IDBI Bank Ltd. has reported a net loss of Rs. 853.01 crore for the first quarter ending June as compared with a profit of Rs. 241.10 crore a year ago. It has now taken the record of being the lender with the highest bad loan ratio (24.11%) and has replaced Indian Overseas Bank (NPA ratio – 23.6%).

However, the bank has received capital infusions from the government and the Life Insurance
Corporation of India through a preferential allotment of equity shares and this looks to improve the bank’s capital position.

Capital adequacy ratio improved to 10.92% from 10.70% in the March quarter. The bank has received Rs.394 crore from LIC and Rs. 1,861 crore from the government.

The bank is under the Reserve Bank of India’s prompt corrective action (PCA) and it has reported an 85% year on year surge in bad loans amounting to Rs. 50,173 crore while its gross bad loans jumped 12%. The PCA required the banks to increase recoveries of its bad loans, reduce risky loans, strengthen their capital base and restrict branch expansion, among other measures, to improve their balance sheet.

Around 72% of the bad loans are from five large corporate borrowers, which were also part of the bank’s watch list of stressed loans.More
Posted on: 2017-08-17 18:15:14

The State Bank of India (SBI) has a decline of 20.45% in its standalone net profit for the June 2017 quarter at Rs 2,005.53 crore against the previous year’s Rs 2,520.96 crore. The bank cited that these results are not comparable with the previous year as six associate banks were merged with the bank this year during this quarter.

Bad loans are also mounting for the bank with the NPAs increasing up to 9.97% (in absolute numbers Rs 1.88 lakh crore) from 6.9% in the previous quarter (Rs 1.01 lakh crore) and 6.94% in the year-ago quarter.

Net NPAs rose to 5.97% against 3.71% in the previous quarter and 4.05% in the same quarter last year.Provisions and contingencies rose 53.1% to Rs. 21,054.74 crore. Within this, the bank set aside Rs 12,227 crore towards provisions, and after accounting for write-offs, it stood at Rs 8,929 crore.

The bank is taking a lot of measures to prevent the risk of loans turning bad. It has brought in Rs 32,427 crore as corporate advances. It also invoked strategic debt restructuring for accounts worth Rs 12,807 crore, and the Scheme for Sustainable Structuring of Stressed Assets for another Rs 8,124 croreMore
Posted on: 2017-08-14 14:58:01

Former Reserve Bank of India (RBI) Governor Bimal Jalan stated that farm loan waivers should not be turned into a policy and should only be given on a ‘need basis’. He made this statement at the event titled “Economics and Governance” organized by the think tank, Thinkers and Penguin Random House India.

He further stated that - "Farm loan waiver as a one-time effect is all right. But you can`t make it a policy.Else people will borrow farm loan and may use it for other purposes. It should be need based."

RBI Governor Urjit Patel and SBI Chairperson Arundhati Bhattacharya have also earlier said farm loan waivers should not become a practice as they result in fiscal slippages.

Jalan also supported the mechanism of RBI where banks are allowed to initiate insolvency proceedings against defaulters to make good their NPAs or bad loans.

"We should go fast. Whatever can be done has to be done. Why delay it? We have already delayed NPA action. We need to take timely action," he said. He added that "genuine business failures" was a different issue.

He further stated that it will take some time for the impact of the Banking Regulation (Amendment) Bill,2017 to be felt.More
Posted on: 2017-08-13 00:08:22

Nowadays, it has become almost next to impossible to purchase a house without a home loan from banks or financial institutions. Interest rates are plummeting and many are rushing to avail home loans.However, there are few things to keep in mind before you take a home loan:

Legality of the property

Check the reputation of the builder and the papers of the property before you purchase it. The builder’s profile can also be checked online as RERA has been implemented.

Down payment

Save up for the down payment of the property which is usually about 20% of the value of the property.

Check your eligibility criteria

Lenders have an eligibility list which needs to be met before you can borrow money from the bank. Banks look at the credit history besides other factors such as your age, income, occupation, collateral security,margin requirements, etc.

Check the fees and charges associated with the loan

Loans come with fees and charges such as processing fee.

