scholarly journals Public Sector Banks in India : Growth of NPAs and Restructuring Aspects

2021 ◽  
pp. 368-381
Author(s):  
Parmod K Sharma ◽  
Dr. Babli Dhiman
Keyword(s):  
Public Sector ◽  
Top Management ◽  
Regulatory Capital ◽  
Too Big To Fail ◽  
Public Sector Banks ◽  
Administrative Control ◽  
Reserve Bank ◽  
Stake Holder ◽  
The Government ◽  
Reserve Bank Of India

The recent restructuring of Public Sector Banks (PSBs) has generated immense interest in the economic world and the various stakeholders which include investors, depositors, borrowers, the staff working in these banks and the top management of the merging entities. Whereas the depositors look for safety of their monies, the borrowers of merging entities look for new loan products at cheaper rates and faster delivery. The investors will look for resumption of dividend payouts at higher rates and capital appreciation of their investments and the staff looks for better working conditions. The top management will expect more freedom to operate and manage their respective banks more efficiently to grow and earn higher profits. The merger of strong banks was recommended by the first Narasimham Committee in 1991. It has taken almost 28 long years for the Government of India to act on this very critical suggestion of the committee. It is widely believed that this belated step has been initiated due to huge pile of Non Performing Assets (NPAs) with Public Sector Banks and the resultant need for their frequent recapitalization. It is a moral hazard and bad economics for any government to regularly recapitalise PSBs being the major stake holder and having total administrative control of their boards and the top management. To enable PSBs meet the regulatory capital as per international norms and the provisioning requirements enforced by Reserve Bank of India, use of tax payer’s money (collected for economic development of the country) is questionable. However it is made clear by the government that the merger is intended to make PSBs bigger and internationally competitive and to build up their capacity to access capital markets for raising resources. A perspective of growth of NPAs and the resultant impact on the financial  deterioration of PSBs over a time horizon can give answers to the need for restructuring of Public Sector Banks as repeat of such actions by the government may again be necessitated in future. The improvement in financial performance parameters of PSBs over next few years will answer if act of restructuring by the Government of India results  in  internationally strong ‘too big to fail banks’ .

Investing Productively: The Banking Sector

New India ◽  
2020 ◽  
pp. 145-178
Author(s):  
Arvind Panagariya
Keyword(s):  
Public Sector ◽  
Detailed Analysis ◽  
Banking Sector ◽  
Public Sector Banks ◽  
Formal Economy ◽  
Reserve Bank ◽  
Private Banks ◽  
The Government ◽  
Public Money ◽  
Indian Banks

Banks collect savings by households via deposits and channel them to the most productive investors in the form of credit. What happens to bank credit has a determining impact on growth, especially in the formal economy. A key feature of Indian banks has been repeated episodes of accumulation of non-performing assets followed by their recapitalization by the government using public money. These episodes have been concentrated in public sector banks (PSBs), which continue to account for two-thirds of banking assets. This chapter offers a detailed analysis of these episodes and argues that it is time for the government to give serious thought to privatization of PSBs. PSBs are subject to regulation by both the government and the Reserve Bank of India (RBI), but RBI has limited powers over them. On average, private banks outdo PSBs along nearly all dimensions in terms of efficiency.

How should Factoring Service be Launched?

1988 ◽  
Vol 13 (3) ◽  
pp. 23-28
Author(s):  
S P Singh
Keyword(s):  
Financial Institutions ◽  
Government Policy ◽  
Unit Cost ◽  
Study Group ◽  
Public Sector Banks ◽  
Reserve Bank ◽  
Collection Period ◽  
Market Approach ◽  
The Government ◽  
Reserve Bank Of India

Factoring is basically the purchase of book debts of client companies. Apart from financing investments in book debts, the factoring company offers individualized service packages covering credit screening, ledger keeping and collection, and provision for doubtful debts and write offs. In the context of the government policy of strengthening money and capital markets, a study group of the Reserve Bank of India is considering how to launch factoring service in India. S P Singh considers two approaches to launching factoring service. One is the conventional approach of letting banks, which are providing cash credit for book debts, promote factoring as an extension of their activities. The other the market approach of enabling independent companies compete on improving upon the current average collection period and percentage of write offs. Singh recommends the market approach to launching factoring service. Efficient factoring, requires a culture of price banking, aggressive selling and low unit cost operations�a culture unfamiliar to public sector banks and financial institutions.

