May 30, 2015

Gold coins will soon be available with buyback facility

NCDEX launches gold forward contract to cut imports

In a first, commodity exchange NCDEX plans to sell gold coins with a buyback facility, but only when the new forward contract ‘Gold Now’ launched on Thursday enters the second stage.

While various banks sell gold coins, so far no one is offering the buyback option, making things difficult for the consumer when he/she wants to sell. The new NCDEX arrangement gives consumers an exit route.

The ‘Gold Now' platform, an online market for buying and selling gold, will accept gold recycled in exchange-approved refineries. The idea is to reduce dependence on imports by complementing the recently announced Gold Monetisation Scheme (GMS).. With ‘Gold Now’, NCDEX hopes to bring out 2-5 per cent of the 25,000 tonnes of gold lying idle in homes and lockers.

“We intend to offer contracts in 5 gram, 10 gram and 50 grams coins in the next six months,” Samir Shah, Managing Director and Chief Executive Officer of NCDEX, said at a press conference here. At present, the spot trading contract is available in 100 gram and 1 kg bars.

Terming the new product a ‘new national market’ for gold, Shah said the exchange is creating an international standard ecosystem. Investors, too, will get a wider choice as they can either opt for a gold deposit scheme under the GMS, or go for the exchange-based contract.

“When you open a gold deposit account under the proposed GMS, you will get a fixed rate of 1 per cent. But on the exchange platform the returns will be market-driven. One may get 5-6 per cent returns,” he said, adding the new initiative will lead to ‘Make in India’ gold by linking up the gold recycling industry.

“We need to create an awareness in the market. Hopefully, if we get 5 per cent of an estimated 25,000 tonnes of idle gold, you can imagine the impact it will have in reducing imports,” he said. Gold demand in India, the world’s largest consumer, will not come down, but the supply side can be addressed by mobilising idle gold, he added.

Under ‘Gold Now’ contracts, one can trade in ‘imported gold’ accredited by the London Bullion Market Association as well as recycled ‘India gold’ from domestic refineries, he said. Under these contracts, gold will be compulsorily delivered to buyers from six centres — Delhi, Ahmedabad, Mumbai, Kochi, Hyderabad and Chennai.

To ensure quality of the recycled domestic gold, NCDEX has accredited four refineries — MMTC Pamp, Kundan, Shirpur Gold Refinery and Edelweiss Gold Refinery — as ‘Good Delivery’ gold refiners.

May 29, 2015

Postal department readying game plan to roll out payment banking service

The postal department is readying its game plan to roll out payment banking services — hoping to get a licence in a couple of months — and is closely looking at global models and preparing to hire top executives, people familiar with the matter said.

"Based on our discussions and interactions with the RBI ( Reserve Bank of India), we hope to get a nod by July," a senior official of the Ministry of Communications & Information Technology told ET. The central bank hopes to issue payment bank licences by the end of 2015, RBI Deputy Governor SS Mundra said recently.

The postal department expects to make the payment bank viable within three years of operations. Payment banks can accept deposits and can't offer credit. "Our calculations show that we will be able to generate profits of close to .`91 crore by the end of five years," the official said.

In February, Finance Minister Arun Jaitley had thrown his weight behind India Post's application, saying the government hoped to utilise its vast network of about 1.55 lakh points of presence across the country to help promote schemes such as the Pradhan Mantri Jan Dhan Yojana, aimed at promoting access to financial services.

India Post has studied models of various postal bank models of China, Japan, Vietnam and France to chart out its growth plan. "We have set a target of opening around 650 branches by the fifth year of operations. Additionally, we hope to have around 25,000 spokes and 1.3 lakh access points across India," the official said.

According to guidelines issued by the RBI in November, payment banks can accept demand deposits, subject to a cap of .`1 lakh per customer, and provide payment and remittance services through the Internet, branches, business correspondents and mobile banking.

Payment banks cannot offer credit facilities directly, although they can act as agents of commercial banks for credit and other services.

