For 'biggest scam in India's history', RBI, two private sector banks get threat mails



The sender also claimed to have planted bombs at 11 locations across Mumbai, where the three banks – HDFC and ICICI are the other two – are headquartered.


The Reserve Bank of India (RBI), which is headquartered in Mumbai, and two city-based private sector banks (HDFC and ICICI) on Tuesday received threat mails, in which the sender accused the RBI and private sector banks of carrying out the ‘biggest scam in the history of India,’ and claimed to have planted bombs at 11 locations across the financial capital, Mint reported citing Mumbai Police.


The sender also demanded the resignation of Union finance minister Nirmala Sitharaman and RBI governor Shaktikanta Das, among others, for their 'involvement' in the so-called ‘scam.’


“We demand that both RBI Governor and Finance Minister to immediately resign from their posts and release a press statement with a full disclosure of the scam. We also demand government to give them both and all those who are involved the punishment they deserve,” the emails said, as per Mint.


Where were the ‘bombs’ planted?

Three of the locations at which the sender claimed to have planted bombs were: RBI-New Central Building, Fort; HDFC House-Churchgate; and ICICI Bank Towers, BKC (Bandra-Kurla Complex). Also, the mails warned that the explosives would detonate at 1:30 pm.


What did the police find?

The Mumbai Police said that upon being made aware of the mails, they sent their personnel to each of the 11 locations, though nothing was found.

“A case has been registered and the probe is underway,” a police official told news agency ANI.

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Latest Bank merger news of PSU banks and PSU Insurance Company

 


A government document shared on social media has triggered speculation about possible PSU bank mergers between Union Bank and UCO Bank, and Bank of India and Bank of Maharashtra. The document, whose source couldn't be verified, said that a Parliamentary committee will hold discussions with four PSU banks in the first week of January under banking laws, which govern mergers and acquisitions, among other things.

However, the government has not yet provided official information regarding the merger. Neither of the four PSU banks mentioned have made any stock exchange filings in this regard.


The document being circulated on X (formerly Twitter) is a government PDF issued in the name of Ramesh Yadav, Under Secretary of the Government of India. The letter is issued to the Governor, Reserve Bank of India, Chairman of LIC, IRDAI, and NABARD, along with MD and CEOs of UCO Bank, Bank of Maharashtra, Bank of India, and Union Bank of India.

The PDF is also addressed to CMDs of New India Assurance Company, United India Insurance Company, Oriental Insurance Company, National Insurance Company, and MD & CEO of SBI Life Insurance Company. The subject of the alleged government PDF states 'Study Visit programme of the Committee on Subordinate Legislation, Lok Sabha to Mumbai and Goa from 2 to 6 January 2024'.

The 2-day programme includes informal discussions with the representatives of Union Bank of India and UCO Bank on January 2, and with representatives of Bank of Maharashtra and Bank of India on January 4, 2024, on rules/regulations framed under Banking Regulations Act 1949 and other relevant Acts as applicable to them and the regulatory mechanism in post-merger scenario.

The Finance Ministry has reportedly issued a clarification, saying that this is a parliamentary committee on subordinate legislation, and it has no connection whatsoever with the policies of bank mergers, according to CNBC-Awaaz. Amid the merger buzz, the ministry reportedly changed the agenda of its meeting. According to the new agenda, there is no mention of the word “Merger”, which simply means that there is no proposal for a merger between Union Bank of India and UCO Bank, Bank of India, and Bank of Maharashtra, said CNBC Awaaz in its report.

Meanwhile, No proposal to merge the public sector banks is being considered by the government and the discussions were part of a ‘routine exercise, Reuters also reported citing two sources from the Ministry of Finance.










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Government To Meet RBI, NPCI And TRAI After UCO Bank Incident: What Caused 'Rs 820 Crore Technical Glitch' At The Bank


Public sector UCO Bank on Thursday said it has been able to recover around Rs 649 crore out of Rs 820 crore, which is about 79 per cent of the amount “erroneously credited” to some customers due to a technical issue in the Immediate Payment Service (IMPS).


“The bank has initiated requisite actions to recover the balance amount of Rs 171 crore and the matter has also been reported to the law enforcement agencies for necessary action,” it said in an exchange filing.


During the period from November 10 to 13, the bank observed that due to technical issue in IMPS, certain transactions initiated by holders of other banks have resulted in credit to the account holders in UCO Bank without actual receipt of money from these banks, UCO bank said in another filing. Money is instantly transferred in the IMPS system from one account to another account.


“The bank, as a precautionary measure, has made the IMPS channel offline and is working closely with the stakeholders to resolve the issue and restore the IMPS services at the earliest,” it said.


“The bank re-iterates and assures that all other critical systems are operational and available. The bank continues to provide safe and secured services to customers,” it said.


The financial impact, if any, due to the development is yet to be ascertained and the bank will endeavour to intimate the ascertainment, the bank said.

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RBI supersedes board of large Cooperative Bank for a year, cites poor governance

 


Abhyudaya Cooperative Bank's net non-performing assets (NPAs) ratio have zoomed up to 12 per cent, sources said on November 25. A day after the Reserve Bank superseded the city-headquartered bank's board, it has emerged that the cooperative bank's cost-to-income ratio had zoomed up to 80 per cent.


The RBI order on November 24 had superseded the board for 12 months on material concerns emanating from poor governance standards observed in the bank" but refrained from putting any business restrictions. They placed an administrator and an advisory panel to assist him.


