Sunday, November 16, 2014

FinMin review meeting with chiefs of PSU banks, FIs on Nov 20

FinMin review meeting with chiefs of PSU banks, FIs on Nov 20
The Finance Ministry has called a meeting of chiefs of public sector banks on November 20 to review their financial performance and Jan Dhan Yojana, among other things.

Chief executives of financial institutions like Nabard and NHB are also attending the meeting.
"Finance Minister Arun Jaitley may attend the meeting. If the Minister is unable to, Department of Financial Services Secretary Hasmukh Adhia will head the review meeting," a source said.

The main agenda of the meeting is discussing financial performance at the end of the second quarter, sources said.

The progress of Pradhan Mantri Jan Dhan Yojana (PMJDY) is another important issue that will be discussed in the meeting.

The issue of asset quality and recovery of bad loans would also be discussed. Credit to farm sector, MSME, housing and education loans may also come up talks, sources said.

Besides, there would be deliberation on lending to stalled projects.

The Prime Minister on August 28 launched the the PMJDY scheme to boost financial inclusion. About 7 crore bank accounts have been opened under Jan Dhan scheme so far.

As on November 10, 7.24 crore accounts have been opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) of which 4.29 crore in rural and 2.95 crore are in urban areas. RuPay Cards have been issued in case of 3.97 crore accounts.

The Yojana envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility.

The main features of the PMJDY scheme include Rs 5,000 overdraft facility for Aadhar-linked accounts, RuPay Debit Card with inbuilt Rs 1 lakh accident insurance cover.

Besides, account holders under the scheme will get life insurance cover of Rs 30,000. This was additional benefit announced by the Prime Minister during the launch of the scheme.

Under the scheme, the account holders will get an overdraft facility of Rs 5,000.

Blistering pace: 6.5 crore bank accounts opened so far under Jan Dhan scheme


Banks, especially public sector and regional rural banks, are going all out to open accounts for individuals from low-income segments.

Under the Prime Minister Jan-Dhan Yojana (PMJDY), which was launched on August 28, banks collectively opened a whopping 6.51 crore basic savings bank deposit accounts (BSBDA) in just two months. 

Going by the blistering pace at which banks are opening accounts, in all probability, they will surpass the target of reaching 7.5 crore un-banked families by January 26, 2015.

Of the 6.51 crore new accounts that have been opened so far, 4.95 crore are with zero balance, as per data submitted by banks to the Finance Ministry. 

Banks mobilised deposits aggregating ₹4,857 crore from the remaining 1.56 crore new accounts. What this means is that new customers, on average, deposited ₹3,113 per account. 

Public sector banks and regional rural banks accounted for 81 per cent and 16 per cent, respectively, of the total accounts opened under PMJDY. The response of private sector banks to the Yojana has been lukewarm.

While banks went all out to open the accounts, they could not issue “RuPay” debit cards to almost half of the new customers.

RuPay cards

“With banks aggressively taking up the task of opening accounts under the PMJDY, supply of RuPay cards lagged demand. However, steps have been taken to augment the supply of cards.

“By December 15, all customers who opened accounts under the PMJDY will receive the cards,” said a senior public sector bank official. PMJDY is a National Mission for Financial Inclusion. It seeks to ensure access to financial services, namely, banking/savings and deposit accounts, remittance, credit, insurance and pension in an affordable manner.

RuPay debit card is the home-grown card payment scheme launched by the National Payments Corporation of India to rival global payment processing giants Visa and MasterCard.

Under PMJDY, the debit cards comes with ₹1 lakh accident insurance cover, and an additional ₹30,000 life insurance cover for those opening bank accounts before January 26, 2015.
The performance of the BSBDA is monitored and overdraft facility of up to ₹5,000 is given in a phased manner. 

To remain eligible for the ₹1 lakh accident insurance cover that comes with the BSBDA, the RuPay cards have to be used at least once in 45 days.

At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice.
The cards have to be activated at the earliest and made operational.

Monday, November 10, 2014

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.

Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account holder to be eligible for the insurance cover. But of the seven crore accounts opened under the scheme, only 1.71 crore accounts have seen transactions while the rest have had zero balance since they were opened, which means there have been no transactions in these accounts.

PMJDY, which was launched by Prime Minister Narendra Modi on August 28, seeks to cover 7.5 crore un-banked households in the country in the first phase. It provides Rs 5,000 overdraft facility for Aadhar-linked accounts and RuPay debit card, besides a Rs 1 lakh accident insurance cover "If an account holder meets with an accident during the 45 days when there has been no transaction in his account, he is not entitled to the insurance cover," said a senior executive with state-run Vijaya Bank who is involved in implementing PMJDY.

5 crore Jan Dhan accounts outside Rs 1 lakh accident insurance ambit

The executive said most of the account holders seem unaware of the '45-day clause'. "We are trying to explain it to them," he said. National Payment Corporation of India (NPCI), which has an agreement with private sector HDFC Ergo to provide this insurance cover, is of the view that the accident insurance should not be looked as a plain vanilla welfare measure. "These are initial days of the scheme and there is no need to get disheartened," said AP Hota, managing director and CEO of NPCI."Most of these accounts will be soon linked with various direct benefit transfer schemes and then there will be regular transactions."

The government is all set to launch a modified direct benefit transfer for liquefied petroleum gas (LPG) on a pilot basis in 54 districts across the country. Under the scheme, LPG consumers will be able to get subsidy directly in their bank accounts even if they do not have Aadhaar numbers.

So far, under PMJDY around 32% accounts have been seeded with Aadhaar and around 4 crore have been issued the Rupay debit card.The prime minister had earlier said that a lot of effort will be required in promoting financial literacy among the new account holders. "New accounts also need to be kept alive and properly utilised.

Aadhaar numbers will need to be seeded in bank accounts," he had said.Towards this end, the finance ministry is working on to increase the reach of banks through various models, including banking correspondents to facilitate banking facilities.
Five crore of the seven crore bank accounts opened under the government's flagship financial inclusion programme, Pradhan Mantri Jan Dhan Yojana (PMJDY), have fallen outside the ambit of the in-built Rs 1 lakh accident insurance cover as these accounts have seen no transaction since they were opened.

Bankers and insurance industry executives say rules require at least one transaction in the account in the preceding 45 days for an account holder to be eligible for the insurance cover. B ..

Jan Dhan balance tops Rs 5,000 crore mark, nearly 7 crore accounts opened

 

The Pradhan Mantri Jan Dhan Yojana has so far managed to bring over Rs 5,000 crore into the formal banking system, as close to seven crore account holders have started depositing cash into their bank accounts. A large part of this money was hitherto kept at home, with little or no productive use.

Latest data collated by the finance ministry showed that on November 3, 6.98 crore bank accounts had been opened across the country, with Rs 5,300 crore parked in them. Just a tad under 4 crore RuPay cards had been issued to these account holders, with the remaining expected to get the ATM card over the next few weeks, officials said.

At the current pace, it's a matter of days before bank employees help the government scale the target of opening 7.5 crore bank accounts under the financial inclusion scheme launched on August 29. The government was looking to achieve the target before January 26, 2015, well ahead of the earlier schedule of August 15, 2015. But with the target within reach, the finance ministry is now looking at doubling the target to open 15 crore accounts, said an official.

While banks have been ahead of the curve in opening bank accounts, the run rate for deposit accumulation has started picking up now. At current levels, each Jan Dhan account has a balance of around Rs 750. Initially, the average balance in each account was around Rs 500.

Historically financial inclusion accounts have been low value accounts for public sector banks with balances of less than Rs 1,000. For banks, experts said, the challenge is to ensure that the accounts remain active and account holders keep depositing funds as low account balance have in the past deterred bankers from pushing financial inclusion.

This time, however, the government is hoping that cash transfer into the accounts will ensure that transactions take place and sufficient balance is maintained. With the finance ministry also proposing overdraft facility based on the financial history of an account holders, there is an added attraction to maintain a healthy balance.

