Cabinet Clears Bill To Deal With Crisis In Banks, Insurers

New Delhi: The Cabinet on Wednesday gave approval to a proposal to introduce a Bill in Parliament for setting up a Resolution Corporation to deal with bankruptcy in banks, insurance companies and financial entities. The Financial Resolution and Deposit Insurance Bill, 2017, which aims to instil discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities, was approved by the Union Cabinet chaired by Prime Minister Narendra Modi, an official statement said.

The proposed Bill will provide for a comprehensive resolution framework to handle any bankruptcy situation in banks, insurers and financial sector entities.

According to the statement, the Bill when enacted will pave the way for setting up of the Resolution Corporation. It would also lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill.

Cabinet Clears Bill To Deal With Crisis In Banks, Insurers

“It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, to transfer the deposit insurance powers and responsibilities to the Resolution Corporation,” it said.

The Resolution Corporation would ensure the stability and resilience of the financial system, protecting the consumers of covered obligations up to a reasonable limit and public funds to the extent possible.

The government recently enacted the Insolvency and Bankruptcy Code, 2016 for the insolvency resolution of non-financial entities.

The proposed Bill complements the Code by providing a resolution framework for the financial sector. Once implemented, this Bill together with the Code will provide a comprehensive resolution framework for the economy. It seeks to give comfort to consumers of financial service providers during any financial distress.

It would help in maintaining financial stability in the economy by ensuring adequate preventive measures while at the same time providing necessary instruments for dealing with a post-crisis situation.

The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of a number of retail depositors. Further, this Bill seeks to cut down the time and costs involved in resolving the problem of the distressed entities.

 

Provide Adequate Transaction Details In Passbooks: RBI To Banks

Mumbai: The RBI today asked banks to provide “adequate details” of transactions in the passbooks and statements of accounts so that customers can cross-check them.

Earlier, the Reserve Bank had advised them to avoid inscrutable entries in passbooks/statements of account and ensure that brief, intelligible particulars are invariably entered with a view to avoiding inconvenience to depositors.

However, the RBI said it has come to its notice that many lenders still do not provide adequate details.

Earlier, RBI had advised banks to avoid inscrutable entries in passbooks.

“In the interest of better customer service, it has been decided that banks shall at a minimum provide the relevant details in respect of entries in the accounts,” the central bank said while prescribing a list of details to be provided.

The details to be provided by banks in passbooks, include name of the payee, mode of transaction, nature of the charges (like fee/ commission/ fine/ penalty), and loan account number.

 

Government Allows Co-Operative Banks To Deposit Old Notes With RBI

The Finance Ministry on Tuesday allowed banks, post offices and district central cooperative banks to deposit the scrapped Rs. 500 and 1,000 rupee notes with the Reserve Bank of India within 30 days and exchange the value of notes deposit with the new notes.

In an official notification the Finance Ministry said, “Specified bank notes may be deposited by such Bank, Post Office or District Central Cooperative Bank, as the case may be, in any office of the Reserve Bank, within a period of 30 days from the commencement of these rules, and get the exchange value thereof by credit to the account of such Bank, Post Office or District Central Cooperative Bank, as the case may be, subject to the satisfaction of the Reserve Bank of the conditions specified in the said notification and the reasons for non-deposit of the specified bank notes within the period under that notification.”

Banks can deposit old notes with RBI within 30 days.

The relaxation comes against the backdrop of reports that many district co-operative banks did not have enough cash to disburse to farmers, particularly in Maharashtra. The reason, the banks say, is that nearly six months after demonetisation, they still have crores of cash in old currency, which the Reserve Bank of India (RBI) is refusing to accept.

Nashik’s District Central Cooperative Bank told NDTV they still have a stockpile of Rs. 340 crore in old 500 and 1,000 notes. Unless this money is converted to new, payments will be hard to make, said Narendra Darade, Chairman of Nashik’s DCCB.

The demonetisation of high value currency notes of Rs. 500 and Rs. 1,000 announced on November 8, 2016 led to scrapping of over Rs. 15 lakh crore from the system.

 

Telecom Sector Woes Do Not Pose Systemic Threat To Banks, Says Fitch

Mumbai: In the wake of recent liquidity crisis at Reliance Communications, global rating agency Fitch Ratings today said though the country’s banks do not have large exposure to the telecom sector, but defaults could affect lenders with weak financials.

“Indian banks’ exposure to troubled telecom companies is not large enough to pose a systemic threat, but defaults could add to problems at banks with weak balance sheets,” the rating agency said in a note here today.

