General Affairs
Military Equipment Worth Rs. 9,100 Crore Gets Defence Ministry Nod
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The Defence Ministry has given its approval for the procurement of military equipment and weapons worth Rs. 9,100 crore, officials said today.
The procurement will include two regiments of Aakash missile systems, they added.
The acquisition proposals were approved by the Defence Acquisition Council (DAC), the Defence Ministry's highest decision making body on procurement.
The Defence Acquisition Council also approved the design and development of test equipment for guided weapons systems for T90 tanks.
The Defence Ministry has given its approval for the procurement of military equipment and weapons worth Rs. 9,100 crore, officials said today.The procurement will include two regiments of Aakash missile systems, they added.
The acquisition proposals were approved by the Defence Acquisition Council (DAC), the Defence Ministry's highest decision making body on procurement.
The Defence Acquisition Council also approved the design and development of test equipment for guided weapons systems for T90 tanks.
India Sends Relief Material To Bangladesh For Rohingya Refugees
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India on Monday provided relief supplies, including over 1 million litres of kerosene oil and 20,000 stoves, to Bangladesh for Rohingya Muslims who live in makeshift camps. This is the third phase of assistance provided by India to the Sheikh Hasina government in Bangladesh to meet the humanitarian needs of hundreds of thousands of refugees who fled an army crackdown last year in Myanmar.
Bangladesh, which faced a big influx of Rohingya Muslims from Myanmar, has called on the international community to intervene and put pressure on Myanmar to address the issue.
Over 700,000 Rohingya Muslims fled Myanmar's violence-hit Rakhine state to neighbouring Bangladesh since August last year when the military intensified crackdown against alleged outfits of Rohingya Muslims.
India's High Commissioner to Bangladesh Harsh Vardhan Shringla handed over 1.1 million litres of super kerosene oil and 20,000 kerosene multi-wick stoves to Minister of Disaster Management and Relief Mofazzel Hussain Chowdhury at Cox's Bazar.
The kerosene oil and stoves will address the energy needs of the displaced persons and contribute to environmental conservation in Bangladesh by reducing demand for locally sourced firewood.
This is as per the requirement of assistance expressed by Bangladesh, the High Commission of India said in a statement.
The relief supplies were then distributed to displaced persons at Kutupalong camp in Cox's Bazar.
Vikram Doraiswami, Joint Secretary (Bangladesh, Myanmar) of the Ministry of External Affairs, was also present on the occasion.
This is the third phase of humanitarian assistance by India to Bangladesh to assist in its efforts to meet the requirements of displaced persons from the Rakhine State of Myanmar.
In September last year, India under Operation Insaniyat, extended the first phase of humanitarian assistance comprising 981 metric tonnes of relief supplies.
The relief material included rice, pulses, sugar, salt, cooking oil, tea, ready-to-eat noodles, biscuits, mosquito nets among others to meet the immediate requirements of the approximately 3,00,000 displaced persons at that time.
In May, 373 metric tonnes of relief material containing 104 metric tonnes of milk powder; 102 metric tonnes dried fish; 61 metric tonnes baby food; 50,000 raincoats; and 50,000 pairs of gum boots for the rainy season were handed over in Chattogram.
India has always responded readily and swiftly to any crisis in Bangladesh in keeping with the close ties of friendship between the two countries, the statement said.
India remains committed to continue assisting the government and people of Bangladesh in meeting the humanitarian needs of displaced persons from Myanmar, it added.
Bangladesh, which faced a big influx of Rohingya Muslims from Myanmar, has called on the international community to intervene and put pressure on Myanmar to address the issue.
Over 700,000 Rohingya Muslims fled Myanmar's violence-hit Rakhine state to neighbouring Bangladesh since August last year when the military intensified crackdown against alleged outfits of Rohingya Muslims.
India's High Commissioner to Bangladesh Harsh Vardhan Shringla handed over 1.1 million litres of super kerosene oil and 20,000 kerosene multi-wick stoves to Minister of Disaster Management and Relief Mofazzel Hussain Chowdhury at Cox's Bazar.
The kerosene oil and stoves will address the energy needs of the displaced persons and contribute to environmental conservation in Bangladesh by reducing demand for locally sourced firewood.
This is as per the requirement of assistance expressed by Bangladesh, the High Commission of India said in a statement.
The relief supplies were then distributed to displaced persons at Kutupalong camp in Cox's Bazar.
Vikram Doraiswami, Joint Secretary (Bangladesh, Myanmar) of the Ministry of External Affairs, was also present on the occasion.
