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He continues the focus on social amelioration TN accounts for the largest recruits by the IT sector Polls and promises Another Indian music maestro at the UN Editor's Notes TELANGANA at last…BUT A more liberated TN… Contrarian cousins Gas is the way forward Naidu will soon build a new Hyderabad Whistle-Stop Tour of Raghuram Rajan Delhi Chalo... A professional at the helm of IRDA... Editor's Says Vibrant Gujarat A rich pool of talent not utilised…. PPP mode for upgrading Corporation Hospitals Quality education through the PPP mode Gay abandon in pricing Diamond jubilee of Egmore Samskrt School Boy, can you beat these? Welcome GST CSR and CMI: promise of another Srinivasan Ramanujan... Paytm karo... Recognition to role of NBFCs.... Sweet news for TN sugar mills When nations steal growth from one another… Plummeting profits of PSBs Shale gas and its shallow future Russi Mody – a tribute Engineering seats go abegging Five star activism stalls development activity Delhi is distant… Return to king coal for urea... Delhi returns to BJP Colour-Chem’s colourful KRVS Noble nonagenarians... EEC at the National Media Centre Kinetic Karnataka The power-full Hindujas Online not in line with brick and mortar businesses... IPL - no surprise this scam Padma Bhushan for A Ramakrishna A Grand Finale for SN’s MS centenary at the US… B H Kothari - a tribute Insurance companies bleeding, yet no decision on increasing FDI limit! When the President was rendered homeless… Modi and the lady Welcome thrust on trade in Modi’s foreign visits... IAS invades NDDB... An informal presentation - analytical, forward locking... Of course, Gujarat is vibrant Moily’s bold thrust …and of a popular trade leader SoA @ 80 Remembering Indira Sivasailam... Why land prices zoom in TN? L&T- the specialty of special purpose vehicles Chennai and Kolkata miss opportunity to grow as Delhi and Mumbai Tax agriculture Revive development banks... Streamlining mandatory third party cover More tributes to GR Wise Presidents Fortune 500 review Readers' Mail For whom the MIDS bell tolls? Modi storms Silicon Valley Infrastructure funding – lessons learnt Valli, they are more marginalised Making ‘my Amaravati’... Lesson from Chandrababu Naidu L&T: focus on infrastructure and more infrastructure… Build close rapport with business leaders An enemy’s enemy is a friend Where a state respects its litterateurs… Align crops to agro climate endowments… Adapt Vajpayee dinner diplomacy Music happens Dr C Rangarajan returns to Chennai Auto components surge… Measuring roof tops in terms of KW/MW Telangana in top gear… Haul over the coal The ‘Ayyo-yes’ is no more Sweeter prospects for sugar Put expensive assets created to use... Multi-faceted Venkat Tihar, Puzhal not different from Parappana Agrahara Odisha: spectacular win by Naveen Patnaik How Air-India loses customs... TGS- The king storyteller Sri Lanka votes for change F C Kohli - his concerns all embracing Naidu’s return augurs well for Seemandhra MHC should not return to its old indisciplined ways CRS, a jewel among managers, is no more. Poor representation for Kerala and TN in Cabinet Adharma of opposition politics Lalu’s envy, India’s pride Air Asia India will set new benchmarks for budget travel The rise and rise of KCP The few handicaps... Why this malaise in medical education? Tribute – M V Murugappan Come elections, come advertisements... Land reclamation from sea appears cheaper! Nuclear power at the nucleus Excel Generators provide the vital back-up Delhi is distant Intellectual of rare qualities More Shakthi to Das’ elbow Silver Years of Madras Musings When online building permits work…. Wanted: a second airport for Chennai Convulsions in The Hindu The why of tax incentives Liberal imports idling indigenous capacities Should we change the official year? When Ratan Tata visited SRM Fuel for thought Welcome focus on core competence IPL type auction for VCs? The rise and fall of Annamalai University Don’t seem to feel the pulse… CIPET hqrs to stay at Guindy – for the present? Kulandai was a giant Alexa – Talking Wikipedia Small units prefers to remain small... West Bengal: mindless malignancy Marketing expert Balagopal is no more Discoms deserve better… Robber barons everywhere Tough task taking states together Mu Sigma – is no more Focus on quality of power - its only around 170-180V Limit foreign borrowings to hi-tech, export potential projects... Demise of a media baron... Things happen by accident and not by design... Bihar – Nitish Kumar adopts the Lalu model CII projects higher growth… No engine for this car R Sridhar steps down as CEO of Shriram Capital Fall in crude prices help in oil sector reform The Ports’ Pasha expands into Tamil Nadu No Maha Koottani in TN... More Shakti to resource mobilisation... Cleaning Ganga – relocate tanneries and install electric crematoria Mersal magnified Airlines in India: cost and space Protest masters... Road development slows down TIAM turns a full cycle China invests in India When small is no larger beautiful.. For whom the bell tolls? The Gulf aviation boom A Grand Finale for SN’s MS centenary at the US… Muffled voices for merit… All eyes on Sankara Nethralaya He saved millions from starvation... Preserving for the future When TN politicians can emulate Kerala's PC’s preference for professionals Make standards certification mandatory... The sea- saw battle continues... Shipping woes of Chennai companies Scientists urged to take up farmer-oriented research The brown list of Venkitaramanan Tribute – UCAL Selvan… TN – agglomerate land holdings without alienating ownership Funding the un-funded Like Hinduism: many paths to reach God... Which side are you, Montek? Pharma – overdose of copying New IT products of Ramco in the pipeline… This scant respect for Law Cutting the nose to spite the face Eternal support for capitalisation of PS banks Tatas moving out of urea production... GM Technology at last! Computation of GDP – conundrums continue Revving up the manufacturing sector Welcome changes that testify to Jayalalithaa’s return to health ONGC at KG Basin Fortune for Indian Airlines WTO Meet: resolved to meet again Rahman at CIC Breaththrough in malaria control Rs.1600 crore paper board plant of TNPL More heat than light There was flood of milk. Reason: no milk commissioner! The ‘Jayanthi Tax.’ The Jan Dhan bonanza Cement prices continue to rise… Bihar elections - the Rajaji formula worked Medical costs hit the roof... Tribute – Manikam Ramaswami Maximising the micro pricing … Permanent secretariat for TN GIM The balancing act An inexplicable neglect The nuclear option A proud Madrasi Varuna (rain) in 2015; Vaayu (air) in 2016. Chennai devastated London, London Narayan The star of Spencers is no more Solar, solar everywhere … Not just in-laws (and outlaws); they’ve renowned academics at the helm! Solar thermal shines… Tribute Secularism and anti-Hinduism Reliance’s TV – 18 ready to launch Tamil News Channel Shanti and Sadhana through Music to the lack of interest on the part of these to focus on original research. This despite the much lower costs of such research in India. The industry which thrived on the protection of a closed economy and the advantage of a vast domestic market, has failed to organise its evolution on healthy lines Quality silica from Neyveli S Ramanathan – a versatile musician, musicologist No mega rail project for Tamil Nadu Building loyalty through the stomach Poor quality of university VCs A think tank for Chennai Inflation: are we emulating Argentina and Brazil? The Swadeshi Trump Strengthen the base... Banning booze... S V Raju – a ‘good’ true liberal Waning interest in public discussions… Increasing non co-operation of state leaders A C Muthiah – his munificent bequeaths to science Where is Rajaji? Tatas moving out of urea production... Kudos to NDTV... TN-leverage strength of BHEL, NLC... Shaming of Tamils by Tamil farmers at Delhi Towards speedy justice A glass full of corruption A welcome initiative by the judiciary Godspeed, Chief Minister JJ A friendly business group EVM is tamper-proof A yen for wastage… Roaring Ro-Ro facility Parliament in paralysis... GNS - 100: our first subscriber
 
