Page 7 - BANKING FINANCE JUNE 2016
P. 7
BANK UPDATE
Small and payments Health of banking sector shows the state of economy:
banks doesn't have a de- UBI chief
vised business model:
SBI chief Stating that the health of banking sector is the "reflection of the economy",
Arun Tiwari, chairman and managing director of Union Bank of India has said
Small and payments banks have not that a number of industries that went for expansion in the last four years have
yet devised a busi- been "caught in the trough" as they are now facing problems of "cash-flows".
ness model which
can be termed vi- "Please do not forget that banking is a reflection of the economy. If the economy
able, SBI chairper- is not doing well then the banking also cannot do well….We did not know this
son Arundhati four years ago, and today we are faced with NPAs," said Tiwari.
Bhattacharya said.
The CMD also felt that the proposed Bankruptcy Bill - expected to be introduced
"Neither the payments banks nor in the Parliament - will speed up the recovery process. "Once the person feels
small finance banks seem to have as that he cannot shake off the recovery process, then he comes to the table for
yet devised a business model that talks," Tiwari said.
can be said as viable," said
Bhattacharya. BBB should study the auditor appointment in banks:
Chopra
She added, "...a mobile banking cus-
tomer, who is also a customer for The newly-constituted Banks Board Bureau should study the current auditor
payment services, will be less free to appointment process in banks and frame new norms for this
migrate to a competition for mobile purpose, Amarjit Chopra, former president of the CA Institute,
services. Hence, it is hard to see pay- has suggested. "This could be a reform area and should be
ment banks taking away customers entrusted to the Bureau. This should be added to the terms
or income from commercial banks in of reference of the Banks Board Bureau," Chopra told.
a big way. Similar arguments hold for
small finance banks." Chopra felt that India should go back to a system where the
Reserve Bank of India or a committee set up by the Department of Financial
BBB priority will be to Services (DFS) should appoint central statutory auditors.
start lending to lenders
This would be much better than the current practice of allowing the audit com-
The key priority of the newly set up mittees of respective banks to appoint auditors. As part of providing more func-
Banks Board Bureau tional autonomy to banks, the government had allowed banks (audit commit-
(BBB) will be to re- tees) to appoint central statutory auditors. "It is a fact and quite unfortunate
start lending by that corruption has crept in when it came to auditor appointments by bank
state-run lenders, boards or its audit committees," Chopra said.
said Chairman Vinod
Rai. "We will work to Tirupati temple deposits 1,311 kg of gold in PNB
restore the confidence of banks to
lend. The first priority is to kick start The Tirupati Balaji temple management known as Tirumala Tirupati
lending by public sector banks, with- Devasthanams (TTD) has said that it has deposited 1,311
out the fear of bureaucratic over- kg of pure gold bars of 0.995 purity with Punjab National
hang," said Rai. Stressed assets, Bank under the Gold Monetisation Scheme and is nego-
along with slow economic activity, tiating for better terms for making more such deposits.
have made banks cautious in lending.
The deposit was made under the three-year short term
While the BBB will also work on con- Gold Monetisation Scheme and the PNB was chosen
solidation and capital infusion in because it quoted the highest interest rate at 1.75 percent per annum, said
banks, Rai declined to give a timeline the statement, citing TTD Executive Officer D. Sambasiva Rao. The short term
for the consolidation. scheme has the advantage of redeeming the deposits in gold which temples
like Tirupati favour. The TTD has written to the Reserve Bank of India (RBI) and
the central government to amend the Gold Monetisation Scheme.
BANKING FINANCE | JUNE | 2016 | 7
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