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He continues the focus on social amelioration Welcome changes that testify to Jayalalithaa’s return to health When the President was rendered homeless… Liberal imports idling indigenous capacities Gas is the way forward For whom the bell tolls? The Ports’ Pasha expands into Tamil Nadu Delhi is distant Modi storms Silicon Valley Come elections, come advertisements... Convulsions in The Hindu Diamond jubilee of Egmore Samskrt School Quality silica from Neyveli Eternal support for capitalisation of PS banks Mersal magnified All eyes on Sankara Nethralaya Silver Years of Madras Musings Delhi is distant… Russi Mody – a tribute F C Kohli - his concerns all embracing More tributes to GR Auto components surge… Another Indian music maestro at the UN L&T- the specialty of special purpose vehicles Excel Generators provide the vital back-up Remembering Indira Sivasailam... Secularism and anti-Hinduism Permanent secretariat for TN GIM Padma Bhushan for A Ramakrishna Rahman at CIC The star of Spencers is no more An inexplicable neglect Five star activism stalls development activity WTO Meet: resolved to meet again A yen for wastage… China invests in India Solar thermal shines… Boy, can you beat these? Fortune 500 review Welcome focus on core competence Lesson from Chandrababu Naidu Modi and the lady Cutting the nose to spite the face Kudos to NDTV... Preserving for the future When TN politicians can emulate Kerala's Godspeed, Chief Minister JJ Build close rapport with business leaders Mu Sigma – is no more Shipping woes of Chennai companies Polls and promises Welcome GST The ‘Ayyo-yes’ is no more A think tank for Chennai Tatas moving out of urea production... No Maha Koottani in TN... Return to king coal for urea... Insurance companies bleeding, yet no decision on increasing FDI limit! Gay abandon in pricing Protest masters... Engineering seats go abegging GM Technology at last! CII projects higher growth… CRS, a jewel among managers, is no more. Infrastructure funding – lessons learnt When nations steal growth from one another… West Bengal: mindless malignancy Tax agriculture Maximising the micro pricing … Wise Presidents Discoms deserve better… A Grand Finale for SN’s MS centenary at the US… Poor representation for Kerala and TN in Cabinet Fortune for Indian Airlines IAS invades NDDB... Put expensive assets created to use... Shale gas and its shallow future When Ratan Tata visited SRM CIPET hqrs to stay at Guindy – for the present? Of course, Gujarat is vibrant Don’t seem to feel the pulse… Naidu will soon build a new Hyderabad L&T: focus on infrastructure and more infrastructure… Delhi returns to BJP He saved millions from starvation... Tatas moving out of urea production... EEC at the National Media Centre The Swadeshi Trump Intellectual of rare qualities Demise of a media baron... 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Welcome thrust on trade in Modi’s foreign visits... There was flood of milk. Reason: no milk commissioner! Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai Telangana in top gear… Contrarian cousins Poor quality of university VCs Shanti and Sadhana through Music Paytm karo... Measuring roof tops in terms of KW/MW Revive development banks... TELANGANA at last…BUT London, London Narayan Align crops to agro climate endowments… Where is Rajaji? Tihar, Puzhal not different from Parappana Agrahara An informal presentation - analytical, forward locking... SoA @ 80 How Air-India loses customs... A C Muthiah – his munificent bequeaths to science A more liberated TN… Haul over the coal Fuel for thought Noble nonagenarians... Medical costs hit the roof... 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The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines The brown list of Venkitaramanan Quality education through the PPP mode Scientists urged to take up farmer-oriented research Revving up the manufacturing sector Small units prefers to remain small... Focus on quality of power - its only around 170-180V Lalu’s envy, India’s pride Music happens For whom the MIDS bell tolls? TGS- The king storyteller The balancing act EVM is tamper-proof Adapt Vajpayee dinner diplomacy Cleaning Ganga – relocate tanneries and install electric crematoria Making ‘my Amaravati’... When online building permits work…. …and of a popular trade leader Rs.1600 crore paper board plant of TNPL CSR and CMI: promise of another Srinivasan Ramanujan... Solar, solar everywhere … Banning booze... Land reclamation from sea appears cheaper! 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Plummeting profits of PSBs

The results of the third quarter performance of public sector banks are a great shock to the investors.    

First, we had the results of three public sector banks – Central Bank of India, Allahabad Bank and Dena Bank - that reported losses of Rs 836.62 crore, Rs 486.14 crore and Rs 662.85 crore respectively. Then came the bombshell from State Bank of India, the country’s largest lender, reporting a 61.7 per cent drop in net profit to Rs 1115 crore from Rs 2910 crore in the previous year’s corresponding figures. This reduction resulted in the Sensex plunging by a 21-month record figure of 807.07 points. Later we had the healthy PSB, Bank of Baroda, reporting a loss of Rs 3342 crore, the highest ever quarterly loss posted by any public sector bank in the industry, thanks to a provisioning of a whopping Rs 6474 crore compared to the Rs 1149 crore it provisioned in the previous quarter. The gross NPA was shown as Rs 38,934 crore (9.68 per cent) and net NPA Rs 21,806 crore ie. 70 per cent rise.

Breaking the convention, the NDA-II government drafted bank managers from the private sector to head public sector banks.  Ravi Venkatesan, the new Chairman (drafted from Microsoft India) and P S Jayakumar, the new MD & CEO (drafted from Citibank) of Bank of Baroda, were not weighed down by the baggage and came out boldly with such hefty provisioning.  

IE has been pointing to the gay abandon with which bank chairmen of several public sector banks were lending. We had pointed to Indian Overseas Bank as an instance of such profligacy. Then CMD, M Narendra was enjoying a field day getting kudos for such largesse from industry associations. He was cleverly hedging his bets by having gala functions year after year presenting high ups at the policy level from Finance Minister P Chidambaram to Minister of State for Finance, Namo Narain Meena to Reserve Bank of India Governor, Deputy Governor, et al in lavish functions.

PSBs have seen a surge in their bad loans following directions from the RBI to classify some large corporate accounts as bad debts. Banks have been avoiding to classify these as NPAs, as it would hurt their bottom line. But thanks to RBI Governor Raghuram Rajan voicing seriousconcern, public sector banks started provisioning more. SBI’s provisions for bad loans soared 59 per cent to Rs 7645 crore.

A staggering Rs 52,542 crore of bad loans have been waived off by PSBs, a 52.6 per cent increase over the previous fiscal. Public sector banks indulged in massive settlements in which unrecoverable loans were settled at huge discounts. These are attributed to pressures from politically powerful personalities, eg. a Rs 10 crore outstanding loan settled for around Rs 3 crore with suggestions of liberal kickbacks from political intermediaries.

Such bad management resulted in an inevitable low valuation of the banks’ stocks. This is in contrast to private banks including the large HDFC, ICICI and Axis Bank and smaller ones like City Union Bank, Karur Vysya Bank and Lakshmi Vilas Bank showing healthy balance sheets.

The urgent need is for bold reform of the banking sector. Union Finance Minister Arun Jaitley announced at the CNN Asia Business Forum 2016, his plans to go for a series of banking reforms. There is the hint of the government reducing its holdings in PSBs to 51 per cent.

Such a step would bring in twin advantages: it will make the banks more accountable to the shareholder and secondly force these to earn higher profits and relieve the government of the burden to capitalise these frequently.  Such a step will also pave the way for more mergers and acquisitions. Of course, the task is not easy. Bank employees’ unions are strong and have resisted successfully such significant reforms.

 

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