Check the interest rate

Lower the interest rate, lower is the EMI. You should always weigh your options before zeroing in on a particular loan.

Check your affordability of paying EMIs

You should look at a loan to income ratio of 20% to 30% and not take a loan whose EMI you will not be able to afford.

Buy an insurance plan to cover the loan amount

You can opt to take a mortgage redemption insurance cover while taking a home loan as it will avoid the financial burden on your family.

Look around

You should always do your homework before taking a home loan. Go online and compare interest rates and charge structures of home loans.More
Posted on: 2017-08-10 17:37:45

SEBI has recently introduced an order that companies will be downgraded if it misses its loan repayment.This will help check such borrowers who routinely delay repayment of monthly loan installments as such failure will result in downgrading of their companies to “junk”.

Many companies including leading ones often pay their dues just a few days before the 90 day deadline to retain standard asset classification on their loans. Classification as a non-performing asset or NPA limits the company’s borrowing ability to raise further capital in addition to being a reputation risk.

This new rule of SEBI will most probably end this practice, at least for those companies that are rated.SEBI has put the onus on debenture trustees, rating companies and companies themselves to inform the default on payment. Rating companies will now have to downgrade the defaulting company immediately on non-repayment even when they are not termed as NPA as per the asset classification norm of RBI.

As per Crisil Ratings, this new diktat may cause some short-term disruptions but would be positive for the market in the long run. It will bring more discipline and transparency in the credit markets.More
Posted on: 2017-08-09 15:25:35

SEBI asked firms to make information regarding listed companies defaulting on loan payment from banks and other financial institutions, public within one working day. It is tightening its disclosure norms for listed companies which will come into force from October 1.

SEBI also noted in its circular which it released citing the new disclosure norms that “Corporates in India are even today primarily reliant on loans from the banking sector. Many banks are presently under considerable stress on account of large loans to the corporate sector turning into stressed assets, nonperforming assets (NPAs).”

The SEBI has brought about changes in its disclosure norms to address this critical gap in the availability of information to investors. The companies will now have to inform SEBI in case of any defaults in payment of interest, installment obligations on debt securities, loans from banks and financial institutions and external commercial borrowings (ECBs).

The companies would have to inform stock exchanges about date of default as well as date of making such disclosure, name of the lender, number of investors in the security as on date of default, details of the obligation, current default amount and gross principal amount on which the default has occurred.More
Posted on: 2017-08-08 17:37:33

The state of Jharkhand has received a $100 million loan from the Indian government and the World Bank to improve the conditions in rural areas. This move is expected to benefit almost 200,000 rural households and 3,500 farmer producer groups.

About 60% of the farms in Jharkhand, which split from Bihar in 2000, are marginal or small which produces single crops highly vulnerable to climate change. Recent weather conditions and droughts have led to the loss of 40% of the crops in the state.

The loan would be used to help the state develop climate-resilient agriculture and diversify into high yielding varieties of pulses and oilseeds.

The loan amount will also be used towards improving productivity in rice paddies, community based micro irrigation and support moves into value added sectors such as livestock, fisheries, and non-timber forest produce.

A spokesperson for the World Bank stated – “Improving farm profitability and rural incomes can play a central role in achieving rapid and inclusive agricultural growth. By closely aligning with the institutional structure of women’s self-help groups, this project will contribute to the government’s efforts at reducing gender gaps in agriculture and financial inclusion, and also help to improve food and nutrition status of rural mothers, adolescent girls and children in Jharkhand.”More
Posted on: 2017-08-03 14:06:35

Madhya Pradesh Chief Minister, Manohar Lal Khattar urged people to come together and work for the betterment of the society while chairing ‘Chaupal’ (Centre for Holistic Advancement and Uplift of the Poor and Landless) which was organized by Ashwini Chopra, MP and the Swadeshi Jagran Manch.

The Chief Minister and Harvinder Kalyan, HAFED chairman and Gharaunda MLA, announced to
contribute their one-month salary to ‘Chaupal’.