May 27, 2015

Pension fund and 2% load!

Let me explain about P.F. Fund and Pension Fund from my understanding.
P.F is deducted at the rate of 10% of Basic Pay from Employee.
An equal amount is contributed by bank to the P.F. account of employee 
These amounts are credited to the P.F. trust account of the individual banks.
Representatives of recognised unions will find place in the Board of trustees.
They have access to the Income/Expenditure account and balance sheet of the trust.
The amounts deposited in the account are invested in various financial instruments like 
Govt., Bond etc., Income generated will be utilized for giving interest to employees account.
At the time of retirement the amount (both employee contribution and Bank contribution) 
standing in the concerned employee will be given to the employee

This is the procedure of Contributory P.F. system.

In case of Pension Fund what is happening?
In 1995 Pension was introduced in Banking sector.
At that time, amount lying in P.F. trust (belonging to Pension opted employees) 
is transferred to Pension fund of the individual Banks.
Thereafter 10% contributions from employees were credited to P.F. Trust account.
10% Contribution by Bank was/ should be credited to Pension Fund.
The amount thus accrued in Pension Fund is invested and income generated also 
credited to Pension Fund .
Out of this fund only, Pension to all retired employees who opted for Pension scheme,
Commutation amount and family pension for the diseased employees, are disbursed every month .

Now my doubts are
1. Whether union representatives are members of any governing board of Pension Fund?

2. If not, Why? After all, the fund belongs to employees.
3. Whether Union people have access to read Income /Expenditure account and
    Balance Sheet of the fund?
4. Whether unions are aware of what is the income generated in this fund every year?
5. Whether Bank is contributing 10% of Basic Pay of all employees every month to Pension Fund?
   (or contribute some funds at their will and pleasure. )
    Whether Banks have contributed the 2/3 amount of additional cost, as accepted by in 9th B.P.S?
6. Whether UBFU is accepting the figures given by IBA , without any scrutiny.?
 Replies received under RTI act by some interested comrades, reveals that Pension Fund is not maintained as if it should be maintained.
********************************************************************************
9th B.P.S. and Pension fund!

At the time of every B.P.S , IBA will tell that “pension fund is short of funds.
 To retain its viability some sacrifice from employee side is needed “ 
In 7th and 8th some % in increase in wage revision is sacrificed/compromised.

At the time of 9th B.P.S , employees under Contributory P.F. system also want to  join Pension scheme. 
Then IBA said Pension Fund can’t bear the additional cost due to joining of more employees to the scheme. Further it said that additional cost to be shared by Banks and employees. Unions accepted for this deal. Then what will the additional cost ? IBA gave a huge figure that is far away from actual expenditure. Then BEFI intervened and produced a document containing the actual projection of additional cost.  It is much much lesser amount than what is given by IBA. All the unions in UFBU and IBA 
accepted the document after verifying the correctness of the projections.
Then it was decided that 2/3 of additional cost will be borne by IBA and 1/3 will be borne by employees.
The amount so decided are recovered only from those employee who newly joining the Pension scheme. (Thanks to one leaf of two leaves union’s change of stand at the last minute)
Thus a section of employees paid penalty for joining Pension Scheme, even though this  section  of employees suffer from lesser wage revision for the sack of employees already in Pension Scheme.

*********************************************************************************
10th B.P.S. and Pension fund!

This time also IBA said that “since merger of D.A. with Basic Pay is much higher and consequent Pension disbursement will also be high. 
(Mere merging of D.A will not increase pension. Because D.A. is reduced correspondingly. Only loading in addition will make the difference.)
Pension Fund can’t bear the additional burden.
Hence restrict the loading to 2% instead of 15 % “.  Unions accepted the IBA’s argument and signed in the dotted line.
1. My question is, if any document containing the projection of additional cost due to merger of D.A to Basic Pay with 15% loading, is given to UFBU?
2. What is the additional cost mentioned by IBA?
3. Whether unions have analysed and come to a conclusion?
4. On what basis UBFU accepted the proposal of loading 2% only on Basic Pay?
  (which is not a practice in previous occasions)
Members have the right to know about this decision.
************************************************************************************
What will happen in 11th B.P.S.?
IBA will again say Pension Fund can’t bear additional cost. Therefore Pension will not be paid 
at 50% of last drawn Basic Pay. 
Only 40% of last drawn Basic Pay will be paid as Pension hereafter,
UFBU will accept and sign.

