PSU banks announce share-swap ratios ahead of April 1 merger

Following the footsteps of State Bank of India and Bank of Baroda, the boards of 10 public-sector banks on Thursday approved mergers and issued share-swap ratios to create four large banks in the economy.
The four anchor banks will be Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank. The merger will be effective from April 1.
Last year, Bank of Baroda took over Vijaya Bank and Dena Bank. Before that, State Bank of India (SBI) had merged all its five associate banks with itself to enter the global top 50 banks’ list in terms of size. Punjab National Bank (PNB) will merge with United Bank of India and Oriental Bank of Commerce to create the largest bank in the country after State Bank of India.

According to notifications to the stock exchanges, Delhi-based PNB will issue 1,150 shares for 1,000 shares of Oriental Bank of Commerce, and 121 shares for 1,000 shares of United Bank of India.
Mumbai-based Union Bank of India will take Andhra Bank and Corporation Bank. Union Bank of India will issue 325 shares for 1,000 shares of Andhra Bank, and 330 shares for 1,000 shares of Corporation Bank.
Bengaluru-based Canara Bank will issue 158 shares for 1,000 shares of Syndicate Bank.
Allahabad Bank said for every 1,000 shares (face value Rs 10) of Allahabad Bank, there would be 115 shares (face value Rs 10) of Indian Bank.
The Union Cabinet had approved the consolidation to build the mega banks “to create more efficient and bigger public sector banks in the challenging environment to meet the credit needs of a growing economy and to achieve operational efficiency by scale of business”. The amalgamation will lead to a wide geographical reach, technology adaption, and, more importantly, better utilisation of scarce capital.
A grievance redress system has been put in place, and a committee has been formed headed by a retired judge. If shareholders have any issue with the swap ratio — for example, if they feel they didn’t get enough time or if they need information — they can raise it. This is the board-approved swap ratio.
“After the committee receives all the grievances, it will have seven days to recommend changes, if needed, which will be the final swap ratio,” said a top official of a PSB to be merged.
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Allahabad Bank Q3 net loss widens over two-fold


Allahabad Bank on Tuesday reported an over two-fold jump in standalone net loss for the December quarter at ₹1,986.26 crore on higher bad loans and provisioning.

The state-owned lender had reported a net loss of ₹733 crore in the corresponding October-December period of the previous fiscal.

Total income (standalone) during the quarter under review grew to ₹4,860.35 crore from ₹4,756.88 crore in the same period of 2018-19.

The bank's gross non-performing assets (NPAs) rose to 18.93 per cent of the gross advances by the end of the December quarter as against 17.81 per cent a year ago.

However, it was down sequentially from 19.05 per cent at the end of September 2019.

In value terms, the gross NPAs or bad loans rose to ₹32,149.92 crore from ₹28,218.79 crore a year ago.

Net NPAs, however, came down to 5.13 per cent ( ₹7,449.27 crore) from 7.70 per cent ( ₹10.865.26 crore), Allahabad Bank said.

Provisions for bad loans for the quarter increased to ₹3,003 crore from ₹1,900 crore a year ago, it said.

"The bank is carrying additional provision of ₹1,801.26 crore over and above the provisions required to be made in terms of prudential norms issued by RBI, to ensure compliance with the PCA norms of net NPAs," the bank said.

The losses on consolidated basis too widened to ₹1,980.82 crore for the quarter from ₹746.83 crore in the year ago period. Income was higher at ₹5,009.57 crore as against ₹4,896.75 crore.

As a relief to MSME borrowers registered under GST, the Kolkata-headquartered lender said as many as 667 such accounts were restructured for an outstanding amount of ₹348.13 crore.

For the accounts covered under the Insolvency and Bankruptcy Code (IBC), the bank is holding provision of ₹6,292.47 crore (100 per cent of total outstanding as on December 31, 2019).
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These PSU Banks to get Rs.8,655 crore for preferential allotment

The government has approved releasing Rs.8,655 crore to three public sector lenders -- Allahabad Bank, Indian Overseas Bank (IOB) and UCO Bank -- for preferential allotment of shares.

The Ministry of Finance has approved infusing fresh capital amounting to Rs.2,153 crore in Allahabad Bank, Rs.2,142 crore in UCO Bank and Rs.4,630 crore in IOB via for preferential allotment of shares.


Fresh capital infusion by the government is a part of the announcement made by Finance Minister Nirmala Sitharaman, in her maiden Budget on 5 July.

