financial news today

 02.02.2020: Today's Banking / Financial News at a Glance

 PSU banks inefficient on every parameter : In a strong critique of the performance of public sector banks (PSBs), the Economic Survey said while Rs 4.3 lakh crore of taxpayers’ money has gone into PSBs, every rupee invested has lost 23 paise as on 2019. The survey also described Indian banks as suffering ‘dwarfism’, with only one bank in the top 100, while six are needed for an economy like India’s size. PSBs should be asked to share corporate data among themselves through a GSTN like entity (PSB network) and undertake analytics of the data using fintech. PSB employees should hold stake through Employee Stock Option Scheme across all levels. “Part-ownership of PSBs by employees will reduce agency problems. This is because employees who own shares are incentivised to increase market value of equity.” Assessing the performance of government banks after completion of 50 years of nationalisation in July 2019, the government’s report card on economy said on every performance parameter ‘PSBs are inefficient compared to their peer groups’. - Times of India

 No recapitalisation for public sector banks in FY21: FM : Finance Minister Nirmala SItharaman on Saturday said the government has infused Rs 3.5 lakh crore in the PSU banks and now banks will go to market to raise funds on their own, ruling out any recapitalisation. "Financial inclusion is the key. A clean, reliable and robust financial sector is critical for robust economy", she said.  "We have infused Rs 3.5 crore capital into PSU banks. A few among them will be encouraged to move capital market for fundraising purposes", she said in her Budget Speech. - moneylife.in

 Nationwide strike impacts banking services for second day at PSBs : Services of public sector banks were impacted on Saturday as nation-wide strike by employee unions entered its second day. The strike call has been given by the United Forum of Bank Unions (UFBU), an umbrella body of nine bank unions, including All India Bank Officers' Confederation (AIBOC), All India Bank Employees Association (AIBEA) and National Organisation of Bank Workers (NOBW) to press for wage revision pending since November 2017.However, private sector lenders like ICICI Bank and HDFC Bank were operational.Branches in several parts of the country remained closed and some of the ATMs also went dry, according to reports coming various parts of the country. Many banks, including State Bank of India (SBI), had informed customers in advance that operations may be impacted to some extent due to the strike. Cash deposit, withdrawal, cheque clearances, instrument issuance and loan disbursement were affected. - Business Standard

 SBI to re-examine retail loans bought from DHFL after remarks from ED : State Bank of India (SBI) will re-examine the pooled retail loans it had bought from Dewan Housing Finance Corporation (DHFL) in light of the ongoing probe by agencies into the company’s dealings. “We do a thorough due diligence at the time of purchase of loan pools. But, we will have a look again in the light of what the ED (Enforcement Directorate) has said. So that exercise will be carried (out). We will have a relook,” SBI chairman Rajnish Kumar said on Friday in a quarterly earnings call. - Financial Express

 Canara Bank MD, CEO RA Sankara Narayanan retires : Public sector lender Canara Bank on Saturday said its Managing Director and CEO R A Sankara Narayanan has retired. "RA Sankara Narayanan, Managing Director & CEO of the Bank has retired from the services of the Bank on 31st January 2020, on his attaining the age of superannuation," Canara Bank said in a filing to BSE. Shares of Canara Bank were trading at Rs 204.50 apiece on BSE, up 0.99 per cent - Economic Times

 Depositors get higher protection cover after 27 years : Depositors may heave a sigh of relief as the government has raised the deposit insurance limit five-fold to Rs 5 lakhs after twenty seven years. Demand for raising the deposit insurance limit gained momentum after a run on a large sized multi-state co-operative bank after it came under an RBI administrator for financial irregularities pertaining to loans to real estate firm HDIL. “ The Deposit Insurance and Credit Guarantee Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a depositor, which is now ` one lakh to ` five lakh per depositor” said finance minister Nirmala Sitharaman in her Budget speech to the Parliament, assuring that the house that the deposits with the country’s commercial banks are safe . - economic times

 Now, PSBs can approach the capital market to raise funds : Union Finance Nirmala Sitharaman, on Saturday, said a few public sector banks (PSBs) will be encouraged to approach the capital market to raise additional capital. In her Budget speech, she emphasised that the government has infused about ₹3.50-lakh crore by way of capital into PSBs for regulatory and growth purposes. “We had earlier approved consolidation of 10 banks into four... Governance reforms would be carried out in these banks so that they become more competitive,” said Sitharaman. Karthik Srinivasan, SVP and Group Head, Financial Sector Ratings, ICRA, observed that unlike the past Budgets where the capital allocation for banking sector had always remained a focus, in line with his credit rating agency’s estimates of limited capital requirements of PSBs during FY2021, there has been no capital allocation for PSBs. “We expect most of the PSBs to turn profitable in FY2021 and raise capital from the markets for their growth requirements,” he said. - Business Line

