In the guidelines for issuing new banking licences, the RBI has put in a string of requirements to further its financial inclusion agenda, including making it mandatory for the proposed banks to open at least 25% of branches in unbanked areas
The Reserve Bank of India (RBI) does not have any target in mind on the number of banking licences to be issued in this round, a senior official of the central bank has said.
“As of now, we have received 26 applications. Financial inclusion has to be a pre-condition for such banks to come. How many banks will come, that depends upon their complete plan and analysis of their proposals,” RBI executive director R Gandhi said at an event in Mumbai today.
“We will have to wait for a few months before we decide how many banks will be given licence. There is no target number,” he added.
The number would depend on the proposal and business plans of the applicants. “It depends upon the proposal and business plans including their proposed efforts on financial inclusion. We cannot predict how many applicants will pass through these requirements,” he added.
About 26 players have applied for banking licences, including the likes of India Post, LIC Housing Finance, Reliance Capital, Aditya Birla Nuvo, and L&T Finance.
In the guidelines for issuing new banking licences, the central bank has put in a string of requirements to further its financial inclusion agenda, including making it mandatory for the proposed banks to open at least 25% of branches in unbanked areas.
On the issue of financial inclusion, Gandhi said there are enormous challenges that lie ahead in achieving it.
“Post independence, we had a resolution to give attention to poverty alleviation. Our economic planning had poverty alleviation as a key plank... Still, these 40 odd years, efforts have not made serious dent. This indicates the enormous challenges that lie ahead for us in achieving financial inclusion,” he said.
He also said that several new ideas and innovative approaches were required to achieve this goal.
RBI governor D Subbarao was originally supposed to address the gathering at a central Mumbai college today, but Gandhi had to step-in as a last minute arrangement as the governor rushed to New Delhi. He was also not able to make it to another engagement at a college in the city.
Subbarao will be meeting finance minister P Chidambaram and they are likely to discuss the challenges on the macroeconomic front.
Sunil Gupta is an auditor and director of several companies related with former minister Pawan Bansal's son and nephew. He is serving on the Canara Bank board since 2007, first as government nominee director and later as shareholder director
State-run lender Canara Bank is electing three shareholder directors in its forthcoming annual general meeting (AGM) on 22 July 2013. Out of the eight contestants, the first name is that of Sunil Gupta who is serving on Canara Bank’s board since 2007, first as a government nominee director and later as a shareholder director. Gupta, closely associated with Pawan Bansal, former minister of Railways, is also auditor and director of Bansi Raunaq Energy, a company owned by Pawan Bansal’s son Amit.
According to a report from the Economic Times, Gupta helped the former minister’s son to secure loans from Canara Bank. Gupta also recommended Vikram Bansal, the former minister’s nephew for the post of independent director on the board of Canara HSBC Oriental Bank of Commerce Life Insurance Co in August 2010. Vikram was also an authorised signatory of the insurance company, a joint venture of Canara Bank with Oriental Bank of Commerce (OBC) and HSBC Insurance Holdings. Just like Gupta, he also was director of Bansi Raunaq Energy.
“Gupta is a chartered accountant for a number of companies owned by the minister’s family and became a director in state-owned Canara Bank when Bansal was the junior minister for finance responsible for expenditure, banking and insurance,” the newspaper says.
As per the guidelines issued by the Reserve Bank of India (RBI), a director on the board of a bank has to disclose if he holds any similar position in any other entity, his membership in any corporate bodies and his interests as a partner or proprietor of firms.
While Gupta was director of Bansi Raunaq Energy, he was also nominated as director of Canara Bank. However, the newspaper quoted him as saying that “Bansi Raunaq Energy was a defunct company and hence there was no conflict of interest.”
According to the Economic Times report, Canara Bank had given loans of around Rs35 crore to companies owned by Pawan Bansal’s sons and a nephew. Gupta was also auditor of Theon Pharmaceuticals and ISIS Packaging, both associated with Amit Bansal. Both companies have collectively taken a loan of about Rs10 crore from Canara Bank.
Coming back to Canara Bank, during 2007 Gupta joined the board of directors as a government nominee director. He was appointed by the government under clause 9(3)(h) of the Bank Nationalisation Act for a term of three years.
As soon as his term as government nominated director was about to expire, Gupta was elected as shareholder director under clause 9(3)(i) of the Bank Nationalisation Act for a period of three years. He is again in the race to become shareholder director for the second consecutive time. Reportedly, Canara Bank has persuaded some of its institutional investors to vote for Gupta. However, this cannot be confirmed.
If elected, Gupta would be one of the firsts to complete a term of nine consecutive years as director on the Canara Bank board, once as government nominee and twice as shareholder director.