The CM distributed cheques of Rs. 10,000 each to 550 women for small loans and also gave away keys of 71 e-rickshwas to unemployed youths. Citing the importance to make people self-dependent, Khattar asked Chopra to organize similar programmes throughout the state.

Emphasis was also given for the ‘Beti Bachao, Beti Padhao and making her self-reliant’. The duo also took rides in an e-rickshaw and interacted with the beneficiaries.

The CM also laid the foundation stones of 33kV substations in Sector 32 and Sector 4.
Union Minister Rajiv Pratap Rudy’s wife Neelam Pratap Rudy, Union Minister Dharmendra Pradhan’s
wife Mridula Pradhan, MP Chopra’s wife Kiran Chopra, CEO of Kinetic Green Sulja Firdia Modwani
and HAFED chairman Harvinder Kalyan among others were present on the occasion.More
Posted on: 2017-08-02 09:16:27

Central Bank of India reported a lower net loss of Rs. 577 crore in the first quarter ended June 30, 2017 as compared to Rs. 600 crore in last year’s quarter. This has been made possible due to lower burden of loan loss provisioning and income tax refunds.

The net interest income in the reporting quarter was down 20 per cent year-on-year (y-o-y) at Rs. 1,331 crore, while the non-interest income rose 34 per cent y-o-y at Rs. 660 crore.

Loan loss provision were lower at Rs. 1,269 crore (Rs 1,544 crore in the year ago quarter).

The bank had deferred tax asset (income tax refund) of Rs. 242 crore (Rs 358 crore income tax refund in the year ago quarter).

As per the RBI directions for initiating insolvency process, it is needed to made an additional provision of Rs. 961 crore in respect of selected accounts spread over proportionately over three quarters starting from September 2017 quarter.

Gross non-performing assets (GNPAs) increased by Rs. 4,147 crore during the quarter to Rs. 31,398 crore as at June-end 2017.

GNPAs as a percentage of gross loans nudged up from 17.81 per cent in the March 2017 quarter to 18.23 per cent in the June 2017 quarter.More
Posted on: 2017-07-30 19:04:20

Banks in Punjab have expressed concern over the decline in farm loan recovery. The Punjab government asked the banks to provide details of 10.25 lakh farmers who will be the beneficiaries in order to formulate the final plan of the loan waiver scheme.

Bank officials met with the Punjab Finance Minister, Manpreet Badal to discuss the debt waiver scheme after citing that the loan waiver scheme has surmounted the interests in farmer loan accounts as no farmer was repaying his loan.

"We expressed our concern with the state government about the loan recovery. We have told the
government that loans should remain regular. If the repayments stop, then farmers will not eligible for interest subvention of three percent," said a bank official.

The government has also been asked by the banks to make a final announcement of the cut-off date till which the waiver benefit will be available to the farmers. Banks in Punjab has stopped giving fresh loans to the farmers who have defaulted in making repayments in anticipation of debt waiver. This has increased the interest in their accounts to as much as 60 percent.

The government has asked the banks to furnish details of farmers including small and marginal farmers owning land up to five acres.More
Posted on: 2017-07-27 17:48:10

The Chief Minister of Maharashtra, Devendra Fadnavis has stated that 25,000 centres will be set up across the state to accept forms for loan waiver scheme. Every Gram Panchayat will also have at least one such centre for farmers. This statement was issued to the reporters prior to the beginning of the monsoon session in Mumbai.

Last month, the Maharashtra government had announced a loan waiver scheme of Rs. 34,022 crore for the farmers in the state. This will be causing a heavy burden to the state exchequer.

The Chief Minister also stated that the ‘Aapale Sarkar’ web portal was being upgraded for uploading the information of farmers, their outstanding loan and land holding.

He added that the idea is to select only genuine farmers through this exercise of setting up centres to accept the waiver forms.

"After a good spell of rains in the last few days, 88 per cent area has come under sowing. The government has spent around Rs. 3,000 crore so far on tur procurement," he said.

As per reports, a total of 21 bills will be placed during the monsoon session.More
Posted on: 2017-07-25 17:32:27

The Maharashtra government has recently published a district wise loan waiver list for Rs. 36 lakh but this list is full of errors, discrepancies and also discriminations.