Sitharaman had first proposed a capital infusion Rs.70,000 crore in public-sector banks in two phases. First, banks were to subscribe to bonds floated by the government and in the second phase, the government was to infuse the money into these banks.

As of 20 November, the government had infused Rs.60,314 crore in public-sector banks of the total of Rs.70,000 crore that was announced for these banks.

At 12.16pm, the shares of Allahabad Bank were nearly 8% up at Rs.19.15 apiece. Shares of UCO Bank were higher by 3.6% and IOB nearly 9% at Rs.17.40 and Rs.12.25 , respectively.


All these three banks are currently under the Reserve Bank of India’s prompt corrective action (PCA) framework and their ability to exit the same will be driven by a reduction in net non-performing asset ratio to less than 6.0% and maintenance of capital conservation buffer, which further depends on the capital infusion by the government.
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Allahabad bank Q2 net loss widens


Allahabad Bank on Friday reported widening of net loss to Rs 2,103.19 crore for the September quarter 2019-20 due to higher provision for bad loans. The state-owned lender had registered a loss of Rs 1,816.19 crore during the year-ago period, according to a regulatory filing.

In the preceding June quarter, the bank clocked a profit of Rs 128 crore.

Total income during July-September 2019 however rose to Rs 4,725.23 crore from Rs 4,492.23 crore in the same period last fiscal, the filing said.

Gross non-performing assets (NPAs) or bad loans increased to 19.05 per cent (Rs 31,467.53 crore) of the gross advances as on September 30, 2019 from 17.53 per cent (Rs 27,236.19 crore) by the same period of 2018.

Net NPAs came down to 5.98 per cent (Rs 8,502.09 crore) from 7.96 per cent (Rs 11,082.74 crore) in the year-ago period, it said.

The provisioning for bad loans spiked to Rs 2,721.97 crore in the second quarter, from Rs 1,991.88 crore in the year-ago period.

During the quarter under review, the bank made additional provision of Rs 1,982.41 crore over and above the provisions required to be made in terms of prudential norms issued by the RBI, to ensure compliance with the PCA norms of the net non-performing advances, it added.

The bank said it made no additional provisioning for the cases admitted under NCLT (list 1 and 2) as per the Insolvency and Bankruptcy Code for the quarter as well as first half ended September of this fiscal as it had already parked Rs 749.51 crore as at March-end 2018 towards these.

The non-performing loan provision coverage ratio of the bank is 79.30 per cent, it said.

"Pursuant to Government of India letter dated August 30, 2019 on amalgamation of PSBs, the board of directors in its meeting held on September 16, 2019 has considered and accorded its in-principle approval for amalgamation of the bank with Indian Bank and commencement of the amalgamation process, subject to all applicable approvals," Allahabad Bank said.

Further, the bank is evaluating the option of lower corporate tax under the amended tax rules.
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Allahabad Bank Q1 result, posts a net profit

Allahabad Bank reported a net profit of Rs 128 crore in Q1 June 2019 as compared to a net loss of Rs 1944.37 crore in Q1 June 2018.

Bank's gross non-performing assets (NPAs) stood at Rs 28,703.47 crore as on 30 June 2019 as against Rs 28,704.78 crore as on 31 March 2019 and Rs 25,067.55 crore as on 30 June 2018.

The ratio of gross NPAs to gross advances stood at 17.43% as on 30 June 2019 as against 17.55% as on 31 March 2019 and 15.97% as on 30 June 2018.

The ratio of net NPAs to net advances stood at 5.71% as on 30 June 2019 as against 5.22% as on 31 March 2019 and 7.32% as on 30 June 2018.

The provisions and contingencies declined 63.48% to Rs 1008.80 crore in Q1 June 2019 from Rs 2762.82 crore in Q1 June 2018. Provision coverage ratio of the bank was at 78.58% as on Q1 June 2019.

Bank's capital adequacy ratio (Basel III) rose to 12.55% in Q1 June 2019 from 6.88% in Q1 June 2018.

The Government of India holds 92.1% stake in Allahabad Bank as of 30 June 2019.


Allahabad Bank is a leading public sector commercial banks in India, offering banking products and services to corporate and commercial customers and retail customers.
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Five PSU banks have over 70% NPA from industry in FY19


The non-performing assets (NPAs) in the industry sector accounted for over 50 per cent of the total bad debts in 18 of the 20 state-run banks in 2018-19, indicating the massive concentration risk still facing the banking sector.

