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BOI QUESTIONNAIRE
Sr. QUESTIONS ANSWERS/INFORMATION
No.
1 Full Name of Bank & Branch Bank of India, Turbhe Branch
2 Regulatory Authority Reserve Bank of India
3 Date of Establishment/Incorporation and Bank of India was incorporated on 7th September
Banking License 1906 under Act No. VI of 1887 of the legislative
council of India. Bank of India was nationalized
under Banking Companies Act 1970, India
4 Does your institution have a branch or a YES
subsidiary operating under offshore banking Bank of India Cayman Islands branch
license? Date: 29.05.1980
Licensing Body: Cayman islands-Registrar of
companies
Regulating Body: Cayman Islands Monetary
Authority
Country: Cayman Islands
5 Listing (Stock Exchange): YES
Is your institution’s shares listed on any stock Name of Stock Exchange: BSE, NSE
exchange markets? Stock Symbol: 532149, BANKINDIA
6 Number of Employees 48129 (as of 31st March 2017)
7 Shareholders: 1) Government of India with 73.72% of
List all of your institution’s shareholders with ownership
shareholding greater than 5%? 2) LIC of India with 12.82% of ownership
8 Indicate areas of Institution’s business Commercial banking
activities Retail Banking
Investment Banking
Asset Management
Private Banking
Merchant trading
Treasury management
9 Products and Services: Trade finance products (e.g. Forex, letter of
Enlist your institution’s principal products and credit, ECA financing, etc.)
services Lending activities
Trust & Asset management services
Investment products (e.g. securities,
commercial/government bonds)
Correspondent banking
International Funds Transfer
Others, Please specify
10 Does your institution handle traveler’s checks YES
or demand drafts? NO
11 Does your institution allow your customers to YES
have direct access to your correspondent NO
account as a sub-account holder? DON’T KNOW
12 Provide industry sectors of which your Agricultural sector
institution’s customer belong to MSME sector
Retail sector
Corporate sector
13 From the sectors selected above, if there is any
concentration to a specific sector, indicate in
which there is concentration
14 Does your institution have a transaction YES
monitoring system to automatically detect NO
suspicious activities/transactions? DON’T KNOW
15 Does your institution have a sanction screening YES
system to automatically detect a transaction NO
which may involve any sanctioned party? DON’T KNOW
16 Is money laundering a criminal offence in YES
India? NO
DON’T KNOW
Has the country established laws designed to YES
prevent money laundering and terrorist NO
financing? DON’T KNOW
Does your institution comply with those laws? YES
NO
DON’T KNOW
17 Does your institution’s AML/CFT program
include Enhanced Know Your Customer (KYC)
routines in relation to the following:
a) Dealings with individuals, companies YES
and institutions located in dealing with NO
high risk countries? DON’T KNOW
GENERAL QUESTIONS
1. What is the one thing which gives you competitive advantage over
your peers?
2. Do you see scope of improvement with respect to cash
management products of your bank? If YES please elaborate
3. What according to you should be an ideal cash management
product/service?
The reason why this is happening suddenly is that the Reserve Bank of India has
given banks a list of corporates which it has discovered are playing with the system -
repaying to some banks and not repaying to others. So RBI has asked even those
banks to whom the loans are being repaid to classify them as defaulters. This is
possible even if technically they are not in default with that particular bank as the
concept of cross default applies in banking.
To understand why there are so many stressed loans one needs to rewind to 2008.
Immediately after the global financial crisis when global markets had seized up and
trade had suffered, the Indian government decided to boost the economy by pumping
money into banks and asking them to restructure loans to companies who are going
through difficult times and not to classify them as defaulters. Restructuring
essentially meant giving banks more time and easier terms of repayment. Most of
this happened through public sector banks
This restructuring of loans had become the order of the day. Between March 2009
and March 2012, while total gross advances of the banking system grew at a
compound annual growth rate of less than 20%, restructured standard advances
grew by over 40%. Resultantly, the proportion of Restructured Standard Advances to
Gross Total Advances increased from 3.45% in March 2011 to 4.68% in March 2012.
In a 2012 speech RBI deputy governor KC Chakrabarty had highlighted how banks
had planted the seeds for bad loans by being liberal with the ‘corporate debt
restructuring’ mechanism.
Despite the problems coming to light as early as 2012, the drift continued. In 2013
after taking charge as RBI Governor Raghuram Rajan highlighted the need for
finding out ‘where the bodies are buried’
One of the steps taken by Rajan was to set up a central database of big-ticket loans
called the Central Repository of Information on Large Credits (CRILC). This helped
RBI identify which banks are not recognizing bad loans. For instance way back in
April 2015 HDFC Bank sold Essar Steel's loans at a steep discount following a
default, other banks continued to maintain the loan as a standard asset on their
books.
Towards the end of 2015 when it became clear that the global environment is not
going to be conducive for revival of sectors such as steel, power and engineering RBI
decided that time has come for deep surgery as band aids were not doing their job.