This is the third phase of humanitarian assistance by India to Bangladesh to assist in its efforts to meet the requirements of displaced persons from the Rakhine State of Myanmar.
In September last year, India under Operation Insaniyat, extended the first phase of humanitarian assistance comprising 981 metric tonnes of relief supplies.
The relief material included rice, pulses, sugar, salt, cooking oil, tea, ready-to-eat noodles, biscuits, mosquito nets among others to meet the immediate requirements of the approximately 3,00,000 displaced persons at that time.
In May, 373 metric tonnes of relief material containing 104 metric tonnes of milk powder; 102 metric tonnes dried fish; 61 metric tonnes baby food; 50,000 raincoats; and 50,000 pairs of gum boots for the rainy season were handed over in Chattogram.
India has always responded readily and swiftly to any crisis in Bangladesh in keeping with the close ties of friendship between the two countries, the statement said.
India remains committed to continue assisting the government and people of Bangladesh in meeting the humanitarian needs of displaced persons from Myanmar, it added.
Congress Charges False, Misleading, Election Commission Tells Top Court
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The Congress party's allegations about irregularities in the voters' lists in poll-bound Madhya Pradesh and Rajasthan are "false and misleading", the Election Commission of India told the Supreme Court today.
Congress leaders Kamal Nath and Sachin Pilot had alleged duplication of voters in the lists in Madhya Pradesh and Rajasthan where Assembly elections are due later this year. To ensure free and fair polls, the two leaders had approached the top court, which then directed the Election Commission (EC) to respond to the allegations.
"The Election Commission has taken all steps to verify the voters' list. The Congress's allegations are false, incorrect and misleading. Their petition must be dismissed," the commission said.
The EC also said that the Congress party can't just go to the Supreme Court seeking directions for the commission and interfere in its functioning.
During the hearing last month, senior advocate Abhishek Manu Singhvi, appearing for Kamal Nath and Sachin Pilot, claimed that Mr Nath had conducted a survey on his own cost in Madhya Pradesh and found that there were over 60 lakh duplicate voters in the voters' list.
He added that large numbers of duplicate voters were found in Rajasthan as well.
The Congress has, therefore, asked for a random verification of Voter Verifiable Paper Audit Trail (VVPAT) slips with votes cast in at least 10 per cent polling stations in every constituency. He has also said the voters' list should be provided in text format.
In its response, the EC said that it is taking steps to implement VVPAT with Electronic Voting Machines (EVM) in a phased manner. "We can't implement VVPAT in 10 per cent of polling stations as demanded by the Congress," the EC said.
The paper trail machine or VVPAT is a device which dispenses a slip with the symbol of the party for which a person has voted for. The slip appears on a small window for seven seconds and then drops in a box. The voter cannot take it home.
The VVPAT are used in all polling stations. But as of now, results of EVMs and VVPATs are matched in one polling station per constituency.
There have been demands from various political parties to increase the number of polling stations where EVM and VVPAT results are matched to dispel fears about electronic voting machines being rigged to favour a particular party. They have demanded at least 30 per cent of them to be cross-checked.
The commission only matches one per cent of the votes and to dispel doubts, it should allow matching of results of at least five per cent EVMs and paper trail slips, former Chief Election Commissioner SY Quraishi had suggested.
The Congress party's allegations about irregularities in the voters' lists in poll-bound Madhya Pradesh and Rajasthan are "false and misleading", the Election Commission of India told the Supreme Court today.Congress leaders Kamal Nath and Sachin Pilot had alleged duplication of voters in the lists in Madhya Pradesh and Rajasthan where Assembly elections are due later this year. To ensure free and fair polls, the two leaders had approached the top court, which then directed the Election Commission (EC) to respond to the allegations.
"The Election Commission has taken all steps to verify the voters' list. The Congress's allegations are false, incorrect and misleading. Their petition must be dismissed," the commission said.
The EC also said that the Congress party can't just go to the Supreme Court seeking directions for the commission and interfere in its functioning.
During the hearing last month, senior advocate Abhishek Manu Singhvi, appearing for Kamal Nath and Sachin Pilot, claimed that Mr Nath had conducted a survey on his own cost in Madhya Pradesh and found that there were over 60 lakh duplicate voters in the voters' list.
He added that large numbers of duplicate voters were found in Rajasthan as well.