According to Reserve Bank, total debt owed by telcos to banks is only Rs. 91,300 crore, accounting for just 1.4 per cent of all bank loans.

Telecom Sector Woes Do Not Pose Systemic Threat To Banks, Says Fitch

Anil Ambani-led Reliance Communications is struggling to repay Rs. 45,000 crore of debt to its lenders.

Due to weak operating performance and liquidity condition the company and its various debt instruments were downgraded by multiple rating agency including Fitch Ratings.

Last week, the lenders to Reliance Communications agreed to restructure its debt under strategic debt restructuring of Reserve Bank of India. The lenders have given the company a seven month breather to repay a part of the debt.

Fitch further said the credit profiles of the country’s telcos are under pressure from fierce competition stemming from the entry into the market of Reliance Jio last year and rising capex required for the roll-out of 4G services.

“Some companies could find it difficult to service their debt and we have the sector on a negative outlook,” it said.

The banks already have significant asset quality issues that could be made worse by stress in the telco sector.

It, however, said exposure to other troubled sectors is much larger. Lending to iron and steel companies, for example, accounts for 4.7 per cent of total lending. The power sector accounts for 8.7 per cent and the road sector for 2.7 per cent.

The agency said loans to telcos are also generally backed by spectrum assets, which should provide a better chance of recovery than, for example, a steel factory operating below capacity or a power plant that lacks a power purchase agreement.

“That said, the sale of spectrum assets might take longer than banks expect and not fetch full value, given that the top-three telcos now have sufficient spectrum to run their operations for the medium term,” the report said.

 

Don’t report frauds below Rs 1 lakh to police: CVC to banks

The Central Vigilance Commission (CVC) has asked public sector banks not to report frauds below Rs one lakh to local police, unless their staff is involved in such crimes.

Earlier banks were mandated to report fraud of above Rs 10,000 and below Rs one lakh to police.

The decision was taken by the CVC in consultation with the Reserve Bank of India (RBI), taking into the account the practical difficulties faced by public sector banks in reporting such categories of cases.

CVC

It has been decided that only if staff of the bank is involved in the fraud cases of below Rs one lakh and above Rs 10,000, would such cases need to be reported or complaint filed with local police station by the bank branch concerned, the commission said in a directive to chiefs of all the banks.

The cases of frauds of upto Rs one lakh and not below Rs 10,000 are to be scrutinised by banks officials concerned for further necessary action, a senior CVC official said.

As of September 30, 2016, the Non-Performing Assets (NPAs) declared by various scheduled commercial banks stood at a whopping Rs 6,65,864 crore, according to an official data.

The NPAs of the country’s largest lender State Bank of India is Rs 97,356 crore, followed by Rs 54,640 crore of Punjab National Bank and Rs 44,040 crore of Bank of India, it said.

Bank of Baroda has NPAs of Rs 35,467 crore, Canara Bank Rs 31,466 crore, Indian Overseas Bank Rs 31,073 crore, Union Bank of India Rs 27,891 crore, IDBI Bank Limited Rs 25,973 crore, Central Bank of India Rs 25,718 crore, Allahabad Bank Rs 18,852 crore and Oriental Bank of Commerce Rs 18,383 crore, said the data, which was given by the government in Rajya Sabha in August last year.

 

Fake Currency Detection In Banks Swell To Maximum In Eight Years

New Delhi: Counterfeit currency detection instances in the country’s banking channels have seen an all time increase in the last eight years at over 3.53 lakh instances, according to a latest government report.

All banks, either public sector, private and foreign banks in the country, are mandated to report such instances to the Financial Intelligence Unit (FIU) under anti-money laundering law provisions.

“The number of counterfeit currency reports (CCRs) increased from a mere 8,580 in 2007-08 to 35,730 in 2008-09 and 3,53,837 in 2014-15,” the report, accessed by PTI, said.

The amount of fake currency detected has not been specified. (Representational image)

However, the amount of fake currency detected has not been specified.

CCR is defined as the usage of a forged or counterfeit currency note or bank note as genuine or where any forgery of a valuable security or a document has taken place during a cash transaction at a bank.

As per the data complied since 2007-08, when the government first mandated the FIU to receive such reports under the Prevention of Money Laundering Act (PMLA) from banks, the year 2009-10 saw reportage of 1,27,781 CCR, in 2010-11 it was 2,51,448, in 2011-12 it was 3,27,382, in 2012-13 they were 3,62,371 and in 2013-14 a total of 3,01,804 such instances were reported.