Rajnish Kumar takes over as fourth MD of State Bank of India

Country's largest lender State Bank of India today said the government has appointed Rajnish Kumar as the Managing Director - Compliance and Risk department.

The post was lying vacant since November last year after the then MD A Krishna Kumar retired.

"In my new assignment, I will be looking after a new department - compliance and risk, which has been created for the first time by the bank. My focus will be on technology upgradation and providing skill development," he said.

Prior to this, Kumar was managing director and CEO of SBI Capital Market (SBI Caps).

The other three serving MDs at SBI are Pradeep Kumar (Corporate Banking Group), B Sriram (National Banking Group) and VG Kannan (Associates and Subsidiaries).

For the post of fourth MD, four deputy managing directors of SBI group had appeared for interviews in December last year.

Apart from Kumar, those who had appeared for the interview include Praveen Kumar Gupta, SBI's chief financial officer, NK Chari, head of medium corporate group at SBI, and S A Ramesh Rangan, MD at State Bank of Patiala.

It could be noted that the current SBI chairman Arundhati Bhattacharya has also served as the MD and CEO of SBI Caps in past.

Even the two former MDs - R Shreedharan, S Viswanathan and one serving MD - VG Kannan had also come from SBI Caps.

Both Kumar and Sriram will also be contenders for the post of SBI Chairman on the retirement Bhattacharya in October next year.

While Pradeep Kumar retires in October this year, Kannan's retirement is due in July next year.

How SBI chief Arundhati Bhattacharya uses technology and recovery to give the bank a new-age makeover

In 2001, a 45-year-old deputy general manager at State Bank of India (SBI) was wondering why the bank is spending so much money in maintaining foreign operations' back office overseas, when JPMorgan Chase, UBS, HSBC, and Credit Suisse were shifting theirs to India.

The manager wanted to replicate that model, but could not do so as red tape and a rigid bureaucratic structure built into a more than 200-year-old government-owned institution made even the simplest of tasks difficult. Today, that manager, Arundhati Bhattacharya, is the bank's chairman. Even as she grapples with the onerous task of cutting bad loans, recovering money from defaulters and gaining market share, she has not forgotten her 14-year-old idea. "I did not find traction then, so I am bringing it now," she adds.

Locating bank back offices in low-cost locations like India would seem a no-brainer. The fact that SBI is doing it now may seem ordinary but it is important in the context of the bank's history, its decisionmaking process and its structure.

The bank and its chairman finally appear to have got wiggle room to break down resistance and push through decisions that would lower costs. However, back office relocation is the least of SBI's problems. India's biggest, oldest and most venerable bank faces multiple challenges at a time when the weight of bad loans alone, not to mention competition and costs, threatens to derail its plans.

Bhattacharya would know more than anyone else that SBI may well get bypassed by the technology revolution if it does not take serious steps. She is not sitting idle. But she is not tearing up the system and creating a revolution either.

She is working methodically and systematically to identify problems and fix them. Technology and recovery will be the pillars on which SBI rests. When she decided to transform the bank from a staid state-run lender into a customer-friendly one, she went hunting for a technology hand familiar with the ways of the West, and hired former Barclays executive SK Bhasin as chief technology officer.

"I have been looking across the globe for people who have done these things well to try and replicate some of their experience," says Bhattacharya. We have done all of these through IT (information technology). Without IT none of these things could be done well." State-run bankers, intensely focused on lending and raising deposits, rarely factored in technology in their lives.

