Indian Banks & Financial System

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Manish_P
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Re: Indian Banks & Financial System

Post by Manish_P »

Mumbai hawala ‘king’ arrested for Rs 2,000 crore laundering
Mohammad Farooq alias Farooq Shaikh, one of the city’s biggest hawala operators, was arrested by the Enforcement Directorate (ED) on Tuesday in a Rs 2,253-crore money laundering case involving his Stelkon Infratel Pvt Ltd. Stelkon was part of Farooq’s network of 160 shell companies and was run from a one-room office in Zaveri Bazaar.

Farooq was on the radar of various probe agencies since 2014 and is believed to be associated with underworld elements, said officials.The Directorate of Revenue Intelligence had investigated the case of inflated remittances abroad and submitted a report to the ED in 2016 for action under the Prevention of Money Laundering Act. Last May, the CBI registered a case as it suspected the role of bank officials in the scam (see box). Subsequently, ED too registered a money laundering case against the same set of the accused.
ED officials said Farooq used his accounts with co-operative banks to deposit cash collected from his clients. After routing the money through several layers of transaction, he would bring the money into his accounts, mainly in nationalized banks, and then make the remittances after submitting forged documents. The CBI FIR says it appears that the banks did not exercise any due diligence in verifying the genuineness of the importers and the documents submitted during the request for remittances. “There appears to be no cross-checking regarding the veracity of the bill of entry before permitting the amount to be remitted,” it added. Sometimes, against a single bill of entry, the fraudsters remitted money several times through multiples banks or branches. Or, based on forged documents, the importers inflated the value of the imports and remitted this inflated amount.
chetak
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Re: Indian Banks & Financial System

Post by chetak »

^^^^^^^

It only means that politically connected folks benefited from his business and it was in their interest to keep it running.

Some poor low level joe will be jugged and hauled over the coals and everyone will then pretend that all have done a great job in the fight against black money.

Business as usual and now, on to the next "grand" secular scheme of money making.

Same actors, same script but different shell company and different bank.
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Re: Indian Banks & Financial System

Post by Supratik »

Vijay Mallya looses a lawsuit in UK.

https://economictimes.indiatimes.com/ne ... 080899.cms
Manish_P
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Re: Indian Banks & Financial System

Post by Manish_P »

Over 2000 ATMs shut down by banks in just 10 months
More than 2000 ATMs were closed in the ten months between May 2017 and February 2018 in different locations of the country, RBI data examined by FE Online said. The total number of onsite bank ATMs now stand at 107,630 from nearly 110,116 in May 2017, as on February 2018. The number of offsite bank ATMs have in fact increased and are now 99,029 from 98,360 in May 2017. The ATMs which are located at the branch premises are called on-site ATMs and the ATMs located away from the branch is called off-site ATM.
In order to reduce the cost associated with setting up and maintaining ATMs banks are shutting them down, said DT Franco, General Secretary, All India Bank Officers’ Confederation (AIBOC) told FE Online.
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Re: Indian Banks & Financial System

Post by Vasu »

Aadhaar has emerged as key document for new bank accounts: Survey

Image
Aadhaar has emerged as an enabler for financial inclusion with 76% to 95% of new accounts opened in different states relying on biometric identification but steps are needed to improve continued usage of these bank accounts, says a survey that analysed three-year data from rural Andhra Pradesh, Rajasthan, and West Bengal.

Use of Aadhaar, the 12-digit biometric identity number issued by the Unique Identification Authority of India, is likely to widen for delivery of public services with the government planning major welfare schemes like the Ayushman Bharat National Health Protection Mission that will cover 500 million people.

Despite growing access to bank accounts among Indian adults, the survey found only a subset of accounts were actively in use—66.6% in Andhra Pradesh, 58.1% in West Bengal, and 44.9% in Rajasthan. “The next major challenge in financial inclusion is active participation in the financial ecosystem,” it said.
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Re: Indian Banks & Financial System

Post by Thakur_B »

Word in the market is that the PSU Bank's that have gone under PCA or likely to do do will be cutting down perks of the employees (lease, petrol, telephone) to a tune of 15-20% resulting in pay cut of ₹4-5k on the juniourmost officers. This will put significant pressure on employees who already have to put up with staff shortages and frankly brutal work environment on top of already low pay.
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Re: Indian Banks & Financial System

Post by Raveen »

Thakur_B wrote:Word in the market is that the PSU Bank's that have gone under PCA or likely to do do will be cutting down perks of the employees (lease, petrol, telephone) to a tune of 15-20% resulting in pay cut of ₹4-5k on the juniourmost officers. This will put significant pressure on employees who already have to put up with staff shortages and frankly brutal work environment on top of already low pay.
...and yet manage to remain the most unproductive, unfocused, and plain offensive gavermint folks you'll deal with
Neshant
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Re: Indian Banks & Financial System

Post by Neshant »

Its getting to the point when we can ask - do we even need banks?

Technology already exists to connect borrower to creditor directly and automate the enforcement of contracts without the need of middlemen skimming fees and becoming corrupt.

