Banking News Dated 23rd February 2018

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Banking News: February 23, 2018

Banking News Dated 23rd February 2018

Stop the Blame Game - Let RBI and
Finance Ministry own responsibility: AIBOC

Source: Press Release dated February 22, 2018
All India Bank Officers' Confederation

Much is talked and written about scams in the Banking sector after the Nirav Modi Scam in PNB.

Why RBI, Finance Ministry, CVC and others wake up only when a major scam surfaces? 

Why we are not analysing the failure of the system?

What is the role of the Govt and its policies which cause system failures and scams?

There have been Harshad Mehta Scam, Ketan Parekh Scam, and the NPA scam (not declared as scam by the Govt or RBI) due to misuse of the loopholes in the system.

In this case, when a Buyer’s Credit is available for importers why at all RBI introduce Letter of Undertaking (LoU) which is not in vogue among foreign banks? What was the necessity for RBI to encourage imports by helping the borrower to get cheaper credit abroad instead of helping Indian Banks to increase them credits which would give better taxes for the country?

It is a well known fact that the SWIFT has been used for frauds from the nineties and there are many reported hacks of SWIFT.  Why RBI and the Govt did not intervene to correct the system?

What happened to Supervision and Audit? Why RBI failed in supervision? Is it because RBI has been busy with other things like demonetisation? They are still counting the notes ever after a year! Has RBI lost its autonomy?

In what way the Chief Economic Advisor has improved the economy? He is talking about Privatisation? Does he want to handover the Banks which have been looted by the Corporates to them so that they can loot more?

We need better banking, better reporting, better supervision and better technology in aid of these. What we need is to ignore the cry to privatise PSBs, as if ownership uniquely determines ethics and efficiency.  The popular chestnut is that PSB are structurally vulnerable to poor governance, resulting in the run-up in NPAs. Data, yet again, militate against the hypothesis.

While there might be cases of fraudulent behaviour, they are not the overwhelming cause for the accretion of NPAs in PSB. Second, cases of governance breakdowns are not a monopoly of PSB — globally and in India, many privately-owned banks have been regularly identified with such errors of omission and commissions. Global regulatory fines on banks run into many billions of dollars every year.

The Economic Survey 2016-17 studied the causes of the large NPA build-up in PSB. A very large part of it can be attributed to a growth­ induced credit bubble, followed by macroeconomic and regulatory issues that burst the bubble rudely. Corruption and malfeasance were not identified as a key variable.

In 2008, a raft of European and American banks, all privately owned, had to be bailed out by governments. The list of institutions bailed out included some of the best known brands in the business.  The financial crisis of 2007-08 was the result not of public sector sloth and corruption but of private sector greed and poor regulation. Lehman Brothers went belly up, without any state ownership. Royal Bank of Scotland and Barclays avoided collapse by taking government equity. It is not ownership but the quality of regulation, reporting and management that determine banking efficiency.

Closer home, privately-owned Global Trust Bank and Bank of Rajasthan had to be rescued with state support. The reason for the above is quite simple — banking isn’t the same as soaps, or steel, or hotels.

In India, the political economy circumscribes the quality of regulation and internal control policies at banks. It is important to appreciate this while fixing responsibility for the bad loans and large frauds at public sector banks.

The TARP or Troubled Assets Reconstruction Program strategy of the US government to bail out US banks in 2008 cost approximately $800 billion. How much has the Government of India spent, over the years, on PSB bailouts? How does it compare with the rest of the world? Contrary to the popular narrative, Indian banks (predominantly PSB) have required very little bailouts over the years, compared to the rest of the world.

Both in terms of direct fiscal costs as well as indirect costs to the economy, banking bailouts in India have been quite modest in terms of their impact. An IMF Working Paper on Systemic Banking Crisis, covering all banking and sovereign crises between 1970 and 2011 brings out the data starkly. 

The average fiscal cost of bank bailouts across the world was 6.8% of GDP between 1970 and 2011. For emerging economies, the cost was 10% of GDP. For India, in the same period, bank bailouts cost far less than 1% of GDP, a negligible amount.

The current PSB recapitalisation plan announced by the government, amounting to Rs 2.11 lakh crore over two years, would account for less than 0.5% of current year GDP, and less than 0.25% annualised for two years. Further, India’s bank bailouts have extracted far less cost out of the Indian economy than bank stress situations elsewhere.