The Congress has, therefore, asked for a random verification of Voter Verifiable Paper Audit Trail (VVPAT) slips with votes cast in at least 10 per cent polling stations in every constituency. He has also said the voters' list should be provided in text format.
In its response, the EC said that it is taking steps to implement VVPAT with Electronic Voting Machines (EVM) in a phased manner. "We can't implement VVPAT in 10 per cent of polling stations as demanded by the Congress," the EC said.
The paper trail machine or VVPAT is a device which dispenses a slip with the symbol of the party for which a person has voted for. The slip appears on a small window for seven seconds and then drops in a box. The voter cannot take it home.
The VVPAT are used in all polling stations. But as of now, results of EVMs and VVPATs are matched in one polling station per constituency.
There have been demands from various political parties to increase the number of polling stations where EVM and VVPAT results are matched to dispel fears about electronic voting machines being rigged to favour a particular party. They have demanded at least 30 per cent of them to be cross-checked.
The commission only matches one per cent of the votes and to dispel doubts, it should allow matching of results of at least five per cent EVMs and paper trail slips, former Chief Election Commissioner SY Quraishi had suggested.
NASA's Newest Planet Hunter Telescope Shares First Science Image
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NASA's newest planet hunter telescope, the c, has now shared the first science image that it captured as part of its initial round of data collection.
Part of the data from TESS' initial science orbit includes a detailed picture of the southern sky taken with all four of the spacecraft's wide-field cameras, NASA said in a statement on Monday.
This image captures a wealth of stars and other objects, including systems previously known to have exoplanets.
"In a sea of stars brimming with new worlds, TESS is casting a wide net and will haul in a bounty of promising planets for further study," said Paul Hertz, Astrophysics Division Director at NASA headquarters in Washington.
"This first light science image shows the capabilities of TESS' cameras, and shows that the mission will realise its incredible potential in our search for another Earth," Mr Hertz said.
TESS acquired the image using all four cameras during a 30-minute period on August 7, NASA said.
The images include parts of a dozen constellations, from Capricornus to Pictor, and both the Large and Small Magellanic Clouds, the galaxies nearest to our own.
"This swath of the sky's southern hemisphere includes more than a dozen stars we know have transiting planets based on previous studies from ground observatories," said George Ricker, TESS principal investigator at the Massachusetts Institute of Technology's (MIT) Kavli Institute for Astrophysics and Space Research in Cambridge.
TESS's cameras monitor large swathes of the sky to look for transits. Transits occur when a planet passes in front of its star as viewed from the satellite's perspective, causing a regular dip in the star's brightness.
TESS builds on the legacy of NASA's Kepler spacecraft, which also uses transits to find exoplanets.
Its target stars are 30 to 300 light-years away and about 30 to 100 times brighter than Kepler's targets, which are 300 to 3,000 light-years away.
The spacecraft launched from NASA's Kennedy Space Center in Cape Canaveral, Florida, on April 18 aboard a SpaceX Falcon 9 rocket and used a flyby of the Moon on May 17 to head toward its science orbit.
It started collecting scientific data on July 25 after a period of extensive checks of its instruments, NASA said.
Part of the data from TESS' initial science orbit includes a detailed picture of the southern sky taken with all four of the spacecraft's wide-field cameras, NASA said in a statement on Monday.
This image captures a wealth of stars and other objects, including systems previously known to have exoplanets.
"In a sea of stars brimming with new worlds, TESS is casting a wide net and will haul in a bounty of promising planets for further study," said Paul Hertz, Astrophysics Division Director at NASA headquarters in Washington.
"This first light science image shows the capabilities of TESS' cameras, and shows that the mission will realise its incredible potential in our search for another Earth," Mr Hertz said.
TESS acquired the image using all four cameras during a 30-minute period on August 7, NASA said.
The images include parts of a dozen constellations, from Capricornus to Pictor, and both the Large and Small Magellanic Clouds, the galaxies nearest to our own.
"This swath of the sky's southern hemisphere includes more than a dozen stars we know have transiting planets based on previous studies from ground observatories," said George Ricker, TESS principal investigator at the Massachusetts Institute of Technology's (MIT) Kavli Institute for Astrophysics and Space Research in Cambridge.
TESS's cameras monitor large swathes of the sky to look for transits. Transits occur when a planet passes in front of its star as viewed from the satellite's perspective, causing a regular dip in the star's brightness.
TESS builds on the legacy of NASA's Kepler spacecraft, which also uses transits to find exoplanets.
Its target stars are 30 to 300 light-years away and about 30 to 100 times brighter than Kepler's targets, which are 300 to 3,000 light-years away.