Important question, however, is can a person become a director for 12 consecutive years by using loopholes in the rules and provisions. The provisions under which the government appoints its nominee directors and shareholders elect their representative directors are different. Both permit two consecutive terms of three years each as director. However, somebody with connections at the right places can remain director on a state-run bank board by using these same provisions. Take for example, Gupta can get elected this time as shareholder director and after three years can again be appointed as government nominee director. That means a term of 12 consecutive years.
Coal India has something like $6 billion in cash reserves that can be used to obtain good quality assets abroad and be gainfully spent within the country. It should also avoid venturing into unknown foreign assets and instead outsource domestic mines
India needs annually about 600 million tonnes of thermal coal of which 20% (about 120 million tonnes) is imported due to shortfall in indigenous production, which is around 492 million tonnes.
Coal India (CIL) was set up in 1976 as a national monopoly by taking over all the private coal mines in the country, and Coal India is the world's largest coal company. At present, imported coal comes from Australia, Indonesia and Mozambique. Due to slackening of demand, particularly from China, international coal prices have come down from$92 in 2011-12 to $72 in 2012-13 per tonne.
It may be recalled that in order to ensure supplies of coal, a few years ago, coal blocks were allotted to private enterprises, in a non-transparent manner, because it was felt that they would ‘deliver’ the goods by developing the mines in a more efficient and profit oriented manner. However, when they failed to do so, these were repossessed by the government and have now been allotted directly to power generating units. It now remains to be seen how seriously these units take this challenge and start mining operations, so that their dependence on Coal India is reduced considerably.
According to data available from the Central Electricity Authority (CEA), the thermal coal based power plants only utilized 61.5% of their capacity due to non-supply of coal and 11.5% capacity due to non-supply of gas. In other words, these power plants were working on 73% of their installed capacity.
Now, what is the major problem that has plagued the Coal India to meet the national demand of coal? There are a number of problems, such as the issues of obtaining various clearances from state governments, ministry of environment and forests, hassles in land acquisitions, rehabilitation of those whose lands have been acquired, compensation claims, piling up of coal at mine pitheads, inadequate supply of rakes and related transport bottlenecks. On the top of these, even the dedicated rail corridors are not fully operational due to slow speed of work!
These apart, there have been delays in FSAs between CIL and various consumers of coal. The major dispute between NTPC-CIL has now been resolved, though the actual terms of the settlement have not been made public, including the issue of supply of poor quality lower caloric value coal and the inspection procedures to ensure these does not come in the way of future supplies.
To overcome the supply problem of good quality thermal coal, CIL has also been looking at overseas assets to buy. These may look rosy on the outside but past experience of some leading corporate giants like the Rio Tinto group has not been satisfactory. In fact, it has been reported that it had to write down and accept a substantial loss in Mozambique because, after it took over an asset, it found that the recoverable coal was much lower than the original estimate!
CIL’s own experience in Mozambique, for example, where it has made a small beginning has not been satisfactory. It has obtained a licence to explore coal mining rights in Limpopo region, but after the initial investment of some Rs15 crore, it now needs to establish a railway line to link to the port. Unless other users are able to share the cost of such an infrastructure development, it would be an expensive proposition for it to take on its own. This will increase the cost.
What then are the best alternatives under these difficult circumstances? CIL would be better off in getting into long-term supplies with reputed overseas suppliers in Australia and Indonesia, for a start, rather than venture into the unknown of owning assets and getting into equity participation, unless the joint venture partner has a long history of successful mining operation in that country.
Second is to concentrate on local development of indigenous mines. Though it may be necessary to follow up with the state governments and the MOEF for pending clearances, many of which are several years old, and simultaneous plan infrastructure development, so that time is not lost.
There are too many such cases “in process” and CIL has to have a crack team, if it does not have one already in operation, whose main job is to tackle such matters. Leaving such matters for work to progress in a routine manner has only meant delays as we see them today. These have to be tackled on a war-footing.
Take the three main units of coal production for CIL on its web-site. For example, in the case of Eastern Coalfields, they are awaiting for clearances, which are “pending for more than five years now”. The details are not given on the website. So, this writer took up the issue with Rakesh Sinha, chairman and managing director of this unit, seeking information on the matter. There has been no response; in fact, not even an acknowledgement from the CMD’s office. A reminder has also not evinced any response!
One has to presume that either the CMD does not care for such letters of serious interest or considers it below his status to respond. Or, he may have no authority to respond or give out such information, and may have referred the matter to Narsing Rao, CMD of Coal India for clearance?
How does anyone know if “pending clearance” is not due to similar bureaucratic bungling?
The fact is that CIL is flushed with funds and it has something like $6 billion in cash reserves that it can use to obtain not only good quality assets abroad, but maybe gainfully spent within the country. Venturing into the unknown in a foreign country is best avoided by sourcing the mines within the country. What CIL can do is invite some leading coal miners in well established pioneers like UK and USA in this field, which will bring in long-term benefits to the people here in our own country, where the estimated reserves are substantial.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)