People in the know said that poor governance led to gradual accumulation of NPAs and deterioration on the cost-to-income ratio. According to sources, the bank management led by chairman Sandeep Ghandat had hired excessively to win over voters in the Parbhani district of Maharashtra, which is a political base for the family.


In what should allay any concerns among customers, sources said the bank had made an operating profit in FY23, and has a sizeable proportion of the deposits in the low-cost current and savings account. The bank has also consistently maintained the statutory liquidity ratio and cash reserve ratio, those in the know said.


With the professional team looking after the day-to-day affairs of the bank, it will recover its bad loan to clean up its balance sheet and also improve operating efficiency," a person in the know said. The person added that Abhyudaya Bank will continue its normal business as there are no restrictions placed on it.


On November 24, there were reports saying that the RBI has agreed to open its currency chest for the next three days in order to ensure that all the ATMs of the lender dispense cash as sought by the depositors. The regulatory move against the bank was one of the biggest such actions against any cooperative lender after the PMC Bank case, where strong restrictions were put on the depositors as well.Abhyudaya Cooperative Bank's net non-performing assets (NPAs) ratio have zoomed up to 12 per cent, sources said on November 25. A day after the Reserve Bank superseded the city-headquartered bank's board, it has emerged that the cooperative bank's cost-to-income ratio had zoomed up to 80 per cent.


The RBI order on November 24 had superseded the board for 12 months on material concerns emanating from poor governance standards observed in the bank" but refrained from putting any business restrictions. They placed an administrator and an advisory panel to assist him.


People in the know said that poor governance led to gradual accumulation of NPAs and deterioration on the cost-to-income ratio. According to sources, the bank management led by chairman Sandeep Ghandat had hired excessively to win over voters in the Parbhani district of Maharashtra, which is a political base for the family.


In what should allay any concerns among customers, sources said the bank had made an operating profit in FY23, and has a sizeable proportion of the deposits in the low-cost current and savings account. The bank has also consistently maintained the statutory liquidity ratio and cash reserve ratio, those in the know said.


With the professional team looking after the day-to-day affairs of the bank, it will recover its bad loan to clean up its balance sheet and also improve operating efficiency," a person in the know said. The person added that Abhyudaya Bank will continue its normal business as there are no restrictions placed on it.


On November 24, there were reports saying that the RBI has agreed to open its currency chest for the next three days in order to ensure that all the ATMs of the lender dispense cash as sought by the depositors. The regulatory move against the bank was one of the biggest such actions against any cooperative lender after the PMC Bank case, where strong restrictions were put on the depositors as well.

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RBI Monetary Policy Meeting Highlights: RBI keeps interest rates unchanged

 The Monetary Policy Committee has on August 10 unanimously voted to leave the repo rate unchanged at 6.5 percent, RBI Governor Shaktikanta Das announced today. The Standing Deposit Facility rate is also retained at 6.25 percent; and the Marginal Standing Facility rate, Bank Rate is also retained at 6.75 percent. The MPC has also decided to remain focused on the withdrawal of accommodation with preparedness to act should the situation so warrant.The Reserve Bank of India's Monetary Policy Committee (MPC), has three members from the RBI and three external members. During the last MPC meeting in June, the repo rate was left unchanged. Today's decision marks the third time rates have been left unchanged. The central bank had earlier raised repo rates by a total of 250 bps since May 2022 with an aim to tackle inflation.



This is the third MPC meeting this fiscal. The MPC consists of three external members and three officials of the RBI. The external members of the panel are Shashanka Bhide, Ashima Goyal, and Jayanth R Varma. Besides Governor Shaktikanta Das, the other RBI officials in MPC are Rajiv Ranjan (Executive Director) and Michael Debabrata Patra (Deputy Governor).

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RBI imposes Rs. 2.5 crore penalty on three banks


The Reserve Bank of India (RBI) imposed a monetary penalty on three private and public sector lenders on Friday. The central bank charged Jammu & Kashmir Bank with 
Rs.2.5 crore penalty, while the Bank of Maharashtra faced a fine of Rs.1.45 crore. Axis Bank received the least amount of penalty among them to the tune of Rs.30 lakh.


Jammu & Kashmir Bank:

RBI imposed a Rs.2.5 crore penalty on J&K Bank for non-compliance with certain directions issued by RBI on ‘Creation of a Central Repository of Large Common Exposures-Across Banks’, read with ‘Central Repository of Information on Large Credits (CRILC) – Revision in Reporting’, ‘Loans and Advances – Statutory and other Restrictions’ and ‘Time-bound implementation and strengthening of SWIFT-related operational controls’.

According to RBI's inspection, J&K Bank non-complied in --- (i) failed to ensure integrity and quality of data submitted to CRILC, (ii) extended term loans to a corporation (a) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects are sufficient to take care of the debt servicing obligations and (b) failing to ensure that the repayment/servicing of said term loans were not made out of budgetary resources and (iii) created financial/non-financial messages in SWIFT without first ensuring that the underlying transactions have been duly reflected in the CBS.


Bank of Maharashtra:

This government-owned bank was imposed with Rs.1.45 crore penalty for non-compliance with certain directions issued by RBI on ‘Loans and Advances – Statutory and Other Restrictions’ and Advisory on ‘Man in the Middle (MiTM) Attacks in ATMs’ (the Advisory).

