Developments in Commercial Banking (Part 3 of 3) - আরবিআই - Reserve Bank of India
Developments in Commercial Banking (Part 3 of 3)
Movements in Provisions for Depreciation in Investment
3.69 PSBs increased their provisions for depreciation in investments during the year by an amount exceeding the write-back. New private banks, on the other hand, unwound their provisions reflecting possibly the greater proportion of investments in the AFS and HFT categories (Table III.27).
Incremental Non-performing Assets
3.70 The recoveries of NPAs in 2002-03 have exceeded additions implying that, incremental NPAs, both in gross and net terms, have turned negative. In absolute terms, for SCBs as a whole, gross NPAs declined by Rs.2,147 crore. There was a marginal increase in the incremental gross NPAs of nationalised banks with additions outpacing recoveries. Net NPAs, on the other hand, declined by over Rs.1,800 crore, reflecting the increased provision made by them during the year. The largest decline was effected by the State Bank group. This, in effect, served to make the incremental ratio of gross NPAs to gross advances negative for most bank groups in 2002-03. Incremental net NPAs also mirrored a similar trend (Table III.28 and Table III.29).
5. Capital Adequacy
3.71 As at end-March 2003, all the 27 PSBs had capital to risk-weighted assets ratio (CRAR) above the stipulated minimum levels of 9 per cent. Of these, 26 banks had CRAR levels in excess of 10 per cent. For PSBs as a whole, the CRAR as at end-March 2003 stood distinctly higher at 12.64 per cent than that of 11.76 per cent as at end-March 2002. Capital adequacy for top five banks (in terms of total assets) was more or less around the overall CRAR for the PSBs (Chart III.8). Perhaps, in view of the impending operationalisation of the new Capital Accord, banks, especially those with international presence, have been holding capital well above the stipulated levels.
3.72 All the old private sector banks and foreign banks operating in India had CRAR above the stipulated levels. Two new private sector banks had CRAR below the prescribed minimum (Table III.30). Bank-wise details of CRAR of various bank groups are given in Appendix Table III.21 (A) to 21(C).
Equity Capital
3.73 The amendments in the State Bank of India Act, 1955 as well as the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970/1980 have enabled
PSBs to increasingly take recourse to the capital market to shore up their capital base. Over the period 1993-2002, as many as 12 PSBs raised capital through public issues to the tune of Rs.6,501 crore.
3.74 During 2002-03, the Union Bank of India made an Initial Public Offering (IPO) in August 2002 by a public issue of 18 crore equity shares at an issue price of Rs.16 per share aggregating Rs.288 crore. The bank also returned capital of Rs.58 crore to the Government immediately prior to the issue. Consequent upon this IPO, the shareholding of the Government in the bank stands reduced to 60.9 per cent. Allahabad Bank made an IPO in October 2002 by public issue of 10 crore shares of Rs.10 each at par aggregating Rs.100 crore. Consequent upon the issue, the Government shareholding in the bank has reduced to 71.2 per cent. Canara Bank made a public issue of 11 crore equity shares at an issue price of Rs.35 aggregating Rs.385 crore. Subsequent upon this issue, the Government shareholding in the bank stands reduced to 73.2 per cent. With this, the total amount raised by PSBs through equity issues over the period 1993-2003 has aggregated Rs.7,274 crore. The Government shareholding in PSBs which have accessed the capital market, presently ranges from a low of 57.2 per cent to a high of 75 per cent.
Return of Capital
3.75 During 2002-03, three nationalised banks, viz., the Union Bank of India (Rs.58 crore), Canara Bank (Rs.278 crore) and Andhra Bank (Rs.50 crore) returned capital to the Government. With this, the total capital returned by nationalised banks to Government till end-March 2003 aggregated Rs.1,253 crore.
Writing off Losses against Paid-up Capital
3.76 With the approval of the Central Government, the Central Bank of India and UCO Bank wrote off losses of Rs. 681 crore during the year 2001-02 and Rs.1,665 crore during 2002-03, respectively, from its paid-up capital.
Indian Banks' Operations Abroad
3.77 Several Indian banks have been operating in other countries across the world. As at end-September 2003, the number of Indian banks having overseas operations remained at nine, of which eight banks were in public sector and one in the private sector. With the closure of State Bank of India's Flushing, New York branch in the USA, and the foreign currency banking unit of Indian Overseas Bank in Colombo, the total number of overseas branches of the nine Indian banks has been reduced to 92.
3.78 The number of representative offices of Indian banks abroad increased from 15 to 18 with the opening of representative offices in London and New York by ICICI Bank Limited, in Dubai by HDFC Bank Limited, in Shenzhen (China) and Ho Chi Minh City (Vietnam) by Bank of India, and in London by Punjab National Bank. The State Bank of India had earlier closed down its Representative offices in Ho Chi Minh City (Vietnam), Sao Paulo (Brazil) and Jakarta (Indonesia).
