SEBI guidelines to aid trustees in monitoring AMCs activities
The Securities and Exchange Board of India (SEBI) on Monday issued guidelines to provide administrative assistance to trustees in monitoring various activities of asset management companies (AMCs).
 
As per the SEBI circular, trustees should appoint a dedicated officer having professional qualifications and a minimum five years of experience in finance and financial services-related fields.
 
The securities market regulator said that in its interactions with the trustees, it had received feedback seeking provisions for administrative assistance to trustees in monitoring various activities of the AMCs.
 
"The officer so appointed, shall be an employee of the trustees and directly report to the trustees. The scope of work for the said officer shall be specified by trustees from time to time to support the role and responsibilities of the trustees," it said.
 
Further, trustees shall have standing arrangements with independent firms for special purpose audit and/or to seek legal advice in case of any requirement, as identified and whenever considered necessary.
 
The regulator said that the trustees shall continue to be liable for discharge of various fiduciary responsibilities as cast upon them in the SEBI (Mutual Funds) Regulations, 1996.
 
The circular will come into effect on October 1.
 
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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    AIBEA Asks RBI To Review Appointment of KV Kamath as Head of Loan Restructuring Committee
    The All India Bank Employees Association (AIBEA) has expressed its opposition to the appointment KV Kamath as chief of the expert committee on resolution framework for COVID-19-related stress as the association says his name figures in a first information report (FIR) filed by Central Bureau of Investigation (CBI).
     
    The AIBEA in a letter to Shaktikanta Das, governor of Reserve Bank of India (RBI) says, "...we may draw your kind attention to the reports that have appeared in the media about the infamous nepotism scandal in ICICI Bank involving Chanda Kochar for sanctioning huge loan of more than Rs3,000 crore unscrupulously to Videocon company. As per media reports, in the FIR filed by the CBI, in addition to the name of Ms Kochar, the name of Mr Kamath also appears." 
     
    "It is reported that besides being the former chief executive (CEO) and non-executive chairman of ICICI Bank, Mr Kamath was also a member of the committee that approved the loan, which have now become questionable and are under investigation. Hence, we strongly feel that at this stage, making such a person as chairman of this expert committee is avoidable and needs to be reviewed," says CH Venkatachalam, general secretary of AIBEA, in the letter.
     
    Mr Venkatachalam also recalled the recommendation of Mr Kamath-led task force set up by Confederation of Indian Industry (CII) in 1999 on bank non-performing assets (NPAs) to close Indian Bank and privatisation of State Bank of India (SBI) and Bank of Baroda.
     
    He says, "AIBEA questioned the committee and its recommendations as one of the members of that Committee himself was a bank loan defaulter. Today Indian Bank is one of the best run Banks and everyone also knows the growth and progress of SBI and Bank of Baroda under public sector."
     
    Last week RBI announced setting up of an expert committee on resolution framework for COVID-19-related stress, as a special window under the prudential framework on resolution of stressed assets issued on 7 June 2019.
     
    The panel led by Mr Kamath has members like Diwakar Gupta, vice president of Asian Development Bank and TN Manoharan, chairman of Canara Bank, Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services LLP as strategy adviser and Indian Banks' Association (IBA)'s chief executive, who would act as member-secretary.
     
    The expert committee headed by Mr Kamath will make recommendations on the required financial parameters to be factored in the resolution plans, with sector-specific benchmark ranges for such parameters.
     
    The expert committee will also undertake the process validation for the resolution plans to be implemented under this framework, without going into the commercial aspects, in respect of all accounts with aggregate exposure of Rs1,500 crore and above at the time of invocation.
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    COMMENTS

    alok.ambrosia

    3 months ago

    It's extremely regrettable that the RBI should have chosen a person with such a dubious track record as Mr Kamath to head this Committee. The 1999 Task Force headed by Mr Kamath made recommendations which were not just ridiculous, but perhaps stemmed from internal interests in the taking over of prime PSU Banks. It is understood that Mr Kamath is now holed up in Singapore for fear of being put behind bars should he come back to India.

    Under the circumstances, for RBI to cast the said Mr Kamath as the Head of yet another committee, puts not only the outcome of this Committee but also the integrity of the Central Bank under serious doubt, as well as their ability to act in the best interests of the Nation.

    WHEN WILL THIS ROT END ??

    santhraj

    4 months ago

    Adage goes that 'Caesar's wife should be above suspicion.' In the same analogy, Shri Kamath should voluntarily stay away from Chairing a committee that would decide the fate of redefining the NPAs. There was a rumour that he would replace the present FM. Government should not only act honestly but also appear to act honestly. Who will listen as the government knows the inside out of Shri Kamath.

