Page 43 - Banking Finance January 2020

ARTICLE

legal action initiation and copy of possession notice settlement. Claims of the respective MLI will be settled
under SARFAESIA. to the extent of 2 times of the fee including recovery
X Declaration and undertaking must be signed by an remitted during the previous financial year. Any claim
officer not below the rank of AGM. lodged exceeding 2 times of the total fee including
recovery remitted by MLI will be suspended till such time
X For claims below Rs. 20 lacs, only declaration and the position is remedied i.e., payout is brought well
undertaking is sufficient. For claims of Rs. 20 lakh within the payout cap limit.
and above, checklist is also to be submitted.
Y All the above mentioned guidelines are applicable for
X All the online system have maker and checker new sanctions.
concept.
Settlement of claim: Other benefits:

Settlement of claim takes place in 2 stages. There are various other benefits to banks some of which is
X 1st instalment of 75% of amount in default is paid enumerated as under:
within 30 days of receipt of all the information. X Loan covered under CGTMSE carry zero risk weight
for guaranteed portion.
X 2nd instalment is paid on conclusion of recovery
proceeding. Where decree is obtained, 2nd X No provisioning for NPA account to the extent of
instalment is released after 3 years of the date of guarantee coverage.
decree. X Saving of time, energy and cost of bank.
Y Credit the amount in account when complete 1st X Helps in better risk management and faster
instalment is received. Amount received on Ad-hoc basis recovery of dues.
to be kept in sundry until full 1st instalment is received.
Y Any recovery made after receiving 1st instalment must However, it must be kept in mind that CGTMSE pays the
be remitted to CGTMSE, after deducting legal expenses. amount from the corpus created out of taxpayers money.
Coverage of NPA account under CGTMSE does not absolve
Y However, any recovery made through the sale of the borrower from his obligation to pay the entire dues to
collateral security may be retained by the MLI for the bank. All efforts must be taken to recover the amount
appropriation of dues.
from the borrower even after settlement of the claim by
Y CGTMSE has now introduced a cap on total claim CGTMSE. T

RBI recommends Finance Ministry to align small savings rate

Before the announcement of interest rates on small savings schemes for the January-March quarter by December 31,
the RBI has asked the Finance ministry to align small saving rates in a bid to improve
transmission. “The ministry has been internally sounded out and communicated by
RBI also on small savings rate alignment requirements for better transmission, RBI
has told government the banks’ response in this regard also. It will be a call by the
government,” said sources.
The focus will be on the small savings rates by banks, industry and account holders of
such schemes mostly for retired government workers, marginal class, farmers, women.
Such schemes are the Post Office Saving Schemes that include a bucket list of prod-
ucts that offer reliability and risk-free returns on investment. Such security and returns are perks mostly associated
with a central government-run savings portfolio.
The ministry has been nudging RBI to push banks particularly the PSBs to pass the whole amount of interest rate cuts
(repo rate cuts) to retail loans for pushing consumption. Banks have resisted it fearing their margin will take a hit in
case of 100 per cent transmission. Recently SBI chairman Rajnish Kumar said banks cannot go beyond a threshold to
cut deposit rates which is linked to the lending rates.

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