3.79 The number of joint ventures and subsidiaries abroad of Indian banks stood at 5 and 15, respectively.
Foreign Banks' Operations in India
3.80 Foreign banks have been permitted more liberal entry into the Indian financial market since the inception of reforms. As at end-September 2003, the number of foreign banks in India were 35 with 207 branches. However, the number of their Representative Offices remained unchanged at 26.
3.81 Under a Scheme of Amalgamation and in terms of Section 44A of the Banking Regulation Act, 1949, the Indian branches of Standard Chartered Grindlays Bank Limited (SCGB) were merged with the Indian branches of Standard Chartered Bank (SCB). Accordingly, SCGB was de-scheduled in August 2002 in terms of Clause (b) of sub-section (6) of section 42 of the Reserve Bank of India Act, 1934.
3.82 The Development Bank of Singapore Limited, incorporated in Singapore with one branch in Mumbai, changed its name to 'DBS Bank Limited' with effect from July 21, 2003 in terms of clause (c) of sub-section (6) of Section 42 of the Reserve Bank of India Act, 1934 (2 of 1934).
3.83 Five banks, viz., Commerzbank, Dresdner Bank AG, KBC Bank, the Siam Commercial Bank P.C.L., and the Toronto Dominion Bank have wound up their banking operations in India. The Overseas Chinese Banking Corporation Limited is in the process of closing their operations in India.
6. Regional Spread of Banking
3.84 The total number of branches of SCBs as at end-June 2003 stood at 66,514. Branch expansion of commercial banks has recorded an average annual growth of nearly one per cent over the last five years. The share of rural branches declined marginally to 48.7 per cent as at end-June 2003 from 49.0 per cent as at end-June 2002 reflecting the branch rationalisation policy wherein loss-making rural branches at centres served by two commercial bank branches (excluding that of regional rural banks) may be closed by mutual consultation. There was a marginal rise in the share of urban branches, whereas the proportion of metropolitan branches stayed at the same level as earlier (Appendix Table III.22).
3.85 The state-wise distribution of branches reveals that all regions witnessed a rise in the number of branches over the period July 2002 to June 2003, although in absolute terms, the additions to bank branches have been declining over the last few years. In line with the regional distribution of the national income, the Southern and Central regions accounted for the highest percentage of bank branches. In fact, the Southern region experienced the opening of the maximum number of branches during the year, particularly in the States of Andhra Pradesh and Karnataka. The Northern region also experienced a significant increase in the number of branches opened during the year, particularly in Punjab (31) and Delhi (26) (Appendix Table III.23).
3.86 While questions have been raised about the usefulness of 'social banking' in India on efficiency grounds, recent evidence on Indian rural branch expansion programme between 1997 and 1990 suggests that the programme made a significant dent on rural poverty and increased non-agricultural output (Box III.9).
7. Interest Rates of Scheduled Commercial Banks
3.87 Fiscal 2002-03 continued to see a softening of interest rates in most markets (Table III.31). In the credit markets, commercial bank deposit rates continued to fall reflecting the ample liquidity in the banking system. Lending rates remained relatively sticky, reflecting the impact of structural factors as well as the revival of credit demand during the latter half of the year. As a result, the spread between long-term deposit rates and lending rates widened during the year (Chart III.9).
Domestic Deposit Rates
3.88 The deposit rates, in general have come down during 2002-03, following moderation in inflation expectations (Table III.32). Maturity-wise, longer term deposit rates of commercial banks showed a larger decline than the short-term rates.
3.89 The Reserve Bank has been encouraging banks to adopt floating rate deposit schemes, notwithstanding the poor response from the depositors as these were in the long-term interest of banks as well as depositors. In order to improve flexibility in the interest rate, banks were given freedom to decide the period of reset on variable rate deposits. In this context, a Working Group (Chairman: Shri H.N. Sinor), with members from major banks and the Reserve Bank to examine various issues concerning the deposit rates and procedure, submitted its Report in May 2003.
(Per cent) |
||||
|
|
||||
Interest Rate |
March |
March |
September |
|
2002 |
2003 |
2003 |
||
|
|
||||
1 |
2 |
3 |
4 |
|
|
|
||||
I. |
Credit Markets |
|||
1.Deposit Rate |
||||
Public Sector Banks |
4.25-8.75 |
4.00-7.00 |
3.75-6.25 |
|
Foreign Banks |
4.25-10.00 |
3.00-8.50 |
3.00-8.00 |
|
Private Banks |
5.00-10.00 |
3.50-8.00 |
3.00-8.00 |
|
2.Lending Rate |
||||
Public Sector Banks |
10.00-12.50 |
9.00-12.25 |
9.00-12.25 |
|
Foreign Banks |
9.00-17.50 |
6.75-17.50 |
5.05-17.50 |
|
Private Banks |
10.00-15.50 |
7.00-15.50 |
8.00-15.50 |
|
II. |
Money Markets |
|||
3.Call Borrowing (Average) |
6.97 |
5.86 |
4.50 |
|
4.Commercial Paper |
||||
WADR (61-90 days) |
7.78 |
6.53 |
5.26 |
|
WADR (91-180 days) |
8.00 |
6.21 |
4.89 |
|
Range |
7.41-10.25 |
6.00-7.75 |
4.74-6.50 |
|
5.Certificates of Deposit |
||||
Range |
5.00-10.03 |
5.00-7.10 |
4.25-6.00 |
|
Typical Rate |
||||
3 months |
7.38 |
- |
5.00 |
|
12 months |
10.00 |
5.25 |
5.31 |
|
6.Treasury Bills |
||||
91 days |
6.13 |
5.89 |
4.57 |
|
364 days |
6.16 |
5.89 |
4.59 |
|
III.Debt Markets |
||||
7.Government Securities Market |
||||
5-year |
6.75 |
5.92 |
4.79 |
|
10-year |
7.30 |
6.13 |
5.13 |
|
8.AAA rated Corporate Bonds |
||||
1-year |
8.05 |
6.21 |
5.05 |
|
5-year |
8.40 |
6.79 |
5.54 |
|
|
|
||||
8. Regional Rural Banks
Mobilisation and Deployment of Funds
3.90 Regional Rural Banks (RRBs) continue to be important in rural institutional financing in terms of geographical coverage, clientele outreach, business volume and contribution to the development of the rural economy. In line with macroeconomic trends, deposit mobilisation by RRBs has been slowing down in recent years.