A recent report by Boston Consulting Group, Ficci and the Indian Banks' Association had pointed out that among the 16 crore no-frills accounts opened before Jan Dhan's launch, only a quarter had a single transaction last year. Similarly, a quarter actually had a balance. "In effect, five years of effort has led to about 20% addition to active savings bank accounts in the nation," said the report, released in September.


Chandra Shekhar Ghosh, CMD of micro finance institution Bandhan Financial Services, which recently got RBI permission to set up a bank network, told TOI on Tuesday that the challenge for banks is to deliver services at the doorstep. "The Jan Dhan Yojana is a very good initiative to open the accounts but how banks design the products and services and bring it to the doorstep that is the issue. You need to inculcate the habit of banking with those customers," he said.

Three-fourths of Jan-Dhan accounts hold zero deposits

Even as banks race to open up accounts under the Pradhan Mantri Jan-Dhan Yojana, only a quarter of the accounts opened till date have any cash deposited in them.

Official data reveals that of the 6.99 crore bank accounts opened till November 4, 75 per cent or 5.29 crore accounts have zero balance. The data also reveals that it is two non-BJP states — Uttar Pradesh and West Bengal — where the maximum number of bank accounts have been opened under the scheme.

However, 1.69 crore accounts under the scheme have managed to bring in Rs 5,294.10 crore of household savings into the formal banking channels. Back of the envelope calculations show that on an average each of the accounts have deposited Rs 3,100.

Officials, however, argue that opening of bank accounts is more important and savings will pick up gradually. “A bank account will help inculcate the habit of saving,” said an official. The Jan-Dhan Yojana was launched by Prime Minister Narendra Modi on August 28 with the goal of eradicating “financial untouchability” of the poor by opening at least one bank account for every family in the country in less than six months.

At the time banks had been given a target of opening 7.5 crore accounts under the scheme. Each of the accounts come with a debit card, Rs 1 lakh accidental insurance policy and Rs 30,000 free medical insurance cover for those who enroll before January 26. Depending on the performance of the accounts in the first six months, banks will later extend a Rs 5,000 overdraft facility to one account per household.

While Samajwadi Party led-Uttar Pradesh has opened 1.16 crore bank accounts under the scheme, Trinamool Congress-governed West Bengal has opened 49.54 lakh bank accounts. BJP-led Rajasthan and Madhya Pradesh have opened 46.3 lakh and 45.82 lakh accounts, respectively, under the scheme till October 29, 2014. The finance ministry, which has been keeping an eye on the progress of the scheme is hopeful that it will meet the target for account opening this fiscal. The data reveals that of the 6.99 crore accounts opened, 3.69 crore RuPay debit cards have also been issued while 2.15 crore accounts have been seeded with Aadhaar numbers.

However, experts say that for the scheme to be truly successful, banks need to provide doorstep services. “Bankers need to understand that if they want to really do financial inclusion, accounts have to be active… they need to provide doorstep banking along with overdraft facility from day one so that the holder can easily access the services,” said Chetna Vijay Sinha, chairperson, Mann Deshi Bank Organisation that runs a regulated cooperative bank for women.

Friday, October 31, 2014

Get account holders under Jan Dhan to use RuPay card, FinMin tells banks

To get customers opening accounts under the Pradhan Mantri Jan Dhan Yojana to use their RuPay debit cards, the Finance Ministry is believed to have asked banks to take a carrot-and-stick approach.
So, to remain eligible for the ₹1 lakh accident insurance cover that comes with the Basic Savings Bank Deposit Account (BSBDA), the cards may have to be used at least once in 45 days.

At a recent meeting, Finance Ministry mandarins told top bankers that mere issuance of cards will not suffice. The cards have to be activated at the earliest and made operational. 

Ministry officials said that customers have to be advised to operate the cards at a certain time interval, say, once in 45 days, in order to continue to enjoy the accident insurance cover without any charge to them.