The spacecraft launched from NASA's Kennedy Space Center in Cape Canaveral, Florida, on April 18 aboard a SpaceX Falcon 9 rocket and used a flyby of the Moon on May 17 to head toward its science orbit.
It started collecting scientific data on July 25 after a period of extensive checks of its instruments, NASA said.
Supreme Court Adjourns Hearing On Rafale Fighter Jet Deal Till October 10
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The Supreme Court today adjourned a hearing on a plea seeking a stay on the Rafale fighter jet deal between India and France.
A bench of Justices Ranjan Gogoi, Navin Sinha and KM Joseph adjourned the matter till October 10 after petitioner advocate ML Sharma told the bench that he wanted to file some additional documents in the case and sought adjournment in the matter.
"You yourself circulated a letter seeking adjournment on the ground of ill health. Now you are saying that you want to file additional documents. We are simply adjourning the matter to October 10," the bench said.
In his petition, Mr Sharma has alleged discrepancies in the fighter jet deal with France and sought a stay on it.
Mr Sharma has said in his plea that the inter-government agreement to buy 36 Rafale fighter jets must be quashed as it was an "outcome of corruption" and not ratified by Parliament under Article 253 (Parliament has power to make any law for implementing any inter-government agreement) of the Constitution.
The petition has also sought lodging of an FIR and prosecution of Prime Minister Narendra Modi, former defence Minister and present Goa Chief Minister Manohar Parrikar, business tycoon Anil Ambani and French armament firm Dassault, along with recovery of the amount.
A similar plea was filed in the top court in March this year seeking an independent probe into the Rafale deal and disclosure of the cost involved in it before Parliament.
The plea, filed by Congress leader Tehseen S Poonawalla, had sought issuance of a direction against the Centre on why the Union Cabinet's approval was not sought as part of the Defence Procurement Procedure (DPP) before signing the procurement deal with France on September 23, 2016.
Rafale deal is a defence agreement signed between the governments of India and France for the purchase of 36 Rafale fighter aircrafts in a fly-away condition as part of the upgrading process of the Indian Air Force equipment. The Rafale fighter is a twin-engine Medium Multi Role Combat Aircraft (MMRCA) manufactured by French aerospace company Dassault Aviation.
Indian Air Force had advanced a proposal to buy 126 fighter aircraft in August 2007 and floated a tender. Following this, an invitation was sent to various aviation companies to participate in the bidding process.
Mr Poonawalla had claimed in his plea that the MoD had withdrawn the 2007 tender for procurement of 126 fighter planes, while the deal announced for procurement of 36 Rafale fighter aircraft was altogether a fresh procurement.
His plea said that in 2012, the deal for 126 fighter aircraft was proposed by the then UPA government, and out of the total of 126, 18 Rafale fighter jets were to be delivered by Dassault Aviation company in a fly-away condition, while the remaining 108 were to be manufactured in India at the public sector Hindustan Aeronautics Limited (HAL) under a transfer of technology agreement.
A bench of Justices Ranjan Gogoi, Navin Sinha and KM Joseph adjourned the matter till October 10 after petitioner advocate ML Sharma told the bench that he wanted to file some additional documents in the case and sought adjournment in the matter.
"You yourself circulated a letter seeking adjournment on the ground of ill health. Now you are saying that you want to file additional documents. We are simply adjourning the matter to October 10," the bench said.
In his petition, Mr Sharma has alleged discrepancies in the fighter jet deal with France and sought a stay on it.
Mr Sharma has said in his plea that the inter-government agreement to buy 36 Rafale fighter jets must be quashed as it was an "outcome of corruption" and not ratified by Parliament under Article 253 (Parliament has power to make any law for implementing any inter-government agreement) of the Constitution.
The petition has also sought lodging of an FIR and prosecution of Prime Minister Narendra Modi, former defence Minister and present Goa Chief Minister Manohar Parrikar, business tycoon Anil Ambani and French armament firm Dassault, along with recovery of the amount.
A similar plea was filed in the top court in March this year seeking an independent probe into the Rafale deal and disclosure of the cost involved in it before Parliament.
The plea, filed by Congress leader Tehseen S Poonawalla, had sought issuance of a direction against the Centre on why the Union Cabinet's approval was not sought as part of the Defence Procurement Procedure (DPP) before signing the procurement deal with France on September 23, 2016.