At the same time, there was a recovery in credit off-take. The Monetary and Credit Policy Statement of April 2002 announced that RRBs should maintain their entire SLR holdings in the form of Government and other approved securities by converting existing deposits with sponsor banks into approved securities by March 2003. However, SLR deposits maturing beyond March 31, 2003 have been allowed to be retained with sponsor banks till they mature, and upon maturity, these deposits are to be converted into Government securities. As a result, there was a sharp accretion in investments in Government securities, largely funded by a drawdown of inter-bank assets (Table III.33).
Financial Performance of RRBs
3.91 The data in respect of 196 RRBs for 2001-02 and 2002-03 indicate that there has been an overall decline in the number of profit-making RRBs in 2002-03. The performance of the loss-making RRBs witnessed a sharp downturn during 2002-03. On the expenditure front, both the interest expenses as well as operating expenses of the loss-making RRBs witnessed a sharp rise, the latter owing largely to the rise in the wage bill. The increase in operating profits of the profit-making RRBs in 2002-03 was largely offset by the significant losses of the loss-making RRBs. As a consequence, the loss-making RRBs, in terms of their net profit to total assets, fared poorly than in the previous year leading to a decline in the ratio for RRBs as a whole (Table III.34).
Purpose-wise Outstanding Loans and Advances
3.92 The composition of credit extended by RRBs continued to be broadly the same. While the shares of agricultural and non-agricultural loans are broadly equal, there has been a marginal bias in favour of the latter in recent years (Table III.35).
9. Priority Sector Lending
Public Sector Banks
3.93 The outstanding priority sector advances of PSBs increased by 18.6 per cent during 2002-03. At this level, priority sector advances formed 42.5 per cent of net bank credit (NBC). While 'other priority sector advances' registered the largest rise, direct and indirect advances to agriculture, taken together, also registered an increase. Advances to agriculture constituted 15.3 per cent of NBC as on the last reporting Friday of March 2003 (Appendix Table III.24). The bank-wise details of advances to agriculture and weaker sections as well as NPAs arising out of advances to weaker sections are furnished in Appendix Tables III.25 (A) and 25(B).
Private Sector Banks
3.94 Total priority sector advances extended by private sector banks rose as a proportion of NBC. The share of other priority sector category was the highest at 21.3 per cent of NBC, followed by advances to agriculture and small-scale industries (Appendix Table III.26). Bank-wise details of advances to priority sector, agriculture and weaker sections as well as NPAs arising out of advances to weaker sections are furnished in Appendix Table III.27 (A) and 27(B).
Foreign Banks
3.95 Foreign banks operating in India are required to achieve the target of 32.0 per cent of NBC for the priority sector with sub-targets of 10.0 per cent of NBC for small-scale industries and 12.0 per cent of NBC for exports. Lending to the priority sector by foreign banks constituted 33.9 per cent of NBC as on the last reporting Friday of March 2003, of which the share of export credit, as percentage to NBC was 18.7 per cent (Appendix Table III.28).
Differential Rate of Interest (DRI) Scheme
3.96 The differential rate of interest (DRI) Scheme, introduced in 1972, is being implemented by all SCBs throughout the country. Under the scheme, bank finance is provided at a concessional rate of interest of 4.0 per cent per annum to the weaker sections for engaging in productive and gainful activities, thereby enabling an improvement in their economic conditions. Banks are required to lend at least one per cent of their aggregate advances as at the end of the previous year under the scheme. Moreover, two-thirds of the total DRI advances must be routed through the bank's rural and semi-urban branches. The annual income ceiling for eligibility is Rs.7,200 per family in urban or semi-urban areas and Rs.6,400 per family in rural areas. The outstanding advances of PSBs under the DRI Scheme as at end-March 2003 amounted to Rs. 300 crore in 3.70 lakh borrowal accounts. The DRI advances of the banks as at the end of March 2003 formed 0.08 per cent of the total advances outstanding as at the end of the previous year, i.e., March 2002 which is lower than the relative target of one per cent.