BoM committed non-compliance in the extent of --- (1) it sanctioned a term loan to a Corporation (i) in lieu of or to substitute budgetary resources envisaged for certain projects; (ii) without undertaking due diligence on the viability and bankability of the projects to ensure that revenue streams from the projects were sufficient to take care of the debt servicing obligations; and (iii) the repayment/servicing of which was made out of budgetary resources, and (2) it failed to implement required control measures for ATMs relating to end-to-end encryption of communication between the ATM terminal/PC and the ATM Switch, within the prescribed timeline.


Axis Bank:

Axis Bank, one of the leading private sector lenders, was penalised with Rs.30 lakh due to its non-compliance with certain provisions of the RBI directions on ‘Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances – Credit Card Accounts’.

As per RBI's inspection, Axis Bank had levied penal charges in certain accounts for late payment of credit card dues though the customers had paid the dues by the due date, through third party platforms.


Notably, before imposing the charges, RBI had sent notices to these three banks --- advising them to show cause as to why a penalty should not be imposed on them for failure to comply with the directions issued.


After considering the banks' reply to the notice, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted the imposition of monetary penalty on these banks.

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85% People Have Chosen To Deposit Rs 2,000 Notes Instead Of Exchanging Them, Reveals RBI Governor

 


In line with industry-wide expectations, the RBI today announced its decision to keep the repo rate unchanged for the second consecutive time in its MPC meeting. Given that this was RBI’s first MPC meeting after the Rs 2,000 note withdrawal decision, the RBI governor Shaktikanta Das did give an update regarding what the trends have been in the past three weeks. 


“Approximately half of the total Rs 2,000 notes in circulation have come back to the banks,” the RBI governor mentioned at the press conference after the MPC meeting this morning.


Citing bank data, the RBI governor said Rs 2,000 notes worth Rs 3.62 lakh crore were in circulation as of the end of March 2023, of which notes worth Rs 1.8 lakh crore have come back. About 85% of these notes that returned to banks have come back as deposits, Das revealed. This is in line with expectations, he said.


The RBI announced the Rs 2000 note withdrawal on May 19, 2023.

Following the announcement to scrap India's highest-denomination banknotes, economists had said they expected bank deposits to rise by as much as Rs 2 lakh crore, as per ET.


According to analysts, higher deposits will bring down banks’ deposit costs and likely impact their net interest margins or NIMs positively as credit demand remains broadly unchanged. As per RBI data, the percentage of Rs 2,000 notes at the time of their withdrawal was just 10.8% of total notes in circulation, which is a big drop from Rs 6.73 lakh crore at its peak in March 2018. 


Why The RBI Decided To Withdraw Rs 2000 Notes

The RBI withdrew Rs 2,000 notes from circulation in May as part of its 'clean note policy'. At the time of withdrawal, the central bank justified its move by saying these notes have served their purpose. As per an official announcement, people who hold these notes with them can get them exchanged or deposit them by September 30.


Unlike in the case of 2016's demonetisation, the present Rs 2,000 notes will continue to remain legal tender, as per RBI's statement.

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RBI imposes Rs 84.50 lakh penalty on this PSU Bank

 


RBI on Friday said it has imposed a penalty of Rs 84.50 lakh on Central Bank of India (the bank) for non-compliance with certain provisions of norms related to frauds classification and reporting. The Reserve Bank had conducted statutory inspection for supervisory evaluation of the bank with reference to its financial position as on March 31, 2021.


Examination of the reports revealed that the public sector lender had failed to report as fraud to RBI certain accounts within seven days of decision of Joint Lenders' Forum (JLF) to declare the accounts as fraud.


It had recovered SMS alert charges from its customers on flat basis rather than on actual usage basis.


The RBI had issued a notice to the bank advising it to show cause as to why penalty should not be imposed on it for failure to comply with the directions.


"After considering the bank's reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty...," the central bank said.


RBI, however, added the penalty is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

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Why has the RBI withdrawn Rs 2,000 notes?



The central bank has advised the public to deposit Rs 2000 banknotes, which were introduced after Rs 500 and Rs 1000 notes were withdrawn during the demonetisation exercise six years ago, into their bank accounts and /or exchange them into banknotes of other denominations at any bank branch.

Why has the RBI withdrawn Rs 2000 notes?

The Rs 2000 note was introduced in November 2016 under Section 24(1) of The RBI Act, 1934, primarily with the objective of meeting the currency requirement of the economy expeditiously after the legal tender status of Rs 500 and Rs 1000 notes was withdrawn. With the fulfilment of that objective, and once notes of other denominations were available in adequate quantities, the printing of Rs 2000 notes was stopped in 2018-19.

The RBI issued the majority of the Rs 2000 denomination notes prior to March 2017; these notes are now at the end of their estimated lifespan of 4-5 years. This denomination is no longer commonly used for transactions; besides, there is adequate stock of banknotes in other denominations to meet currency requirements.


“In view of the above, and in pursuance of the ‘Clean Note Policy’ of the Reserve Bank of India, it has been decided to withdraw the Rs 2000 denomination banknotes from circulation,” the RBI said.

And what is the Clean Note Policy?

The Clean Note Policy seeks to give the public good-quality currency notes and coins with better security features, while soiled notes are withdrawn out of circulation. The RBI had earlier decided to withdraw from circulation all banknotes issued prior to 2005 as they have fewer security features as compared to banknotes printed after 2005.


However, the notes issued before 2005 continue to be legal tender. They have only been withdrawn from circulation in conformity with the standard international practice of not having notes of multiple series in circulation at the same time.

So will the Rs 2000 banknotes continue to be legal tender?

