Banking for Beginners

On Friday 30 th August When FM Sitharaman announced merger of several Public sector banks, she metamorphosed Indian Banking industry forever. From structural point of view, this is being considered as the biggest game changer after nationalization of Banks in two tranches on 19 th July 1969 and 15 th April 1980. Biggest consolidation exercise in Indian banking industry will result in merger of 10 banks into 4, thus reducing the total number of Public sector banks from 27 in 2017 to 12 now.  To summarize, United Bank of India and Oriental Bank of Commerce shall merge into Punjab National Bank, Syndicate Bank into Canara Bank, Allahabad Bank into Indian Bank and Andhra Bank alongwith Corporation Bank shall merge with Union Bank of India. Seeds of this consolidation exercise were sown 28 years back in 1991, when the Committee on Financial system headed by former RBI Governor M Narsimhan had recommended   3-4 mega Banks at the top who can have a Global footprint with oth...

On Monday 26 th  August 2019, Reserve Bank of India (RBI)’s Central board accepted the recommendations of a committee headed by former RBI Governor Bimal Jalan and decided to transfer a sum of Rs. 1,76,051 crore to the Government.  Jalan committee was constituted in December 2018 to re-evaluate RBI’s economic capital framework (ECF) and to examine as to how much and in what form RBI should maintain its Capital structure. What has been done this year is not new. Every year RBI transfers funds to Government representing surplus of income over expenditure. In the last 10 years this amount has varied from    Rs.  18,759 crores (2009-10), Rs. 15,009 crores (2010-11) Rs. 16,010 crores (2011-12), Rs. 33,010 crores (2012-13(, Rs. 52,679 crores (2013-14) Rs 65,896 crores (2014-15),    Rs 65,876 crores (2015-16), Rs. 30,659    crores (2016-17) to Rs. 50,659 crores (2017-18). What has changed this year is the quantum of sum transferred. This...

What Mr Arun Jaitley probably meant in his blog post , was that although CBI was competent to investigate and conclude charges against an offender, in this case Ms Chanda Kochhar abd her associates, but they may be venturing into sensationalism if they name a whole gamut of bankers /committee members without any conslusive proof against them. This may only tarnish their names, without serving any purpose. I have been on the board of a Public sector Bank as an independent Director, and can say with conviction that independent Directors/ committee members have limited access to information and rely heavily on the recommendations being put up by concerned credit departments. Moreover, at the board or committee level, disclosures pertain to financial numbers only, which are generally satisfactory. Rarely a Bank's board takes a positive call even though the numbers are negative. This is not to say that vigilant and knowledgable Board members cannot analyse or see through a fake proposa...

Banking for Beginners: PNB Fraud - what happened and what went wrong : It has been almost three weeks since Punjab National Bank (PNB) went public with the Nirav Modi / Geetanjali Gems (Mehul Choksi) issue. R...

It has been almost three weeks since Punjab National Bank (PNB) went public with the Nirav Modi / Geetanjali Gems (Mehul Choksi) issue. Reams have been written about various facets of the entire episode and may continue in days to come. There has been an intense debate in media and public domain, and the whole episode has been variously classified as fraud, open loot of public money, misdemeanor and Niravgate etc , but there are many core process issues which are still not clear.   For the uninitiated, let’s try to decipher what has happened and what is yet unanswered.   On February 14, 2018 PNB informed Bombay stock exchange that it had detected fraudulent transactions worth around Rs 11,380 crore (USD 1.77 billion) put through its Mid Corporate branch at Brady House, Mumbai. It further said that the Bank has already lodged a complaint with Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) implicating celebrity Jewelers and Diamantaires Nirav ...