This list was tweeted by the Chief Minister’s office late on Monday night which had a detailed list of farmers as per district wise. As per the said list, 813 farmers’ loans have been waived off. This list however, does not have any mention of the Wardha district. Also, the list states that the government has waived off Rs. 2.49 lakh farmers loan in Buldhana district but as per the government record, there are only Rs 2.35 lakh farmers in the district.

Ashok Chavan, president of the Maharashtra Congress Pradesh Committee exclaimed that “I was amazed with the farmers loan waiver list. It has a lot of errors and discrepancies." Chavan questioned how the head of state and administrative could display such carelessness. "Chief Minister Devendra Fadnavis should apologise immediately for this major goof up. He should not waste his time covering it up and pushing it under carpet. This is a very serious issue,” Chavan said.

He also stated that there should not be any farmers in Mumbai as there is no agricultural land in Mumbai.More
Posted on: 2017-07-24 16:51:51

The government is planning to merge smaller public sector banks which are not performing well into a handful of big global banks on the footsteps of the successful merger of State Bank of India. However, bank unions feel that this step may not necessarily help the balance sheets of the struggling public sector banks.

The General Secretary of the All India Bank Employees’ Association, CH Venkatachalam, stated “What purpose will it serve? What kind of banks are being looked at for the merger? There are many questions.

The weakness in the banks is due to bad loans. The solution is by resolving those and getting recovery." The government is looking at merging some of the 21 public sector banks into 10-12 banks. One of the possibilities is that smaller banks could be merged into Punjab National Bank, Bank of Baroda, Canara Bank and Bank of India. Many smaller banks such as IDBI Bank and Indian Overseas Bank have been faced with mounting losses over the past year and this consolidation will help eliminate smaller and weaker banks.

However, the union raised a valid point by stating that NPAs in SBI is still huge and consolidating banks is not making them more efficient.More
Posted on: 2017-07-21 00:45:38

A special court has issued an order for the attachment of the accounts of businessman Vijay
Mallya and his associates in the UK and Switzerland for his default in the IDBI loan case.

The court also granted the agency’s request for issuance of Letter Rogatory to the UK to assist itin the loan default probe to carry out the investigations about the accounts.

As per the CBI investigations as stated in the chargesheet, there were many lapses on the part of IDBI officials in the process of sanctioning and disbursement of loan of Rs 1,300 crore to
Kingfisher Airlines (KFA). These officials have been arrested.

Out of this, Rs. 260 crore was diverted by KFA, while Rs 263 crore was used to pay salaries, tax deducted at source, income tax and loan installments. It is alleged that Mallya diverted a large part of the loan amount for his “personal expenses.”

The report by the CBI also stated that IDBI allegedly showed “undue favour” to KFA in the
matter of sanction and disbursement of short-term loans of Rs. 150 crore in October 2009 and
Rs. 200 crore in November 2009, and another corporate loan of Rs. 750 crore in November 2009.More
Posted on: 2017-07-19 17:35:03

The Maharashtra state government is offering an interim loan of Rs. 10,000 till the loan waiver process is completed in the state. However, this move seems to be a failure as the Kolhapur District Central Cooperative Bank (KDCCB) has not received a single application for the interim loan.

On June 10, the state government announced a farm loan waiver of Rs. 34,000 crore amidst farmer
protests across the state. There are some conditions for the attainment of this loan which were scathed after farmer protests. Norms for possession of vehicles and salary slips were done away with.Despite the revised conditions, no one approached the district bank for the loan.

The chairman of KDCCB Hasan Mushrif said, "The Kolhapur district bank has not received any application for the interim loan of Rs 10,000. The bank does not have enough workforce to check statements filed in affidavit. We have not received any road map regarding the implementation of loan waiver." Farmers are of the view that Rs. 10,000 is a very small amount being offered by the state and that they need at least Rs. 25,000 at the time of sugarcane cultivation. Therefore, they are adopting other means of finance.More
Posted on: 2017-07-17 12:55:58