The Rs 2000 banknote will continue to maintain its legal tender status, the RBI has said. Members of the public can continue to use Rs 2000 banknotes for their transactions and also receive them in payment. “However, they are encouraged to deposit and/ or exchange these banknotes on or before September 30, 2023,” the RBI said.


What will happen after September 30?

The RBI has not clarified the status of these notes after September 30. However, it has said that its instructions on the Rs 2000 notes will be effective until that date.


What should you do with the Rs 2000 notes you have?

The RBI has advised people to “approach bank branches for deposit and/ or exchange” of these banknotes. “The facility for deposit into accounts and exchange for Rs 2000 banknotes will be available at all banks until September 30, 2023,” the RBI has said. The facility for exchange will also be available until September 30 at 19 RBI Regional Offices that have Issue Departments.

Is there a limit on how much money you can exchange or deposit?

You can exchange Rs 2000 banknotes up to a limit of Rs 20,000 at a time. You don’t have to go your own bank — a non-account holder of bank also can exchange Rs 2000 banknotes up to a limit of Rs 20,000 at a time at any bank branch.


The exchange of Rs 2000 banknotes can also be made through business correspondents up to a limit of Rs 4000 per day for an account holder.


Deposits into bank accounts can be made without restrictions “subject to compliance with extant Know Your Customer (KYC) norms and other applicable statutory / regulatory requirements”, the RBI has said.


When can you start exchanging the Rs 2000 notes?

To give time to banks to prepare, RBI has asked people to approach branches or ROs of RBI from May 23 to exchange their notes.


What happens if someone has a very large number of Rs 2000 notes?

Technically, a person can seek multiple exchanges in packets of Rs 20,000 at a time. However, this is expected to attract the attention of enforcement agencies and the Income-tax Department. Those holding large sums of money in Rs 2000 notes are likely to find it difficult to exchange their money.

Could there be a repeat of the demonetisation chaos of 2016?

It is unlikely that bank branches will witness chaos and long queues like in 2016 this time. The printing of Rs 2000 notes was stopped in 2018-19, and they are no longer commonly seen with the public — unlike the ubiquitous Rs 500 and Rs 1000 notes in 2016.


Also, the decision to withdraw Rs 500 and Rs 1000 notes was announced suddenly, taking the public by surprise. The exchange Rs 2000 notes will begin only on May 23, so banks and the public have sufficient time.

Could there be a repeat of the demonetisation chaos of 2016?

It is unlikely that bank branches will witness chaos and long queues like in 2016 this time. The printing of Rs 2000 notes was stopped in 2018-19, and they are no longer commonly seen with the public — unlike the ubiquitous Rs 500 and Rs 1000 notes in 2016.


Also, the decision to withdraw Rs 500 and Rs 1000 notes was announced suddenly, taking the public by surprise. The exchange Rs 2000 notes will begin only on May 23, so banks and the public have sufficient time.

Banks holding currency chests (CCs) should ensure that no withdrawal of Rs 2000 denomination is allowed from the CCs. All balances held in the CCs should be classified as unfit and kept ready for dispatch to the respective RBI offices.

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RBI imposes penalties on BoI and Federal Bank


Reserve Bank of India (RBI) on Friday said it has imposed a penalty of Rs 5.72 crore on Federal Bank for deficiencies in regulatory compliance.


A  penalty of Rs 70 lakh has also been imposed on Bank of India for non-compliance with certain provisions of Know Your Customer (KYC) norms and instructions on 'compliance function in banks' issued by RBI, it said in a statement.


About Federal Bank, RBI said the bank failed to ensure that no incentive (cash or non-cash) was paid to its staff engaged in insurance broking/corporate agency services by the insurance company, according to a separate statement.



RBI had carried out Statutory Inspection for Supervisory Evaluation (lSE) of the bank with reference to its financial position as on March 31, 2020.


In another statement, RBI said a fine of Rs 7.6 lakh has been imposed on Dhani Loans and Services Limited, Gurugram for non-compliance with KYC norms.


RBI said the penalities are based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the two banks and Dhani Loans and Services with their customers.

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RBI imposes monetary penalty on this PSU bank for non-compliance

 


Before the penalty, RBI had conducted a statutory inspection for supervisory evaluation of the bank regarding its financial position as of March 31, 2020, and the examination of the Risk Assessment Report, Inspection Report, and all related correspondence about the same.


The Reserve Bank of India (RBI) on Friday imposed a monetary penalty of Rs.57.50 lakh on the government-owned Indian Overseas Bank for non-compliance with certain directions. The penalty was related to the directions issued by RBI on Frauds – Classification and Reporting by commercial banks and select FIs.


RBI said, "This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers."


Before the penalty, RBI had conducted a statutory inspection for supervisory evaluation of the bank regarding its financial position as of March 31, 2020, and the examination of the Risk Assessment Report, Inspection Report, and all related correspondence about the same.


As per the central bank, the inspection revealed non-compliance with the directions issued by RBI, inter-alia, to the extent the bank (i) failed to report certain instances of frauds involving ATM card cloning/skimming, to the RBI within three weeks from the date of detection, (ii) failed to ensure integrity and quality of data when it did not report credit information in CRILC on certain borrowers having aggregate exposure of Rs.5 crore and above, and (iii) linked certain floating rate loans to Micro and Small Enterprises, extended by it on or after October 01, 2019, to MCLR/Base Rate instead of an external benchmark.


Following this, RBI had issued a notice to the bank advising it to show cause as to why the penalty should not be imposed on it for failure to comply with the directions issued by the central bank.


