MCA scanner on banks lending to deregistered companies

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So far 13 banks have provided information to the government on 13,140 accounts of 5,820 deregistered companies, with the most startling details emerging from IDBI Bank, Bank of Baroda and Canara Bank.

The corporate affairs ministry is likely to ask the department of financial services to take action against the banks which have continued lending to companies that have been deregistered.

The ministry is also likely to raise the issue of banks not showing urgency in sharing information on transactions of these companies before and after the announcement of demonetisation on November 8 last year.

The Registrar of Companies, which comes under the corporate affairs ministry, had struck off 2.09 lakh companies from the list of active establishments after they failed to comply with regulatory requirements. Banking transactions of these companies are restricted only for settling liabilities.

Despite this, according to sources, one government-owned bank has lent more than Rs 280 crore to a company after it was deregistered. Such transactions are likely to have occurred among other public sector banks as well, but the government still doesn’t have detailed data on the dealings, they said. “There is a need for greater transparency. We are simply waiting for the banks to come up with more information. Only a few have shared (the information) so far,” a senior government official said.

So far 13 banks have provided information to the government on 13,140 accounts of 5,820 deregistered companies, with the most startling details emerging from IDBI Bank, Bank of Baroda and Canara Bank.

Earlier this month, the government said these 5,820 companies had deposited Rs 4,573 crore post demonetisation in banks and withdrew Rs 4,552 crore, even as they held balances of just Rs 22 crore on the day demonetisation was announced. This number is likely to go up manifold once the banks share more data.

The government is probing accounts of all the 2.09 lakh companies that were struck off the registry, which previously had about 13 lakh companies.

Four banks — Qatar National Bank, Doha Bank, Emirates NBD Bank and Punjab Gramin Bank — stated that they didn’t hold any accounts of the suspect companies.

A few companies were found to be having multiple accounts in some banks, like Bank of Baroda, where one company held as many as 915 accounts.

Banks’ auditors under lens: RBI seeks explanation on differences in write-downs

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According to RBI data, PSU banks in FY17 have written off Rs 81,683 crore against Rs 2.49 lakh crore in the past five years.

The Reserve Bank of India (RBI) has questioned scores of auditors at 27 public sector banks on the process and logic they had used to compute and report write-downs at the lenders, two people close to the development told ET.

The RBI has sought written explanation on differences in the write-down assessments by its own inspectors and those certified by the auditors. A write-down is a reduction in the estimated and nominal value of an asset, and is charged off as a loss to the profit and loss account for the relevant period. In some cases, the RBI has also questioned the provisioning methodology and non-performing asset (NPA) figures arrived at by the auditors at a few public sector banks, sources told ET.

The banking regulator is examining whether auditors at these state-run lenders followed RBI guidelines on write-downs, provisioning and NPAs. “This is part of RBI’s annual assessment. Auditors will have to explain how they provisioned for NPA and how they calculated write-downs,” said a person aware of the matter.

The write-downs, NPA and provisioning figures arrived at by the auditors and RBI inspectors differ by up to 10%.

WRITE-DOWNS & PROVISIONING
According to RBI data, PSU banks in FY17 have written off Rs 81,683 crore against Rs 2.49 lakh crore in the past five years. In a few cases, the audit reports of some of these lenders do not reflect these write-downs, said one of the persons cited above. Most banks do not separately report write-downs in their accounts, combining them often with quarterly provisioning.

Most Indian public sector banks use more than one auditor due to the enormous size of their balance sheets. Most auditors are mid-to-small Indian firms that audit several branches. The 27 public sector banks collectively employ 115 auditors, according to data analysed by the ET Intelligence Group.

According to the people in the know, auditors at State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Allahabad Bank and Bank of India (BoI) were sent the show-cause notices about two weeks ago.

ET’s detailed email queries to the regulator and the affected lenders – SBI, PNB, BoB, IDBI, Indian Overseas Bank, Canara Bank, BoI, Oriental Bank of Commerce (OBC) and Allahabad Bank – did not elicit any response.

REGULATOR HAS PRIVILEGED ACCESS’
According to a major bank’s auditor who did not wish to be identified, the differences are not unexpected. “The RBI has access to information an auditor may not. Like, if a loan in bank X has gone toxic, the auditor of bank Y may not know, but the RBI would,” he said. He added that there is a time lapse between auditors preparing an account and the RBI conducting inspections. “What you must look at is the impact on the P&L of a bank due to divergence. In most cases, that is not much,” he said.

To be sure, there may have been ‘technical’ errors in interpreting the writedown rules, resulting in the differences. “There is a direct impact of the new accounting standards on the way write-downs are arrived at,” said a senior executive at a top audit firm. “Under the old accounting system, the rules around write-downs were not as precise, and there is a possibility that some auditors may have ignored this.”

