WEEKLY FINANCIAL SNIPPETS-30/06/2018

  1. RBI TO PUNISH AUDITORS FOOR LAPSES IN BANK AUDIT: Reserve Bank of India has said it would punish statutory auditors for lapses in conducting Bank’s audit. It may even bar the said auditors from taking fresh audit assignment. RBI said the quantum of punishment will depend on the magnitude of the divergence from prescribed norms and the auditors would be provided sufficient hearing before any such action is taken. Their role has recently been called into question for lapses in identifying bad loans. RBI had found significant divergence in asset classification in almost all the leading banks.

 

  1. PNB LAUNCHES CENTRALIZED LOAN PROCESSING CENTRE (CLPC): Punjab National Bank launched its first CLPC as part of its efforts to strengthen internal system and process. Many steps have been taken by the bank under its “Mission Parivartan”, an initiative to push the bank forward on its transformation journey. It has also launched a new initiative called Reach In Reach Out (RIRO). RIRO and CLPC are efforts to improve its credit quality and ensure faster processing of loans. The bank said this   will improve turn-around-time and will also serve as a strong communication tool with customers and staff. In our opinion many banks are already having their respective CLPCs and our experience says that CLPCs don’t reduce the turn-around-time but instead it delays the process.

 

  1. GOVERNMENT REJECTS “BAD BANK” IDEA BUT OK WITH ARC: The government has rejected the “Bad Bank” idea but is ok with launching of an Asset Reconstruction Company (ARC) that will take over the state-run banks’ bad /toxic loans as it is not keen on diverting more taxpayers money towards their resolution. Big cases of loan defaults are already in the process of resolution under IBC so it will not make much sense to have a bad bank for smaller bad loans as not much value can be derived from them.

 

  1. NEARLY 25% OF BANK LOAN BOOK HAS TURNED SOUR: As per the Financial Stability Report released by RBI, nearly 25% or one-fourth of banks loan book has turned sour and the worst is not yet over. The bi-annual report further says that lower profits could prevent banks from building cushion against unexpected losses or shocks. Bad loans of 11 PSU banks placed under PCA may worsen from 21% in March 2018 to 22.3% and six PSBs facing PCA may not be able to meet required minimum capital requirement as per the Basel norms of 9%.

 

  1. PNB INTERNAL REPORT REVEALS LAPSES THAT LEAD TO $ 2 BILLION FRAUD BY NIRAV MODI: A 162 page report submitted by PNB internal auditors tasked with probing the fraud, lays bare lapses that go far beyond a few Branch officers. The report points out how 54 PNB officials –ranging from clerks to foreign exchange officers, and auditors to head of regional offices, allowed the fraud to be perpetuated. PNB CEO Mr. Sunil Mehta told the press that they have already suspended 21 officials and no one will be spared.

 

  1. SAY GOOD BYE TO SHARE CERTIFICATES, YOU HAVE TIME TILL DECEMBER TO CONVERT THEM TO DEMAT FORM: About 2.3% of India’s $ 2 trillion plus market capitalisation is still held in physical stock even after two decades after Stock Exchanges went online. Holders of these physical shares in listed companies now face December 2018 deadline to convert them into dematerialised form if they have to sell or hold them.

 

  1. NUMBER OF CREDIT CARD ACCOUNTS GREW 50% SINCE DEMONETIZATION: A CIBIL study has revealed that the number of credit card accounts following the note-ban reform in November 2016 has increased by nearly 50%.
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