Banks were also advised to have an “SMS” alert system for BSBDA beneficiaries so that they use the RuPay card once in 45 days and remain eligible for the accident insurance cover, said a senior official of the Union Bank of India.

RuPay is the home-grown card payment scheme launched by the National Payments Corporation of India (NPCI) to rival global payment processing giants Visa and MasterCard. 

It has been conceived to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions to participate in electronic payments.

This card is accepted at all ATMs (for cash withdrawal) and at most of the PoS machines (for making cashless payment for purchases) in the country.

A ‘Basic Savings Bank Deposit Account’ or ‘no-frills’ account does not have any minimum balance requirement. The services available for such accountholders include deposit and withdrawal of cash at bank branches as well as ATMs; receipt/credit of money through electronic payment channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and departments.

While there is no limit to the number of deposits that can be made in a month, accountholders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and comes with the facility of ATM card or ATM-cum-debit card.

The Pradhan Mantri Jan Dhan Yojana (PMJDY), which was launched on August 28 by Prime Minister Narendra Modi, is a National Mission for Financial Inclusion. 

Financial inclusion is the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low-income groups at affordable cost 

The Yojana seeks to ensure access to financial services — namely, banking/savings and deposit accounts, remittance, credit, insurance and pension — in an affordable manner.
Banks have been set a collective first target of reaching 7.5 crore unbanked families under the PMJDY by January 26, 2015.

Sunday, October 26, 2014

We expect credit growth to pick up by end of third quarter: Bank of India MD Vijayalakshmi Iyer



Bank of India is planning to set up a subsidiary dedicated to social work, a first among its domestic peers. Amid increasing competition, the public sector lender is trying to consolidate the credit portfolio, cut expenses and focus on fee and treasury income to stay profitable. The bank is focusing on bringing down stressed assets by strict monitoring and faster resolution of cases. Vijayalakshmi Iyer, chairperson & managing director, tells Manju AB how she is steering the bank out of its bad debt problem by personally attending to large accounts. Excerpts from the interview:

What is driving business at Bank of India? With credit growth being at a decade low, how will banks beat the trend and still stay profitable?
The growth has been very low in tune with the industry trend post March 2014. This actually provided an opportunity to consolidate credit portfolio and to put more resources for monitoring mechanism. These efforts will result in lower credit cost and will improve profitability. With more focus on timely resolution of stressed assets, the profitability will, in fact, improve.

When do you expect corporate credit to pick up? And which sectors do you see reviving faster than others?
There has been slowdown in corporate credit demand. Many steps are being taken by the government to enable economic growth to assume faster pace. With pro-growth environment being created, we expect credit growth to pick up by the end of third quarter of the current fiscal. We expect pick-up in SME sector to lead.

How is the retail credit growth?
Notwithstanding lower corporate demand for credit, the retail sector continues to grow resulting in better balancing of portfolio. Focus on agriculture, retail and MSME is driving the business. Widespread geographical spread of branches is helping us growing in these sectors. During the first half of this fiscal, schematic retail loan has grown 12.21% from Rs 21,982 crore as on March 31, to Rs 24,665 crore as on September 30. The growth is 28 % year on year (Rs 19,284 crore to Rs 24,665 crore). Home loan growth has been 31% on a year-on-year basis (Rs 11,400 crore to Rs 14,913 crore). Home loan and LAP constitutes 74% of schematic retail loans as on September 30, 2014 (home loan Rs 14,913 & LAP Rs 3,424 crore). Total retail loans (personal loan segment) of the bank stood at Rs 29,654 crore as on September 30, 2014. Considering the growth pattern in the earlier years, we expect about 40% growth in retail loans during 2014-15.

What will be the key driver of your profits during the current quarter?
The deposit rates have softened in the absence of demand for credit. This will help in achieving lower cost of fund and better "NIM' (net interest margin). Initiatives have been taken to curtail operational expenses as well as to increase non-interest income. All out efforts are being made to achieve lower credit cost by improving monitoring process and also by achieving speedier resolution of non-performing assets. There are two major sources of fee income, in addition to general banking services including remittances, etc. That is (1) business related to credit portfolio and (2) fixed income portfolio. Given the softening of yields on fixed rate bonds, we do expect gains on that account to contribute to our profits.