Despite a sticky systemic NPA issue with PSB for five years, we have had no run on a bank, no stress in the money markets and limited impact on growth.

While there are many reasons for this, a big reason has been state ownership of the banking system. It has meant that bank liabilities have implicit sovereign guarantee, which maintained confidence of the markets in the banking system.

The country is struggling with mounting unemployment.  The Banks have money but they are scared of lending.  They are investing the funds in safe bonds where they are losing interest.  Net result is that the Economy is not growing. 

Employment is not increasing. What is needed is to have a relook at the policies.  It is high time to redirect credit towards Agriculture, Horticulture, Food Processing, small and cottage industries which will increase employment.

11,643 borrowers in the country have availed 38% of the total loans given by Banking Sector as on March 2016.

Just 12 NPA accounts have an outstanding of Rs.2,50,000Crore. 84% of the NPAs belong to Corporates. 

Every year banks are writing off thousands of crores for this corporates which is the biggest scam.

FICCI and Assocham should ask them members to be honest and repay the loans instead of demanding privatisation. 

RBI is not willing to publish the list of NPA borrowers. 

The RBI is the one which introduced CDR, SDR, S4, AQR and PCA.  None of them have helped the Banks but they have helped the Corporates to loot. 

With the revised norms the Banks will have to declare Rs.2 lakh crores more as NPAs and provide 50% provision for them.  This is going to make all the Banks in the country to become red.  This will lead to a financial crisis like the US crisis of 2008.  The Govt may announce a Financial Emergency and handover Banks to the Corporates.  This will be a danger to Democracy itself.

What is needed is reversal of the Economic policies, credit policies and NPA norms and bring in transparency. Why accounts with security should be provided 100% provision for NPA in two years?

Why the present Govt has not appointed officer Directors and Employee Directors, in the boards of the Banks, which are mandated by law? They have scant regards for law itself.

Why Banks are forced into other activities like Aadhar Linkage, Aadhar enrolment, selling pension scheme of Govt, Cross Selling which often is misselling? These are major reasons for weakening supervision.

Why the MD of PNB was sent to Allahabad Bank and why another person was appointed as MD of Punjab National Bank?  What is Mr. Vinod Rai doing in BBB?

Rather than fixing accountability from the top why 18,000 transfer orders were issued in a hurry? The CVC guideline can be implemented in a phased manner. It could have been implemented after annual closing. Who is responsible for the mid academic disruptions to the education of children of the employees? 

Why RBI is still hesitant to Publish List of Defaulters and allow them to run away from the country?

Why the Prime Minister takes with him the businessman on foreign tours who are known for misuse of the system/  Why the same set of businessmen get contracts abroad?

Why these businessmen are show cased abroad and why they are selected by the PMO & Finance Ministry instead of Industry Associations which was the practise earlier?

Three important steps are needed immediately to save the banking sector and the economy.

v         One: Publish the names of defaulters of the Banks and ask banks to write to the home Ministry to make entry in the passports  of the Board of Directors of these Companies “Emigration Clearance Required” so that they don’t run away like Vijay Mallaya, Jatin Mehta, Nirav Modi and Mehul Choksi.

v         Two: Have a relook at the NPA norms.  Why all accounts which have a default of 90 days be declared as NPA? Why not look at the reasons, scope for recovery, security etc?

v         Three: Appoint Officer Directors, Employee Directors and Nominee Directors immediately and allow them to play a watchdog role.  Remove RBI Executives and Finance Ministry Officials from the Boards of Banks as they are Supervisors and they can’t supervise themselves. It’s time for a wakeup call.


PNB fraud overlooked at several
levels, say bank employees union

The IANS (News Agency)
Published on February 22, 2018

Mumbai, February 22 (IANS): The staggering Rs 11,300 crore fraud unearthed in the Punjab National Bank (PNB) last week, was "overlooked at multiple auditing and regulatory levels, compounding it to a point of no return", said a prominent banking industry union here on Thursday.

"The entire fraud is a huge shock, exposing the increasing trends of how the corporates loot banks and peoples' monies," said Maharashtra State Bank Employees Federation General Secretary, Devidas Tuljapurkar.

Addressing the media here, he alleged that now attempts are being made "to dilute the magnitude of the fraud" as being restricted to just "a single branch-two employees issue".

