Medium-scale industries continue to remain under pressure and credit growth is still negative even as gross bank credit growth for November, December and January has been over 8 per cent.
Bankers feel that if more state-owned banks are brought under PCA, it will impact the credit availability for the MSME segment. (Source: The Indian Express)


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11 public sector banks now on RBI watchlist, small firms face credit crunch.