Naturally, the vast number of middlemen who profit from the current system are dead set against it as it would mean the end of their livelyhoods.
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Re: Indian Banks & Financial System

Post by nachiket »

Neshant, please take your "All bankers are crooks" theories to the Perspectives on Global Economic changesthread. No more here.
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Re: Indian Banks & Financial System

Post by ArjunPandit »

https://www.hindustantimes.com/business ... U9sUJ.html
This is to ensure NBFCS have enough liquid assets that can be converted to cash to fund the outflows for 30 days in a scenario of acute liquidity stress. With these guidelines, NBFCS will need to stick to ALM and liquidity discipline at all times. More importantly, this will provide comfort to debt market participants that NBFCS will always be prudent on liquidity,” said Kotak in a note.
Analysts note that it will also have an impact on margins. “The need to hold liquid assets will be a drag on margins and may also push some of them to consolidate even more and increase desperation to securitise. Those NBFCS with ALM gaps, lower ratings, and higher funding cost are worse off. NBFCS with better ratings, balanced ALMS, and diversified funding mix are better off,” said CLSA, a capital markets and investment group, in a recent report.
for depositors, it is a good move. On one hand, they will be offered higher interest rate and on the other hand, the balance sheet of NBFCS will get stronger. The changes of defaults on the depositors’ money will go down,”
In general i have not seen this happening in global context. Not sure the same will happen in indian context either
Manish_P
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Re: Indian Banks & Financial System

Post by Manish_P »

This looks like a ponzi scam added to a political scam but is 'Islamic Banking' allowed in India? Looks like probably the 'owner' has done a post ramadan flight to purer lands..

Bengaluru: After raising Rs 2,000 crore, owner of 'bank' threatens suicide
Hundreds of investors gathered at the office of financial firm I Monetary Advisory (IMA) in Shivajinagar, Bengaluru, on Monday morning after its founder-owner, Mohammed Mansoor Khan , purportedly stated in an audio clip that he was ending his life as he was "tired of bribing corrupt politicians and bureaucrats".

In the audio clip, reportedly addressed to the city police commissioner, Khan alleged senior Congress leader and Shivajinagar MLA R Roshan Baig had refused to return the Rs 400 crore he had taken and that there was a threat to his life. The police are yet to ascertain if Khan has indeed ended his life and have intensified their search for the founder-owner and his family members.

Launched in 2006, IMA, an Islamic banking and halal investment firm, promised returns ranging from 14% to 18% per month before its operations turned into a sort of Ponzi scheme.
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Re: Indian Banks & Financial System

Post by ArjunPandit »

^^PSBs can't but NBFCs can..RBI said no to it. Anyways Indian financial system is not straight fwd to add another layer of complexity to it, esp in high interest regime. With the level of operational risks embedded in Indian system it would be a recipie of disaster unless backed by sharia punishment mechanism

http://www.livemint.com/Industry/GSa1m3 ... s-RBI.html

and then the usual suspects dissing bjp govt

https://thewire.in/banking/islamic-banking-rbi
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Re: Indian Banks & Financial System

Post by Sachin »

Manish_P wrote:This looks like a ponzi scam added to a political scam but is 'Islamic Banking' allowed in India? Looks like probably the 'owner' has done a post ramadan flight to purer lands..
The latest update is that Bangalore Police actually hired a wedding hall to setup counters to receive complaints from the people (mainly from Muslim community) who lost their deposits in the scam. And there is a Karnataka local act which kinds of give "protection" to people who invest in various deposit funds etc. But that act is not going to be of any help, because the "Islamic banker" added the members not as depositors (who deposit money earning interest), but as "share holders" :lol:. Now do share holders get their money back, when the company goes kaput?
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Re: Indian Banks & Financial System

Post by JTull »

Most Islamic bonds resemble equity investments as interest is not sharia-compliant. They must be invested in businesses and real assets (which must in-turn be sharia compliant) as income from real assets is allowed. For example, return from a business or rent. Consequently, returns may be high (equity-like) but loss of capital is also possible. This is just Islamic banking 101. Please google sukuk for more info.

I think Islamic banking has lot of potential in country like India, and must be tapped. It will ensure a large part of the population to have a stake in local economy. Problem in Bengaluru was that the 'banker' was unscrupulous. Govt needs to appoint a regulator for the sector so that the downstream investments can be audited and tracked properly. First task of any regulator is usually to require a compliance officer in regulated entities. Fraud is still possible, but without regulation there's no deterrence.
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Re: Indian Banks & Financial System

Post by nandakumar »

I remember as a school kid, I once went along with my mom to a house a few blocks up the street. Apparently my mom and few others were part of a group that contributed Rs 5 every month and members would gather at this particular house where the lady of the house would organise the auction to bid for this amount. Since there is usually more than one member wanting the pool the winning bidder must be one who is prepared to suffer the maximum discount. The resultant discount is then distributed to other members with the lady organising the pool also getting an equal share. Nobody minds it as each one gets a share every month including the winner of each month as they all gain in the other months to the one where they bid for the pool at a discount. Did the lady break the law on banking? No. Because she didn't call her venture as a bank. Did she break the SEBI law? No. Because she did not make a public announcement. Is it sharia compliant? Of course. Because the discount every one earns is not interest. Now multiply this model by a factor of 'n', the answer is still the same. Modify it slightly in the sense you say they Group members can SMS the bids and it would still be legal. Modify it ever more slightly in that there is actually no real group but the few gullible investors think there is one. That would still not be breaking any law on banking or capital markets. You bet word of mouth soon results in every one wanting a piece of the action.
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Re: Indian Banks & Financial System