"Such massive frauds cannot be committed in merely a simple manner that a branch official could issue Letters of Undertakings (LoUs) of a whopping Rs 11,300 crore during a period of six-seven years without anybody knowing about it," Tuljapurkar emphasised, raising questions on technology, supervision, monitoring, audits, internal checks and control at various levels, besides the role of the Reserve Bank Of India (RBI) in the entire issue.

"How is it possible that the RBI, which carries out a regular audit of all the banks, failed to smell the fraud despite the volumes of money involved over so many years. Was the SWIFT software approved and tested by the RBI before it was approved for the banking sector?" Tuljapurkar asked.

This (fraud) proves that the RBI has miserably failed to fulfill its role as a regulator of the vulnerable banking sector, and with the Governor keeping quiet, it was virtually admitting to a complete collapse of the banking sector, he claimed.

Reiterating the nationwide demand by All Indian Bank Employees Association (AIBEA), Tuljapurkar urged that the PNB's top management should be kept out, till the probe into the fraud is completed.

"While we don't support the wrong-doers at the lower levels, its very strange that the top management like the Chairpersons, CEOs, Directors, Executive Directors, etc, are not covered by any Disciplinary & Conduct Regulations though they take very vital decisions," he said.

He questioned the "haste and hurry" in suspending lower officials, saying this conveyed the impression that only the lower level staffers were responsible for perpetrating scams.

Expressing apprehensions that the RBI could probably "disown" the LoUs' as it had the bankers' receipts, Tuljapurkar wondered whether the RBI had questioned the banks about the guarantees, examined the risks and created necessary firewalls to ensue the tax-payers monies are secure.


A multi-dimensional bank fraud

M Sitarama Murty
The Business Line
Published on February 23, 2018

It is quite baffling how various systems and offices tasked
to detect risk have gone steadily dysfunctional at PNB

The PNB scam has jolted the Government, regulators, investigating agencies, financial and stock markets and the banking industry alike. And much like the proverbial eight blind men, everyone has come up with their own interpretations and diagnosis of the multi-dimensional fraud.

The RBI, for one, blames the bank management saying the fraud was born out of operational risk and reflects the way risk management and internal control mechanisms have failed at PNB. One can’t disagree with the central bank on this. Operational risk is the most complex and difficult risk that all entities face, which means to recognise, identify manage and mitigate such problems.

Suffice to put it simply as risk of failure to comply with standard operating systems and procedures. But was the RBI too a victim of operational risk given that foreign exchange transactions are being closely monitored by the Reserve Bank?

Non-compliance occurs out of sheer ignorance or the failure to recognise its importance, or negligence bordering on indifference, or a deliberate act of commission or omission, an act of sabotage or fraud, by individual functionaries. It is very early to conclude whether at every stage these acts of commission or omission facilitated the perpetuation of the crime.

That said, the fact that this went on for seven years in PNB and surfaced not because of any extraordinary act of brilliance but a causal enquiry by one of the operating functionaries in the normal course of business, is baffling.

The board and its committees

Instead of jumping the gun and blaming any individual or team, it is essential to know the ingredients of various stages at which the fraud could have been prevented or detected early. The Board’s main function is to lay down sound policies and frame guidelines for risk management and control functions. Its duty is also to seek and review implementation of the policies and their efficacy in meeting the objectives, in tune with changing business practices, customer behaviour, market developments, technological innovations, the regulatory climate, etc.

It is a moot question if the boards play their role efficiently and effectively in a limited time of a few hours. The meetings may be reduced to rituals, with the numerous reviews, reports and a bulky agenda. The composition of the boards, their understanding of the nuances of risk management and their importance needs a close look.

The audit committees are required to focus more on the systems and procedures, their efficacy, their implementation and more importantly, their compliance, as brought out by various audit reports, ranging from concurrent, internal, statutory audits to inspections by the Regulator.

At least some members should have thorough knowledge of special areas such as risk management and foreign exchange and international banking.

An incisive analysis of any irregular practices or non-compliance can bring out real and and potential threats.

The same is applicable in the case of the risk management committees as well, who have to play a crucial role in shaping and recommending sound policies and test the practices vis-à-vis laid-down procedures.