(Amount in Rs. crore) |
||||||||
|
|
||||||||
Particular |
2001-02 |
2002-03 |
Variation |
|||||
Loss |
Profit |
RRBs |
Loss |
Profit |
RRBs |
during |
||
Making |
Making |
[196] |
Making |
Making |
[196] |
2002-03 |
||
[29] |
[167] |
[40] |
[156] |
|||||
|
|
||||||||
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 = (7)-(4) |
|
|
|
||||||||
A. |
Income |
484 |
5,080 |
5,564 |
774 |
5,157 |
5,931 |
367 |
(i+ii) |
(6.6) |
|||||||
i) Interest income |
449 |
4,743 |
5,191 |
727 |
4,775 |
5,501 |
310 |
|
(6.0) |
||||||||
ii) Other income |
36 |
337 |
373 |
48 |
383 |
430 |
57 |
|
(15.4) |
||||||||
B. |
Expenditure |
576 |
4,380 |
4,956 |
989 |
4,418 |
5,407 |
451 |
(i+ii+iii) |
(9.1) |
|||||||
i) Interest expended |
361 |
2,968 |
3,329 |
567 |
2,946 |
3,513 |
184 |
|
(5.5) |
||||||||
ii) Provisions and contingencies |
28 |
138 |
166 |
66 |
124 |
190 |
24 |
|
(14.5) |
||||||||
iii) Operating expenses |
187 |
1,274 |
1,461 |
356 |
1,348 |
1,703 |
243 |
|
of which : |
(16.6) |
|||||||
Wage Bill |
158 |
1,107 |
1,264 |
321 |
1,159 |
1,480 |
216 |
|
(17.1) |
||||||||
C. |
Profit |
|||||||
i) Operating Profit/Loss |
-64 |
838 |
774 |
-149 |
863 |
714 |
-59 |
|
(-7.7) |
||||||||
ii) Net Profit/Loss |
-92 |
700 |
608 |
-215 |
739 |
524 |
-83 |
|
(-13.7) |
||||||||
D. |
Total Assets |
6,169 |
50,635 |
56,804 |
10,282 |
53,332 |
63,614 |
6,811 |
(12.0) |
||||||||
E. |
Financial Ratios |
|||||||
(as percentage of total assets) |
||||||||
i) Operating Profit |
-1.0 |
1.7 |
1.4 |
-1.4 |
1.6 |
1.1 |
||
ii) Net Profit |
-1.5 |
1.4 |
1.1 |
-2.1 |
1.4 |
0.8 |
||
iii) Income |
7.9 |
10.0 |
9.8 |
7.5 |
9.7 |
9.3 |
||
iv) Interest income |
7.3 |
9.4 |
9.1 |
7.1 |
9.0 |
8.6 |
||
v) Other Income |
0.6 |
0.7 |
0.7 |
0.5 |
0.7 |
0.7 |
||
vi) Expenditure |
9.3 |
8.6 |
8.7 |
9.6 |
8.3 |
8.5 |
||
vii) Interest expended |
5.9 |
5.9 |
5.9 |
5.5 |
5.5 |
5.5 |
||
viii) Operating expenses |
3.0 |
2.5 |
2.6 |
3.5 |
2.5 |
2.7 |
||
ix) Wage Bill |
2.6 |
2.2 |
2.2 |
3.1 |
2.2 |
2.3 |
||
x) Provisions and Contingencies |
0.5 |
0.3 |
0.3 |
0.6 |
0.2 |
0.3 |
||
xi) Spread (Net Interest Income) |
1.4 |
3.5 |
3.3 |
1.5 |
3.4 |
3.1 |
||
|
|
||||||||
Source: NABARD. |
||||||||
Special Agricultural Credit Plans (SACP)
3.97 In order to enable achievement of the targeted agricultural lending, PSBs were advised to formulate Special Agricultural Credit Plans (SACP) since 1994-95, and fix self-set targets for achievement during the year (April - March). Since the introduction of the SACP, there has been a substantial increase in the flow of credit to agriculture from Rs.8,255 crore in 1994-95 to Rs.33,921 crore in 2002-03 against the target of Rs.36,838 crore for the year 2002-03.
Government - sponsored Schemes
3.98 The total number of Swarozgaris assisted under the Swarnajayanti Gram Swarozgar Yojana (SGSY) during the year 2002-03 (up to February 2003) was 5,35,133. Bank credit to the tune of Rs. 781 crore and Government subsidy amounting to Rs. 404.88 crore were disbursed under this Scheme. Of the Swarozgaris assisted, 1,60,638 (30.0 per cent) belonged to the Scheduled Castes and 78,157 (14.6 per cent) to the Scheduled Tribes, while 2,57,664 (48.2 per cent) were women and 4,166 (0.8 per cent) were physically handicapped.