Post by JTull »

nandakumar wrote:I remember as a school kid, I once went along with my mom to a house a few blocks up the street. Apparently my mom and few others were part of a group that contributed Rs 5 every month and members would gather at this particular house where the lady of the house would organise the auction to bid for this amount. Since there is usually more than one member wanting the pool the winning bidder must be one who is prepared to suffer the maximum discount. The resultant discount is then distributed to other members with the lady organising the pool also getting an equal share. Nobody minds it as each one gets a share every month including the winner of each month as they all gain in the other months to the one where they bid for the pool at a discount. Did the lady break the law on banking? No. Because she didn't call her venture as a bank. Did she break the SEBI law? No. Because she did not make a public announcement. Is it sharia compliant? Of course. Because the discount every one earns is not interest. Now multiply this model by a factor of 'n', the answer is still the same. Modify it slightly in the sense you say they Group members can SMS the bids and it would still be legal. Modify it ever more slightly in that there is actually no real group but the few gullible investors think there is one. That would still not be breaking any law on banking or capital markets. You bet word of mouth soon results in every one wanting a piece of the action.
Please take adequate legal advice before embarking on such a venture. Taking deposits or receiving lumpsum payments on large scale with WhatsApp will run foul of securities and IT laws. There are both Contract and Tort law implications. Offers such as these or holding (/organising) an auction (invitation to treat) can be binding contracts. Your diligence, intent and will are questioned if any of the parties do not fulfill their obligations.
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Re: Indian Banks & Financial System

Post by nandakumar »

JTull
No I am not embarking on any such venture. All that I am saying is that accepting deposits and on lending is not against the law as long as you are not adding the word "bank" to whatever you are doing. Equally what constitutes public solicitation of funds has been a problematic issue for SEBI. Surely Sahara would not have happened nor indeed Sarada unless there was a structural problem?
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Re: Indian Banks & Financial System

Post by ArjunPandit »

https://www.livemint.com/industry/banki ... 23645.html
The committee reports that India’s central bank is yet to publish the securitisation framework and rules on total loss-absorbing capacity (TLAC) requirements. Globally, the norms on securitisation exposures held in the banking book had come into effect on 1 January, 2018.

The RBI also missed the deadline for meeting the TLAC requirement, which ensures that G-Sibs have adequate loss absorbing and recapitalisation capacity so that critical functions can be continued without taxpayers’ funds or financial stability being put at risk. These include instruments that can be either written down or converted into equity, like capital instruments and long-term unsecured debt. The TLAC constitutes 16% to 20% of a group's consolidated risk-weighted assets.

The RBI is also yet to come out with draft regulations on revised Pillar 3 disclosure requirements, which took effect from end-2016. Pillar 3 disclosures aim at ensuring market discipline through disclosures in prescribed format, while Pillar1 focuses on capital adequacy and Pillar 2 looks at the supervisory review process.

According to the report, India’s G-sibs are in the process of implementing rules on interest rate risk in the banking book (IRRBB). These regulations refer to the current or prospective risk to the bank’s capital and earnings arising from adverse movements in interest rates that affect the bank’s book positions. The central bank had issued draft guidelines in February 2017 and is yet to come out with final guidelines.

Globally the rules were effective from end-2018.
The reporter hasn't gone beyond the sensationalism and even bothered to even cold search the BCBS report for 5 mins, which BS (bhediya samachar) did
1. The link here gives the report for other countries
https://www.bis.org/bcbs/publ/d464.pdf
China the other peer country we should be looking to is more red
2. Even developed countries like SoKo (assuming NoKo is not referred as Korea) is also red in the areas
3. Most EU countries are yellow because the guidelines and many of the work gets done by EU and banks have common operations acorss diff countries
4. Indian govt is a lot more invested in the banks and would be unlikely that any bank will be allowed to fail, even if pvt so TLAC, while helpful and transparent and a good to have measure is not absolutely essential
5. Disclosure requirements, i think they wiull come but the costs right now are not justified esp in a global economy headed to recession
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Re: Indian Banks & Financial System

Post by Vips »

All remaining 18,000 bank branches to be under CTS by Sep: RBI.

As part of further improving, speeding up and fool-proofing the payments and settlement systems, the Reserve Bank on Friday said all the 18,000-odd branches which are outside the centralised clearing system called cheque truncation system will come under it by September.

The cheque truncation system (CTS) is in use since 2010 and covers around 1,50,000 bank branches across three cheque processing grids. All the erstwhile 1,219 non-CTS clearing houses have since been migrated to the CTS now.

Since around 18,000 more branches are still outside any formal clearing arrangement, to bring in operational efficiency in paper-based clearing and make the process of collection and settlement of cheques faster resulting in better customer service, it is proposed to bring all such branches under CTS by September, RBI said in a statement.

Separate operational guidelines will be issued within a month, it added.

The central bank also said it will set up a 24x7 helpline for digital payments services to secure them more against fraud and phishing.

The RBI's payment systems vision document envisages setting up a 24x7 helpline for addressing customer queries in respect of various digital payments, which, apart from building trust and confidence, will also reduce expenditure on both financial and human resources.