Rafale deal is a defence agreement signed between the governments of India and France for the purchase of 36 Rafale fighter aircrafts in a fly-away condition as part of the upgrading process of the Indian Air Force equipment. The Rafale fighter is a twin-engine Medium Multi Role Combat Aircraft (MMRCA) manufactured by French aerospace company Dassault Aviation.
Indian Air Force had advanced a proposal to buy 126 fighter aircraft in August 2007 and floated a tender. Following this, an invitation was sent to various aviation companies to participate in the bidding process.
Mr Poonawalla had claimed in his plea that the MoD had withdrawn the 2007 tender for procurement of 126 fighter planes, while the deal announced for procurement of 36 Rafale fighter aircraft was altogether a fresh procurement.
His plea said that in 2012, the deal for 126 fighter aircraft was proposed by the then UPA government, and out of the total of 126, 18 Rafale fighter jets were to be delivered by Dassault Aviation company in a fly-away condition, while the remaining 108 were to be manufactured in India at the public sector Hindustan Aeronautics Limited (HAL) under a transfer of technology agreement.
Business Affairs
Inside story of transformation that was underway at Bank of Baroda just before the big merger
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"It's not an experiment if you know it is going to work," said Jeff Bezos, the founder of e-commerce giant Amazon once. Experiments are always unpredictable and the probability of them failing is very high. This is more so if you are partnering with the government for an experiment. The BJP-led NDA government probably had the right intention when they knocked on the doors of Ravi Venkatesan, former chairman of Microsoft India and ex-independent director of Infosys and P S Jayakumar, an ex-citibanker turned entrepreneur, for helping them in conducting an experiment of sorts with a public sector bank. The idea was to pick one of the largest PSB - Bank of Baroda - and hand it over to outside professionals to manage. They had all the operational freedom to transform the bank. The thought process was to build a template, if the experiment succeeded, for other PSBs to follow (excluding SBI) which were lagging far behind as compared to the private banks.
As people such as Raghuram Rajan, the then Governor of RBI and Jayant Sinha, then minister of state for finance, were on board to convey the message, there was little chance of any professional refusing the offer. So three years ago, Ravi Venkatesan joined the bank as its chairman and P S Jayakumar took over as MD & CEO. The goodwill of two professionals - Venkatesan and Jayakumar was such that there were dozens of other professionals that joined from outside in key positions to help in the transformation of BoB. Last month, Venkatesan didn't get the extension after completing three years. Jayakumar is still to hear from the government, but the announcement of merger of BoB, Vijaya Bank and Dena Bank came before the decision about his extension. The experts say the merger will now halt the entire process and instead shift the focus on integration. This will also create some sort of insecurity amongst the lateral hires about their future as many middle to senior level officers will come from other banks in the merged entity. The stock market was quick to react to the news and Bank of Baroda's share price crashed by 16 per cent to Rs 113. Investors certainly are not liking the move. And there is a reason for it. The market was actually betting on the transformation story.
In the last three years, the duo -- Venkatesan and Jayakumar -- had actually managed to create building blocks for a complete transformation of the bank's business. The bank was actually all set to considerably speed up the transformation efforts. While the transformation, which is already underway, will certainly help the merged entity, the revival or the take off period will now be elongated because of the new merged entity. Dena Bank has the maximum bad loan. The bank itself is under RBI's monitoring under prompt corrective action plan. "It's like starting all over again," says one of the official. But the three year journey of change has seen lots of challenges. The new team had to start from basics. It was as basic as getting a business card printed. In fact the former chairman Venkatesan had to struggle to get his business card printed when he joined the bank. A new lateral hire narrated an incident, where he had to take over a dozen approvals for launching a new product in association with an e-commerce player. It actually went all the way up to the board. By the time approval came, the e-commerce partner was nowhere in the picture. "The PSBs have this upward delegation. Everything has to move up," says one of the official. Though the new team has simplified a lot of things, this was actually the state of affairs at the bank three years ago.
Turbo Charging Retail Banking
These professionals came prepared when they landed at the bank. For example, Jayakumar actually did a lot of reading about the bank before formally joining the bank. He met many of the former CEOs including O P Bhat, former chairman of SBI, who created a retail story at the largest bank in the country. Jayakumar even visited bank's branches without disclosing his identity to see the operations, people management, the look and feel of the branches etc. In the first few days of joining, he gave very specific recommendations for improving internet banking website. So the work for transformation started from day one. The management style was more participative. The business strategy was developed after extensive discussions with people. There were also town hall meetings, eliciting feedback and questions. "The plan was to catch up and also leapfrog," says Jayakumar who met Business Today couple of days before the merger announcement came out.