This prompted Rajan to call up banks and hand them a list of companies that were in
trouble.
Tackling NPA is easy if government and Bank decides to completely go for “No NPA
balance sheet”.
1) Government have to make some strong changes in policy of NPA and Bank loan
system. These changes are as follows
In current rules selling guarantees (securities like home, land, shops etc.) of
defaulters is like solving murder mystery.
Government have to make this process easy for Banks so that Bank can
easily get their money back from the defaulters and also can give this money
as loans. So somebody who wants to start business can start their business
and make new jobs for others.
Government have to give permission to Bank to sell the values of defaulters
At present rules Bank don't give loans easily because of these regulations
Currently taking loans from Bank is much harder than being defaulter because Bank
can't do anything to defaulters. I think I don't have to give the example of Mr Mallya.
For current NPA if Bank sells all the guarantees of defaulters they will get 80% of
their loan amount. Other 20% they can easily cover from their profit if they give
loans in an easy manner to others and if someone from the others is defaulter they
can easily sell their guarantees as soon as that loan becomes an NPA. If this process
becomes faster there are chances of getting more money back from guarantees than
loan amount.
The situation of NPAs, stressed accounts, recovery rates has been worsening in the
Indian banking system. This has been identified after former RBI Governor Raghu
Ram Rajan started the process of annual review of banks loans. RBI and the
government have pushed Banks and NBFCs to recognize bad loans and make
provisions for it, instead of turning a blind eye to the situation. The most important
step in cleaning up the balance sheets of Indian banks is ensuring that all the bad
loans have been recognized as bad.
RBI has also issued guidelines to Banks to put in place Early warning system (EWS).
An effective EWS analyses internal as well as external signals on the companies on a
real time basis and alerts the Bank’s credit/risk analysts of the same. Other steps
contemplated are:
Bankruptcy code
Strategic debt restructuring schemes
Setting up bad bank
Setting up private AMCs
Setting up oversight committee
These are the several steps that the RBI and the government are evaluating. But
foremost, the underwriting and the monitoring systems of the Banks will have to be
made more effective to identify stress accounts well in advance.
The best possible quote for removing NPAs is “Prevention is better than cure”
The main strategies of preventing slippage of standard assets into NPA category and
reducing NPAs are through cash recovery, up gradation, compromise and
settlements.
Preventing NPAs
Reducing NPAs
Now-a-days, recovery is risk of credit on banks. It is also known as credit risk. A bank
credit risk has two distinct faces, ‘quality of risk’ and ‘quantity of risk’. It is observed
that the recovery is carried out in the banks by adopting following ways -
General Mechanism
All the banks operate general mechanism of recovery of NPA. All primary measures
to persuade the defaulting borrowers to repay their over dues like writing letters and
sending representatives of the banks to the borrowers for personal visits, cash
recovery, up gradation of assets, etc.
Instead of organizing a recovery drive banks must short list those accounts, the
recovery of which would provide impetus to the system in reducing the pressure on
profitability by reduced provisioning burden and the recovery of critical amount
(overdue interest and instalment). Once accounts become NPA, bankers should take
steps to upgrade them by recovering the entire over dues. Close follow-up will
generally ensure success.
Legal Mechanism
In case of legal mechanism it is observed that all the banks operated this mechanism
to the maximum extent involving Debt Recovery Tribunals (DRT), Lok Adalat,
Securitization Act, and Compromises (OTS), Write off.
ii) Many factors are causing the problem and low response to compromise proposals.
It affects the business cycle. Business cycle increases the possibility of credit loss,
leading to higher interest provision requirement
iii) In the last few years asset’s quality is challenged in banking sector on account of
slowdown economy, uncertain clement and political interference.
Who is authorizing their loans? What assessment was carried out for these
approvals? Are there any malpractices followed during these assessments?
Is there any action taken against any officer for sanctioning any such
loan? This is a BIG BIG NO.
Another observation, all such are PSU banks, so you know “whose money is this?” No
one from higher authority is going to question this. If there is any action taken
against any employee, we have UNIONS to back them and choke the transactions.
What is the purpose of audits carried out every year? Are they not able to
pin point the NPA of larger amount?
The audits should not be on JUST random x% of cases. They should be towards the
benefits of the organization where larger amount is turning into NPA. Why such
audits are not carried out?
As government, they want to consolidate all the PSU banks into less number of
entities.
NPA in SBI will get diluted when we have assets from SBA, SBB, SBC,…, SBZ put
together, creating a rosy picture. Now you can also see the results where the NPA
percentage has gone down. So we have done a good job. So the stock price is also
going to go high so will be the index, it means that the economy is also doing well.
You see how it makes us appear good after sitting on this same pile of
NPA.
Now when there is support for such practices to paint a picture that the NPA are
reducing, then how can you expect and why are you asking for effective solution for a
problem which is already being treated.