The chief compliance officer religiously gives a certificate that all policies, procedures, regulatory prescriptions and statutory requirements are faithfully and fully complied with, based in turn on the certificates from various operational centers.

The management and various executives are responsible for day-to-day operations and their control.

The transactions

To appreciate the sanctity of standard procedures and how their strict compliance possibly could have averted the events that followed, an analysis of the transactions is necessary.

i) Two officials, the initiator and the confirmatory, authenticate the SWIFT messages, which are at the centre of the fraud. Both of them should satisfy themselves that the transactions underlying the messages are genuine and carry necessary authority. If the initiator logs in a fraudulent message, the confirming officer could detect it since the correctness of the contents like the dates, amounts and names are checked with the original vouchers or notes.

ii) A credit officer vested with necessary powers authorises messages pertaining to letters of credit or undertaking, unless the initiating official himself has the responsibility for credit function also, which is not the case here. Thus the onus on the confirming official is no less.

iii) A branch level concurrent auditor normally verifies all or random transactions depending on the volume, including SWIFT generated messages on a regular basis. The SWIFT system stores all the data. This verification is crucial since SWIFT is not interfaced with the core banking system.

iv) On the basis of the LoCs and LoUs, the overseas banks that negotiate the documents or extend buyers credit, make claims on the issuing bank. Or they can place the funds at the disposal of the customer’s bank. An International Division of the bank funds the Nostro (foreign exchange) accounts, after checking the references. They even contact the issuing branch for confirmation, if the amount is large.

v) For the debits raised in the Nostro accounts, the LoU issuing branches respond either by recovering the amount from the customer or in case of his inability, by debiting a special account at the branch. In these cases, the department or division responsible for reconciliation, the branch officials, the auditors and the Zonal/HO level credit functionaries keep a track and follow up for reimbursement from the customer.

Long outstanding entries are reported for review by the administrative heads and even the Audit Committee periodically. How regularly and seriously this is done is again remains a question.

vi) An important hint is that several queries, advices or reminders criss-cross various levels of control in the bank and not all these communications will reach or are handled by a single or the same functionary. Amongst so many executives receiving the messages or letters at least some one would be alerted, if some thing is amiss, unless, in the unlikely event of every one sleeping, negligent or being involved in perpetuation of a fraud.

So, it is pertinent to note that regular banking functions have taken a back seat in the recent years, many senior executives at various levels, including the branch heads, being pre-occupied with non-core banking functions such as managing demonetisation exercise or focusing on marketing of fee earning insurance and mutual fund products. And the individual incentives offered by insurance companies to bank executives proved detrimental to banks’ interests.

Ultimately it boils down to every one in banks performing their duties meticulously and regularly.

The writer was MD of State Bank of Mysore


Public Sector Banks Don’t
Have a Monopoly Over Fraud

T. T. Ram Mohan
The Wire Online
Published on February 22, 2018

In 1995, Barings, a British investment bank that had been around for over 200 years, was brought down by a rogue trader in Singapore, Nick Leeson. The bank had suffered a loss of $1.3 billion in unauthorised trades. In 2008, Societe Generale, a leading French bank, lost over $5 billion in unauthorised positions taken by a trader. In 2011, a rogue trader caused losses of over $2 billion at UBS, the Swiss bank.

What was common to these banks? Well, private ownership. The amount of $1.77 billion involved in the fraud at the government-owned Punjab National Bank (PNB) is a large one and a cause for concern. However, in exposing itself to the fraud, PNB is in the exalted company of some of the most sophisticated private banks worldwide. Like road accidents or plane crashes, frauds at banks are unavoidable. They are a cost of doing business, so to speak. The key is to ensure that losses inflicted by fraud stay within reasonable bounds.

In a banking fraud, some employees of a bank or outsiders – or the two colluding with each other–cause losses to a bank. Often – but not always – the fraud relates to the sanction of a loan or credit risk. This results in a non-performing asset (NPA). Since public sector banks (PSBs) account for the majority of the NPAs in the Indian banking system today, there is a widespread perception that this is proof of colossal fraud at PSBs.

