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Finance Minister Piyush Goyal Meets Heads Of State-Owned Banks

Goyal will meet heads of public sectors banks based out of western and southern regions today.



A State Bank of India Ltd. (SBI) building stands illuminated at night in Mumbai (Photographer: Dhiraj Singh/Bloomberg)
A State Bank of India Ltd. (SBI) building stands illuminated at night in Mumbai (Photographer: Dhiraj Singh/Bloomberg)

Interim Finance Minister Piyush Goyal met heads of public sectors banks based out of western and southern regions today to resolve various issues concerning them.

The meeting was organised by State Bank of India and was to be chaired by Goyal in Mumbai, people familiar with the matter told PTI. In all, 15 CEOs of state-owned lenders from the two regions participated in the meeting to discuss the way forward for the Indian Banking system, they said.

This is the first meeting with the heads of PSU banks after their annual financial result for 2017-18. Most banks posted losses in the fourth quarter of the last fiscal.

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State-Owned Banks Worst Hit By Fraud Despite Spending More On Audits

The Nirav Modi fraud-hit Punjab National Bank alone posted a loss of Rs 13,417 crore for the quarter ended March 31, the largest ever quarterly loss by a bank. PNB provided for Rs 7,178 crore, 50 percent of the total amount of Rs 14,356 crore liability with regard to the Nirav Modi fraud in the fourth quarter of 2017-18. The remaining amount will be covered in the three quarters of the current fiscal year.

It is followed by the country’s largest lender SBI posting a Rs 7,718 crore loss for the January-March period, more than twice the Rs 3,442-crore loss reported for fourth quarter of the previous fiscal. The jump in losses came after the lender set aside Rs 24,080-crore for provisions against bad loans after the RBI scrapped all loan restructuring schemes. The banks also had to make a Rs 4,761-crore provision towards depreciation in the value of its bond portfolio.

Besides, almost all banks reported increase in non-performing assets due to Feb. 12 guidelines of the Reserve Bank of India for early identification and reporting of stressed assets. As per the revised guidelines, the banks will be required to identify incipient stress in loan accounts, immediately on default, by classifying stressed assets as special mention accounts depending upon the period of default.

All lenders will be required to put in place board- approved policies for resolution of stressed assets under this framework, including the timelines for resolution, it had said, adding, "As soon as there is a default in the borrower account with any lender, all lenders - singly or jointly - shall initiate steps to cure the default." In addition, sources said, the issues concerning banks which are under Prompt Corrective Action framework of RBI would also be discussed.

Out of 11 PCA banks, seven from these region are part of the framework.

The 11 banks on the RBI's watchlist are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. Together, these banks accounted for Rs 52,311 crore of the Rs 88,139-crore capital infusion plan (through bonds and budgetary support) announced by the government for 2017-18.

As per the revised PCA guidelines released last year, if a bank enters Risk Threshold 3, it may be a candidate for amalgamation, reconstruction or may even be wound up. Among the many metrics that are used to gauge the weakness of a lender, capital, net NPAs, RoA and Tier 1 leverage ratio are a few.

Under the PCA, banks face restrictions on distributing dividends and remitting profits. The owner may be asked to infuse capital into the lender. That apart, lenders would also be stopped from expanding their branch networks. It would need to maintain higher provisions and management compensation and directors' fees would be capped.