Business standard news updates 26-3-2013

Banks initiate crackdown on wilful defaulters

MANOJIT SAHA Mumbai, 25 March Government- owned banks have started cracking the whip on wilful defaulters, with the finance ministry asking them to recover dues from the top 50 defaulters as the first step. Banks have been asked to furnish the information of the top- 50 immediately. Wilful defaulters are those borrowers who have defaulted on loan repayment to banks despite having adequate cash flows and a healthy net worth. The ones who have not utilised the funds borrowed for specific purposes and diverted those for other purposes have also been categorised as wilful defaulters by the Reserve Bank of India ( RBI). The finance ministry has asked chief executives of public- sector banks to take approval of their boards and begin proceedings for penal measures. The ministry has also asked banks to lodge formal complaints against the auditors of the borrowers with the Institute of Chartered Accountants of India, if they find the auditors were negligent or deficient in conducting the duty. The ministry’s directions have come against the backdrop of a rise in “ compromises” made by banks in writing off loans. According to data compiled by the ministry, the reduction in banks’ non- performing assets (NPA) due to compromises made during write- offs was 33 per cent of the total reduction as of Decemberend, compared with 31 per cent as of March- end. The total NPA reduction by public- sector banks as of December- end was ₹ 41,672 crore. The ministry has also mandated banks not to provide any additional facility to these companies and institutional financing for floating new ventures. Following the ministry’s directive, banks have formed committees —comprising chairmen, executive directors and government nominees — to update their respective boards on the matter. “The finance ministry has also directed us to obtain all necessary powers to recover dues from such defaulters,” said a senior executive of a public- sector bank. The move has come within days of Finance Minister P Chidambaram’s comments on the corporate sector’s wilful defaulters. He had said after a meeting with chiefs of public- sector banks last week: loans. Banks and to conduct a committee. To recover dues from 50 top defaulters; finance ministry wants proceedings fast- tracked UNDER STRESS Govt banks’ stressed assets as % of gross advances Bank [1] Dec 2011 [1] Dec 2012 Central Bank of 4.9 India 18.1 Punjab National 8.85 Bank 15.47 Oriental Bank of 8.86 Commerce 14.74 Punjab & 4.49 Sind Bank 14.36 Indian Overseas 10.52 Bank 14.29 Andhra Bank 6.36 14.14 UCO Bank 4.06 13.78 Indian Bank 7.69 13.72 Allahabad Bank 5.63 13.67 Bank of India 7.75 12.25 IDBI Bank 3.03 11.48 State Bank 7.82 of India 10.47 Bank of Baroda 5.34 10.04 All public 6.67 sector banks 11.59 Source: Finance Ministry

Interest rate on small savings, PPF lowered

BS REPORTER New Delhi, 25 March The government today reduced the interest rate on Public the Provident Fund ( PPF) from 8.8 per cent to 8.7 per cent. The new rate will come into effect from April 1. It also lowered the rate on other small savings schemes, with maturity of two years or more, by 10 basis points. This includes fixed deposits ( FD) and recurring deposits ( RD), as well as National Savings Certificates ( NSC). A one- year time deposit will now fetch the investors an interest at the rate of 8.2 per cent, against 8.3 per cent earlier. Fiveyear NSC and 10- year NSC will give a rate of return of 8.5 per cent and 8.9 per cent, respectively. The senior citizens savings scheme will offer the highest rate of interest at 9.2 per cent. Monthly Income Schemes of five- year maturity will earn an interest of 8.4 per cent. Interest on savings deposit and one- year term deposit remains unchanged at 4 per cent and 8.2 per cent, respectively. Based on the decisions taken by the government on the recommendations of the Shyamala Gopinath Committee for Comprehensive Review of National Small Savings Fund, the interest rates for small saving schemes are to be notified every financial year, before April 1 of that year. The committee had recommended benchmarking small savings returns with the market rate. Planning Commission Deputy Chairman Montek Singh Ahluwalia justified the move saying the returns remain favourable to depositors in real terms, as inflation is lower than it was two years ago. “I dont believe that interest rate for savers through the post office system can be delinked completely from the interest rate system in the country. If you want low rate environment, you cannot say, ‘ I want higher interest rate for savers and low interest rate for borrowers’. They have probably moderated a little bit in line with the softening of interest rates,” Ahluwalia said on the sidelines of the Skoch summit. The Reserve Bank of India cut the repo rate by 25 basis points in its last monetary policy review. SCHEMING IT LOW Rate of Interestwef Apr 1, Apr1, Scheme 2012 2013 Savings deposit 4.0 4.0 1- yr time deposit 8.2 8.2 2- yr time deposit 8.3 8.2 3- yr time deposit 8.4 8.3 5- yr time deposit 8.5 8.4 5- yr recurring 8.4 8.3 deposit 5- yr SCSS 9.3 9.2 5- yr MIS 8.5 8.4 5- yrNSC 8.6 8.5 10- yrNSC 8.9 8.8 PPF 8.8 8.7 Source: Finance ministry

