Central Bank’s S Sridhar: NPAs of banks may rise due to rate hikes

Bank chief explains that stress will come from smaller accounts that are not able to bear the increased cost of funds

Mumbai: Central Bank of India's chairman and managing director S Sridhar has said that non-performing assets (NPAs) for the banking industry are likely to increase, as some smaller companies which had borrowed at lower rates find it difficult to service their loans on account of the hike in rates.

"Some increase in NPAs cannot be ruled out, in my view, across the industry," Mr Sridhar said today. He pointed out that different banks would adopt different strategies to deal with this problem.

The stress will emanate from smaller accounts, which "are not able to bear the increased cost of funding" and are constrained because of a "lower access" to money as compared to the past, he said.

Mr Sridhar, who retires from Central Bank today, pointed out that the stress could be traced back to the years of the global slowdown, after 2008 September, when the government announced a stimulus that resulted in high liquidity and low rates, PTI reports.

"Somebody down the chain will have to bear the stress," he Sridhar said. "The stress is inevitable."

The Reserve Bank of India (RBI) had adopted a stance of softening in policy to fuel growth in the slowdown years and then started to tighten rates, as tackling spiralling inflation gained precedence.

RBI has raised its key rates a record eight times in the last 12 months in order to control inflation. The last hike, on 3rd May, was a bigger-than-expected 50 bps, and the bank hinted that it could continue to attack inflation, even if it hurt growth in the short term.
Mr Sridhar said the Central Bank of India is installing software that would identify stress in assets at an early stage, so that action to contain this could be taken swiftly. "The idea is to be proactive, rather than reactive," he said.

Central Bank of India today announced a tie-up with brokerage firm Angel Broking, which will allow its account holders to trade in different asset classes like equities, derivatives and F&O.

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COMMENTS

Pramila Devi

6 years ago

Central Bank of India is the worst tenant among the PSU banks. People are cautioned not to lease their premises to the Central Bank of India for any purpose lest not only they even their generaTIONS WOULD REPENT. First of all they would never give you fair rent nor would maintain the premises in satisfactory condition and thirdly they would never vacate your premises even if they do not have any office or branch in that premises. In fact the central bank of india is builder mafia forcibly occupying the premises of poor landlords.In 1941 my father in law let out a prime property admeasuring 3800 sq. ft. at Chowk (opp. chowk police station)Lucknow UPto Central Bank of India for opening its chowk branch. Despite repeated efforts and law, the Bank did not increase the monthly rent from Rs. 437.50. Not only this it also did not pay electricity dues, house tax and water tax in respect of the above premises despite agreement for the same. The employees have stolen antique wooden doors from the premises and the Bank is contemplating to take away the iron room built by us.On 01.06.2011, it gave to us in writing that the premises has been vacated on 31 May 2011 but despite our representatives sitting there for two days it did not hand over the vacant posession of the said premises due to obvious reasons.Therefor, l;andlords beware of the Central Bank of India as tenant.

Pramila Devi

6 years ago

Central Bank of India is the worst tenant among the PSU banks. People are cautioned not to lease their premises to the Central Bank of India for any purpose lest not only they even their generaTIONS WOULD REPENT. First of all they would never give you fair rent nor would maintain the premises in satisfactory condition and thirdly they would never vacate your premises even if they do not have any office or branch in that premises. In fact the central bank of india is builder mafia forcibly occupying the premises of poor landlords.In 1941 my father in law let out a prime property admeasuring 3800 sq. ft. at Chowk (opp. chowk police station)to Central Bank of India for opening its chowk branch. Despite repeated efforts and law, the Bank did not increase the monthly rent from Rs. 437.50. Not only this it also did not pay electricity dues, house tax and water tax in respect of the above premises despite agreement for the same. The employees have stolen antique wooden doors from the premises and the Bank is contemplating to take away the iron room built by us.On 01.06.2011, it gave to us in writing that the premises has been vacated on 31 May 2011 but despite our representatives sitting there for two days it did not hand over the vacant posession of the said premises due to obvious reasons.Therefor, l;andlords beware of the Central Bank of India as tenant.

Supreme Court grants bail to Piyush Guha, associate of Binayak Sen

Court suspends life imprisonment sentence; asks Mr Guha to furnish bail bond, sureties 

New Delhi: The Supreme Court on Tuesday granted bail to Piyush Guha, who was convicted and sentenced to life imprisonment in a sedition case, along with civil rights activist Binayak Sen.

The vacation bench of judges GS Singhvi and CK Prasad suspended the sentence of life imprisonment and directed Mr Guha's release on bail. The judges also directed Mr Guha to furnish a bail bond of Rs2 lakh and two sureties of Rs1 lakh each.

Mr Guha, a Kolkata-based businessman, was convicted along with Mr Sen and Naxal ideologue Narayan Sanyal, on charges of colluding with Maoists to establish a network to fight the state and they were punished with life imprisonment, PTI reports.

Mr Guha had challenged his conviction in the Chhattisgarh High Court, which refused to grant him bail. When the matter came up before the Supreme Court on 24th May 24, the Court issued notice to the state government and asked it to file its response by 31st May.
 
Challenging the order of the Chhattisgarh High Court, advocate Prashant Bhushan, who appeared on behalf of Mr Guha, pleaded with the court to grant bail and said that he has already spent four years in jail. He also pointed out that the apex court had recently granted bail to Mr Sen.

The Supreme Court had granted bail to 61-year-old Mr Sen on 15th April, questioning his conviction and life sentence for sedition, and saying that he could be called a sympathiser of the Naxalites and nothing beyond that. "No case of sedition is made out," the Court had said. "He may be a sympathiser (of Naxalites) but it did not make him guilty of sedition."

"The worst can be said that he was found in possession of general documents (relating to Naxal activities), but how can it be said that such possession would attract the charge of sedition? How can you level the charge of sedition?" the bench asked.

The conviction and life imprisonment of Mr Sen, along with Mr Guha and Mr Sanyal, had led to outrage among sections of citizens. Some international human rights bodies had even sought the government's permission to observe the court proceedings in this case.

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LIC launches new health plan for hospitalisation benefits

Jeevan Arogya offers comprehensive hospitalisation benefits for the whole family for the principal insured

LIC of India will launch a new non-linked health insurance plan called Jeevan Arogya from 1st June.

The plan offers comprehensive hospitalisation benefits for the whole family for the principal insured. The plan also offers to cover the parents' in-law of the principal insured besides spouse, minor children and parents. The plan also offers to cover surgeries.

This is a defined benefit policy meaning that benefits are fixed in terms of policy conditions and are payable irrespective of the actual amount spent on treatment. Moreover, the benefits are payable regardless of the life insured getting reimbursement under any other scheme from his/her employer or any other insurance company, on the basis of certified photocopies of the original bills.

The minimum age at entry for principal insured should be 18 years and maximum age at entry would be 65 years for self and spouse while it is 75 years for parents and parents in-law. For children, the minimum age at entry is 91 days and the maximum age at entry is 17 years.

The plan offers cash facility, which allows payment of 50% entitlement as advance in case of 57 specified major surgeries. Premium waiver benefit and ambulance benefit are also available in case of certain major surgeries.

The plan also offers the option of taking term assurance rider (up to 100 times of initial daily benefit) and accident benefit rider for the principal insured and spouse.

The premium will depend on one's age, gender, the health cover option one has chosen, whether one is principal insured or other insured life and the mode of payment. The plan provides rebates for higher sum assured and half-yearly/yearly mode of payments.

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COMMENTS

kspopat

6 years ago

it is a very good plan and definitely will get success in indian market as lic has a brand image

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