(Amount in Rs.crore) |
|||
|
|
|||
Purpose |
2001 |
2002 |
|
|
|
|||
1 |
2 |
3 |
|
|
|
|||
1. |
Short-term Loans (crop loans) |
3,095 |
3,812 |
2. |
Term Loans (for agriculture |
||
and allied activities) |
871 |
782 |
|
3. |
Indirect Advances |
N.A. |
N.A. |
I. |
Total (Agriculture) |
3,966 |
4,594 |
(1 to 3) |
(44.9) |
(43.5) |
|
4. |
Rural Artisans, etc. |
181 |
198 |
5. |
Other Industries |
70 |
107 |
6. |
Retail Trade, etc. |
1,123 |
1,279 |
7. |
Other Purposes |
3,483 |
4,393 |
II. |
Total (Non-agriculture) |
4,857 |
5,977 |
(4 to 7) |
(55.1) |
(56.5) |
|
Total (I+II) |
8,823 |
10,571 |
|
(100.0) |
(100.0) |
||
|
|
|||
N.A. Not Available. |
|||
Note: Figures in brackets are percentages to the total. |
|||
Source: NABARD. |
|||
3.99 The total number of applications sanctioned under the Scheme of Liberation and Rehabilitation of Scavengers (SLRS) during 2002-03 were 12,310. Out of this, disbursements added up to Rs. 20 crore in 11,091 cases as on March 31, 2003.
3.100 As for the Prime Minister's Rozgar Yojana (PMRY), as per provisional figures, the number of applications sanctioned under the Scheme during the year 2002-03 numbered 2,22,996 involving an aggregate sanctioned amount of Rs.1,449 crore.
Kisan Credit Cards (KCC)
3.101 The Kisan Credit Card is a successful financial innovation which was introduced pursuant to the announcement made in the Union Budget of 1998-99. The KCCs are issued by SCBs, including the RRBs and co-operative banks. These cards were introduced to simplify credit delivery. The banks were advised in June 2000 that they should consider issue of KCCs for limits below Rs.5,000 also, in order to facilitate wider coverage under the Scheme. They have also been advised to pay interest on the credit balances in the accounts under the KCC Scheme.
3.102 In pursuance of the Union Finance Minister's announcement in his Budget Speech for the year 2001-02, banks have been asked to provide personal accident insurance packages to the KCC holders, as is often done with other credit cards, to cover them against accidental death or permanent disability, up to a maximum amount of Rs.50,000 and Rs.25,000 respectively. The premium burden is to be shared by the card issuing institutions and the KCC holder in the ratio of 2:1. Cumulatively, 101.5 lakh KCCs have been issued by public sector banks since inception of the scheme up to March 2003. During the year 2002-03, public sector banks issued 26.9 lakh KCCs as against the self-set target of 25.8 lakh. All eligible agricultural farmers are required to be covered under the KCC scheme by March 2004. Accordingly, all commercial banks have been advised the revised targets to be achieved.
3.103 The work regarding National Impact Assessment Survey of KCC scheme for assessing the impact of the scheme on the beneficiaries has been entrusted to the National Council of Applied Economic Research (NCAER), New Delhi. The NCAER has since launched the survey and the report is expected by December 2003. The survey covers 53 districts in 10 states and also the state of Assam to cover the North-Eastern region.
Lead Bank Scheme
3.104 The main focus of the Lead Bank Scheme (LBS) has been on enhancing the proportion of bank finance to the priority sector. As at end-March 2003, the LBS covered 582 districts, including the two new districts formed due to reorganisation / bifurcation of the existing districts. The assignment of the new districts to public sector banks is detailed in Table III.36.
3.105 The period of temporary transfer of lead responsibility of Amanita, Badge, Plasma and Stringer districts in Jammu and Kashmir from the State Bank of India to Jammu and Kashmir Bank Ltd., has been extended up to March 2005.
Micro finance
3.106 Recognising micro finance interventions as an effective tool for poverty alleviation, the Reserve Bank had issued comprehensive guidelines to banks in February 2000 for mainstreaming micro credit and enhancing the outreach of micro credit providers. These guidelines stipulate that micro credit extended by banks to individual borrowers directly or through any intermediary would henceforth be reckoned as part of their priority sector lending. The Reserve Bank has not specified any model of micro finance (mF) institutions.
3.107 The Self-Help Group (SHG) Bank linkage programme has, however, emerged as the major programme and is being implemented by commercial banks, RRBs and co-operative banks. There are presently three models of the SHG- Bank linkage programme in the country.
- Model I, lending directly to SHGs without intervention/facilitation of any NGO, which accounts for 20 per cent of the total linkage under the programme.
- Model II, lending directly to SHGs with facilitation by NGOs and other formal agencies, which amounts to 72 per cent of the total linkage.
- Model III, lending through NGO as facilitator and financing agency, which represents the balance eight per cent of the total linkage.
