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Smart banking in smart cities Anytime banking to anywhere banking Small is ‘more’ beautiful Insatiable appetite for credit A bank for women, by women Who is the real beneficiary? Small finance banks offer high interest rates Greet Lakshmi the banking robot Lacklustre credit expansion Drastic decline in asset quality Stage set for Indian ‘avatar’ of foreign banks Big bank merger, bigger expectations Grows Bigger Two banks: their jubilees and performances Banking in Telangana Cradle of banks to a smart city... From lazy banking to easy banking Ernakulam excels... Just 660 days! Target over-ambitious... Hesitancy in announcing year-end results Why any time money? A development bank for BRICS Bank deposits account for 46.3 per cent of household savings How okay are new banks? Capital base of regional rural banks raised New bank licences, at last... Banking overhauling or reorganisation? All that glitters is not gold... Indian customers are tech savvy What is the priority – mergers or NPA reduction? Needed a Banking Atlas Targets continue to be ad hoc How ‘secure’ are the secured loans? Monetary policy continues to adopt dis-inflationary path Governance in Reverse Gear? The paradox: clamour for the Goliath and David Another route for achieving financial inclusion Well-lived... Perhaps small is more beautiful than big! Banking on Risk Bottomlines shrink, bad loans rise... Reaching the Unreached… Thirty more cities seek to become SMART Emerging crisis Reaching out: is it slowing down? It’s a war on black money, support it. Small finance payment banks... Growing gainfully Too big to fail and too small to sail One down in private sector Why priority status? A new development bank rising in the east… United India Insurance - Rs 110 crore losses have been claimed till now due to floods in Tamil Nadu Fund healthcare clinics in villages... LVB- A supermarket of financial services Payment banks have arrived The collaboration suite of cyber criminals Drop in SLR- sparing lendable resources Aadhaar, niraadhaar and banking Rationalised Mega merger is on Managing NPAs... New capitals of Migrant banks Cautious and considerate Financial inclusion vs unclaimed deposits Nothing much can happen…. Good, bad and ugly Merger mania haunts banks Holy or unholy? Growing volume of stressed assets… Ferrying digital banking to Lakshadweep Cut in repo rate – lower than expected
 
Merger mania haunts banks
Creating an agency like PARA is expected to help take over the stressed assets of public sector banks and initiate steps to recover these. But the time is not ripe for implementation, as the merger mania haunts banks.

A major proposal made in the Economic Survey is the establishment of Public Sector Asset Rehabilitation Agency (PARA) aimed at reducing the volume of stressed assets of public sector banks. The third quarter of FY 2016-17 has been disastrous for banks as the Gross NPA ratio went up above 7 per cent for the public sector banks as a whole. The three banks having the highest ratio of NPA are IOB-20.26 per cent; UCO Bank 18.66 per cent and Bank of India-16.12  per cent. 

Efforts made in the past by promoting agencies such as Asset Reconstruction Corporations could not make much dent on the NPAs. The SARFAESI Act empowers banks to auction residential and commercial properties when the borrowers default on their payments.  Debt Recovery Tribunals (DRTs) also have been established for improving recovery process.

Creating an agency like PARA is expected to help take over the stressed assets of public sector banks and initiate steps to recover them. While the proposal is right, the time is not ripe for implementation as the merger mania is haunting the banking sector. The merger of banks can be postponed until they reduce the NPA ratios significantly. The proposed new law and the confiscation of assets of absconders, is expected to help lenders to recover their dues. The confiscated properties may turn out to be a burden unless the banks manage to sell them off.

 

Recapitalisation...and farm credits

To maintain capital adequacy ratios of banks, recapitalisation becomes inevitable. A provision of Rs.10, 000 crore has been made in the Budget, though the actual amount required has not been disclosed. With the shrinkage of bottom lines, banks are not in a position to expand the provision ratio of bad advances.

As the agricultural sector is expected to grow at 4.1 per cent, its credit needs are bound to increase. Besides this, there is a proposal to double farm incomes over the next five years. Farm credit target for next fiscal has been estimated at Rs. 10 lakh crore. While it is necessary to increase farm income, doubling it within the next five years is a difficult proposition. Indian agriculture continues to be a gamble in monsoon, despite the expansion of irrigation facilities. Supportive actions like crop insurance and improvement in rural transportation are expected to facilitate the increase in farm incomes. Budget allocation under Pradhan Mantri Gram Sadak Yojana has been increased to Rs.19, 000 crore. This investment on rural roads is projected to connect 65,000 eligible rural habitations.

 

Cheaper housing loans

Housing being a primary necessity, the government proposes to provide one crore houses to the homeless poor by 2019. This is an ambitious target.  The project is expected to generate greater demand for various house-building materials, resulting in the development of industries engaged in the production of these materials. Besides this, banks are directed to reduce the rate of interest on housing loans. The National Housing Bank would be extending refinance facility to banks for extending cheaper housing loans.

 

Creation of multi skill training institutes

There is a proposal to establish 1500 multi skill training institutes covering 600 districts. The objective is to impart training to rural youth so as to help them take to self-employment. An allocation of Rs.1804 crore has been made towards this purpose. During the 12th Five Year Plan, all the public sector banks have been directed to set up Rural Self Employment Training Institutes in their Lead districts. Coordination between these two institutes has to be maintained to realise the benefits they can generate for the rural youth. 

Some of the new proposals in the Union Budget 2017-18 were not entirely penciled out. Universal Minimum Income, for example, is a desirable welfare-oriented programme, which has not been explained in detail. n

 

 

 

 

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