Not all NPAs, however, can be ascribed to fraud or mala fide intent. Indeed, we have it on the authority of the Economic Survey of 2016-17, no less, that NPAs in the Indian banking system have arisen primarily for reasons beyond the control of bank management. Since PSBs are at the receiving end of an enormous amount of flak on account of NPAs, it’s worth quoting the Survey on the subject:

‘Without doubt, there are cases where debt repayment problems have been caused by diversion of funds. But the vast bulk of the problem has been caused by unexpected changes in the economic environment: timetables, exchange rates, and growth rate assumptions going wrong’.

So much for the notion that it is a combination of political interference and managerial incompetence which has left PSBs with a mountain of NPAs. Just one comparison should drive home the point even further. Gross NPAs as a proportion of total loans at State Bank of India (SBI), the largest bank in India, stood at 10.35 per cent in the quarter ended December 31, 2017. This was after the merger of the parent SBI with all its associate banks, some of which were in a weak state. At the second largest bank, the private sector, ICICI Bank, NPAs on the same date stood at 7.82 per cent, just two percentage points lower. Yet, nobody has alleged political interference or managerial incompetence at ICICI Bank.

Frauds in banking don’t just relate to loans. They may also relate to what is called ‘operational risk’ which involves subversion of systems or processes by employees or outsiders. If, for instance, somebody were to hack into a bank’s IT system and transfer out funds from customer accounts, the bank would have to make good the loss.

The instances of fraud we cited at the beginning of this piece all relate to operational risk. Going by what has been reported so far, the fraud at PNB also relates to operational risk. It appears that an employee at PNB used the SWIFT (Society for Worldwide Interbank Financial Telecommunications) messaging system at the bank to issue unauthorised letters of undertaking (LoUs), which are a form of guarantee, to various firms in the Nirav Modi group.

LoUs are typically issued against cash put up by a firm locally. The overseas branches or affiliates of the firm then used the LoUs to obtain short-term credit from banks abroad. LoUs are typically issued for 90 days or so. At PNB, the employee reportedly issued LoUs for 365 days. According to media reports, the fraud was uncovered after the employee retired and his replacement refused to renew an LoU without a cash margin being provided.

Since the LOUs had been issued and used for a period of around seven years, it would appear that the Modi firms were making repayments when due. Otherwise, the LoUs would not have been renewed. Mr Modi has said in his letter to PNB, now made public, that he was in a position to honour all his dues to the bank and that the confiscation of his assets and suspension of his operations had rendered this impossible.

Was any effort made to recover as much of the dues of Rs 11,700 crore as possible? Or did the uncovering of the fraud leave the PNB management with no choice but to alert the law enforcement authorities? These are among the questions that need answering. We also need a handle on outstanding dues from the Nirav Modi group to all banks and the value of the assets seized from the group, so that we have an idea of the losses to which banks are exposed. The Reserve Bank of India (RBI) must disseminate information of losses in bank frauds annually, using an appropriate metric, say, losses in frauds as a proportion of net interest income or total value of transactions. This will help ensure that hysteria or panic does not erupt every time there is a fraud in the system.

A fraud alerts a bank to shortcomings in systems and processes. In the case of PNB, the delay in linking the SWIFT system with the core banking system has been highlighted. But this is by no means the only lapse. The large number of LoUs issued to the Modi group would have resulted in a surge in fee income at particular branches. The PNB management should have examined how this came about. This applies equally to internal auditors and statutory auditors. Any dramatic improvement in performance must prompt questions. The failure to do so in the case of Nick Leeson was seen to be a key factor in the fall of Barings. The lapses on the part of management and auditors at PNB are only too evident.

The government has been quick to point an accusing finger at the RBI for alleged supervisory lapses. Those familiar with RBI inspection reports will testify to the high quality of these reports–they often pick up issues that have eluded both the management and the board. It is not clear that it is the supervisor’s job to pick up frauds. The practice is for banks to report frauds to the supervisor after which the RBI swings into action. The government must resist the temptation to deflect the heat it is facing on to the RBI.

Frauds are only one form of violation of laws and regulations. These are violations involving some employees without the knowledge of top management. There are other instances where banks themselves violate laws and regulations at the expense of customers, shareholders and, sometimes, the taxpayer, with top management in the know.

There is a long and depressing list of such violations in private banks abroad–Libor-rigging (London Interbank Offered Rate which serves as a benchmark to calculating interest rates on various loans throughout the world), manipulation of exchange rates, money laundering, non-compliance with sanctions, to name a few.