3.108 While 523 districts in all the States/Union Territories have been covered under this programme, 504 banks including 48 commercial banks, 192 RRBs and 264 co-operative banks along with 2,800 NGOs are now associated with the SHG-Bank linkage programme. The number of SHGs linked to banks aggregated 7,17,360 as on March 31, 2003. This translates into an estimated 11.6 million very poor families brought within the fold of formal banking services as on March 31, 2003. More than 90 per cent of the groups linked with banks are exclusive women groups. Cumulative disbursement of bank loans to these SHGs stood at Rs.2,049 crore as on March 31, 2003 with an average loan of Rs.28,559 per SHG and Rs.1,766 per family. 3.109 Micro finance initiatives have shown that banking with the poor is a viable proposition; the repayment rates in this respect are also higher at nearly 95 per cent. The Reserve Bank has been making efforts to give a fillip to mF initiatives through creating an enabling environment. As a part of this effort a High-Level meeting (Chairman: Shri Vepa Kamesam) on mF was convened in October 2002 wherein four Groups were set up to look into issues relating to: (i) structure and sustainability; (ii) funding; (iii) regulations; and (iv) capacity building of mF institutions. The second High-Level meeting of the series was held in August 2003 wherein the group reports were discussed. Thereafter, for greater public debate, the reports of the groups were circulated among banks to elicit their responses before a final view could be taken on the recommendations, particularly on regulatory issues. The feedback has been received from banks and the recommendations are under consideration.
10. Local Area Banks
3.110 The five banks which are presently functional are:
- Coastal Local Area Bank Ltd.,Vijayawada in the districts of Krishna, Guntur and West Godavari in Andhra Pradesh.
- Capital Local Area Bank Ltd., Phagwara in the districts of Hoshiarpur, Jalandhar and Kapurthala in Punjab.
- South Gujarat Local Area Bank Ltd., Navsari in the districts of Navsari, Surat and Bharuch in Gujarat.
- Krishna Bhima Samruddhi Local Area Bank Ltd., Mehboobnagar in the districts of Raichur and Gulbarga in Karnataka and Mehboobnagar in Andhra Pradesh.
- The Subhadra Local Area Bank Ltd., Kolhapur, which was issued licence on July 10, 2003, has commenced banking business from September 30, 2003 in the districts of Kolhapur, Sangli and Belgaum.
3.111 The performance of the LABs as at end-March 2003 reveals that most of them had moderate to high credit-deposit ratios (Table III.37). During 2002-03, the operations of four local area banks continued to remain profitable. Their rise in income was marginal and expenses outpaced incomes. Given the higher provisioning levels, in spite of healthy operating profits, their net profits were substantially lower than the previous year as reflected in the lower return on assets (i.e., net profits to total assets) (Table III.38).
11. Diversification in Banking Activities
3.112 The State Bank of India was given 'in principle' approval to its proposals (i) to convert the Discount and Finance House of India Limited (DFHI) into its subsidiary under Section 19(1)(a) of Banking Regulation Act, 1949 and (ii) to divest its stake in Securities Trading Corporation of India Limited (STCI).
3.113 Bank of India was given approval to merge with itself its wholly owned subsidiary, viz., BoI Asset Management Company Limited.
(As at end-March 2003) |
|||
(Amount in Rs. crore) |
|||
|
|
|||
Name of the LAB |
Deposits |
Advances |
C-D ratio |
(per cent) |
|||
|
|
|||
1 |
2 |
3 |
4 |
|
|
|||
Coastal Local Area Bank Ltd. |
24.1 |
18.0 |
74.8 |
Capital Local Area Bank Ltd. |
75.4 |
45.3 |
60.1 |
South Gujarat Local Area |
|||
Bank Ltd. |
11.4 |
9.6 |
84.6 |
Krishna Bhima Samruddhi |
|||
Local Area Bank Ltd. |
2.5 |
3.9 |
162.5 |
|
|
|||
3.114 During the year under review, 17 public sector banks, nine private sector banks and one foreign bank and a subsidiary of a private sector bank were given 'in principle' approval for acting as corporate agents of insurance companies to undertake distribution of insurance products on non-risk participation basis. For entering into a referral arrangement with insurance companies subject to prescribed conditions, five public sector banks, two private sector banks and one foreign bank were given approval during the year.
3.115 State Bank of India, Bank of Baroda and Punjab National Bank were given approval to promote a new Asset Management Company (AMC) 'UTI Asset Management Company Private Limited' and a trustee company, viz., 'UTI Trustee Company Private Limited', with each bank contributing Rs.2.5 crore and Rs.2.5 lakh, respectively. These three banks were also given approval for promoting 'UTI Mutual Fund' with each bank contributing capital amounting to Rs.2,500 constituting 25 per cent of the corpus of the fund, subject to necessary clearance from Securities and Exchange Board of India (SEBI).
3.116 ICICI Bank Limited was given approval for investing in the equity of National Multi Commodity Exchange of India (NMCE) up to an amount of Rs.8 crore subject to the condition that the bank will provide only normal banking service to NMCE and its members, and will not guarantee trades executed by the members of the exchange. Further, ICICI Bank Limited was given approval for making an additional contribution of up to Rs.81 crore to the share capital of ICICI Lombard General Insurance Company Limited. The bank was also given approval for making an additional investment of Rs.259 crore in the equity of ICICI Prudential Life Insurance Company Limited.