Most of the PSBs are positioned as corporate banks. That was true for BoB also with higher share of corporate banking, at almost half of its total advances. The duo decided to bring higher degree of focus on the retail and SME side of the portfolio. The idea was to de-risk the business model. The retail loans have far lesser NPAs than corporate banking and margins are also better. But the big stumbling block was the lack of infrastructure for collection mechanism, scoring methodology, risk based pricing, and reworking the processes. "If you are scaling the business (retail) without a collection mechanism, the chances are that you will create another set of problems," says Jayakumar.
The bank moved to a modern decision making architecture where account opening, processing and approval of loans, forex and trade finance transactions have moved from branches to a centralised back office.This process took almost a year. The bank is now ready for a higher growth in the retail segment. The bank has also started offering better interest rates to customers with good credit history or higher credit score. Today, the bank has higher percentage of customers with credit bureau score of more than 725.
The bank also decided to have product managers from outside in areas like auto, education loans, tractor financing and commercial vehicle. The bank had also identified white spaces like commercial vehicle, construction equipment financing, wealth management, MSME etc for higher growth.
Branches For Sales and Customer Servicing And Not For Processing
Jayakumar noticed that branches used to keep records dating back to 1930s. These files used to occupy almost 35 per cent of the spaces at the branches. He put in place a mechanism to digitise the records and move all these files to central places. Today, branches are better looking and more customer-friendly.
"There is now a fair amount of differentiation in the branches," says Jayakumar. They have also identified branches for more specialisation in areas like liabilities (generating more current and savings accounts), wealth management and MSME business. "We are bringing in the culture of sales or people going out of branches and spending time with customers," says Jayakumar. The digital processes are also changing the way bank was operating earlier. Take for example, the bank had some 500 people doing the data entry for account opening. With tablets or online banking, these jobs are gone and people were redeployed in sales and other areas. "Lot of work done manually is now digitised," says Jayakumar. In fact, the bank was also setting up fully digital branches.
Relationship Managers For Corporate Banking, More Centralised Approach
In the corporate banking, the credit decision were approved geographically. They have now centralised all the credit approvals. They have built proper metrics and build enough number of relationship managers. The bank has also created a target market group to go out and look for good corporate business. The bank is also doing lot of cross boarder deals with the clients. "We centralised all our corporate exposure in the central office," says Jayakumar.
Catch Up And Leap Frog In Terms Of Technology
The IT infrastructure of the bank was probably dated by five years. It actually skipped a generation in the areas like core banking, CRM system, contact centre etc. "Upgrading core banking is like transplanting the heart while the person is walking," grins one insider. It was a long exercise. The bank actually planned it for 18 months. The core banking was upgraded from Finacle 7 to Finacle 10. This new system has enabled the bank to have better features of Internet banking, mobile banking and also engaging with fin-tech companies by way of APIs. Today, there are dozens of fin-techs that are connected to the bank's system, offering new capabilities and products and also helping in risk management.
There are two IT centres of excellence with partners like Accenture and IBM. The idea is to do analytics and also work on new technologies like blockchain etc. Currently, the bank has a data warehouse that gives a single view of customer. Under the excellence centre, the bank is working on behavioural scores, propensity scores (probability of customer buying more products). "It is still in very formative years. We have infrastructure in place," says Jayakumar.
As people such as Raghuram Rajan, the then Governor of RBI and Jayant Sinha, then minister of state for finance, were on board to convey the message, there was little chance of any professional refusing the offer. So three years ago, Ravi Venkatesan joined the bank as its chairman and P S Jayakumar took over as MD & CEO. The goodwill of two professionals - Venkatesan and Jayakumar was such that there were dozens of other professionals that joined from outside in key positions to help in the transformation of BoB. Last month, Venkatesan didn't get the extension after completing three years. Jayakumar is still to hear from the government, but the announcement of merger of BoB, Vijaya Bank and Dena Bank came before the decision about his extension. The experts say the merger will now halt the entire process and instead shift the focus on integration. This will also create some sort of insecurity amongst the lateral hires about their future as many middle to senior level officers will come from other banks in the merged entity. The stock market was quick to react to the news and Bank of Baroda's share price crashed by 16 per cent to Rs 113. Investors certainly are not liking the move. And there is a reason for it. The market was actually betting on the transformation story.
