Page 6 - Banking Finance October 2015
P. 6
BANK UPDATE
FinMin plans merger of SBI & ICICI Bank wins the title 'too big to fail'
BMB with SBI The Reserve Bank of India had desig- uity tier-I capital, will be applicable
nated the State Bank of India and ICICI from April 1, 2016 in a phased manner
In the midst of speculation about Bank as Domestic Systemically Impor- and would become fully effective from
newly created tant Banks (D-SIBs). This means that April 1, 2019.
Bharatiya Mahila the regulator considers fail-
Bank being ure of these banks to be "RBI has named State Bank
merged with SBI, dangerous for the economy, of India as D-SIB as ex-
the state-run which renders them 'too big pected. However, the addi-
to fail'. tional capital requirement
lender recently impleted that it can of tier I Capital has been
easily absorb the youngest state-run The announcement is far lowered by 20 bps as com-
bank. SBI chairperson Arundhati short of the industry expec- pared to the draft guide-
Bhattacharya said she has not been tations that four to six lenders would lines. SBI currently has a much higher
approached with any such proposal be termed D-SIBs. This would be a re- level of tier I at 9.62% as opposed to
but "if it happens, it is a no-brainer." lief for large public sector banks that 7.00% required under the current
did not make it to the list as they will guidelines." reported SBI chairman
HDFC Bank breaches RBI not have to raise the extra capital that Arundhati Bhattacharya.
D-SIBs are required to maintain.
limit on loans to RIL According to Chanda Kochhar, MD and
Based on the methodology announced CEO of ICICI Bank, the move was ex-
Leading private-sector lender HDFC by the Central Bank, SBI will need to pected given the private lender's size.
Bank has "exceeded" the single-bor- maintain additional capital equivalent "Bank's capital adequacy is well in ex-
rower limit pre- to 0.6% of its loans and investments cess of regulatory requirements and
scribed by the while ICICI will need to maintain 0.2% the bank is not expected to require
Reserve Bank more. The additional capital, which fresh equity capital for the next couple
of India in case has to be in the form of common eq- of years," she added.
of credit expo-
sure to Reliance Industries Ltd. The Bank frauds on the high rise since last two years
bank, however, said its board of di-
rectors approved "the said excess in The number of frauds in the banking tion with which the frauds were ex-
respect of this exposure" and it was sector have increased by more than ecuted. In order to stop financial
within the 20 percent ceiling of capi- 10% over the last two years, with re- frauds, banks are planning to put in
tal funds. tail banking witnessing the highest place a mechanism to alert each other
number of such incidents,
ICICI Bank offers home as reported by consulting about dubious borrowers.
firm Deloitte which was
loans at base rate based on the survey of 44 For instance, whenever a
public, private and foreign bank detects that a large
ICICI Bank, is on the verge of offer- banks. borrower has committed a
ing home loans at the base rate for fraud, other banks will ex-
its rural customers. The base rate of "Around 93% of the respondents amine their position with regards to
pointed out a substantial rise in fraud the borrower. This will then help them
the bank incidents, with more than half of the to take a call on choking off further
stands at 9.70 respondents having witnessed more credit to the deceivers.
percent. Under than a 10% increase (in fraud incidents)
its ICICI Bank within their respective institutions,"as Under this fraud mitigation mecha-
Saral-Rural per the report said. nism, even if one of the lenders ob-
Housing loan, the lender will be of- serves or recognises a borrower as a
fering loans up to Rs.15 lakh. These The report added that banks also wit- fraudster, it will report it to the leader
loans can be availed to purchase, nessed a rise in the level of sophistica- of the consortium, or majority lenders
construct or renovate homes in ru- of the multiple banking arrangement.
ral areas.
6 | 2015 | OCTOBER | BANKING FINANCE
Copyright@ The Insurance Times. 09883398055 / 09883380339
