7-Jan-2022: Bankers say PSBs adequately capitalised and prepared for any stress scenarios in future
Union Minister of Finance & Corporate Affairs Smt. Nirmala Sitharaman reviewed the performance of Public Sector Banks (PSBs) with their Chairmen & Managing Directors (CMDs/MDs) via virtual mode in New Delhi today. The review meeting was also attended by Union Minister of State for Finance Dr Bhagwat Kisanrao Karad and Secretary, Department of Financial Services (DFS), Shri Debasish Panda, along with senior officials of the DFS.
During the review meeting, Smt. Sitharaman assessed various steps taken by PSBs in implementing pandemic-related measures initiated by Government of India and Reserve Bank of India (RBI) and readiness to tackle possible future disruptions that may occur due to the ongoing variant of the COVID-19 pandemic.
While appreciating the success of ECLGS, the Finance Minister said that it is not time yet to rest on our achievements and that our collective efforts must strive towards supporting sectors that face interruption due to continued onslaught of COVID-19 pandemic. Smt. Sitharaman also conveyed to the bankers to continue supporting agriculture sector, farmers, retail sector and MSMEs.
Smt. Sitharaman noted that business outlook is progressively improving in spite of the headwinds from global development and Omicron spread. The Finance Minister underlined that contact intensive sectors may require more support to help them fight against the pandemic.
On the credit demand front, the Finance Minister said that credit demand is expected to pick up on account of growth in retails segments, improvement in overall macroeconomic prospects and improving financial health of borrowers.
During the review meeting, bankers pointed out that PSBs have observed an improvement in the repayment culture in the country.
PSBs have performed well and, supported by various policy measures, provided the required impetus to the economy for coming out of shackles of pandemic induced stress.
Performance of Public Sector Banks (PSBs) —
- PSBs recorded net profit of Rs 31,820 crore in FY 2020-21, highest in last 5 financial years.
- Net profit of Rs 31,145 crore for the first half of FY2021-22, almost equal to that of FY 2020-21.
- PSBs have effected a recovery of Rs 5,49,327 crore during the last 7 financial years.
- PSBs are adequately capitalised and CRAR of PSBs as on September 2021 is 14.4%, against regulatory requirement is 11.5% (including CCB).
- CET1 of PSBs was at 10.79% as on September 2021 against regulatory requirement is 8%.
- PSBs recorded year-on-year credit growth of 11.3% in personal loans, 8.3% in agriculture loans and overall credit growth of 3.5%, as on September 2021.
- Under Credit Outreach Programme launched in October 2021, PSBS have sanctioned an aggregate loan amount of Rs. 61,268 crore.
- During the COVID-19 pandemic, PSBs have performed well in various Government schemes like ECLGS (launched in May 2020 to provide relief particularly to the MSME sector amidst the COVID-19 pandemic), LGSCAS and PM SVANidhi.
- Of the extended limit of Rs. 4.5 lakh crore of ECLGS provided by the Government, 64.4% or Rs 2.9 lakh crore, sanctioned upto Nov. 2021. Over 13.5 lakh small units survived pandemic due to ECLGS, saved MSME loans worth Rs 1.8 lakh crore from slipping into non-performing assets, and saved livelihood for approx. 6 crore families.
In their assessment of overall situation, bankers were confident that PSBs are adequately capitalised and banks are prepared for any stress scenarios in future.
The Finance Minister also thanked the bankers for extraordinarily supporting the country from the start of the COVID-19 pandemic. She attributed the success of ECLGS to the collective efforts of the banking community. Smt. Sitharaman appealed to the banking community to observe COVID-19 appropriate behaviour for the safety of their staff & families and ensure that everyone is vaccinated.
In his address to the bankers, Union Minister of State Dr Bhagwat Karad said that PSBs are the power engines of our economy and congratulated the bankers for their performance during the pandemic times. Dr Karad said that moving with the times, banking has become more open and customer centric.
Earlier at the start of review meeting, SBI Chairperson gave an in-depth presentation on pre-pandemic and current scenario of banking business to the Finance Minister. Later, CMDs/MDs of various PSBs also shared their views on the overall assessment of the banking business and gave various suggestions for overall growth of business.
25-Mar-2020: Cabinet approves recapitalization of Regional Rural Banks to improve their Capital to Risk Weighted Assets Ratio
The Cabinet Committee on Economic Affairs, chaired by Prime Minister Shri Narendra Modi, has given its approval for continuation of the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum regulatory capital to RRBs for another year beyond 2019-20, that is, up to 2020-21 for those RRBs which are unable to maintain minimum Capital to Risk weighted Assets Ratio (CRAR) of 9%, as per the regulatory norms prescribed by the Reserve Bank of India.
The CCEA also approved utilization of Rs.670 crore as central government share for the scheme of Recapitalization of RRBs (i.e. 50% of the total recapitalization support of Rs.1340 crore), subject to the condition that the release of Central Government’s share will be contingent upon the release of the proportionate share by the sponsor banks.
Benefits: A financially stronger and robust Regional Rural Banks with improved CRAR will enable them to meet the credit requirement in the rural areas.
As per RBI guidelines, the RRBs have to provide 75% of their total credit under PSL (Priority Sector Lending). RRBs are primarily catering to the credit and banking requirements of agriculture sector and rural areas with focus on small and marginal farmers, micro & small enterprises, rural artisans and weaker sections of the society. In addition, RRBs also provide lending to micro/small enterprises and small entrepreneurs in rural areas. With the recapitalization support to augment CRAR, RRBs would be able to continue their lending to these categories of borrowers under their PSL target, and thus, continue to support rural livelihoods.