 In relief to MSMEs, banks to provide subordianted debt : Hoping to allay the working capital concerns of micro, small and medium enterprises (MSMEs), Finance Minister Nirmala Sitharaman has proposed a scheme to provide subordianted debt to such entrepreneurs. “This subordinate debt to be provided by banks would count as quasi-equity and would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). The corpus of the CGTMSE would, accordingly, be augmented by the government,” she said in her speech on Saturday. - Business Line

 Govt plans to sell 46.46% holding in IDBI Bank : After ceding 51 per cent controlling stake in IDBI Bank to LIC last financial year, the government now plans to sell the balance holding of 46.46 per cent in the bank. “In the last few years, the government has taken concrete steps to bring our banking system to be robust. However, there is a need for greater private capital. “Accordingly, it is proposed to sell the balance holding of Government of India in IDBI Bank to private, retail and institutional investors through the stock exchange,” said Union Finance Minister Nirmala Sitharama in her Budget speech. - Business Line

 Employees’ unions oppose govt plan to sell shares in LIC : LIC employees’ unions on Saturday opposed the Centre’s plan to sell a part of its shares in the state- run insurance behemoth through an initial public offer (IPO), insisting that the move is “against the national interest”. Finance Minister Nirmala Sitharaman said the Life Insurance Corporation of India (LIC) will be listed as part of the government disinvestment initiative. The government proposes to sell a part of its holding in LIC through IPO, she said while unveiling the Budget 2020- 21. “We strongly oppose the government’s plan to sell a part of its shares in LIC and the move is against the national interest,” a spokesman of an employees’ union told reporters here. Established in 1956, LIC is fully-owned by the central government and has the highest market share in the life insurance segment in the country. - Business Line

 Aspirational and pro middle-class budget: Karnataka Bank chief : Mahabaleshwara MS, Managing Director and Chief Executive Officer of Karnataka Bank, termed the Budget 2020-21 as an ‘aspirational and pro middle-class’ budget. “This is an aspirational and pro middle-class budget mainly for the reason that more thrust has been given to agriculture, affordable housing, tourism, renewable energy and infrastructure sectors. These are all the areas that could touch the middle-class population,” he said.Another plus point is the enhancement of deposit insurance cover from ₹1 lakh to ₹5 lakh. This would help retail depositors, he said. The proposed mechanism for NBFCs and housing finance companies would further fuel the growth, he said. - Business Line

 Clean, reliable, robust financial sector key to achieve USD 5 trillion economy: FM :  Finance Minister Nirmala Sitharaman on Saturday said a clean, reliable and robust financial sector is required for achieving the ambitious target of USD 5 trillion economy. Presenting the Budget for 2020-21, Sitharaman said robust mechanism is in place to monitor health of all commercial banks and asserted that depositors' money is absolutely safe.She noted that Rs 3.50 lakh crore capital has been infused in public sector banks in past years, while acknowledging that there is a need for greater private capital in banks. Sitharaman further said the government plans amendment to facilitate separation of government pension trust from Pension Fund Regulatory and Development Authority (PFRDA). - economic times

 Government mulls changes in PFRDA Act : Finance Minister Nirmala Sitharaman has proposed to make amendments for separation of government pension trust from the PFRDA to strengthen the pension fund regulatory body. “Necessary amendments would be carried out in the Pension Fund Regulatory and Development Authority Act. It will also facilitate separation of NPS Trust for government employees from PFRDA,” Sitharaman said while presenting the Union Budget 2020-21 in Parliament on Saturday. - Business Line

 Fixing Co-op Banks: FM got a few frantic calls from Bengaluru last month : Finance Minister Nirmala Sitharaman turning her attention to the cooperative banking sector may have provided some relief to thousands of depositors in her home state of Karnataka, in specific, as she received quite a few frantic calls from Bengaluru last month after a cooperative bank came under the RBI’s lens. Bengaluru South MP Tejasvi Surya (BJP) called her a few times, about three weeks ago, after the news surfaced that the Reserve Bank of India (RBI) had imposed restrictions on Sri Guru Raghavendra Cooperative Bank in Bengaluru. Thousands of depositors have their savings and deposits in this bank with eight branches.After speaking to the Finance Minister, the MP later put out a note asking depositors not to panic, conveying the Finance Minister’s words of assurance that she will protect the interests of depositors. - economic times

 Forex reserves at lifetime high of $466.69 b : India’s foreign exchange reserves reached a lifetime high of $466.693 billion after a massive $4.535-billion spike in the week to January 24, according to the Reserve Bank of India data. In the previous week, reserves had increased by $943 million to $462.16 billion. In the reporting week, the increase in reserves was mainly due to a rise in foreign currency assets, a major component of the overall reserves, which rose by $4.470 billion to $432.919 billion, the RBI data released on Friday showed. - Business Line.