    Sanjiv.shanbhag

    4 months ago

    AIBEA casting aspersions on composition of entire Committee is righteous. Immediate need for Finance Ministry's intervention.

    RBI Extends Curbs Over 3 Maharashtra-based Cooperative Banks – Customers Pay for Banks’ Fault
    On 30 July 2020, the Reserve Bank of India (RBI) extended its directions to the Vasantdada Nagari Sahakari Bank, the Kapol Cooperative Bank and the Maratha Sahakari Bank. All three urban cooperative banks are from Maharashtra. 
     
    Mumbai-based Maratha Sahakari Bank was placed under RBI directions vide directive dated 31 August 2016, from the close of business on 31 August 2016, for a period of six months. The validity of the above directions has been extended from time to time, the last one being vide directive dated 18 March 2020, valid up to 31 July 2020, for a further period of five months from 1 August 2020 to 31 December 2020. 
     
    The Kapol Co-operative Bank from Mumbai was placed under directions vide directive dated 30 March 2017, from the close of business on 30 March 2017. The validity of the above directions was extended from time to time, the last one being vide directive dated 29 January 2020, valid up to 31 July 2020, for a further period of six months from 1 August 2020, to 31 January 2021.
     
     The RBI in separate notifications for these two banks (The Kapol Cooperative Bank and The Maratha Sahakari Bank Ltd) said that extension should not “per-se be construed to imply that it is satisfied of substantive improvement in the financial position of the aforementioned banks.”
     
    Kapol Cooperative Bank depositors have faced restrictions on accessing their money – one withdrawal of Rs3,000 in six months – since 1 April 2017. The Bank’s board was dissolved by RBI in 2014 and an administrator appointed following instances of rampant corruption and nepotism.
     
    Kapol Cooperative Bank was established as a community-driven bank in 1939 and currently has 15 branches, of which 14 are in Mumbai and one in Surat. The Kapols are vaishyas or baniyas from Saurashtra in Gujarat. 
     
    The Maratha Sahakari Bank was placed under an RBI administrator in 2016 after an audit found that its books were manipulated. The bank had given Rs22 crore in loans to 10 borrowers without following the due procedure. A forensic auditor was commissioned by RBI and a report was submitted in the last week of February 2020. The report said that the 10 borrowers defaulted on their loans, plunging the bank into a crisis. Most of these loan accounts have already been tagged as non-performing assets (NPAs). The forensic audit found that the bank favoured the ten borrowers by refusing to ask for sufficient collaterals, or verifying their documents. In some cases, loans were even granted on the basis of forged documents. 
     
    The central bank, in the public interest, had issued directions to Vasantdada Nagari Sahakari Bank Ltd, Osmanabad, Maharashtra in the exercise of powers vested in it under sub-section (1) of Section 35A of the Banking Regulation Act, 1949 from the close of business on 13 November 2017. RBI has now further extended the directions for a period of two months from 1 August 2020, to 30 September 2020, subject to review. 
     
    The RBI clarified that this should “not per se be construed as cancellation of banking license by it. The bank will continue to undertake banking business with restrictions till its financial position improves.”
     
    Over the past decade, Moneylife has been continuously highlighting the plight of cooperative bank customers and warning people to be careful while choosing the banks for their savings and investments.
     
    In September 2019, RBI had placed various regulatory restrictions on the Punjab and Maharashtra Cooperative bank (PMC Bank) on account of financial irregularities, failure of internal control and systems of the Bank and wrong/under-reporting of its exposures. 
     
    Almost every month, RBI puts out a brief press release announcing the closure of one cooperative bank or the other. Deposit insurance payment data showed that Maharashtra has the highest number of cooperative banks going bust. 
     
    More than 165 cooperative banks have been shut down in Maharashtra in the past 30 years. These small banks fail with unvaried regularity because they were under the shady system of dual regulation—that of RBI and the registrar of cooperatives (RoCS) - which comes under the state government). Both were supposed to be regulating them. RoCS officials used to admit that the RBI did not look closely at these banks, while the RBI claimed that it waited for government recommendations to act as the state's cooperatives department has its auditors on the boards of the banks.
     
    In April 2020, the RBI acted on nine cooperative banks. This included the cancellation of licence of Mapusa Urban Cooperative Bank. RBI found that the bank did not have adequate capital and earning prospects and its continuance would be prejudicial to the interests of its depositors.
     
    In 2020 till date, RBI has put at least 44 cooperative banks across the country under watch citing deterioration in their financials or for flouting prudential norms. This includes cases where the regulator has put fresh restrictions on the business activities and those where RBI extended the restrictions already imposed on the entities. 
     
    On 24 June 2020, the Union government issued an ordinance to bring 1,482 urban cooperative banks and 58 multi-state cooperative banks, with over 86 million depositors and Rs4.84 lakh crore deposits under the direct supervision of RBI.
     