Background: Consequent upon RBI’s decision to introduce disclosure norms for Capital to Risk Weighted Assets Ratio (CRAR) of RRBs with effect from March 2008, a committee was set up under the Chairmanship of Dr. K.C. Chakrabarty.
Based on the Committee’s recommendations, a Scheme for Recapitalization of RRBs was approved by the Cabinet in its meeting held on 10th February, 2011 to provide recapitalization support of Rs. 2,200 crore to 40 RRBs with an additional amount of Rs. 700 crore as contingency fund to meet the requirement of the weak RRBs, particularly in the North Eastern and Eastern Region. Therefore, based on the CRAR position of RRBs, as on 31st March of every year, National Bank for Agriculture and Rural Development (NABARD) identifies those RRBs, which require recapitalisation assistance to maintain the mandatory CRAR of 9%.
Post 2011, the scheme for recapitalization of RRBs was extended upto 2019-20 in a phased manner with a financial support of Rs. 2,900 crore with 50% Government of India’s share of Rs. 1,450 crore. Out of Rs. 1,450 crore approved as GoI’s share for recapitalization, an amount of Rs. 1,395.64 crore has been released to RRBs, upto 2019-20 so far.
During this period, Government has also taken various initiatives for making the RRBs economically viable and sustainable institutions. With a view to enable RRBs to minimize their overhead expenses, optimize the use of technology, enhance the capital base and area of operation and increase their exposure, the Government has initiated structural consolidation of RRBs in three phase, thereby reducing the number of RRBs from 196 in 2005 to the present 45.
4-Jul-2018: Cabinet approves extension of Scheme of Recapitalization of Regional Rural Banks upto 2019-20.
The Union Cabinet has approved the extension of the scheme of recapitalization of Regional Rural Banks (RRBs) for the next three years i.e. upto 2019-20. This will enable the RRBs to maintain the minimum prescribed Capital to Risk Weighted Assets Ratio (CRAR) of 9 per cent.
Impact: A strong capital structure and minimum required level of CRAR will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meeting the credit requirements of rural areas.
Details: There are 56 RRBs functioning in the country. As on 31st March, 2017(Prov.), the total credit given by RRBs is Rs.2,28,599 crore, of which the credit under key categories is as under: -
|
Particulars |
Credit Amount (Rs. crores) |
%age to total credit |
|
Total Priority Sector Lending (PSL) |
2,05,122 |
89.73% |
|
Agriculture (Under PSL) |
1,54,322 |
67.51% |
|
Small & marginal farmers (Under Agriculture) |
1,02,791 |
44.97% |
(Source: NABARD)
The scheme of Recapitalization of RRBs started in FY 2010-11 and was extended twice in the year 2012-13 and 2015-16. The last extension was upto 31.03.2017. A total amount of Rs. 1107.20 crore, as Gol share, out of Rs.1450 crore, has been released to RRBs upto 31st March, 2017. The remaining amount of Rs.342.80 crore will be utilized to provide recapitalization support to RRBs whose CRAR is below 9%, during the years 2017-18, 2018-19 and 2019-20.
The identification of RRBs requiring recapitalization and the amount of capital to be provided, will be decided in consultation with NABARD.
This is in addition to the announcement made in Finance Minister's Budget Speech for 2018-19 relating to allowing financially strong RRBs to raise capital from sources other than Gol, State Government and Sponsor Bank.
Background: RRBs were set up with the objective to provide credit and other facilities, especially to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas for development of agriculture, trade, commerce, industry and other productive activities. RRBs are jointly owned by Government of India, the concerned State Government and Sponsor Banks with the issued capital shared in the proportion of 50%, 15% and 35% respectively.
12-Mar-2020: Nidhi Companies to apply to the Central government for updation of their status
In order to make regulatory regime for Nidhi Companies more effective and also to accomplish the objectives of transparency & investor friendliness in corporate environment of the country, the Central Government has recently amended the provisions related to NIDHI under the Companies Act and the Rules (effective from 15.08.2019).
The amended provisions of the Companies Act (Section 406) and Nidhi rules (as amended w.e.f. 15.08.2019) require that the Nidhi companies have to apply to the Central government for updation of their status/ declaration as Nidhi Company in Form NDH-4.
The time-frame for applying to Central Government in form NDH-4 is as under:-
- Companies incorporated as Nidhi before Nidhi Amendment Rules, 2019 i.e. 15.08.2019 have to apply within a period of one year from the date of its incorporation or within 9 months of the Nidhi Amendment Rules i.e. 15.08.2019 whichever is later.
- Companies incorporated as Nidhi on or after Nidhi Amendment Rules, 2019 i.e. 15.08.2019 have to apply within 60 days of expiry of one year from the date of incorporation or extended period (as granted by concerned Regional Director).
In case a company does not comply with the above requirements, it shall not be allowed to file Form No. SH–7 (Notice to Registrar for any alteration of share capital) and Form PAS–3 (Return of Allotment).
Such companies are required to ensure strict adherence to provision of Companies Act, 1956/2013 and Nidhi Rules, 2014 as amended. In case of contravention of the provisions of these Rules, the company and every officer of the company who is in default shall initially be punishable with fine which may extend to five thousand rupees and further fine in case of continuous violations.
Further, the Investors are advised to verify the status of Nidhi company from the notification issued by Central Government in official gazette before making any investment or deposit.
Under Nidhi Rules, 2014, Nidhi is a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.