After considering the bank’s reply to the notice and examination of additional submissions made by it, RBI came to the conclusion that the charge of non-compliance with the aforesaid RBI directions was substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with such directions.

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IDBI Bank Privatisation: Govt Likely to Invite EoIs in July-End After Discussions with RBI


The central government has been mulling the privatisation of IDBI Bank for quite some time now, and has kept the lender in its list of companies for divestment. The Department of Investment and Public Asset Management (DIPAM) is currently holding roadshows in the US for the sale of the bank, which is set to be another important landmark in reaching India’s divestment targets. The actual quantum of government stake sale at the IDBI Bank will be known once the roadshow is over, the Centre had said earlier in April.


Currently, the government is in the process of holding roadshows in the US, an official was quoted by PTI as saying, on June 10, Friday. After a few more such investor meets, it will finalise the contours of the IDBI Bank stake sale, the official added.


“We may need one more round of discussion with RBI on IDBI strategic sale. The expression of interest (EoI) may be invited by July-end," the official said. It was earlier confirmed by sources that the government may invite EoIs in May for selling its stake in IDBI Bank and expects to complete the disinvestment process in the current financial year 2022-23.


The official said while the quantum of stake dilution of both the government and LIC is yet to be decided, the management control in IDBI Bank will be transferred in the strategic sale.


DIPAM secretary Tuhin Kanta Pandey had in April also said that the EoIs will be invited once the meetings with investors were over. “The quantum of exit will be known post roadshow and then the structure of Expression of Interest will be finalised. One thing is very sure that management control will be passed on. Currently, it is with LIC. But, management control at what level of equity will have to be decided when we have decided the structure of EoI,” Pandey had said in Delhi during an event on LIC IPO roadshow.


The government holds 45.48 per cent stake in the bank, while LIC owns 49.24 per cent. Necessary amendments to the IDBI Bank Act have already been made through the Finance Act 2021, and transaction advisors have been appointed.


The Cabinet Committee on Economic Affairs had given in-principle approval for strategic disinvestment and transfer of management control in IDBI Bank in May last year. “CCEA has given an in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank Ltd”, a government had statement said.


In January 2019, IDBI Bank became a subsidiary of LIC, following the acquisition of additional 8,27,590,885 equity shares. In December 2020, IDBI Bank was classified as an associate company due to the reduction of LIC shareholding to 49.24 per cent. The IDBI Bank privatisation efforts come during a time when the government has put off similar plans for Bharat Petroleum.

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RBI slaps penalty of Rs 1.95 crore on this private bank


The Reserve Bank of India on Monday imposed a monetary penalty of Rs 1.95 crore on Standard Chartered Bank - India for failing to comply with guidelines issued for customer protection, cyber security, credit card operations and creation of central repository for large exposures.


The RBI conducted a statutory inspection of bank’s books and it’s inspection report revealed that that Standard Chartered had failed to credit the amount involved in the unauthorised electronic transactions back to customer accounts. The regulator’s inspection also revealed that the bank was not reporting cyber security incidents within the prescribed time period.


The RBI which conducted a statutory audit in the bank’s books found that the foreign lender was also non-compliant in authorising the direct sales agents to conduct KYC verification, and failed to ensure integrity and quality of data submitted in Central Repository of Information on Large Credits (CRILC).


“A notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of directions,@ the RBI said. “After considering the bank’s replies to the notice, oral submissions made during the personal hearing, and additional submissions made by the bank, RBI came to the conclusion that the charge of contravention was substantiated and warranted imposition of monetary penalty on the bank.

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RBI removes PCA framework from this PSU bank

  


The Reserve Bank of India on September 29 announced that it has lifted the curbs on Indian Overseas Bank and taken the bank out of the Prompt Corrective Action (PCA) framework, the central bank said in a release.

The board for financial supervision reviewed the performance of Indian Overseas Bank and noted that as per its published results for year ended March 31, 2021, the bank is not in the breach of PCA parameters, RBI said.

Further the bank has provided a written commitment that it would commitment that it would comply with the norms of minimum regulatory capital norms, net NPA and leverage ratio on an ongoing basis, RBI said.

Taking all the above into consideration, it has been decided that Indian Overseas Bank is taken out of the PCA restrictions subject to certain conditions and continuous monitoring, RBI said.

RBI had brought Indian Overseas Bank under the PCA framework in October 2015. The bank had been requesting to the central bank to take it out of the PCA framework.

The bank's MD & CEO, Partha Pratim Sengupta had said post the Q4FY21 results that, “As far as all the PCA ratios are concerned, we have been achieving it in the past quarters also, barring one ratio, which is the leverage ratio. With the ploughing back of the profits and also with the infusion of funds by the government of India, we are very, very comfortable in all the parameters.”

Indian Overseas Bank had received Rs 4,100 crore from the government.

Under the PCA norms, the central bank imposes business restrictions on banks having weak financial metrics and the restrictions are decided on a case to case basis.

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RBI lifts PCA restrictions from UCO Bank

 


State-owned UCO Bank will no longer be subject to strict lending curbs imposed by the Reserve Bank of India (RBI) in May 2017, as the central bank said on Wednesday that the lender has been taken out of the prompt corrective action (PCA) restrictions.

Following UCO Bank’s exit, two banks -- Indian Overseas Bank and Central Bank of India -- remain under PCA. The central bank uses PCA framework to rein in banks that have breached certain regulatory thresholds in bad loans and capital adequacy. PCA entails curbs on high-risk lending, setting aside more money on provisions and restrictions on management salary

UCO Bank, RBI said, has provided a written commitment that it would comply with the norms of minimum regulatory capital, net non-performing asset (NPA) and leverage ratio on an ongoing basis. The Kolkata-based lender has also apprised RBI of the structural and systemic improvements that it has put in place to help in continuing to meet these commitments.

