Bankers Trust:

2018: the year of bank resolution and recovery?

2018: the year of bank resolution and recovery?

Globally, bankers are expected to do three things: collect deposits, give loans and invest in government bonds and other financial instruments. In India, they end up doing a few other things as well, including cleaning up the neighbourhood where their branches are located with a broom as part the government’s Clean India Mission to promote sanitation. Ironically, the balance sheets of many banks in India at the moment are in dire need of a clean-up.

Bankers Trust:

Bank recapitalization: The mockery of MoUs and statements of intent

Bank recapitalization: The mockery of MoUs and statements of intent

Public sector banks (PSBs) are “instrumentalities of the state”; managing them efficiently to promote economic development and further public interest calls for efficient public administration and committed public service with due accountability. For ensuring “efficiency” in management of PSBs, two sets of tools were used by the administrative department, the department of financial services (DFS): the statements of intent (SoI) and memorandum of understanding (MoU). Both were supposed to play a critical role in monitoring capital infusion in PSBs, but a deeper look into how both these instruments were used gives us a sense of the quality of governance in PSBs, if nothing else.

Bankers Trust:

The story of ‘need-based’ capital infusion

The story of ‘need-based’ capital infusion

Over the years, the government of India has been infusing “need-based” capital in public sector banks (PSBs) to enable them to maintain capital adequacy (both Tier I and Tier II capital under Basel II norms) while meeting the credit growth expectations. The capital infusion has so far generally been through preferential allotment of equity shares by the banks to their majority owner—the government. In the wake of the global meltdown, a high-level committee on capital requirement of financial institutions (consisting of the finance secretary as chairman, with secretaries from the departments of expenditure, economic affairs and financial services and the chief economic adviser as members) in September 2011 recommended the creation of a holding company for PSBs which could then raise necessary extra budgetary resources.

Bankers Trust:

2018: Year of resolution & recovery for public sector banks?

2018: Year of resolution & recovery for public sector banks?

Globally, bankers are broadly expected to do three things: collect deposits, give loans, and invest in government bonds and other financial instruments. In India, they end up doing a few other things as well, including picking up a broom and cleaning up neighbourhoods where bank branches are located as part of the Swachh Bharat Abhiyan (Clean India Mission). Ironically, balance sheets of many banks in India at the moment are in dire need of a clean-up.