Union Minister of Finance & Corporate Affairs Smt. Nirmala SItharaman's Presentation on amalgamation of National Banks
Union Minister of Finance & Corporate Affairs
Smt. Nirmala SItharaman's Presentation on amalgamation of National Banks
Measures to Achieve Higher Economic Growth
Progress since Announcements on 23.8.2019
Quick Follow-up on Measures Announced on 23.8.19
Announcements
Actions initiated
1 Banks to launch Repo rate linked loan products
8 PSBs have launched repo-linked
home/vehicle/mortgage/cash-credit loans
2. Customer Ease: Time-bound
return of loan documents
Instructions issued. To be enforced through
CBS. Regional Managers responsible.
3. Customer Ease: Online
tracking of loan applications
Implementation initiated with Retail/MSME on
Loan Management Systems
4. Transparent One Time
Settlement (OTS) Policy
Instructions issued
5. Support to NBFCs/HFCs:
Partial Credit Guarantee
Sanction begun with ~₹ 3,300 crore and
~₹ 30,000 crore more in pipeline
6. Co-origination of loans by
PSBs jointly with NBFCs
Bank-NBFCs tie-ups with 4 NBFCs already
in place. More in pipeline.
Rapid Growth needs Robust Credit Capacity
Strong Foundation Laid through Financial Sector Reforms An Ongoing Endeavour
BANKING THEN
BANKING NOW
1. Phone Banking
No interference in commercial decisions
2. Layered entry operations
3.38 lakh “shell” companies struck off
3. Auditors not independently regulated
NFRA set up as independent regulator of auditors
4. Restructuring of stressed assets often without actual resolution
Resolution through IBC: Connected party debarred
5. Stress restructured and not recognized as NPA
Restructuring schemes withdrawn
6. Releases often without ensuring loan conditions/ project clearances
Releases only after ensuring loan conditions and clearances
7. Consortiums with 30-31 members
Consortiums limited to 7 to 9
8. Inadequate techno-economic valuation capacity
Techno-economic valuation cells created in banks
9. Technology / analytics not fully leveraged for appraisal
Technology / analytics used for robust due diligence
10. Inadequate Early Warning Signal system & no specialised monitoring
EWS in place; Specialised agencies monitor loans > ₹ 250 crore
11. Cash flows not ring-fenced
Cash flows ring-fenced
12. Banks overexposed to corporate loans
Business plans implemented for balanced asset mix
13. Sanction and monitoring not strictly separated
Sanctioning and monitoring of big loans strictly separated
14. Banks often on verge of default due to poorer quality capital
Quality of Tier-I capital enhanced
15. Inadequate slippage prevention mechanism
Stressed asset verticals created
16. Fleeing defaulters retained control of assets
Fugitive Economic Offenders Act to confiscate assets
17. Inadequate digital lending interface
PSBloansin59minutes.com launched
18. Foreign branches retained despite losses
Foreign branches rationalised
19. Ad hoc loan-pricing
Adherence to risk-based pricing
20. Loan Management System (LMS) in only a few PSBs
Retail & MSME LMS implemented
21. SWIFT messages not always linked to CBS
SWIFT messages linked to CBS
22. Slow, multi-level decision-making for loan sanction
IT-based centralised processing centres and verticals started
23. No online bill discounting platform
MSME bills discounted on TReDS
24. Selection of top management not done independently
Selection at arm’s length through Banks Board Bureau
25. MD selection from within banks of same category
MD selection from market for large PSBs and wider pool for other PSBs
26. MD also being Chairman weakened Board oversight
Non-executive Chairman introduced
Gains Visible from Amalgamation of BoB + Vijaya + Dena Bank
Unlocking potential through Consolidation
