Tuesday, January 03, 2012

Capital Infusion in Public Sector Banks


Corrupt officials of public sector banks have spoilt the future of not only employees working (excluding some flatterers and some corrupt officials) in the bank but also spoilt the health of the bank. Every year volume of Non Performing Assets called as bad assets in these banks is going up and up and due to this public sector banks need to provide more for bad debts. 

Increasing load of provisioning adversely affects the capital adequacy ratio. This is why government has to infuse capital from time to time. Executive directors and Chairmen & Managing Director of these banks frequently visit the office of Ministry of Finance with a bowl in their hand to bag alms (to request for capital infusion). 

Ministers or you say dirty politicians who misuse government banks for vote bank also extend sympathy and support to these bagging CEOs of banks.

After all it is public money which is being lent to unscrupulous businessmen by corrupt bankers in nexus with corrupt politicians and powerful corporate and rich businessmen of the country. When the asset goes bad, the ultimate burden in shape of service charges and interest is loaded on poor and middle class families.Neither accountability is fixed on top bankers nor strong legal action is initiated against high profile defaulters. 

 I say common men are more sufferers because banks usually extend all privileges to classic and high value customers at the cost of poor and low value customers. They lend money to affluent class i.e. to high value borrowers at low interest rate and similarly pay more interest to depositors who deposit in crores of rupees in banks.Poor persons who can save and deposit little amount in bank will get lower interest and will have to pay higher interest when they borrow the money from bank.

Interest rate is different for different slabs depending on value and volume. But when high value borrowers go bankrupt, the load comes to common men. None of top ranked officers are punished for their wrong decisions. For big value advances, the most common excuse given by banks, businessmen and politicians is bad weather, global recession and monetary policy of RBI.


Even capital infusion by government of India create burden on common men in form of various taxes and levies. Again tax relief and various subsidies are provided to rich and affluent class of people , not to common men. 

Lastly, all types of award in shape of sacrifice on compromise or waiver or loan or write off is extended for providing relief to high value businessmen, not to poor and common men in easy way.

This news published in Economic times on 04.01.2012

MUMBAI: Public sector lender Bank of Maharashtra (BoM) today said it expects a capital infusion by the government this fiscal as it has received a letter from the Finance Ministry in this regard.

"We have received a letter from the government stating that our request for fund infusion is under active consideration and we should be ready for the proposed infusion," the Pune-headquartered bank's Chairman and Managing Director, A S Bhattacharya, told PTI.

However, the quantum of the proposed infusion is not known, he said. The bank has been looking at a capital infusion of around Rs 860 crore by the government.

At present, six to seven public sector banks, including the nation's largest lender, State Bank of India, have approached the government for a capital infusion to shore up their capital adequacy ratio, which will help in further lending to customers.

Last week, Bank of Baroda said it has been assured of Rs 775 crore recapitalisation through preferential share allotment. Yesterday, Union Bank of India had said it would get a capital infusion of Rs 280 crore in the current quarter.

However, there is no final word on a request from the nation's largest lender SBI for the same, though it has been pending for over a year. The bank is expecting a capital infusion of some Rs 4,000 crore this fiscal.

Implementation of Basel-III banking norms, which will be enforced from 2013, requires recapitalisation of the state-run banks by the government.

Earlier, Financial Services Secretary D K Mittal had said though this year's budget for bank recapitalisation was only Rs 6,500 crore, there would be a second supplementary budget after December to infuse capital into select public sector banks.

Referring to capital adequacy ratio, sources in the industry said that post-capital infusion, the combined capital adequacy ratio of BoM stood at 11.88 per cent as of the September quarter. The government holds a 79.24 per cent stake in the bank.

About a possible reduction in base rate, he said the bank would wait till the policy review by RBI on January 24 to take a decision.

"We will take a decision on reduction of the base rate after the policy review. However, there is a possibility of a rate cut in the policy and if that happens, we will reduce our base rate," he said.

Referring to a possible cut in deposit rates, he said this will happen as the base rate comes down. "Cut in deposit rates will happen after the reduction in base rate. Mostly, this will happen in the seven days to one-year range deposits in the first phase," Bhattacharya said.

BoM had posted a 92 per cent jump in net profit for the September quarter to Rs 100.42 crore from Rs 52.3 crore a year ago. Its total income rose by 36.44 per cent to Rs 1,945.15 crore during the period from Rs 1,425.61 crore in the corresponding period last fiscal. 

Further read following news published on same day which will prove that the future is more bleak , dark and dangerous.

Indian banks may require additional Rs 1.4 lakh crore by March 2017



http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/indian-banks-may-require-additional-rs-1-4-lakh-crore-by-march-2017/articleshow/11354586.cms

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