In recent years, banks have ended up paying over $200 billion – that’s right, $200 billion– in fines for these violations. One of the most hallowed names in banking, Wells Fargo, was charged with creating millions of accounts in the names of customers without their consent and has been told that it cannot grow its assets for some time.

The PNB affair has predictably set up an enormous clamour for privatisation of PSBs. Although commercial interests in India, international agencies and the media have been pushing this agenda for a while now, successive governments have not yielded to it. However, given the demands made on it for recapitalisation of PSBs, there is every prospect that the present government will seek to privatise at least some of the weaker PSBs. This is most likely if the government is returned to power in 2019. The Chief Economic Advisor has said time and again that the government intends to shrink the role of PSBs. Episodes such as the one involving PNB, no doubt, come in handy for the purpose.

The argument is made that managers at PSBs lack the incentives to perform. Frauds and NPAs will continue to happen and PSBs as a category are fated to be under-performers. This ignores the fact that in the period 2000-10, PSBs raised their performance and we saw PSB performance converging towards that of private banks. It also ignores the fact that, in private banks, incentives to perform can have the perverse effect of producing exactly the same outcomes – by getting managers to take excessive risks and breaching laws and regulations.

If the gambles pay off, managers make huge bonuses for themselves and enrich shareholders. If the gambles fail, the taxpayer is left holding the can. That is precisely what happened in the global financial crisis of 2007-08. It explains the enormous fines banks have had to pay up in recent years. To flog the incentives argument in light of these experiences and to contend that privatisation will usher in an era of clean, problem-free banking is the height of ignorance.

T.T. Ram Mohan is a professor at IIM Ahmedabad.


New framework on non-performing loan
to increase pressure on banks: Report

The Moneylife Online
Published on February 22, 2018

Mumbai, February 22:  Commenting on India's new framework aimed at speeding up non-performing loan (NPL) resolution, issued by the Reserve Bank of India (RBI) recently, Fitch Ratings says the framework is likely to push up banks' credit costs and undermine earnings in the near-term, further reinforcing the negative outlook on the banking sector, projected earlier by the rating agency. Instead, it recommends stronger regulatory efforts to clean-up bad loan problems, combined with planned recapitalisation of state banks, so as to help support a recovery in the sector over the medium term.

“Regulators appear increasingly impatient with the slow resolution of NPL stock, which has prolonged the NPL cycle. The new NPL framework is the latest in a series of measures to speed up progress. It gives banks less discretion over the reporting and resolution of bad assets and attempts to address the complexities involved in resolving the stressed loans of large borrowers,” says the report.

RBI had directed banks to report defaults by large borrowers weekly, which, according to Fitch, indicates a more invasive approach to tracking bad assets. The timeline for dealing with bad loans has also been made prescriptive, with banks and borrowers forced to implement a plan for resolving loans within 180 days of default or go to insolvency court. There are clear instructions on what constitutes an NPL resolution plan and under what circumstances it would be viewed as implemented. Penalties will apply to banks that fail to comply with prescribed timelines or conceal the status of their stressed accounts, suggesting a shift towards lower regulatory tolerance.

Fitch deems the new framework's overall focus being on recognising and quickly resolving bad loans. “It is likely to result in a rise in NPLs, as banks are forced to reclassify stressed accounts previously recorded as special mention loans or restructured loans. More accounts are also likely to be pushed toward insolvency courts and into liquidation, particularly since the new guidelines require all of a borrower's lenders to agree on a resolution plan to keep it away from the courts,” it contemplates.

The report sees an increase in liquidation raising the likelihood of banks taking larger haircuts on bad loans than they expect. The banking system's average loan-loss cover was around 45% at March 2017, well below our expectation that haircuts may average 75%.

In case most of the $32 billion of fresh capital the government plans to inject into state banks by end-March 2019 is absorbed by losses associated with NPL resolution, it will keep asset growth on a low pedestal and earning will stay under pressure, says the Fitch report.

Banks' weak October-December results underline the ongoing effects of high credit costs and slow asset growth. Regulatory pressure for banks to recognise bad loans led to a 30% rise in NPLs, pushing up credit costs across the sector, particularly at state banks. State banks also suffered treasury losses on account of rising interest rates, further pressuring an already dwindling income base. Sixteen of India's 21 state-owned banks reported losses during 3Q18, with at least three reporting their ninth consecutive quarterly loss. State Bank of India (BBB-/Stable), the country's largest bank, reported its first loss in more than a decade.