Big banks with enhanced capacity to increase credit
Banks with strong national presence and global reach
Operational efficiency gains to reduce cost of lending
Banks with scale for building a $ 5 trillion economy
Enhanced risk appetite
Thrust on NextGen technology for banking
Wider offerings with enhanced customisation
Better ability to raise resources from markets
Snapshot of Consolidations
PNB + Oriental Bank of Commerce + United Bank
2nd largest PSB with business of ₹ 17.95 lakh crore (~1.5 times PNB)
2nd largest branch network in India, with 11,437 branches
Scale and synergy benefits through:
High CASA and lending capacity combined in consolidated bank
Large cost reduction potential due to network overlaps
Cost saving and income opportunities for JVs and subsidiaries
Same CBS platform (Finacle) in all three banks to enable quick realisation of gains
PNB + Oriental Bank of Commerce + United Bank
PNB OBC United Bank of India Amalgamated bank
Total business (in crore ₹) 11,82,224 4,04,194 2,08,106 17,94,526
Gross advances (in crore ₹) 5,06,194 1,71,549 73,123 7,50,867
Deposits (in crore ₹) 6,76,030 2,32,645 1,34,983 10,43,659
CASA ratio 42.16% 29.40% 51.45% 40.52%
Domestic branches 6,992 2,390 2,055 11,437
PCR 61.72% 56.53% 51.17% 59.59%
CET-I ratio 6.21% 9.86% 10.14% 7.46%
CRAR ratio 9.73% 12.73% 13.00% 10.77%
Net NPA ratio 6.55% 5.93% 8.67% 6.61%
Employees 65,116 21,729 13,804 1,00,649
Canara Bank + Syndicate Bank
4th largest PSB with business of ₹ 15.20 lakh crore (~1.5 times Canara Bank)
3rd largest branch network in India, with 10,342 branches
Scale and synergy benefits through:
Large cost reduction potential due to network overlaps
Similar culture to enable smooth consolidation
Cost saving and income opportunities for JVs and subsidiaries
Same CBS platform (iFlex) in both banks to enable quick realisation of gains
Canara Bank Syndicate Bank Amalgamated bank
Total business (in crore ₹) 10,43,249 4,77,046 15,20,295
Gross advances (in crore ₹) 4,44,216 2,17,149 6,61,365
Deposits (in crore ₹) 5,99,033 2,59,897 8,58,930
CASA ratio 29.18% 32.58% 30.21%
Domestic branches 6,310 4,032 10,342
PCR 41.48% 48.83% 44.32%
CET-I ratio 8.31% 9.31% 8.62%
CRAR ratio 11.90% 14.23% 12.63%
Net NPA ratio 5.37% 6.16% 5.62%
Employees 58,350 31,535 89,885
Union Bank + Andhra Bank + Corporation Bank
5th largest PSB with business of ₹ 14.59 lakh crore (~2 times Union Bank of India)
4th largest branch network in India, with 9,609 branches
Scale and synergy benefits through:
Business to become twice to 4½ times existing bank business
Large cost reduction potential due to network overlaps
Cost saving and income opportunities for JVs and subsidiaries
Same CBS platform (Finacle) in all three banks to enable quick realisation of gains
Union Bank Andhra Bank Corporation Bank Amalgamated bank
Total business (in crore ₹) 7,41,307 3,98,511 3,19,616 14,59,434
Gross advances (in crore ₹) 3,25,392 1,78,690 1,35,048 6,39,130
Deposits (in crore ₹) 4,15,915 2,19,821 1,84,568 8,20,304
CASA ratio 36.10% 31.39% 31.59% 33.82%
Domestic branches 4,292 2,885 2,432 9,609
PCR 58.27% 68.62% 66.60% 63.07%
CET-I ratio 8.02% 8.43% 10.39% 8.63%
CRAR ratio 11.78% 13.69% 12.30% 12.39%
Net NPA ratio 6.85% 5.73% 5.71% 6.30%
Employees 37,262 20,346 17,776 75,384
Indian Bank + Allahabad Bank
7th largest PSB with business of ₹ 8.08 lakh crore (~1.9 times Indian Bank)
Nationwide presence with strong networks in the South, North and East
Scale and synergy benefits through:
Doubling of business size
Major scaling up of reach due to complementary networks
High CASA and lending capacity in consolidated bank
Same CBS platform (BaNCS) in both banks to enable quick realisation of gains