3.117 State Bank of India was given 'no objection' to its undertaking the portfolio management of SLR and non-SLR funds of the RRBs sponsored by the bank subject to prescribed conditions.
3.118 Central Bank of India, Corporation Bank, Bank of Baroda, Vysya Bank, Punjab National Bank and Vijaya Bank were also given approval for equity contribution to their subsidiaries / joint ventures companies.
(Amount in Rs.crore) |
|||||
|
|
|||||
Variation during 2002-03 |
|||||
Item |
2001-02 |
2002-03 |
Absolute |
Percentage |
|
|
|
|||||
1 |
2 |
3 |
4 |
5 |
|
|
|
|||||
A. Income (a+b) |
15.1 |
17.1 |
2.0 |
13.7 |
|
a) |
Interest income |
11.0 |
12.7 |
1.7 |
15.6 |
b) |
Other income |
4.1 |
4.4 |
0.3 |
6.8 |
B. Expenditure (a+b+c) |
12.1 |
16.9 |
4.8 |
39.1 |
|
a) |
Interest expended |
6.1 |
7.7 |
1.6 |
26.0 |
b) |
Provisions and contingencies |
0.7 |
2.6 |
1.9 |
276.9 |
c) |
Operating expenses |
5.4 |
6.7 |
1.3 |
25.3 |
of which : |
|||||
Wage Bill |
2.0 |
2.4 |
0.4 |
22.8 |
|
C. Profit |
|||||
a) |
Operating Profit/Loss (-) |
3.6 |
2.7 |
-0.9 |
-26.5 |
b) |
Net Profit/Loss (-) |
2.9 |
0.2 |
-2.7 |
-92.6 |
D. Total Assets |
118.9 |
146.2 |
27.3 |
23.0 |
|
E. Financial Ratios (as percentage of total assets) |
|||||
a) |
Operating Profit |
3.1 |
1.8 |
||
b) |
Net Profit |
2.5 |
0.5 |
||
c) |
Income |
12.7 |
11.7 |
||
d) |
Interest income |
9.3 |
8.7 |
||
e) |
Other Income |
3.5 |
3.0 |
||
f) |
Expenditure |
10.2 |
11.6 |
||
g) |
Interest expended |
5.1 |
5.3 |
||
h) |
Operating expenses |
4.5 |
4.6 |
||
i) |
Wage Bill |
1.7 |
1.7 |
||
j) |
Provisions and Contingencies |
0.6 |
1.7 |
||
k) |
Spread (Net Interest Income) |
4.1 |
3.4 |
||
|
|
|||||
Source: Based on Off-site returns. |
|||||
Local Advisory Boards of Foreign Banks
3.119 On a review of the need for constitution of Local Advisory Boards, foreign banks have been advised in August 2003 that the constitution of Local Advisory Boards by them will no longer be a regulatory requirement and they may decide about their constitution according to their corporate needs. Such constitution of Local Advisory Boards would not require the regulatory approval of the Reserve Bank.
The Prevention of Money Laundering Act
3.120 The Prevention of Money Laundering Act (PMLA), 2002, which received Presidential assent provides the broad legal framework for countering money laundering as defined under the Act. Under the Act, banking companies, financial institutions and intermediaries are required to maintain a record of all transactions (the nature and value of which will be prescribed), and furnish information of such transactions to the Designated Authority (under the Act) within the prescribed time frame; they need to verify and maintain records of the identity of all its clients as prescribed by the Central Government by Rules. It has further been envisaged that they will not be liable to any civil proceedings against them for furnishing such information. The procedure and manner of maintaining and furnishing the information is to be prescribed by the Central Government by framing the relevant Rules in consultation with the Reserve Bank, which is currently in progress.
12. Banks' Liquidation and Amalgamations
3.121 There were 78 banks under liquidation as on December 31, 2002. The matter regarding early completion of liquidation proceedings is being pursued with official/court liquidators.
Amalgamation of Banks
3.122 Nedungadi Bank Limited had been recording profits consistently till the year ended March 31, 2000. However, the bank reported a net loss of Rs. 67.8 crore for the first time for the year ended March 31, 2001. The financial position of the bank did not improve subsequently in the year ended March 31, 2002. The net worth of the bank amounting to Rs.60.4 crore stood fully eroded by the accumulated losses of Rs. 65.5 crore and it was not possible to wipe out these losses in a reasonable time. As the bank's capital was fully eroded, its CRAR had turned negative at (-) 1.9 per cent as against the regulatory requirement of minimum of 9 per cent. As the bank required approximately Rs.125 crore to achieve the minimum CRAR of 9 per cent, there was no option available but to consider amalgamation of Nedungadi Bank Limited with another bank.