Source: Economic Times

FinMin revises criteria for recapitalisation of PSBs

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State-owned banks looking forward to the next round of capital infusion will need to fulfill a new set of criteria, including credit recovery, as the finance ministry has revised the recapitalisation norms.

The second tranche of capital allocation for the current fiscal would be based on cost of operations as well as recovery and quality of credit on the basis of risk weighted assets, sources said.

Only those lenders that fulfil the criteria post third quarter (October-December) results of the current fiscal will be eligible for the second round of funding, sources added.

The money was allocated last fiscal on the twin principles of ensuring 7.5 per cent common equity tier 1 (CET 1) at the end of the 2016 and growth capital to five major banks.

The government in July had announced the first round of capital infusion of Rs 22,915 crore for 13 banks.

“75 per cent of the amount (Rs 22,915 crore)…Is being released now to provide liquidity support for lending operations as also to enable banks to raise funds from the market,” the finance ministry had said in a statement.

“The remaining amount, to be released later, will be linked to performance with particular reference to greater efficiency, growth of both credit and deposits and reduction in the cost of operations,” it had said.

The first tranche was announced with the objective to enhance their lending operations and enable them to raise more money from the market.

Out of the Rs 22,915 crore, State Bank of India (SBI) was provided Rs 7,575 crore followed by Indian Overseas Bank (Rs 3,101 crore) and Punjab National Bank (Rs 2,816 crore).

The other lenders, which have got commitment of capital infusion are Bank of India (Rs 1,784 crore), Central Bank of India (Rs 1,729 crore), Syndicate Bank (Rs 1,034 crore), UCO Bank (Rs 1,033 crore), Canara Bank (Rs 997 crore), United Bank of India (Rs 810 crore), Union Bank of India (Rs 721 crore), Corporation Bank (Rs 677 crore), Dena Bank (Rs 594 crore) and Allahabad Bank (Rs 44 crore).

The capital infusion exercise for the current fiscal is based on an assessment of need as per the compounded annual growth rate (CAGR) of credit growth for the last five years, banks’ own projections of credit growth and estimates of the potential for growth of each PSB, it had said.

Finance minister Arun Jaitley in his budget speech for 2016-17 had proposed to allocate Rs 25,000 crore towards recapitalisation of PSU banks. “If additional capital is required by these banks, we will find the resources for doing so. We stand solidly behind these Banks,” he had said.

 

Source: http://www.mydigitalfc.com/economy/finmin-revises-criteria-recapitalisation-psbs-539

Government lines up over Rs 17k crore to support rooftop solar projects

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The government has lined up almost $2.5 billion (about Rs 16,800 crore) for providing low cost finance to achieve the target of installing 40 GW grid-connected solar rooftop systems.

“The ministry is in negotiations with the KfW Development Bank to secure soft loans of 1 billion euro. They have already provided $100 million funding,” The Ministry of New and Renewable Energy (MNRE) Secretary Upendra Tripathy told reporters here.

The World Bank has committed a loan of $620 million, with the Asian Development Bank and the New Development Bank pledging $500 million and $250 million, respectively, he added.

“This will enable participating commercial banks such as SBI, PNB and Canara Bank to extend loan at or near base rates,” Tripathy said.

The secretary further said in the current fiscal, MNRE is trying to arrange an investment of Rs 6,000 crore for rooftop solar projects.

“The government is committed to encourage rooftop solar projects and Power and MNRE Minister Piyush Goyal will inaugurate a national workshop on Roof Top Solar Power on June 7,” he said.

This workshop will have presentations and discussions on various topics including best practices, innovative projects and major policy initiatives on projects, he added.

Besides senior government officials from the centre and states, the conference will also see participation from solar power project developers, channel partners as well as international agencies such as GIZ, KfW and USAID.

The power generated from solar rooftop plants installed even today is almost at par with the commercial tariff for consumers in many states. The cost of solar power is declining, while that of electricity from fossil fuels is rising.

Today, it is possible to generate solar power from rooftop systems at about Rs 6.5 per kilo watt hour, which is cheaper than power generated from diesel gensets and also cheaper than the cost at which most discoms make power available to industries and high-end domestic consumers.

On the issue of storage of solar power generated from rooftop systems, Tripathy said the government is working on providing some kind of subsidy for such projects.

Also there are plans for installing 15 minutes of storage in two projects in Andhra Pradesh and Madhya Pradesh.

 

Source: http://www.business-standard.com/article/economy-policy/govt-lines-up-over-rs-17k-crore-to-support-rooftop-solar-projects-116060301277_1.html