Under this scheme, major payments system operators will be required to have in place a centralised industry-wide 24x7 helpline to address customer queries in respect of various digital payments and give information on available grievance redressal mechanisms by September.

That apart, the RBI said, it will soon issue outsourcing guidelines for operators and participants of authorised payment systems.

Various authorised payment systems activities are outsourced to optimise efficiency and lower costs. But this also increases system vulnerabilities posing cyber security risks.

To manage the attendant risks in outsourcing and ensure that a code of conduct is adhered to while outsourcing payments and settlement related services, the Reserve Bank will issue guidelines to the operators and participants of authorised payment systems shortly.

Towards better consumer protection measures, the RBI said it will integrate the three ombudsman scheme-- the banking ombudsman scheme; the ombudsman scheme for NBFCs; and the ombudsman scheme for digital transactions in operation from 22 ombudsman offices of the RBI.

Accordingly, it has already operationalised complaint management system portal as one stop solution for alternate dispute resolution of customer complaints.

To make the alternate dispute redress mechanism simpler and more responsive to customers, it has been decided to integrate the three ombudsman schemes and adopt a 'one nation one ombudsman' approach. The integrated ombudsman scheme will be rolled out in June.
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Re: Indian Banks & Financial System

Post by Ambar »

Banks identify NPAs worth Rs 89,000 cr to be transferred to NARCL in initial phase

"Banks have identified around 22 bad loans worth Rs 89,000 crore to be transferred to the National Asset Reconstruction Company Ltd (NARCL) in the initial phase, according to Union Bank of India NSE 0.14 % MD and CEO Rajkiran Rai G. Setting up of NARCL, the proposed bad bank for taking over stressed assets of lenders, was announced in the Budget for 2021-22.

"The Indian Banks' Association (IBA) has asked lead banks to call for meeting .."

Read more at:
https://economictimes.indiatimes.com/in ... aign=cppst

The setting up of NARCL - National Asset Reconstruction Company Ltd (NARCL) is strange considering the whole premise of merging unhealthy PSU banks with healthier ones was to avoid setting up a "bad bank". In 2015-16 when the RBI and GoI forced banks to open up their balance sheets and restructure loans under NCLT NPAs worth a whooping 9 lakh crore rupees were identified. Since then it has fallen to around 7 lakh crores but due to the impact on businesses because of covid the NPAs are estimated to rise by 10%. The aggregate amount of bad loans likely to be transferred in trenches will be 2 lakh crore rupees, so around 1/4th of the total NPAs. What happens to the remaining NPAs ? One reason for creating the NARCL may be because of the renewed urgency to privatize PSU banks. Even the merging of "good banks" with "bad banks" may not have been sufficient as seen in the Vijaya Bank's merger with Bank of Baroda. Even after the merger Bank of Baroda's NPAs kept emerging the recent one being their exposure to the UAE's NMC Health collapse.
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Re: Indian Banks & Financial System

Post by Ambar »

Public sector banks have written off a massive Rs 8 trillion worth of loans during the last 7 years.PSBs' loan write-offs twice as much as govt's capital infusion in 7 years
https://www.business-standard.com/artic ... 154_1.html.
Experts see new surge in bad loans, could rise to 13-15% this FY
https://indianexpress.com/article/busin ... y-7360806/

I am absolutely flummoxed how are Indian banks even in business with >10% NPA year over year ? When NCLT forced the banks to open their books in 2016, the total NPAs stood close to 8 lakh crores or roughly USD 140 billion dollars. The FM and MoF then said they won't be creating a "bad bank" to park the burgeoning NPAs but instead will restructure the NPA and merge "good" banks with "bad" banks and the net result was the great PSU consolidation. However, that seems to have done little to stem the tide of NPAs which has continued to rise (despite at a lower pace than last decade) and now we hear that even after writing off a massive 8 lakh crore rupees of NPAs, the bad loans may surge to 13-15% of the advances this FY. To put things in perspective, the current NPA is 1% in the US, it was around 5.5% at the peak of 2009-10 great recession. In Germany it is around 1.1% and Singapore it is 1.7%, so a double digit NPA year over year for Indian banks is nothing short of astonishing.
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Re: Indian Banks & Financial System

Post by kvraghav »

Simple, not even one bank official gets arrested because he would have done some favor to a ruling party politician somewhere. I am again saying this stop giving loans more than 100 cr to a single director id. Ask them to raise it from the share market via IPO if their business is so promising
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Re: Indian Banks & Financial System

Post by Vivek K »

Well because Banks get away scot free for their bad (bribed) investment decisions. They probably hire the dumbest most corrupt workforce which gives loans in return for bribes and favors. The recent case against the ICICI lady is testament to that.

In 90s for the so called stocks scam, Harshad Mehta was the only one blamed. Bankers got away Scott free. With Nirav Modi - again it was poor lending decisions by bankers motivated through bribes - yet not one banker was put behind bars.

If you reduce lending as the gent above has suggested, then get ready to kiss India goodbye. Lending has to get easier not harder for the economy to rise. Investment decisions by bankers must be better with adequate collateral security.