Sebi plans stronger surveillance systems in 2013- 14

PRESS TRUST OF INDIA New Delhi, 25 March The Securities and Exchange Board of India ( Sebi), plans to put in place a stronger and more effective surveillance system in the next financial year 2013- 14, by way of greater checks against money laundering and an overhaul of its regulations for various market entities and trade activities. The measures proposed to be taken include enhanced surveillance of derivatives market, first- stage monitoring by brokers, stronger audit mechanism for market entities and review of anti- money laundering and terror combating funding norms. Besides, Sebi also plans to bring in guidelines to address conflict of interest for credit rating agencies, introduce regulatory framework for foreign intermediaries soliciting business from investors in India and put in place a centralised KYC framework for the entire financial sector. The proposed steps are part of Sebi’s budget proposals for the year 2013- 14, which have been approved by its board and would be implemented during the course of the year. One of the top priorities identified by Sebi for 2013- 14 would be “ protecting the integrity and safety of the market through a stronger and more effective surveillance mechanism and by strengthening the inspection process of intermediaries”, a senior executive said. Sebi is also planning to strengthen its manpower in the next financial year, besides making greater efforts towards training and skill building of existing staff members. The regulator would also strengthen its data warehousing and business intelligence system (DWBIS), the project which has been initiated in phases to generate reports to identify, detect and investigate aberrations and market abuses that undermine market integrity. In its budget proposals, Sebi also said it was necessary for the intermediaries to maintain high levels of compliance with the stipulated norms. To provide the services to the investors at their door step and to promote a balanced securities market, Sebi is also working on enhancing the physical proximity of Sebi offices to investors and intermediaries. While 10 new local offices are expected to be functional by the end of this month, six more are proposed to be opened during 2013- 14. Enthused by a significant increase in receipt of grievances due to its mass media campaign in 2012- 13, Sebi plans to further strengthen the campaign in the next financial year. Sebi also said it would restart the process of putting in place a unified filing and dissemination platform, called Sebi Unified Platform for Electronic ReportingDissemination ( SUPER- D), to make available information filed with it in user- friendly and analysable form for investors and various stakeholders. To enhance the scope of its activities to more comprehensively monitor compliance with listing requirements, the project was proposed in 201112, but the tender process was discontinued in 2012- 13. The project is now proposed to be completed in 201314. Sebi said it was necessary to carry out continuous review of policy by administering, supervising and inspecting market infrastructure institutions to ensure proper functioning in accordance with laws so as to develop and maintain a risk- free and fair market place. The steps proposed in this regard include introduction of pre- open call auction and post- close call auction, policy on trade annulment, review of policy on block deal window, straight through processing for retail trades and steps to develop corporate bond market. Other proposed measures include norms on utilisation of depository investor protection fund and reporting of client collateral collection and utilisation to clearing corporations. The proposed steps are part of Sebi’s budget proposals for the year 2013- 14, which have been approved by its board and would be implemented during the course of the year