Indian Bank Allahabad Bank Amalgamated bank
Total business (in crore ₹) 4,29,972 3,77,887 8,07,859
Gross advances (in crore ₹) 1,87,896 1,63,552 3,51,448
Deposits (in crore ₹) 2,42,076 2,14,335 4,56,411
CASA ratio 34.71% 49.49% 41.65%
Domestic branches 2,875 3,229 6,104
PCR 49.13% 74.15% 66.21%
CET-I ratio 10.96% 9.65% 10.36%
CRAR ratio 13.21% 12.51% 12.89%
Net NPA ratio 3.75% 5.22% 4.39%
Employees 19,604 23,210 42,814
Consolidated PSBs for strong national presence & global reach
82% of PSB business
56% of commercial bank business
Anchor bank Amalgamating bank(s) Business size* PSB rank by size CBS
Punjab National Bank Oriental Bank of Commerce
United Bank of India ₹ 17.94 lakh cr. 2nd largest Finacle
Canara Bank Syndicate Bank ₹ 15.20 lakh cr. 4th largest iFlex
Union Bank of India Andhra Bank
Corporation Bank ₹ 14.59 lakh cr. 5th largest Finacle
Indian Bank Allahabad Bank ₹ 8.08 lakh cr. 7th largest BaNCS
SBI Amalgamated earlier ₹ 52.05 lakh cr.
Bank of Baroda Amalgamated earlier ₹ 16.13 lakh cr.
To strengthen national presence
Bank Business size*
Bank of India ₹ 9.03 lakh cr.
Central Bank of India ₹ 4.68 lakh cr.
To strengthen regional focus
Bank Business size*
Indian Overseas Bank ₹ 3.75 lakh cr.
UCO Bank ₹ 3.17 lakh cr.
Bank of Maharashtra ₹ 2.34 lakh cr.
Punjab and Sind Bank ₹ 1.71 lakh cr..
Governance Reforms
PSB Boards empowered
To make management accountable to Board, Board committee of
nationalised banks to appraise performance of GM & above (incl. MD)
To make span of control manageable in large PSBs, post consolidation,
Boards given flexibilty to introduce CGM level as per business needs
To recruit Chief Risk Officer from market, at market-linked
compensation to attract best available talent
To enable Succession Planning, Boards to decide system of Individual
Development Plans for all senior executive positions
To ensure sufficient tenure, Boards given flexibility to prescribe
residual service of two years for appointment of GM and above
Strengthening Board committee system
Flexibility given to Boards of large PSBs to enhance sitting fees of NonOfficial Directors (NODs)
For better Board committee functioning, Boards given mandate to
reduce/rationalise Board committees
Risk Management Committee given mandate to fix accountability for
compliance of Risk Appetite Framework
Longer term to Directors on Management Committee of Board (MCB)
to enable them to contribute effectively
MCB loan sanction thresholds enhanced by up to 100%, to enable
focussed attention to higher value loan proposals
Enhancing effectiveness of Non-official Directors (NoDs)
NODs to perform role analogous to independent director
Boards given mandate for training of directors, both for induction and
for specialised purposes
Boards given mandate to evaluate NOD performance annually on
peer-review basis
Leadership development
Executive Directors’ strength in larger banks raised to 4, for better
functional focus and thrust to technology
Creation of leadership pipeline under BBB’s Leadership Development
Programme
PSBs to drive growth
Repositioning PSBs for $5 trillion economy
Wide-ranging Reforms
Financially stronger PSBs
Well-provisioned PSBs: 14 in profit
Technology-driven banking
Scale and synergy — Consolidation
Governance strengthened
Further capital for:
Credit Regulatory compliance
Bank Amount
In crore ₹
Punjab National Bank 16,000
Union Bank of India 11,700
Bank of Baroda 7,000
Canara Bank 6,500
Indian Bank 2,500
Indian Overseas Bank 3,800
Central Bank of India 3,300
UCO Bank 2,100
United Bank of India 1,600
Punjab & Sind Bank 750
Total 55,250
Thank You
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