In the last three years, the duo -- Venkatesan and Jayakumar -- had actually managed to create building blocks for a complete transformation of the bank's business. The bank was actually all set to considerably speed up the transformation efforts. While the transformation, which is already underway, will certainly help the merged entity, the revival or the take off period will now be elongated because of the new merged entity. Dena Bank has the maximum bad loan. The bank itself is under RBI's monitoring under prompt corrective action plan. "It's like starting all over again," says one of the official. But the three year journey of change has seen lots of challenges. The new team had to start from basics. It was as basic as getting a business card printed. In fact the former chairman Venkatesan had to struggle to get his business card printed when he joined the bank. A new lateral hire narrated an incident, where he had to take over a dozen approvals for launching a new product in association with an e-commerce player. It actually went all the way up to the board. By the time approval came, the e-commerce partner was nowhere in the picture. "The PSBs have this upward delegation. Everything has to move up," says one of the official. Though the new team has simplified a lot of things, this was actually the state of affairs at the bank three years ago.
Turbo Charging Retail Banking
These professionals came prepared when they landed at the bank. For example, Jayakumar actually did a lot of reading about the bank before formally joining the bank. He met many of the former CEOs including O P Bhat, former chairman of SBI, who created a retail story at the largest bank in the country. Jayakumar even visited bank's branches without disclosing his identity to see the operations, people management, the look and feel of the branches etc. In the first few days of joining, he gave very specific recommendations for improving internet banking website. So the work for transformation started from day one. The management style was more participative. The business strategy was developed after extensive discussions with people. There were also town hall meetings, eliciting feedback and questions. "The plan was to catch up and also leapfrog," says Jayakumar who met Business Today couple of days before the merger announcement came out.
Most of the PSBs are positioned as corporate banks. That was true for BoB also with higher share of corporate banking, at almost half of its total advances. The duo decided to bring higher degree of focus on the retail and SME side of the portfolio. The idea was to de-risk the business model. The retail loans have far lesser NPAs than corporate banking and margins are also better. But the big stumbling block was the lack of infrastructure for collection mechanism, scoring methodology, risk based pricing, and reworking the processes. "If you are scaling the business (retail) without a collection mechanism, the chances are that you will create another set of problems," says Jayakumar.
The bank moved to a modern decision making architecture where account opening, processing and approval of loans, forex and trade finance transactions have moved from branches to a centralised back office.This process took almost a year. The bank is now ready for a higher growth in the retail segment. The bank has also started offering better interest rates to customers with good credit history or higher credit score. Today, the bank has higher percentage of customers with credit bureau score of more than 725.
The bank also decided to have product managers from outside in areas like auto, education loans, tractor financing and commercial vehicle. The bank had also identified white spaces like commercial vehicle, construction equipment financing, wealth management, MSME etc for higher growth.
Branches For Sales and Customer Servicing And Not For Processing
Jayakumar noticed that branches used to keep records dating back to 1930s. These files used to occupy almost 35 per cent of the spaces at the branches. He put in place a mechanism to digitise the records and move all these files to central places. Today, branches are better looking and more customer-friendly.
"There is now a fair amount of differentiation in the branches," says Jayakumar. They have also identified branches for more specialisation in areas like liabilities (generating more current and savings accounts), wealth management and MSME business. "We are bringing in the culture of sales or people going out of branches and spending time with customers," says Jayakumar. The digital processes are also changing the way bank was operating earlier. Take for example, the bank had some 500 people doing the data entry for account opening. With tablets or online banking, these jobs are gone and people were redeployed in sales and other areas. "Lot of work done manually is now digitised," says Jayakumar. In fact, the bank was also setting up fully digital branches.
Relationship Managers For Corporate Banking, More Centralised Approach
In the corporate banking, the credit decision were approved geographically. They have now centralised all the credit approvals. They have built proper metrics and build enough number of relationship managers. The bank has also created a target market group to go out and look for good corporate business. The bank is also doing lot of cross boarder deals with the clients. "We centralised all our corporate exposure in the central office," says Jayakumar.
Catch Up And Leap Frog In Terms Of Technology
The IT infrastructure of the bank was probably dated by five years. It actually skipped a generation in the areas like core banking, CRM system, contact centre etc. "Upgrading core banking is like transplanting the heart while the person is walking," grins one insider. It was a long exercise. The bank actually planned it for 18 months. The core banking was upgraded from Finacle 7 to Finacle 10. This new system has enabled the bank to have better features of Internet banking, mobile banking and also engaging with fin-tech companies by way of APIs. Today, there are dozens of fin-techs that are connected to the bank's system, offering new capabilities and products and also helping in risk management.