Investigating the Impact of the Announcement of Loan Moratorium on Stock Prices: Evidence from Indian Public Sector Banks

2020 ◽  
Vol 9 (2) ◽  
pp. 106-116
Author(s):  
Animesh Bhattacharjee ◽  
Madhu Kumari ◽  
Joy Das
Keyword(s):  
Public Sector ◽  
Stock Prices ◽  
Market Model ◽  
Index Model ◽  
Chambers Of Commerce ◽  
Reserve Bank ◽  
Bank Stock ◽  
The Government ◽  
The Impact ◽  
Reserve Bank Of India

The present article applies event study methodology in an attempt to investigate the impact of the announcement of 3-month moratorium by Reserve Bank of India on Indian public sector bank equity returns. For the present study, the estimation period is considered to be 120 trading days while the event window is considered to be 21 trading days. To compute the expected returns, the study uses a single-index model or the market model proposed by Fama [Fama, E., 1976. Foundations of finance. Basic Books]. The findings of the study suggest that the market responded to the news relating to the liquidity infusion by the Reserve Bank of India, falling global indices, development of potential coronavirus vaccine, and the announcement of 3 weeks period lockdown. The study further concluded that the market anticipated that the government may announce loan moratorium since industry bodies like The Associated Chambers of Commerce and Industry of India and The Federation of Indian Chambers of Commerce and Industry have recommended loan moratorium in order to safeguard the business enterprises especially the micro-, small- and medium-enterprise sector. Thus, the adjustment in the bank stock prices occurred before the announcement of the 3-month loan moratorium and as a consequence the average annual return on day ED-0 is found to be insignificant.

Commercial Banks in Indian Mutual Fund Industry: A Study on Profitability of Banks Vis-à-vis Their Mutual Fund Business

2018 ◽  
Vol 66 (1-2) ◽  
pp. 89-99
Author(s):  
Joy Das ◽  
Parag Shil
Keyword(s):  
Public Sector ◽  
Mutual Fund ◽  
Commercial Banks ◽  
Banking Regulation ◽  
Jel Classification ◽  
Public Sector Banks ◽  
Reserve Bank ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Government

The present study examined the performance of public sector commercial banks in mutual fund industry in terms of profitability for the period from March 2007 to March 2016. Banks, which were used as an agent by the government to bring changes in the economic scenario of the country and for which most of the larger banks were nationalised in a phased manner, were not performing well during the 1980s and their profits and deposits started to decline. As a result, the Government of India amended the Banking Regulation Act in 1984, to give a wider scope to the banks in terms of business. Many public sector banks started their own sponsored mutual fund companies after 1987 as they had some pre-existing advantages. The data relating to the present study has been collected from corporate Capitaline Plus database and also from the various publications made by the Reserve Bank of India and others from time to time. The data has been analysed by using various profitability ratios and ratio of mutual fund profit to bank profit to reach the conclusion. The study disclosed that the private banks performed better than the public sector commercial banks during the study period. JEL Classification: G21, L25, M13

Analysis of Financial Performance of Public Sector Banks in India: CAMEL

2020 ◽  
pp. 097674792096686
Author(s):  
Yudhvir Singh ◽  
Ram Milan
Keyword(s):  
Public Sector ◽  
Banking Sector ◽  
Positive Impact ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Factors Affecting ◽  
Public Sector Banks ◽  
The Government ◽  
And Performance ◽  
Asset Quality

Public sector banks have been merged by the government in the last few years. This is the rationale behind conducting this study. The purpose of this article is to determine the factors affecting the performance of public sector banks in India and the interrelationship between bank-specific determinants and performance of public sector banks. In this article, we shall analyse the financial data of all the public sector commercial banks for a period spread across 11 years (2009–2019); Capital adequacy, Assets quality, Management efficiency, Earning, and Liquidity (CAMEL) has been used as a performance determinant; system generalised method of moments (GMM) analysis has been used to find the effect of determinants on the performance measurement of public sector banks; and CCA (canonical correlation analysis) has been used to find the interrelationship between the bank-specific determinants and the performance of public sector banks. The finding has important implications in terms of performance in the banking sector. Certain limitations of this study are: It is based on secondary data. The study only covers the financial aspects and not the non-financial aspects. It is found that the asset quality is negatively related with performance of public sector banks. Liquidity and inflation are inversely related to performance of public sector banks in India. Capital adequacy is positively related with banks’ performance, but inversely related with banks’ interest margin. GDP growth has a significant positive impact on banks’ performance, but inversely related with banks’ interest income. Inflation rate is inversely related with banks’ performance. Banking sector reforms are insignificantly related with banks’ performance.