Five state-run banks reported that bad debts from industry contributed more than 70 per cent of their total NPAs, according to Reserve Bank of India (RBI) data presented by the Finance Ministry to the Lok Sabha Monday.

Alarmingly, of these five banks, four are relatively smaller ones.

Andhra Bank had the highest share of industry bad debts at 86 per cent, followed by United Bank of India (UBI) at 78 per cent and Indian Bank at 74 per cent.

The country’s largest bank, State Bank of India (SBI) had 73 per cent of its bad debts from the industry sector, followed by Allahabad Bank at 70 per cent.

Only two banks saw the share of industry NPAs at less than 50 per cent — Syndicate Bank and Bank of India at 36 per cent and 49 per cent, respectively.

Industry issue
Basic metals and metal products, gems and jewellery, engineering, vehicles, construction and textiles have been the major groups within industry seeing high levels of stress, RBI had pointed out in its December 2018 report of trends and progress in banking in India.

In 2017-18, even though industry received 37.3 per cent of total loans and advances by all the banks, it contributed to about three-fourth of the total NPAs.

However, with resolution under the Insolvency and Bankruptcy Code (IBC) picking up pace in 2018-19, industry NPAs have been coming down and banks have been making better recoveries.

The gross NPAs of state-run banks as of March 2019 was at Rs 8.06 lakh crore, as against Rs 8.95 lakh crore in the year-ago period.

Steps taken to resolve bad debts
The Modi government has announced many steps over the last few years to tackle the burgeoning bad debt problem. These include enactment of the IBC, amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, staffing the debt recovery tribunals, and asking banks to crack down on defaulters.

However, despite all these steps, resolution of bad debts has been a slow process, forcing the Modi government to go in for a massive bank capitalisation drive to ensure that state-run banks do not breach any regulatory capital requirements.

The government has also accelerated the bank consolidation drive by merging a big banks with smaller, lesser-performing ones to create a large competitive entity. The government merged State Bank of India with its associate banks and followed it with the merger of Bank of Baroda, Vijaya Bank and Dena Bank.
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Another PSU Bank reports Rs 1,775 cr fraud by Bhushan Power & Steel

Kolkata-headquartered state owned lender, Allahabad Bank, has reported a fraud of Rs 1774.82 crore by Bhushan Power & Steel to the Reserve Bank of India (RBI).
In a stock market notification, on July 13, the bank has alleged misappropriation of funds and manipulation in the books of accounts by Bhushan Power & Steel to raise money from a consortium of banks.
The lender further added that a provision of Rs 900.20 crore has already been made against the exposure.
“It has been observed that the company has misappropriated bank funds, manipulated books of accounts to raise funds from consortium lender banks. At present, the case is at NCLT which is in advance stage and the Bank expects good recovery of the account,” it said in a notice to the bourses.
Allahabad Bank is the second lender after Punjab National Bank (PNB) to report a fraud by Bhushan Power & Steel. Earlier this month, PNB reported a Rs 3,800 crore fraud by the company.
 Bhushan Power & Steel defaulted on Rs 47,700 crore worth of loans in 2017 and was one of the 12 cases referred for resolution under Insolvency and Bankruptcy Code.
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Four PSU Banks fined for violation of KYC norms by RBI

The Reserve Bank of India (RBI) has imposed a penalty of Rs 1.75 crore on four public-sector banks, including PNB and UCO Bank, for non-compliance with KYC requirement and norms for opening of current accounts. While PNB, Allahabad Bank and UCO Bank have been fined Rs 50 lakh each, a Rs 25-lakh penalty has been imposed on Corporation Bank.



Giving details, the RBI said the penalty has been imposed for non-compliance with certain provisions of directions issued by it on know your customer norms or anti-money laundering standards and opening of current accounts. The action, however, 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 banks with their customers, the RBI added.




In a stock exchange filing on Tuesday, UCO Bank said, “We inform that the RBI in exercise of powers conferred under Section 47 (A) (1) (c) read with Section section 51 and 46 (4) (1) of the Banking Regulation Act, 1949, has imposed a penalty of Rs 5 million (Rs 50 lakh) on UCO Bank for non-compliance of RBI directives on ‘KYC norms/AML standards/CFT/obligation of banks and financial institutions under PMLA 2002’ and also on ‘opening of current accounts by banks — need for discipline’.”




Similarly, Allahabad Bank, in a stock exchange filing, said the RBI has imposed a penalty of Rs 50 lakh on the bank for non-compliance of the directions issued the by RBI on “KYC norms/AML standards” and “opening of current accounts”.
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