“The performance of the UCO Bank, currently under the prompt corrective action framework of RBI, was reviewed by the Board for Financial Supervision. It was noted that as per its published results for the year ended 31 March 2021, the bank is not in the breach of the PCA parameters," RBI said

As on 31 March, UCO Bank’s net NPA ratio stood at 3.94%, down 151 basis points (bps) from the same period last year. Its total capital adequacy ratio under Basel III was at 13.74%, up 204 bps from Q4 of FY20.

RBI governor Shaktikanta Das said on 6 August that it has been taking banks out of the restrictive framework based on assessments.

“We keep on reviewing that position. Recently, we removed one public sector bank from PCA tag. And as and when required requests are received, we analyse it, if it meets RBI’s regulatory requirements and if in our assessment, we feel confident that it’s a fit case, the RBI will do the needful. So, we have been taking banks out of PCA," said Das.

The PCA framework was introduced in December 2002 as a structured early intervention mechanism along the lines of the Federal Deposit Insurance Corp.’s (FDIC) PCA framework. These regulations were later revised in April 2017. In a speech on 12 October 2018, then RBI deputy governor Viral Acharya had defended the revised PCA norms, calling it the required medicine to prevent further haemorrhaging of bank balance sheets. He had added that in spite of their worse capitalization and stressed assets ratio compared to other banks, PCA banks had credit growth that was as strong as that of other banks up until 2014.

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RBI cancels licence of Maharashtra-based bank


The Reserve Bank of India (RBI) on August 13 said it has cancelled the licence of Karnala Nagari Sahakari Bank of Maharashtra.
Consequently, the bank ceases to carry on banking business, with effect from the close of business on August 13, 2021, the RBI said in a release.


"The Commissioner for Cooperation and Registrar of Cooperative Societies, Maharashtra has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank," the RBI said.As per the data submitted by the bank, 95 percent of the depositors will receive full amounts of their deposits from Deposit Insurance and Credit Guarantee Corporation (DICGC), the RBI said.


The RBI said the bank does not have adequate capital and earning prospects and failed to comply with the requirements of various sections of the Banking Regulation Act, 1949.The continuance of the bank is prejudicial to the interests of its depositors and the bank with its present financial position would be unable to pay its present depositors in full, the RBI said, adding public interest would be adversely affected if the bank is allowed to carry on its banking business any further.


“The bank is prohibited from conducting the business of ‘banking’ which includes acceptance of deposits and repayment of deposits as defined in Section 5(b) read with Section 56 of the Banking Regulation Act, 1949 with immediate effect,” the RBI said.On liquidation, every depositor would be entitled to receive deposit insurance claim amount of deposits up to Rs five lakh from the DICGC, the RBI said.


This is the latest instance of the central bank clamping down on weak co-operative banks. In 2021 so far, the RBI has issued over 100 directives imposing various regulatory measures on erring or poorly run urban co-operative banks.Doing so, the central bank has continued the clampdown on the industry, which it kicked off in 2020.


Prior to Karnala Bank, the RBI cancelled the licence of three banks in 2021--Shivajirao Bhosale Sahakari Bank on May 31, Bhagyodaya Friends Urban Co-operative Bank Limited on April 22 and Vasantdada Nagari Sahakari Bank on January 11.Last year, it cancelled three permits--Karad Janata Sahakari Bank, CKP Co-operative Bank and the Mapusa Urban Co-operative Bank of Goa.


The RBI has a system in place to enforce punitive actions. The RBI’s Enforcement Department (EFD, set up in April, 2017 to separate enforcement action from supervisory process, identifies actionable violations from the inspection reports, risk assessment reports and scrutiny reports. Market intelligence reports, references from the top management and complaints are also used for investigation. An Adjudication Committee then adjudicates the violations and determines the quantum of penalty.


Besides punishing weak co-operative banks, the RBI has been tightening the rules for these institutions. On June 25, the central bank issued two back-to-back notifications on appointment of managing directors and chief risk officers of urban co-operative banks. The RBI said the tenure of the managing director shall not be for a period of more than five years at a time, subject to a minimum period of three years at the time of first appointment.


Also, the performance of the MD needs to be reviewed by the Board annually, the RBI said, adding the post of the MD or WTD (whole-time directors) cannot be held by the same incumbent for more than 15 years, the RBI said. Further, the UCBs need to ensure that the ‘fit and proper’ criteria of the MD, who should function under the overall general superintendence, direction and control of the Board of Directors, the RBI said.

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RBI eyeing 'phased introduction' of digital currency:Deputy Governor


The Reserve Bank of India is considering a “phased introduction" of a central bank digital currency as it will need legal changes to be made in the nation’s foreign-exchange rules and information-technology laws, Deputy Governor T. Rabi Sankar said.


Delivering a speech to outline the RBI’s plans on Thursday, Sankar said policymakers were considering running pilot programs for the proposed central bank digital currency. Its introduction will protect people from the volatility of private virtual currencies, he said.


“Central banks have increased their attention on digital currencies," in recent years, Sankar said, adding that the introduction of such currencies -- which will be backed by the sovereign -- will help in bringing down the usage of cash in the economy, while minimizing the damage to the public from the usage of private currencies.