India’s 5G auction will boost Reliance’s digital plans

2021 ◽  
Keyword(s):  
Public Sector ◽  
Business Strategy ◽  
Financial Support ◽  
Content Type ◽  
Public Sector Banks ◽  
Spectrum Auction ◽  
Floor Price ◽  
The Government

Significance This came after the government announced plans for a 4G spectrum auction in March 2021, after a five-year gap. There is growing speculation that this will be followed by an auction of 5G spectrum later in the year. Impacts Reliance’s lead on 5G will boost its broader digital business strategy. New financial support to indebted telcos will help to avoid further strain on public sector banks. Data tariffs are likely to remain competitive in India, even after a new floor price.

Marketing of Banking Services in India

2017 ◽  
pp. 107-133
Author(s):  
Rakhi Arora
Keyword(s):  
Banking Sector ◽  
Technological Development ◽  
Banking System ◽  
Foreign Banks ◽  
Indian Society ◽  
Reserve Bank ◽  
Nationalised Banks ◽  
The Government ◽  
Indian Banks ◽  
Reserve Bank Of India

Banking sector plays an important role in Indian Financial Sector.It has a long history that has gone through various stages of development after Liberalization, Privatization, and Globalization (LPG) has taken place. The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. The scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are further classified into: nationalised banks; State Bank of India and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks, which are controlled and governed by Reserve Bank of India (Central Bank of India) and Ministry of Finance. In this era, the government has issued licenses to the new entrants to establish new banks to serve the Indian society. This chapter focuses on to show the various undergone phases of Indian banking system, growth of deposits and credits, technological development in Indian banking sector, services provided by the Indian banks, benefits and challenges faced by the Indian banks.

Prospects for India in 2018

2017 ◽  
Keyword(s):  
Public Sector ◽  
Prime Minister ◽  
Content Type ◽  
Public Sector Banks ◽  
Bharatiya Janata Party ◽  
Economic Slowdown ◽  
The Government

Subject Prospects for India in 2018. Significance India’s ruling Bharatiya Janata Party (BJP) has responded to the recent economic slowdown by drawing up plans to recapitalise public sector banks (PSBs) and invest in infrastructure. Prime Minister Narendra Modi is also under pressure to create jobs. The government will be expected to deliver on its promises with elections due in around 18 months’ time.

India’s remedy for bad debt may not bring relief

2017 ◽  
Keyword(s):  
Prime Minister ◽  
Banking System ◽  
Job Creation ◽  
Bank Credit ◽  
Content Type ◽  
Reserve Bank ◽  
Bankruptcy Code ◽  
The Government ◽  
Bad Debt ◽  
Reserve Bank Of India

Subject Implementation of India's new Insolvency and Bankruptcy Code. Significance Shrinking bank credit is hindering India’s ability to finance spending. The Reserve Bank of India (RBI) is relying on the recently instituted Insolvency and Bankruptcy Code (IBC) as the principal instrument to address the problem of stressed assets in the banking system. Impacts The government may accelerate plans to merge stronger and weaker PSBs. Indian corporates may increase their issue of bonds denominated in domestic currency. Prime Minister Narendra Modi will emphasise job creation rather than investment until the next election.

Action at a distance

2018 ◽  
Vol 26 (1) ◽  
pp. 39-61
Author(s):  
Athula Ekanayake
Keyword(s):  
Corporate Governance ◽  
Public Sector ◽  
Long Distance ◽  
Content Type ◽  
Public Sector Banks ◽  
Good Corporate Governance ◽  
Distance Control ◽  
Action At A Distance ◽  
The Government ◽  
Case Organization

Purpose By using Latour’s notion of “action at a distance” (Latour, 1987), the purpose of this paper is to examine the ways in which the government acts at a distance to achieve corporate governance of public sector banks, and the extent to which accounting enables such actions of the government. Design/methodology/approach This study follows the qualitative research approach and adopts the case study research method. A major public sector bank in Sri Lanka was selected as the case organization for this study. Data were gathered from semi-structured interviews with organizational participants and document study. Findings The study provides evidence to suggest that inscriptions produced through four areas of accounting, namely external reporting, external auditing, management accounting and internal auditing, have the capacity to develop strong explanations enabling action at a distance and good corporate governance in the case organization. The study also provides evidence to show how the role of accounting in long-distance control and corporate governance in the case organization is influenced by various contextual factors. In particular, the study finds that undue government interference over the case organization to gain the long-distance control have resulted in deteriorating the level of corporate governance. Research limitations/implications The findings support the literature that examines the accounting in its social context. Practical implications The findings suggest that actors should be allowed to operate independently, particularly without political expedience and undue influences from pressure groups, which ensure effective utilization of accounting inscriptions by the actors in long-distance control as well as good corporate governance of public sector banks. Originality/value Although research into accounting in public sector organizations has gained considerable importance in recent times, those studies examining public sector banks are still lacking. The paper aims to fill this gap.

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