The data for 2010-11 to 2014-15 shows that the major chunk of these reports, at over 90 per cent, were filed by private Indian banks and a majority of them pertain to usage of fake Indian currency notes (FICN) and not any other valuable security as defined under the CCR terminology.

“The private Indian banks contribute majority of CCRs. The compliance levels of the public sector banks continued to be low despite the matter having been taken up with the RBI,” the report said.

It added that during the “review” of public sector banks on this issue, the best practices of private Indian banks in detection and reporting of counterfeit currency notes were highlighted.

A senior Finance Ministry official put the figures in perspective: “CCRs are meant to check the menace and extent of FICN entering the banking system which forms a very important part of the functioning of the economy.

“While the figures of the eight years, since the regime of reportage of such incidents first began, have shown an increasing trend, it is good that the banks are increasingly able to detect them and report to the FIU,” the official said.

The FIU under the Union finance ministry, acts as the national agency to provide financial intelligence to law enforcement agencies for safeguarding the economy from abuses of money laundering, terrorist financing and other offences, further disseminates this data to investigative agencies to ascertain the source of the FICN and undertake legal action under criminal laws aimed to check money laundering and black money.

The report, however, did not talk about the results after the CCRs were handed over to probe agencies like the National Investigation Agency (NIA), the Directorate of Revenue Intelligence and others.

The report said the FIU, during 2014-15 also received a total of 58,646 suspicious transaction reports (STRs) from all types of banks, financial institutions like insurance companies, intermediaries like stock brokers and additional non-financial businesses and professions like casinos and private locker operators.

The STRs in the latest data compiled year of 2014-15 were the second highest after 61,953 such reports were received by the FIU in 2013-14.

A suspicious transaction, under PMLA, is defined as any transaction that either indicates that it has been made in circumstances of unusual or unjustified complexity or appears to have no economic rationale or bonafide purpose.

The definition is also applicable to those transactions that give rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.

As per data, the maximum STRs are reported to the FIU by banks as compared to any other financial intermediary mandated to do so in the country.

Acting on these STRs, the report said, “the CBDT (Income Tax Department) detected unaccounted income of Rs. 4,471.65 crore while it seized assets worth Rs. 65 crore, the Customs and Service Tax department detected tax evasion to the tune of Rs. 21.59 crore and the Enforcement Directorate detected and seized proceeds of crime to the tune of Rs. 25 crore during 2014-15.”

The agency also received over 3.4 lakh cross-border wire transfer reports (CBWTR) during the said time period.

A CBWTR pertains to any money transfer of Rs. 5 lakh and above or its equivalent in foreign currency where either the origin or destination of fund is India.

The central financial intelligence agency first started getting these reports from February, 2014.

The FIU, the report said, possesses information of about 2.5 crore unique persons with average relationship of nearly 8.5 per person and thirteen transactions for each account.

Cabinet Clears Bill To Deal With Crisis In Banks, Insurers

New Delhi: The Cabinet on Wednesday gave approval to a proposal to introduce a Bill in Parliament for setting up a Resolution Corporation to deal with bankruptcy in banks, insurance companies and financial entities. The Financial Resolution and Deposit Insurance Bill, 2017, which aims to instil discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities, was approved by the Union Cabinet chaired by Prime Minister Narendra Modi, an official statement said.

The proposed Bill will provide for a comprehensive resolution framework to handle any bankruptcy situation in banks, insurers and financial sector entities.

According to the statement, the Bill when enacted will pave the way for setting up of the Resolution Corporation. It would also lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill.

Cabinet Clears Bill To Deal With Crisis In Banks, Insurers

“It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, to transfer the deposit insurance powers and responsibilities to the Resolution Corporation,” it said.

The Resolution Corporation would ensure the stability and resilience of the financial system, protecting the consumers of covered obligations up to a reasonable limit and public funds to the extent possible.

The government recently enacted the Insolvency and Bankruptcy Code, 2016 for the insolvency resolution of non-financial entities.

The proposed Bill complements the Code by providing a resolution framework for the financial sector. Once implemented, this Bill together with the Code will provide a comprehensive resolution framework for the economy. It seeks to give comfort to consumers of financial service providers during any financial distress.

It would help in maintaining financial stability in the economy by ensuring adequate preventive measures while at the same time providing necessary instruments for dealing with a post-crisis situation.

The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of a number of retail depositors. Further, this Bill seeks to cut down the time and costs involved in resolving the problem of the distressed entities.