Credit rating mechanisms must also be improved.
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Re: Indian Banks & Financial System

Post by Ambar »

Privatization is the way forward and hence the creation of NARCL aka the "bad bank" to clear the balance sheets of these PSU dinosaurs before marrying them off to buyers from the private sector. I cannot think of many financial institutions that carry 10%+ NPA year over year and survive for long, ofcourse the PSU banks have lasted because the GoI keeps pumping capital into them. There's also a fear that loan recasting program for MSMEs will eventually reveal a significant number of NPAs which will further stress the balance sheets of PSUs.

From the Financial Express
Despite its conspicuous impact on the economy, NPAs have an insurmountable burden on investment and savings of investors like you and me.

A sound banking system is sine qua non for maintaining financial stability in any country, which can be achieved by lifting off the dead weight of non-performing assets from its balance sheets. However, it is common knowledge that Indian banks are saddled with bad debts thereby ranking them as one of the worst in the world. In fact, it wouldn’t be wrong to state that India is definitely the worst in the BRICS bloc when it comes to its NPA management programme.

While there is no universally acknowledged official ‘acceptable’ limit for NPAs, bad loans within 3 per cent are considered manageable. As aforementioned, compared with most BRICS members, India fares quite poorly compared to China’s, as its NPA stands at 1.75 per cent while India’s NPA stands at a whopping 9.85 per cent. In the recent case of PMC Bank, the bank’s last available numbers for March 31, 2019 showed a large deposit base of Rs 11,600 crore, a Gross NPA ratio of 3.76 per cent and net NPA ratio of 2.19 per cent, which did not seem out of the ordinary. However, its capital adequacy ratio was higher than the regulatory requirement of 12 per cent and its advances were growing in the double digits.

From a macro-economic standpoint, countries with high NPAs typically do not have high economic growth, investment and savings in the economy. Additionally, if loan non-recovery balloons, the bank’s net interest margin (NIM), profitability, return on assets, dividend payout, etc. all get severely affected, which in many cases does not spell well for the Bank’s credibility. Moreover, credit inflow is also jeopardized as its very financial soundness comes under scrutiny.

Despite its conspicuous impact on the economy, NPAs have an insurmountable burden on investment and savings of investors like you and me. A high NPA ratio usually suggests that a bank’s management and recovery programs are flawed and hence an individual’s money isn’t safe in its mighty, hollow vaults. This emphatically leads to a low rate of savings for the people. Thus, due to burgeoning bad loan books, investment in the economy usually plummets.

Depositing money in a bank with a recent history of stress, a dicey reputation for governance, known problems in the loan book or a precarious GNPA and capital adequacy position exposes you to the risk of RBI directions, which can deprive you of access to your money for temporary periods.

What is the main thrust on which a sound financial institution is built? It certainly is on in its safe asset keeping credibility. However, with the mounting NPAs, investor trust and confidence has drastically eroded. This increase in the systemic level in India’s banking sector (and the debt market) is certainly causing increased stress, and investors may find their money wiped out for no fault of their own.

Talking about liability management, high NPAs frequently provide an impetus to the banks to lower their interest rates on deposits thereby lowering the rate at which your investment in Fixed Deposits grows. Thus, in order to maintain their NPAs, interest rate on loans and advances rise. This invariably increases the cost of borrowing thereby discouraging people from taking out loans and thus reducing the flow of money in the market. This way, investors are not only deprived of their expected returns, but also find the value of their investments eroded. Thus, high burgeoning NPA crisis of a country can rattle its financial banking system and it can certainly prove to be a hurdle to its growth.
With the RBI conducting asset quality reviews across banks, better NPA recognition has become the need of the hour to ensure that the problem is addressed well in time rather than stretched or swept under the carpet. The extent of bad loans is yet to surface. Loan moratoriums and rescheduling have kept NPAs at bay. Many corporates have suffered severely; but nobody knows what exactly is happening. The real damage shall begin to surface over the next few quarters, as vaccine campaigns have ramped up and with COVID (hopefully) gone away, corporates shall begin to disclose their annual results and banks compelled to label their problem loans as NPAs.

With the growth of loans in the economy, once moratorium is lifted and repayments start coming to banks, NPAs would significantly rise. In this aspect RBI has asked banks to do provisioning, buffers and raise capital, in order to be a resilient organization. Such a conservative approach coupled with a strong legal framework is likely to pass on the benefits to investors like us.
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Re: Indian Banks & Financial System

Post by Ambar »

In related news -
A court in the United Kingdom declared Indian fugitive businessman Vijay Mallya bankrupt on Monday.

This will pave the way for a consortium of Indian banks led by the State Bank of India (SBI) to pursue a worldwide freezing order to seek repayment of debt owed by Vijay Mallya’s now-defunct Kingfisher Airlines by seizing his Indian assets.

"As at 15.42 [UK time], I adjudicate Dr Mallya bankrupt," Chief Insolvencies and Companies Court Judge Michael Briggs said during a virtual hearing of the Chancery Division of the London High Court.

The consortium of Indian banks had argued for the bankruptcy order to be granted in their favour. They were represented by law firm TLT LLP and barrister Marcia Shekerdemian.

Meanwhile, 65-year-old Vijay Mallya remains on bail in the UK. A 'confidential' legal matter, perhaps related to an application for asylum, is yet to be resolved in connection with unrelated extradition proceedings.