Bhattacharya's efforts in targeting future businesses is reflected in its recent business arrangements with Amazon, Snapdeal and many more digital-age companies, pushing the Essars and Chettiyars to the back seat.

New businesses are future profits. But what about the bad loans of the past, which together with restructured loans are at 10% of total loans, making the industry technically insolvent. SBI is no exception to bad loans. Its gross bad loans and restructured loans are at Rs 83,434 crore, or 8.4% of total loans, equivalent to the government's spend on social issues like healthcare and education this year.

"There is no point in getting impatient," says Bhattacharya. "It has to be done diligently. When the finance minister wanted to know the one thing that was my priority, I said we wanted a bankruptcy law."

The Indian judiciary is notorious for prolonging decisions on disputes, and the promoters of companies, especially wealthy ones such as United Spirits' Vijay Mallya whose Kingfisher Airlines owes more than Rs 7,000 crore, have exploited the loopholes. But because the Narendra Modi government unlike previous ones does not provide defaulters with protective shields, bankers such as Bhattacharya are emboldened to take action. "We have a lot of angst against these promoters, who we believe are taking the system for a ride," says Bhattacharya.

"If the promoter has taken money he has to give it back. There are no two ways about it. If they don't, their lives are going to be miserable. I have deep pockets to do it. There is no point in messing around." All this is not lost on foreign investors. SBI is the only top PSU lender where foreign funds are raising stake even as they have cut them in Punjab National Bank and Bank of India.

"I would say SBI is a private sector bank because the new CEO is phenomenal," says Avinash Gupta, managing director and head of institutional equities at Bank of America Merrill Lynch. Gupta deals with a lot of foreign investors, many of whom are impressed by Bhattacharya's firmly-in-control attitude and her desire to change things. When Bhattacharya took charge in 2013, profits were sliding, bad loans were climbing, the economic climate had deteriorated and the private sector was poaching its clients . There was no point in waiting for the tide to turn.

"I couldn't expect the external environment to suddenly turn around and give me good results," says Bhattacharya. What did she do? "Like any good housewife who will husband her resources when the chips are down to ensure every rupee helps make her go further," SBI turned prudent, she said. "When I talk about cutting expenses, I mean unwanted expenses. Not what is required to build business," she says. "All expenditure has to be controlled to yield the best results. A lot of us were travelling economy (class) for quite a while."

Lawyers and landlords are at the receiving end of Bhattacharya's measures to contain waste. The days of branches negotiating rent for branch offices are over. It is no longer done at the 11th hour, which often gives property owners the upper hand. Alerts come up 18 months before the lease expires, and the head office monitors and ensures it is done a year in advance.

It is no secret that the judiciary and the system are as responsible for banks' ills as the banks themselves. While disputes run for months, bankers remain observers. But this is not the case with SBI anymore. Its advocates have been made accountable. "There are some advocates who keep taking adjournments, and there are others who move fast," says Bhattacharya.

"I know every advocate's performance." While a lot of these issues are administrative in nature, what is the scene when it comes to its core business — lending?

"She has a very clear-headed approach," said Romesh Sobti, MD & CEO of IndusInd Bank. "It's a well-defined approach to many issues the banking industry is facing. She is forthright in her ability to articulate issues not only facing SBI but also the banking industry," said Sobti.

There is a paradigm shift. Tractor loans, treated as crop loans, are now automobile loans. Instead of waiting for the harvest to repay, the borrower has to pay on a monthly basis, like with equated monthly instalments in a car loan.

"When a farmer gets money from a crop, it first goes to others — the teacher, grocer... banks are last on the list," says Bhattacharya. "Make them EMI-based. Can I give them loans which will yield a regular stream of income? We were lacking the customer connect."

Many current and former SBI customers would agree. The question now is not just how quickly she can change perceptions about the bank but also how soon she can make the bank's cash machine churn out profits. With non-performing loans assuming alarming proportions, it will take all of Bhattacharya's combativeness to stem the rot.