How are your deposits growing? Any specific campaigns to mobilise CASA (current account savings account)?
It is desirable to match growth in deposits to growth in credit business. Given that demand for credit has been muted, the deposit portfolio is registering slower growth in keeping with opportunities for deployment. We are placing thrust on CASA business and special drives are being arranged across the country to expand the customer base further. Technology related initiatives are being implemented to make banking more customer friendly. The government business is also being expanded with a view to increase CASA portfolio.

How is the joint lending forum (JLF) helping the bank combat the rise in bad loans? Is the JLF being implemented in all earnestness with co-operation from all banks?
Joint Lending Forum (JLF) has been helping the banking system in early resolution of stressed accounts as RBI guidelines warrants time bound rectification process by all banks if majority of banks (75% in value and 60% in numbers) agree for any of the three options available, that is rectification, restructuring or recovery. The implementation of corrective action plan under JLF route has almost stabilised barring addressing of few issues like short period available for implementation of restructuring under CDR
on-CDR route.

Asset reconstruction companies (ARCs) say banks need to give bigger discounts for sales to happen. What has been your experience?
In fact, the role of ARCs is very important in faster resolution of stressed assets. We feel that ARCs need more capitalisation to meet the revised norms of payment of cash up-front of 15%. Admittedly, with higher cash up-front, the ARCs will have more commitment, which will lead to even faster resolution. Bigger discounts on sales will force banks to have bigger hit to their P&L.

Now social media networks like Facebook and Twitter are attempting at money transfers, printing cheque books, etc. Is there any threat to traditional banking from these alternate channels?
There is no question of threat. Innovations in technology are always welcome as they help in achieving higher level of efficiency in providing banking services. It is desirable to remain aligned with evolving technology. We have focus on IT enabled services to ensure that our customers have access to state-of-the-art technology. We were the first PSU bank to introduce first ATM long back in the country. Recently, we introduced cash remittance through ATM to non customers without use of ATM card. It has received good response. Most of our ATMs are now enabled to provide this service of Instant Money Transfer (IMT).

Banks are planning to sell off their non-core assets to streamline the organisation What would be your non-core assets that you might put on the block?
We do have strategic investments and keep reviewing the same from time to time. It is always desirable to realise gains on such investments to augment capital. It is a continuous process.

You had plans of setting up a wholly owned subsidiary for corporate social responsibility. What has been the progress of that?
With a view to have consistent approach for achieving our corporate social responsibility objectives, we have proposed formation of a trust. We have approached appropriate authorities for approvals. We are expecting approvals soon.

Will you have to raise money for Basel III compliance? Will you give some details on the fundraising plans of the bank?
We need to strengthen our capital structure to ensure consistent growth while maintain the desirable levels of capital adequacy. This is a continuous process. We are observing capital market developments very closely and have plans to raise capital at an appropriate time.

Finally, how is Jan Dhan scheme faring and how much of deposits in these accounts if at all have you collected?
Our bank has opened 28.82 lakh accounts from August 16 to October 16 under Jan Dhan scheme and collected Rs 70.07 crore deposits. The scheme is in full swing by means of carrying out household surveys in all the allotted Sub Service Areas (SSA) and wards which is expected to be completed by October 31.Number of RuPay Cards issued by our Bank so far is 17.94 lakh. The backlog is expected to be cleared by November 15. Aadhaar seeding and opening of accounts through e-KYC is picking up and we have seeded 23.48 lakh accounts and opened 11,716 accounts through e-KYC so far.

Have you also rolled out Swachh Bharat campaign?
In this national endeavour, BOI has committed Rs 4 crore for construction of toilets in government schools. The project will cover 85 girls secondary schools in Jharkhand. List of schools and districts covered in the state has already been conveyed to finance ministry, and ministry of HRD. Implementation will be done through local agencies in coordination with BOI zonal offices situated in Jharkhand.