Vijay Mallya's barrister Philip Marshall sought a stay and adjournment of the bankruptcy order as long as legal challenges remain ongoing in Indian courts. But the judge turned down these requests and concluded there was "insufficient evidence" that the debt would be paid back to the petitioners in full within a reasonable time period.

Additionally, an application seeking permission to appeal against the bankruptcy order was given. Judge Briggs refused this as well, stating that there was "no real prospect of success" of the appeal.

The petitioners in this case consist of a consortium of 13 banks that include SBI, Bank of Baroda, Corporation bank, Federal Bank Ltd, IDBI Bank, Indian Overseas Bank, Jammu & Kashmir Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of Mysore, UCO Bank, United Bank of India and JM Financial Asset Reconstruction Co. Pvt Ltd.


I am curious about reluctance of Vijay Mallya, Nirav Modi, Mehul Choksi etc to return home and face the music. Its not like these "bankrupt" billionaires are pennyless, they have stashed enough money and assets all over the world to last for few generations. At most they would have faced few months in a cushy VIP cell in Tihar and then be out on bail for the rest of their lives. Case in point is bankrupt money transfer company finablr/UAE healthcare giant NMC Health founder BR Shetty, Punjab National Bank and Bank of Baroda have over Rs 3000 crores exposure to the failed NMC Health, and BR Shetty currently stuck in India has counter sued PNB and Bank of Baroda in a US court for approving fraudulent loans !
Vips
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Re: Indian Banks & Financial System

Post by Vips »

Vijay Mallya, Nirav Modi etc would fear for their lives as the Political leaders who gave loans by taking massive bribes would fear exposure and would go to any lengths to keep it from coming out. We have the case of Rajan Pillai who was easily done in by his rivals and met the 72 houris in Tihar Jail.
Vivek K
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Re: Indian Banks & Financial System

Post by Vivek K »

The above two posts show exactly why India will never have an industry. Look at Donald Trump - America's biggest con man, tax evader, you name it and he has done it in business. Imagine declaring bankruptcy of the Trump Taj Mahal to show $1 billion in losses and get a tax write off. This while Casinos are full and making bucket loads of money. And what happened to him? Jail? Penalties? Nope - He became the US President and perhaps will come back in 2024.

The industrial setup has to have several checkpoints to limit losses or at least to ensure there is a collateral for loans. In India, what does Industry have to contend with?
a) Unproductive, unskilled factory workers that unionize to operated as extra judicial powers - refer the case of Maruti Udyog where the workers broke the legs of the HR manager because their demands were not met and set the building on fire.
b) Every one wants a cut from the industrialist - the politician wants money for his fun & frolic plus to fight elections, the banker wants his cut for "all" the money he sanctions to the industry, the taxation thugs want their cut so that they can amass fortunes without anyone daring to challenge them (I am not even going to start about the inspectors, labor commissioners .......).
c) Public sector service providers to industry - electric boards - harras industry by inefficient power supply, forcing the industrialist to add capital expenditure and invest in an alternative power source to keep the machines running
d) Inefficient port and other infrastructure- frequent strikes of various services add expenses for the industry since they must deliver to the customer in time.
e) Archaic laws requiring large workforce

But who is held holding the bag if things go wrong, the industrialist at the end of it all. And despite having invested everything in their industry, they are expected to cough up additional monies to pay to banks and financial institutions. In industrialized nations, the industrialist would declare bankruptcy and be protected from his creditors. In India, the industrialist is treated like a criminal and like Rajan Pillai, Pavan Sachdeva, Harshad Mehta and several others, bumped off to protect politicians and bankers.

That is why India remains a poor nation, with poor, decaying infrastructure, and despite having a large domestic market, lags in industrial growth.
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Re: Indian Banks & Financial System

Post by Yagnasri »

If anyone thinks that Chinese NPA is just 1.75% or any such % then they are not living in real world. As far as the banking sector in Bharat concerned private sector fares as bad as if not worse than PSU Banks. The issues like delay in courts, lack of training in credit appraisal etc. lack of interest in recovery, staff shortage in critical areas ( Yes there is serious staff shortage in credit departments in most of the PSU and Private banks) and over jealous NPA classification measures by the regulators, fear of CBI are all responsible for the present state of affairs.
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Re: Indian Banks & Financial System

Post by kvraghav »

I am sorry if people are still comparing the success story of India with full lending to the Industries from the Banks. Bank lending should be for operational needs. Capital spending should come from the capital market. What sort of a business model will it be when businesses are leveraged to 80% in debt but the share holders continue to own controlling stake and not answerable to anyone? Why dont they dilute it by raising capital through IPO ? Its simply promotors do not want to let go of the control but are ready to leverage the companies to the brim. IL&FS and Japypee associates are a prime example of these. Whatever profits are earned goes in paying off the interest and rest are taken by the share holders/ promotors. When more capital is needed, more loans.
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Re: Indian Banks & Financial System

Post by AdityaVM »

Saar, I am one of those much reviled Officials in a PSB.

What Yagnasri garu is saying is true, only an order of magnitude worse. Officers fresh out of probation with no experience or expertise in anything but passbook printing are given assignments as branch manager in and are then pressed to sanction loans inMSME etc . Despite no training to understand and appraise the proposal, Under threat of punishment transfers. There are no people with actual skills because in public sector banking if you have capacity and knowledge you are humiliated not appreciated and even those who want to gain the skills are neither given the time not training to do so.

