India’s public sector banks have no place to hide—they stand in full public glare. Three large state-owned banks announced their June quarter earnings on Tuesday. Punjab National Bank (PNB), the largest among them, announced a 48% drop in net profit.
At first glance, the revised draft of the Indian Financial Code released last week, 853 days after the Financial Sector Legislative Reforms Commission (FSLRC) published the first draft, seems to be a balancing act. It has recommended substantial dilution of the powers of the proposed Financial Sector Appellate Tribunal (FSAT). This will replace the existing Securities Appellate Tribunal and entertain appeals against all financial sector regulators, including the Reserve Bank of India (RBI), but won’t have the powers to set aside any regulations which the first draft had envisaged.
Shares of Yes Bank Ltd lost more than 7% in one day in the first week of July after UBS Securities India Pvt. Ltd downgraded the stock to sell. UBS’s major concern is the bank’s rising exposure to financially stressed companies.
The Reserve Bank of India (RBI) will sell up to Rs.10,000 crore worth of government bonds on Monday to drain excess liquidity from the banking system—the first so-called open market operation (OMO) this fiscal year. The liquidity in the system is in surplus but banks are not in a mood to cut loan rates further.
In an interview with this newspaper last week, Rajiv Lall, vice-chairman and managing director of IDFC Bank Ltd, which is awaiting the banking regulator’s final nod to start operations in October, said: “The way the world is moving, branches are becoming less relevant for a connect with customers. The goal is really to use technology intelligently in a way that it builds a trusted relationship with customers at scale and at lower cost.” IDFC Bank will have five branches in Mumbai and Delhi and 15 for its so-called Bharat banking operations in Madhya Pradesh.