Plummeting profits of PSBs

The results of the third quarter performance of public sector banks are a great shock to the investors.    

First, we had the results of three public sector banks – Central Bank of India, Allahabad Bank and Dena Bank - that reported losses of Rs 836.62 crore, Rs 486.14 crore and Rs 662.85 crore respectively. Then came the bombshell from State Bank of India, the country’s largest lender, reporting a 61.7 per cent drop in net profit to Rs 1115 crore from Rs 2910 crore in the previous year’s corresponding figures. This reduction resulted in the Sensex plunging by a 21-month record figure of 807.07 points. Later we had the healthy PSB, Bank of Baroda, reporting a loss of Rs 3342 crore, the highest ever quarterly loss posted by any public sector bank in the industry, thanks to a provisioning of a whopping Rs 6474 crore compared to the Rs 1149 crore it provisioned in the previous quarter. The gross NPA was shown as Rs 38,934 crore (9.68 per cent) and net NPA Rs 21,806 crore ie. 70 per cent rise.

Breaking the convention, the NDA-II government drafted bank managers from the private sector to head public sector banks.  Ravi Venkatesan, the new Chairman (drafted from Microsoft India) and P S Jayakumar, the new MD & CEO (drafted from Citibank) of Bank of Baroda, were not weighed down by the baggage and came out boldly with such hefty provisioning.  

IE has been pointing to the gay abandon with which bank chairmen of several public sector banks were lending. We had pointed to Indian Overseas Bank as an instance of such profligacy. Then CMD, M Narendra was enjoying a field day getting kudos for such largesse from industry associations. He was cleverly hedging his bets by having gala functions year after year presenting high ups at the policy level from Finance Minister P Chidambaram to Minister of State for Finance, Namo Narain Meena to Reserve Bank of India Governor, Deputy Governor, et al in lavish functions.

PSBs have seen a surge in their bad loans following directions from the RBI to classify some large corporate accounts as bad debts. Banks have been avoiding to classify these as NPAs, as it would hurt their bottom line. But thanks to RBI Governor Raghuram Rajan voicing seriousconcern, public sector banks started provisioning more. SBI’s provisions for bad loans soared 59 per cent to Rs 7645 crore.

A staggering Rs 52,542 crore of bad loans have been waived off by PSBs, a 52.6 per cent increase over the previous fiscal. Public sector banks indulged in massive settlements in which unrecoverable loans were settled at huge discounts. These are attributed to pressures from politically powerful personalities, eg. a Rs 10 crore outstanding loan settled for around Rs 3 crore with suggestions of liberal kickbacks from political intermediaries.

Such bad management resulted in an inevitable low valuation of the banks’ stocks. This is in contrast to private banks including the large HDFC, ICICI and Axis Bank and smaller ones like City Union Bank, Karur Vysya Bank and Lakshmi Vilas Bank showing healthy balance sheets.

The urgent need is for bold reform of the banking sector. Union Finance Minister Arun Jaitley announced at the CNN Asia Business Forum 2016, his plans to go for a series of banking reforms. There is the hint of the government reducing its holdings in PSBs to 51 per cent.

Such a step would bring in twin advantages: it will make the banks more accountable to the shareholder and secondly force these to earn higher profits and relieve the government of the burden to capitalise these frequently.  Such a step will also pave the way for more mergers and acquisitions. Of course, the task is not easy. Bank employees’ unions are strong and have resisted successfully such significant reforms.

 

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