I will elaborate further if anybody wants me to, after work today.
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Re: Indian Banks & Financial System

Post by srin »

Vivek K wrote: But who is held holding the bag if things go wrong, the industrialist at the end of it all. And despite having invested everything in their industry, they are expected to cough up additional monies to pay to banks and financial institutions. In industrialized nations, the industrialist would declare bankruptcy and be protected from his creditors. In India, the industrialist is treated like a criminal and like Rajan Pillai, Pavan Sachdeva, Harshad Mehta and several others, bumped off to protect politicians and bankers.
So, Mallya didn't divert the bank loans given to Kingfisher to fund the F1 team and RCB ? Also his company didn't deduct TDS of salaries and not pay the IT department?
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Re: Indian Banks & Financial System

Post by Adrija »

So, Mallya didn't divert the bank loans given to Kingfisher to fund the F1 team and RCB ? Also his company didn't deduct TDS of salaries and not pay the IT department?
Srin- garu, all that may be true, but that does not detract from the essential observation... our economy continues to suffer from many many structural defects, all of which have been listed before. But FWIW, I would posit that even if the judicial system and contract enforcement were to be corrected - which would be a huge huge effort and a huge huge positive- we should still not have PSBs as they will more often than not always be prone to mismanagement and always in need to taxpayer bailout

It is essentially an "agency" problem to use the proper economic terminology- there is no incentive, and no penalty- for those sanctioning a loan to be able to manage the risks of it going bad, as there is neither upside nor downside for the individuals involved, and more likely mala-fide considerations -either extraneous e.g., "phone banking" to use Modi-ji's famous term, or even self, as they are likely to be penalized anyways if it goes bad and hence might as well profit from it.

The state is best placed to rid itself completely of all banks, and empower the RBI even further in terms of oversight and governance. I am aware of the drawbacks of the regulatory regime including regulatory capture, but on balance that is the lesser of two evils

IMHO and all that of course
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Re: Indian Banks & Financial System

Post by Ambar »

Yagnasri wrote:If anyone thinks that Chinese NPA is just 1.75% or any such % then they are not living in real world. As far as the banking sector in Bharat concerned private sector fares as bad as if not worse than PSU Banks. The issues like delay in courts, lack of training in credit appraisal etc. lack of interest in recovery, staff shortage in critical areas ( Yes there is serious staff shortage in credit departments in most of the PSU and Private banks) and over jealous NPA classification measures by the regulators, fear of CBI are all responsible for the present state of affairs.
1.75% NPA for China may be fictional but there is no denying that the % of NPL in the US is <1%, Germany is 1.1%, UK is 1.1%, Singapore is 1.3%. At around 12% to 13% we are among the worst in the world and in company of a bunch of African republics, oligarchs led Ukraine and the forever bankrupt Greece.

Here's the World Bank's list of countries by their banking NPAs -

https://data.worldbank.org/indicator/FB ... _desc=true

Also, i disagree that we are overzealous in classifying a loan as a NPA. The RBI guidelines for an asset to qualify as a NPA is pretty straight forward :

a. The principal's interest and installment remain overdue for more than 90 days (for term loan).
b. Said account remains out of order for more than 90 days, in respect of an Overdraft/Cash Credit.
c. The bill remains unpaid and overdue for more than 90 days in the case of purchased and discounted bills.

There's a great irony in India's PSU lending. In early 2000s when i wanted a loan to purchase a new motorcycle, a PSU bank did thorough due diligence by asking all sorts of documents, letter from my manager, HR, a guarantor to sign papers and sent someone physically to my home and work location, all for Rs 45,000. Round about the same time in the same city a certain Vijay Mallya got a whooping Rs 8000 crores in loans probably without even having to leave his cushy cabin ! While lack of credit appraisal and shortage of staff may well be the reason for some % of bad loans, the biggest contributors to our NPA is because of the collusion of banking executives with our politicians, i cannot think of any PSU bank which will lend >100 crores to a businessman without some minister dialing the chairman or VP of a public sector bank.
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Re: Indian Banks & Financial System

Post by Vivek K »

Comparing financing for a motor cycle to that for a well established industry is talking abut two different thigs completely. Just because your motorcycle loan took longer, does not mean that the industry did not follow all procedures in applying for its loan. What is your perception that it should take the industry longer based upon? Two entities may have entirely different credit worthiness and have different abilities to get credit (max permissible bank finance). For example, In the 90s, when the Indian Government was in the doldrums and had to mortgage its Gold Assets for loans of a few billion to keep the country running, Reliance secured a 100 yr bullet loan from Japan of $5B in less than a day (or short time) - no interest or principal payments for 100 years. All paid together in one shot. So should we put the Ambanis behind bars for raising money so fast while even GOI was unable?

Unrealistic and business unfriendly attitudes like these are what make India unviable for industrial growth. Because i am having it tough, I should want all others including "job creators" to have it tougher? As far my knowledge goes some industries can raise even more than Mallya in lesser time? Are they all thieves?