Sankar’s speech comes just days after the European Central Bank took a major step toward a digital euro approving an “investigation phase" that could ultimately lead to a virtual currency being implemented around the middle of the decade. The next stage will last 24 months and aims to address key issues on design and distribution, the ECB said.


Most major central banks trail China where trials of a digital currency have started in several cities. Eastern Caribbean islands that share a central bank, including Grenada and St. Kitts and Nevis, have already launched their own versions. The US Federal Reserve and the Bank of England are looking into the possibilities for their economies.


Earlier this year, in its annual Report on Currency and Finance, the RBI said central bank-backed digital currencies could be designed to promote non-anonymity of monetary transactions and financial inclusion by direct transfers.


Interest-bearing digital fiat can also increase the economy’s response to changes in the policy rate, the RBI report said. In emerging markets, facing large scale-capital inflows, such a currency can act as an instrument of sterilization, alleviating the constraint that a finite stock of government securities in the central bank’s balance sheet poses, the report said.


On the downside, the RBI report said that since central bank digital currencies provide anonymity, they may have implications for cross-border transactions. To curb this, appropriate safeguards would need to be laid down under existing anti-money laundering and financial-terrorism laws.

Sankar said countries with partially convertible currencies could come under pressure and the banking system witness a flight of deposits, if central bank-backed digital currencies are introduced.


The RBI has expressed concern about cryptocurrencies on a number of occasions, citing issues such as money laundering and terrorism financing. The regulator banned banks and other regulated entities from supporting crypto transactions about three years ago, but the Supreme Court overruled that ban last year.

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KYC details can be updated by Dec 31; select limited KYC a/cs can be made fully compliant: RBI

 


Amid the second Covid-19 wave, the Reserve Bank of India (RBI) asked banks and other regulated financial entities not to impose any punitive restriction against customers for failure to update KYC till 31 December 2021.


The RBI has also decided to extend the scope of video KYC (know-your-customer) or V-CIP (video-based customer identification process) for new categories of customers such as proprietorship firms, authorised signatories and beneficial owners of legal entities.


"Keeping in view the COVID-related restrictions in various parts of the country, Regulated Entities are being advised that for the customer accounts where periodic KYC updating is due/pending, no punitive restriction on operations of customer account(s) shall be imposed till December 31, 2021," RBI Governor Shaktikanta Das said while announcing steps to deal with the COVID pandemic.


In his address, Das stressed that RBI stands in "battle readiness" to ensure that financial conditions remain congenial and markets continue to work efficiently.


The governor, who announced several set of measures in wake of the second wave of the COVID-19 pandemic, further said the central bank will continue to be proactive throughout the year – taking small and big steps – to deal with the evolving situation.

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Cabinet approves RBI's proposal to merge Lakshmi Vilas Bank with DBS Bank, all branches to function as DBS Bank, says RBI


Union Cabinet on Wednesday approved the merger of capital-starved Lakshmi Vilas Bank (LVB) with DBS Bank India. The Reserve Bank of India on 17 November proposed the merger of the 94-year-old lender with the Indian arm of Singapore’s DBS Bank. As part of the amalgamation, DBIL will infuse fresh capital of Rs.2,500 crore into LVB.

The central bank on 17 November placed Lakshmi Vilas Bank under one-month moratorium, superseded its board and capped withdrawals at Rs.25,000 per depositor. "With the merger, there will no further restrictions on the depositors regarding the withdrawal of their deposit," Union minister Prakash Javadekar said.


Analysts and global credit rating agencies have applauded RBI's move and said that it will benefit both parties. "The quick action taken by the RBI in the Laxmi Vilas Bank matter affirms the faith of the depositors in the banking system," Ajay Shaw, Partner, DSK Legal.


"LVB merger with another bank is a very prudent step in order to save the depositors and to mitigate the systematic disruption associated with it. The image of government and regulator gets enhanced by such timely action and response," said S Ravi, former chairman of Bombay Stock Exchange (BSE) and Managing Partner of Ravi Rajan & Co.


DBS was the first foreign bank to receive a banking licence after the central bank allowed foreign banks to set up a wholly owned subsidiary in 2014. "With DBS likely to use digital capabilities to enhance its physical footprint in India, the proposed deal could lead to a 30-40% increase in Indian assets of DBS," said JPMorgan analysts Harsh Wardhan Modi and Saurabh Kumar.


The regulator had put LVB under Prompt Corrective Action in September 2019. The lender earlier reported widening of its net loss at Rs.397 crore in the second quarter ended September 2020 due to rise in bad loans and provisions. On 25 September, the shareholders of the bank had voted out seven members from the board, including the then MD and CEO S Sundar. The RBI on 27 September appointed the CoD composed of three independent directors Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra, being headed by Meeta Makhan.


Moody’s said the merger will strengthen DBS’s business position in India by adding new retail and small and medium-sized customers.

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Moratorium on Lakshmi Vilas Bank, and what it means for depositors, financial sector


After the failures of IL&FS, Punjab & Maharashtra Cooperative Bank and DHFL, and the bailout of Yes Bank, the Reserve Bank of India decision to impose a 30-day moratorium on Lakshmi Vilas Bank Ltd (LVB) and put in place a draft scheme for its amalgamation with DBS Bank India, a subsidiary of DBS of Singapore, has raised concerns about the safety of the financial system.

Why was LVB put under moratorium and amalgamated with DBS Bank?

The RBI said the financial position of the Chennai-based LVB, which has a network of 563 branches and deposits of Rs 20,973 crore, has undergone a steady decline, with continuous losses over the last three years eroding the bank’s net-worth.