3.123 As a precursor to amalgamation, Nedungadi Bank was placed under moratorium for a period of three months from November 2, 2002. During this interim period, the Reserve Bank had prepared a Draft Scheme of Amalgamation of the Nedungadi Bank Limited with the Punjab National Bank, in exercise of powers conferred on it by sub-section (4) of Section 45 of the Banking Regulation Act, 1949.8 The Reserve Bank on November 13, 2002 notified the draft scheme of amalgamation of Nedungadi Bank Limited with Punjab National Bank. The draft scheme was forwarded to both the banks for their comments and the Reserve Bank invited suggestions or objections on the draft scheme by November 30, 2002. The said Scheme of amalgamation was sanctioned by the Central Government in terms of sub-section (7) of Section 45 of the Act, through a notification dated January 31, 2003. The scheme of amalgamation of Nedungadi Bank Limited with Punjab National Bank came into force with effect from February 1, 2003.
13. Other Developments
Donation by Banks
3.124 As per the extant instructions, banks may make donations for various purposes during a financial year, within the prescribed limit of 1 per cent of their published profit for the previous year. On a review of the matter in the wake of representations received from Indian Banks' Association/banks, it has been decided that the donations made by banks to the Prime Minister's Relief Fund would be exempted from the above ceiling provided the proposal has the approval of the bank's Board and the donation amount is reasonable vis-à-vis its stated profit. However, the restriction on the overall limit on donations up to a maximum of Rs. 5 lakh for loss-making banks would apply in this case as well.
Insurance Business by Banks
3.125 As per existing guidelines for entry of banks into insurance business, banks which satisfy certain parameters, i.e., minimum net worth of not less than Rs. 500 crore, CRAR not less than 10 per cent, net profit for the last three continuous years, reasonable level of non-performing assets and a satisfactory track record of the performance of their subsidiaries, if any, are eligible to set up insurance joint venture on risk participation basis. Banks which are not eligible as joint venture participants, as above, would be allowed to take up strategic investment up to a certain limit for providing infrastructure and services support, if these banks satisfy some of the criteria specified therein. Further, any SCB or its subsidiary would be permitted to undertake insurance business as agent of an insurance company and distribute insurance products without any risk participation. The referral model, by which banks can provide physical infrastructure to insurance companies within their select branch premises and earn fee for each referral made by them, was not specifically indicated in the earlier guidelines. As the referral arrangement is akin to sub-agency and is incidental to the main activities of an agency business, it was decided that banks can undertake this activity with prior approval of Reserve Bank/ Insurance Regulatory and Development Authority.
Progress in Use of Hindi
3.126 During the year, four quarterly meetings of the Official Language Implementation Committee (OLIC) of PSBs were held and the follow-up actions were taken on the decisions taken in these meetings, particularly regarding the use of Hindi in data processing and core banking solution facility to operate ATMs in Hindi / Regional languages, conduct of high-level meetings in Hindi and increase in bilingual data processing work in branches. In order to increase the number of branches doing data processing work in Hindi, guidelines were issued to banks by the Reserve Bank.
3.127 The 23rd Rajbhasha Sammelan of banks was held in Hyderabad in October 2002. Its various recommendations to increase the use of Hindi were approved by the Official Language Implementation Committee viz., a) Department of Electronics, Government of India, should develop a Operating System (OS) in Hindi and ensure that all Hindi software developers follow Unicode standards; b) Special programmes may be conducted for senior executives for providing information regarding Official Language Act, Rules and various provisions of Official Language and the senior executives may address in Hindi in their top-level meetings; c) During the course of inspection of branches / tours, senior executives should also get information regarding use of Hindi; and d) Senior executives should initiate use of Hindi at their level.
1 The assets and liabilities of scheduled commercial banks are analysed primarily on the basis of end-March audited annual accounts.
2 This sub-section is based on the statutory returns submitted by scheduled commercial banks under Section 42 (2) of the Reserve Bank of India Act, 1934.
3 For the purpose of achievement of the target which was prescribed up to 2002-03, banks were allowed to deploy funds under housing finance allocation in any of the following categories: (a) direct finance; (b) indirect finance; (c) investment in bonds of NHB/HUDCO or combination thereof; and (d) investments by banks in rated securitised debt instruments issued by any Special Purpose Vehicle (SPV), or entity representing housing loans granted by approved housing finance companies (under the supervision of NHB).
4 Net demand and time liabilities available with the banking system less statutory pre-emptions and credit off-take.
5 As part of additional disclosures, banks have been mandated to disclose provisions towards loan losses from the year 1996-97 onwards in the ‘Notes on Accounts’ in the balance sheet.
6 Bank-wise details of select parameters of PSBs, private sector banks and foreign banks are furnished in Appendix Tables III.15(A) to 15(I), III.16(A) to 16(H) and III.17(A) to 17(H), respectively.
7 Non-performing assets refer to non-performing loans and advances.
8 This Section deals with powers of Reserve Bank to apply to Central Government for suspension of business by a banking company.
এই পেজটি শেয়ার করুন:
রিজার্ভ ব্যাঙ্ক অফ ইন্ডিয়া মোবাইল অ্যাপ্লিকেশন ইনস্টল করুন এবং সাম্প্রতিক সংবাদগুলিতে দ্রুত অ্যাক্সেস পান!