Meanwhile, the  large fraud worth around USD1.8 billion uncovered at a branch of Punjab National Bank (PNB, BBB-/Stable) underlines the risks to bank performance posed by poor risk control and management supervision, which are a weakness across much of the sector, and have contributed to bad loan problems. “We have placed PNB on Rating Watch Negative until more clarity emerges on the extent of control failures and the impact on its financial position,” the report states.


First sale of Electoral Bonds
via SBI to begin from March 1

The Zee News
Published on February 22, 2018

Bonds will be available at main branches of the SBI in
four metro cities — Delhi, Mumbai, Chennai and Kolkata

New Delhi, February 22: The wait for investing in electoral bonds will ve over soon, as the Finance Ministry today said that the first sale of electoral bonds will commence from March 1, 2018, through country's largest lender State Bank of India (SBI) network.

"State Bank of India (SBI) has been authorised to issue and encash electoral bonds initially at its 4 authorised branches. The first issue of the scheme will be opened in March 2018 in place of January 2018 for the first quarter of 2018," the ministry said in a tweet.

Accordingly, the first sale of Electoral Bonds will commence from 01st March 2018 for a period of 10 days i.e. up to 10th March 2018. "The bond shall be encashed by an eligible political party only through a bank account with the authorised bank," said the ministry.

Only Political Parties registered under Section 29A  of Representation of People Act, 1951 & which secured not less than 1 % of the votes polled in the last General Election to the House of People or Legislative Assembly of the State, shall be eligible to receive Electoral Bonds.

According to the provisions of the scheme, electoral bonds may be purchased by a person, who is a citizen of India or incorporated or established in India. It further said that a person an individual can buy electoral bonds, either singly or jointly with other individuals. On January 02, the Government of India (GoI) has notified the Electoral Bond Scheme 2018 vide Gazette notification.

According to the ministry, electoral bonds would be a bearer instrument like Promissory Notes and an interest-free banking instrument. A purchaser will be allowed to buy electoral bonds only on fulfilment of all KYC norms and by making payment from a bank account. However, the purchaser will not carry name of the payee.

These bonds will have a life of just 15 days, and during this time only a citizen can make a donation to political parties. Interest-free electoral bonds for political funding can be purchased from SBI in multiples of Rs1,000, Rs10,000, Rs1 lakh, Rs10 lakh and Rs1 crore.

Additionally, a 30 days period shall be specified by the government in the year of general election. Eligible party can encash the bonds only through a designated bank account with an authorised bank. Investments in electoral bonds will be exempted from tax.


Loose talk: Army chief Bipin Rawat should
refrain from making political points

The Times of India
Published on February 23, 2018

Army chief General Bipin Rawat found himself at the centre of a political controversy due to remarks made at a public platform. Speaking at a seminar on the northeast organised at DRDO Bhawan, Rawat alleged a planned influx of people from Bangladesh into the north-eastern states as part of a proxy war being waged by Pakistan with support from China. Elaborating on his point, the army chief pointed to the fast growth of Badruddin Ajmal’s All India United Democratic Front (AIUDF) party in Assam as compared to BJP in the 1980s.

Needless to say this was totally unnecessary. As a serving army chief, Rawat ought to refrain from making public political comments. In that sense, Ajmal is right in questioning why the army chief should be concerned about a legitimate political party rising faster than BJP. Rawat’s choice of words, irrespective of actual intentions, creates the impression that he views AIUDF as Chinese-Pakistani proxies. Moreover, migration takes place primarily for economic reasons, and it is a stretch to say that China or Pakistan is somehow behind migration from Bangladesh.

Rawat had been criticised earlier for talking about the prospect of a two-front war. That criticism was unjust and he was perfectly within his remit there, as the head of the army has the responsibility to anticipate all permutations of military threats facing the nation. But it is not part of his job to meddle in politics; that must be avoided at all costs. Hitherto the Indian army has been known and respected for its professionalism. Commenting on a political party muddies waters and creates opportunities to cast aspersions on the institution of the army. Rawat must strictly maintain the army’s political neutrality – else we would become a bit like Pakistan.

 Source: Internet News papers and Anupsen articles