The bank has not been able to raise adequate capital to address these issues. It was also experiencing continuous withdrawal of deposits and low levels of liquidity. Serious governance issues in recent years have led to deterioration in its performance. LVB posted a net loss of Rs 397 crore in the September quarter of FY21, as against a loss of Rs 112 crore in the June quarter. Almost one fourth of the bank’s advances have turned bad assets. Its gross non-performing assets (NPAs) stood 25.4% of its advances as of June 2020, as against 17.3% a year ago.

A recent merger proposal had come from AION-backed Clix Capital but the discussions didn’t work out. The bank was earlier wooed by SREI Capital. It almost tied up with Indiabulls Housing Finance, but the RBI objected to the merger proposal. The bank management had indicated to the RBI that it was in talks with certain investors, but failed to submit any concrete proposal.

Are depositors and the financial system safe?

The RBI, which put a cap of Rs 25,000 on withdrawals, has assured depositors of the bank that their interest will be protected. The combined balance sheet of DBS India and LVB would remain healthy after the proposed amalgamation, with Capital to Risk Weighted Assets Ratio (CRAR) at 12.51% and Common Equity Tier-1 (CET-1) capital at 9.61%, without taking into account the infusion of additional capital.

The RBI had earlier this year bailed out Yes Bank through a scheme backed by State Bank of India and other banks. One safety net for small depositors is the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, which gives insurance cover on up to Rs 5 lakh deposits in banks. The RBI and the government have often assured that the financial system is safe and sound, but a spate of failures have the potential to affect the confidence of depositors.

What has gone wrong with the sector?

The collapse of IL&FS in 2018 had set off a chain reaction in the financial sector, leading to liquidity issues and defaults. Punjab & Maharashtra Co-op Bank was hit by a loan scam involving HDIL promoters and the bank is yet to be bailed out. The near-death experience of Yes Bank in March 2020 sent jitters among depositors. The RBI action against LVB was expected after shareholders recently voted against the appointment of seven directors to its board.

Old-generation private banks had come under the spotlight, with shareholders of LVB and Dhanlaxmi Bank recently firing their chief executive officers in the span of a week. The LVB episode started unfolding after the RBI and banks led by SBI bailed out fraud-hit Yes Bank. The RBI has been monitoring the performance of private banks and large NBFCs.

What happens to investors in these banks?

Shareholders in Yes Bank faced a significant erosion in wealth as the stock price crashed below Rs 10 per share from a peak of Rs 400 per share. In the case of LVB, equity capital is being fully written off. This means existing shareholders face a total loss on their investments unless there are buyers in the secondary market who may ascribe some value to these. Shares of LVB closed at 20% lower circuit Wednesday. In its draft scheme for the amalgamation, the RBI said that “On and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off.”

In the case of Yes Bank, too, some individual investors faced a total loss on their investments in AT-1 bonds. Nearly Rs 9,000 crore worth of AT-1 bonds sold to various institutional investors, and to high net worth individual investors in the secondary market, were fully written off. As per RBI rules based on the Basel-III framework, AT-1 bonds have principal loss absorption features, which can cause a full write-down or conversion to equity. 📣 Express Explained is now on Telegram

What are the issues facing old-generation private banks?

The functioning of many such banks has been under scrutiny in the last couple of years, as most of them do not have strong promoters, making them targets for mergers or forced amalgamation. Two other South-based banks – South Indian Bank and Federal Bank – have been operating as board-driven banks without a promoter. In Karur Vysya Bank, the promoter stake is 2.11%, and in Karnataka Bank, there’s no promoter. The problems in LVB follow the similar challenges faced by Yes Bank as well as Punjab & Maharashtra Co-operative Bank in recent times.

What has been the regulatory response to these failures?

On July 24, 2004, the RBI, then headed by Y V Reddy, announced a moratorium on private sector lender Global Trust Bank, which was then reeling under huge losses and bad loans. The bank was merged with public sector Oriental Bank of Commerce within 48 hours under an RBI-led rescue plan.

Nearly 16 years later, the RBI has followed a somewhat similar approach on resuscitation of the troubled lenders of Yes Bank and now LVB. The moratorium announcement was followed by a reconstruction plan for Yes Bank and capital infusion by banks and financial institutions, with State Bank of India, ICICI Bank, Kotak Mahindra Bank, HDFC, Axis Bank and others putting in equity capital in the reconstructed entity. While banking observers agree that the RBI has acted whenever a bank or an NBFC faced trouble, the question remains whether it made the interventions swiftly.

Will loan stress caused by the pandemic impact the banking system?

NPAs in the banking sector are expected to increase as the pandemic affects cash flows of people and companies. However, the impact will differ depending upon the sector, as segments like pharmaceuticals and IT seem to have benefited in terms of revenues. NPA accretion in cash-rich sectors like IT, pharmaceuticals, FMCG, chemicals, automobiles is expected to be smaller when compared to areas like hospitality, tourism, aviation and other services.

An expert committee headed by K V Kamath recently came out with recommendations on the financial parameters required for a one-time loan restructuring window for corporate borrowers under stress due to the pandemic. Corporate sector debt worth Rs 15.52 lakh crore has come under stress after Covid-19 hit India, while another Rs 22.20 lakh crore was already under stress. This effectively means Rs 37.72 crore (72% of the banking sector debt to industry) remains under stress. Companies in sectors such as retail trade, wholesale trade, roads and textiles are facing stress, whie NBFCs, power, steel, real estate and construction were already under stress when the pandemic began.

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