    The ordinance now empowers the RBI to override the RoCS to remove the management and merge or dissolve cooperatives, among other things. These banks will now be audited as per RBI norms.
     
    Thus, it gives RBI the same powers of supervision over cooperative banks as it does over scheduled banks and also a say in key appointments. This means that RBI will now be fully responsible if any cooperative bank fails. Moneylife’s managing editor Sucheta Dalal wrote about this historic move here. You can watch her speak on this on Moneylife News Bites. Dr Yerram Raju wrote his take on this here
     
    Of course, the question remains whether RBI has the supervisory bandwidth to do justice to its steadily growing mandate, and it looks difficult unless its supervisory machinery is beefed up.
     
    In September 2019, cooperative banks were provided an opportunity to convert themselves into small finance banks. However, they have shown little interest and only one bank came forward and got the in-principle approval from RBI.
     
    In a recent interview, RBI board member Satish Marathe said that with the latest change in law, RBI must stop asking cooperative banks to turn into small finance banks and, instead, look to make them better by setting milestones. 
     
    The RBI governor Shaktikanta Das said recently that in the case of the urban cooperative banks (UCBs), special efforts are being made to move towards a risk-based and proactive supervisory approach to identify weaknesses in their operations early. He said “An early warning system with a stress-testing framework has been formed for timely recognition of weak banks for appropriate action.”
     
    Before you get lured by the higher interest rates on deposits offered by the cooperative banks, you need to research and check these following details: 
     
    1. How much capital does the bank have? The bank’s capital is the capacity of the bank to withstand losses. Since   cooperative banks have deposits which need to be paid, banks need to have adequate capital. Cooperative banks need to have a minimum capital adequacy ratio (CAR) of 10.875%.
     
    2. Profitability of the bank: This is determined by return on assets (RoA). It is an aspect that should be looked into. A RoA of 1% or more than 1% certifies that the bank is sound provided all other parameters are good too.
     
    3. Non-performing assets (NPAs) or bad loans where borrowers are unable to repay the loans: Higher NPAs indicate that the bank’s finances are deteriorating. The banks have to classify these bad loans as NPAs and keep aside a part of their earnings to cover up for these NPAs. 
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    COMMENTS

    bala.mathur

    3 months ago

    Why has the Media not brought to the notice of the public that currently there is an indefinite employee strike underway at PMC Bank? I understand they are protesting the total inaction of RBI in the last 11 months to resolve the issue.

    valentine.barboza

    3 months ago

    Shut all cooperative banks even if they show good results.. this medium is a platform for corrupt politicians and businessmen to loot the poor mans savings. All nationalised banks should be put under scanner and any staff found guilty of any fraud whatsoever should be jailed for life..

    REPLY

    kalemohan

    In Reply to valentine.barboza 3 months ago

    yes you rightly said

    s5rwav

    In Reply to valentine.barboza 3 months ago

    Big Private Sector Bank like ICICI Bank is Looted by the Directors of the Bank. RBI & CBI Protect Mr KV Kamath and Mrs Chanda Kochhar. I am Babubhai Vaghela from Ahmedabad. Thanks.... https://docs.google.com/viewer?a=v&pid=forums&srcid=MDM3NzY0OTcwNTkzMjU3MDQ4MjQBMDIwMDc5MzMzMTM2MjY1Mjg3NDABWGFDamlPNW9CQUFKATAuMQEBdjI&authuser=0

    kalemohan

    4 months ago

    These are the latest examples but what about Rupee co-op.bank Pune and Pen co-op bank Pen which are under restrictions of RBI since 2013.This is due to only politicians fraud in the banks.

    s5rwav

    4 months ago

    Supreme Court of India Judges should Order to Recover the Loss to the Bank Customers from the Salary of Mr Shaktikanta Das the Incumbent Erring Governor of RBI and his Officers at RBI. I am Babubhai Vaghela from Ahmedabad. Thanks.

    REPLY

    kalemohan

    In Reply to s5rwav 4 months ago

    yes Vaghela said is correct.RBI due to corrupt checkers/Inspectors.

    glnprasad52

    4 months ago

    This is just a tip of the iceberg and maybe RBI who knows facts is going slow, as a run/rush on several banks may bring sharp criticism against them and many co-op banks are not strong in any parameters.

    shetyerb

    4 months ago

    How many of the Directors and General Managers from these Banks are in jail?
    If not, at least under Modi Sarkar it is high time that at least four persons per Bank are sent to jail.

    REPLY

    kalemohan

    In Reply to shetyerb 4 months ago

    yes correctly said sir.

    bala.mathur

    4 months ago

    RBI enjoys limitless powers and zero accountability. Can any Government Authority ask for more than this?

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