Cabinet nod for Rs24,000 cr FDI in HDFC Bank

In another move to bolster the Indian banking system, the Union Cabinet on Wednesday approved a Rs 24,000 crore foreign direct investment (FDI) as additional share capital into private sector HDFC Bank, Finance Minister Piyush Goyal announced.

Briefing reporters here following a cabinet meeting, Goyal said that with this additional FDI foreign equity in HDFC Bank would continue to remain within the mandatory cap of 74 per cent.

"Even with this infusion, the foreign equity will remain capped below 74 per cent.

"The current 72.62 percent foreign equity holding is being raised to 74 per cent with this Rs 24,000 crore FDI," he said.

Goyal also said the bank's capital adequacy ratio would be strengthened in this way, and it had also indicated its intent to expand both its physical branches network as well as its digital banking reach.

On the other hand, the profitability of state-run banks has been hit hard in recent times owing to the provisioning required to be made on account of their accumulated non-performing assets (NPAs), or bad loans.

Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Hong Kong regulator increases supervision on Allahabad Bank branch
 State-run lender Allahabad Bank on Tuesday said the Hong Kong Monetary Authority (HKMA) has enhanced supervisory arrangements on its Hong Kong branch while "assessing implications of the capital positions" of the lender.
 
"..we have to inform you that the Hong Kong Monitory Authority while assessing the implications of capital position of our bank as on march 31, 2018, has enhanced the supervisory arrangements on our Hong Kong branch," it said in a regulatory filing.
 
In fact, the bank's capital to risk-weighted assets ratio (CRAR) had declined to 8.69 per cent at the end of March quarter from 11.27 per cent at the end of December quarter of 2017-18. 
 
The HKMA, the de facto central bank of Hong Kong, is responsible for maintaining monetary and banking stability.
 
According to the filing, the branch should maintain high quality liquid asset in Hong Kong equivalent to 100 per cent of unpledged deposits.
 
"ALHBHK (Allahabad Bank Hong Kong branch) should not proactively solicit customer deposits in Hong Kong. However, transactional deposits such as pledged deposits for commercial loans would be excluded from this supervisory arrangement," the filing said.
 
According to supervisory arrangements imposed by HKMA, the branch should maintain a position of 'net due to' its head office, other branches and any direct or indirect subsidiaries and associates of the bank.
 
"ALHBHK should not incur additional non-bank credit exposures," the filing added.
 
The bank's latest annual report said its Hong Kong branch had earned operating profit of Rs. 90.52 crore and net profit of Rs. 44.86 crore in the financial year 2017-18.
 
In the last fiscal, the bank's international business stood at Rs. 12,871 crore and recorded a negative year-on-year growth of (-) 8.91 per cent on account of 12.82 per cent year-on-year drop in overseas advances.
 
In fact, under the capital adequacy guidelines stipulated by the Reserve Bank of India (RBI), the lender is required to maintain a CRAR of 9 per cent with minimum Common Equity Tier I (CET1) of 5.5 per cent as on March 31, 2019.
 
In fact, the RBI had last month imposed additional restrictions on Allahabad Bank under prompt corrective action (PCA) framework.
 
The lender was asked to restrict expansion of risk-weighted assets (RWA), reduce exposure to high-risk loans and restrict accessing or renewing wholesale deposits.
 
The lender had posted a net loss of Rs 3,509.63 crore in the March quarter of 2017-18.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Urjit Patel grilled by Parliamentary panel, seeks more powers for RBI
RBI Governor Urjit Patel, who was on Tuesday grilled by parliamentarians over challenges being faced by the banking sector including the huge number and size of bad loans and frauds like the one in Punjab National Bank, sought more powers for the central bank to oversee Public Sector Banks (PSBs).
 
Patel, summoned by the Parliamentary Standing Committee on Finance for questioning in relation to these issues, said that the situation has improved and the Reserve Bank of India (RBI) has taken some measures to strengthen the banking system.
 
He appeared along with the Deputy Governors and deposed under the topic "Banking Sector in India issues, challenges and the way forward including Non-Performing Assets in banks and financial institutions". 
 
The meeting was chaired by Congress leader Veerappa Moily and attended by former Prime Minister Manmohan Singh among others.
 
Answering questions for over three hours, Patel said that the RBI "needs more powers to oversee PSBs", sources present in the meeting said.
 
A source told IANS that Patel briefed about the current situation and said it has improved with regard to the issue of the Non-Performing Assets (or bad loans).
 
The central bank has taken some measures to strengthen the banking system, Patel said but pointed out that the RBI did not have "sufficient powers" to discipline Chairmen of banks or change members of their Boards.
 
During the meeting, sources said, the Governor faced tough questions from lawmakers on bad loans, bank frauds, cash crunch and other issues.
 
Some members of the committee also sought to know about the reasons for recent instances of ATMs running out of cash and NPA crisis and bank frauds (Nirav Modi).
 
Patel had earlier given a written submission about the corrective measures that have been taken.
 
Sources said that Patel informed that measures adopted by the RBI to tackle the crisis include prompt corrective action framework, implementation of Insolvency and Bankruptcy Code and a new resolution framework.
 
An MP said that Patel did not give any reply to some questions on demonetisation. 
 
Citing reports of experts on the notes in circulation, which was earlier stated to be around Rs 17 lakh crore and has now increased to Rs 18.5 lakh crore, a member said that this was contradicting the purpose of demonetisation.
 
About the latest situation on the notes in circulation, Patel is reported to have said said that the RBI would give the answer later.
 
Another member said people have lost trust in the banking system and everybody is withdrawing cash while ATMs are depleted. "People are putting the money somewhere else which is going to be a run on the bank," he is believed to have said.
 
In response, the RBI Governor said, "everything is fine".
 
He was also asked about Punjab National Bank and told that LoUs were going from "Nirav Modi to Nirav Modi" which the banks are supposed to inspect.
 
Another member told the Governor that RBI was not fulfilling its obligations to the people to which Patel said he will reply to these questions later.
 
He also said the International Monetary Fund and World Bank have praised its regulatory role.
 
The next meeting of the committee will be held on June 19.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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COMMENTS

Mahesh S Bhatt

3 months ago

Joker of Bank Jokes Patel Rap another Joke Mahesh Bhatt

Dayananda Kamath

3 months ago

Instead of clamouring for more power, he should use the available power judiciously. When you are not using the existing powers effectively, what guarantee is there that more power given will be used effectively. An example is under FEMA every provision has a disclaimer if AD is satisfied any transaction can be allowed. Satisfaction is subjective. But RBI as regulator should see how this satisfaction clause is utilised. Customer can go to an AD who me he can satisfy.
Even though there is a provision in FEMA that every AD has to report transactions declined with reason for decline to RBI . But how many transactions are reported. It is mechanism to monitor unauthorised transactions are not routed through compromising satisfied AD. But what mechanism is there to monitor the same.
Many of these issues have been brought to the notice of RBI as well as parliamentary committee. But no questions and clarifications appear. Hope these will be raised shortly.

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