Are you certain that Mallya diverted the funds to embezzle them? Or did he incur losses due to unrealistic operating costs imposed by the Airports Authority of India and sudden high fuel costs worldwide? Look at the airline business in India - Jet airways, the star of the 90s is now bankrupt, Rashtriya Sahara, Modi Luft, East West, and several others have gone belly up? Did this all happen because their owners were cheats? What did the US do when its airlines were folding up? Give them more money to save the businesses and keep people employed. What did we do to Jet, Kingfisher......? Don't believe everything an overzealous Government Official puts out - it is typically over reported.

And - Mallya had offered to the banks to pay them the principal amount borrowed. Indian banks add all kinds of frivolous charges to NPAs perhaps for negotiation purposes. Now what we're seeing is that the banks will recover what Mallya had offered to pay them anyway - and they will still get to declare him a criminal.

Instead - could the GOI (sitting on $600 B of reserves) have provided additional loans (like the US) to Kingfisher to keep it operating - looked at its rates and charges and made it more profitable for airlines to operate allowing the business to survive and grow? Would it have helped the people employed by the airline? Would it have provided tax revenues from the airline profits and sales of tickets?

Indians love to close businesses - other nations find ways to keep them running. Every dollar invested in a business leads to an indirect $7-10 impact to economies in industrialized nations.
Last edited by Vivek K on 27 Jul 2021 20:41, edited 1 time in total.
Vivek K
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Re: Indian Banks & Financial System

Post by Vivek K »

srin wrote: So, Mallya didn't divert the bank loans given to Kingfisher to fund the F1 team and RCB ? Also his company didn't deduct TDS of salaries and not pay the IT department?
You tell me boss! I thought that you are upset because Mallya used the bank loans to fund a lavish lifestyle.

So if his companies did not deduct TDS of salaried staff - were the financial staff and the auditors (internal and external) of the company sleeping? Auditors have to certify tax compliance before every FY closing. So did the auditors aid and abet this? Or is this just another accusation to make the case look sensational?

If taxes were deducted and not deposited - that would be something different from if Taxes were neither deducted nor deposited. Which is it?
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Re: Indian Banks & Financial System

Post by sankum »

Everyone were in bed with him so that no regulatory action was taken.

This is widespread in financial frauds and money laundering from higher educational institutions. Even after many complaints no action is taken and the persons responsible are not accountable.
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Re: Indian Banks & Financial System

Post by chetak »

srin wrote:
Vivek K wrote: But who is held holding the bag if things go wrong, the industrialist at the end of it all. And despite having invested everything in their industry, they are expected to cough up additional monies to pay to banks and financial institutions. In industrialized nations, the industrialist would declare bankruptcy and be protected from his creditors. In India, the industrialist is treated like a criminal and like Rajan Pillai, Pavan Sachdeva, Harshad Mehta and several others, bumped off to protect politicians and bankers.
So, Mallya didn't divert the bank loans given to Kingfisher to fund the F1 team and RCB ? Also his company didn't deduct TDS of salaries and not pay the IT department?
they haven't paid salaries to employees, payments to suppliers and contractors for goods and services.

all airline expenses are in dollars. Funds were diverted and stashed abroad by over invoicing aircraft lease payments, spares and training expenses.

it was a systematic stripping of assets. just like another joker did in the low cost space. This mahatma took bribes from leasing companies to lease aircraft for his own airline. Skimmed off the top for spares, inflight catering sales and crew hire was done through subsidiaries that he had setup and he took a percentage from every salary paid for such "hired" crews.
Last edited by chetak on 27 Jul 2021 20:49, edited 1 time in total.
chetak
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Re: Indian Banks & Financial System

Post by chetak »

sankum wrote:Everyone were in bed with him so that no regulatory action was taken.

This is widespread in financial frauds and money laundering from higher educational institutions. Even after many complaints no action is taken and the persons responsible are not accountable.
every regulator was paid off. cash or kind or cash and kind.
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Re: Indian Banks & Financial System

Post by srin »

Vivek K wrote:
srin wrote: So, Mallya didn't divert the bank loans given to Kingfisher to fund the F1 team and RCB ? Also his company didn't deduct TDS of salaries and not pay the IT department?
You tell me boss! I thought that you are upset because Mallya used the bank loans to fund a lavish lifestyle.

So if his companies did not deduct TDS of salaried staff - were the financial staff and the auditors (internal and external) of the company sleeping? Auditors have to certify tax compliance before every FY closing. So did the auditors aid and abet this? Or is this just another accusation to make the case look sensational?

If taxes were deducted and not deposited - that would be something different from if Taxes were neither deducted nor deposited. Which is it?
These are the criminal charges against him and filed *before* he absconded and a simple web search will show you this.

The point is that this isn't a simple matter of industrialist who went bankrupt as you claim. There are charges of fraud that he needs to answer to.
Vivek K
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Re: Indian Banks & Financial System

Post by Vivek K »

Point is - it is as simple as I'm stating.

1. The system wants kickbacks
2. The industrialist provides kickbacks - from the company's books and hides it under various heads
3. When the company fails - such transactions come out and the system calls it criminal
Who is the real criminal? Not the bankers? Not the politicos? Only the industrialist? What is the fault of the employees that lose their jobs because the system forgets all about them? Is it better to close industries? Or to keep them running?
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