There are two IT centres of excellence with partners like Accenture and IBM. The idea is to do analytics and also work on new technologies like blockchain etc. Currently, the bank has a data warehouse that gives a single view of customer. Under the excellence centre, the bank is working on behavioural scores, propensity scores (probability of customer buying more products). "It is still in very formative years. We have infrastructure in place," says Jayakumar.
Forget 100 days! Not even 50 days of employment provided under MGNREGS
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MGNREGS has the potential to increase wages of casual labour if implemented at its full capacity. Under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), at least 100 days of guaranteed wage employment in a fiscal is provided to any rural household whose adult members volunteer to do unskilled manual work on demand.
The scheme was ranked as the world's largest public works programme by the World Bank in 2015. The scheme provides a social security net for 15 per cent of our country's population.
However, while the scheme aims at providing 100 days of guaranteed employment, on an average, at an all-India level below 50 days of employment was actually provided in FY 18. None of the states were able to provide full 100 days employment as mentioned in the scheme as per extracts from latest RBI annual report.
Click here to Enlarge
The average days of employment provided under MGNREGS was a mere 45.2. Tripura was leading the pack with close to 75 days of employment. While Manipur provided only 20 days of employment.
As cited by RBI, the scheme has a huge potential and can even propel daily wages, if implemented at full capacity by reducing the availability of casual workforce. In total, workforce of 25.4 crore workers is available.
As per the official numbers available on the MGNREGA website, in FY18 average days of employment provided per household was 45.77 which was only 46 in FY17 and 40.17 days in FY15.
The average wage rate per person in FY18 was Rs 169.46, in FY17 it was Rs 161.65 and in FY15 wage rate was only Rs 143.92.
The primary objective of MGNREGA was to enhance livelihood security in rural areas along with creating of durable assets such as building roads and canals. Employment had to be provided within 5 km of an applicant's residence, and minimum wages had to be paid. If employment is not provided within 15 days of application, applicants are entitled to an unemployment allowance. This unemployment allowance had to be paid by state governments.
The scheme was ranked as the world's largest public works programme by the World Bank in 2015. The scheme provides a social security net for 15 per cent of our country's population.
However, while the scheme aims at providing 100 days of guaranteed employment, on an average, at an all-India level below 50 days of employment was actually provided in FY 18. None of the states were able to provide full 100 days employment as mentioned in the scheme as per extracts from latest RBI annual report.
Click here to Enlarge
The average days of employment provided under MGNREGS was a mere 45.2. Tripura was leading the pack with close to 75 days of employment. While Manipur provided only 20 days of employment.
As cited by RBI, the scheme has a huge potential and can even propel daily wages, if implemented at full capacity by reducing the availability of casual workforce. In total, workforce of 25.4 crore workers is available.
As per the official numbers available on the MGNREGA website, in FY18 average days of employment provided per household was 45.77 which was only 46 in FY17 and 40.17 days in FY15.
The average wage rate per person in FY18 was Rs 169.46, in FY17 it was Rs 161.65 and in FY15 wage rate was only Rs 143.92.
The primary objective of MGNREGA was to enhance livelihood security in rural areas along with creating of durable assets such as building roads and canals. Employment had to be provided within 5 km of an applicant's residence, and minimum wages had to be paid. If employment is not provided within 15 days of application, applicants are entitled to an unemployment allowance. This unemployment allowance had to be paid by state governments.
CCI imposes total penalty of Rs 38 crore on 18 sugar mills
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The Competition Commission of India (CCI), the anti-trust regulator -- has imposed a total penalty of Rs 38 crore on 18 sugar mills and two associations for rigging the bids of a joint tender floated by oil marketing companies -- HPCL, BPCL and IOCL -- in January 2013 for procurement of ethanol for blending with petrol.
The two associations are Indian Sugar Mills Association (ISMA) and Ethanol Manufacturers Association of India (EMAI).
The action was taken following a complaint lodged by India Glycols Limited and five other informants.
The case pertains to a joint tender floated by oil marketing companies (OMCs) for the supply of ethanol to comply with the government's mandatory 5 per cent blending norms.
The complainant -- India Glycol -- accused ISMA and EMAI of persuading the OMCs to come-out with a Joint Tender for the purpose of procuring ethanol. It alleged that the joint tendering was an agreement amongst horizontal players, to procure ethanol from various suppliers in breach of the competition laws, causing adverse effect on competition within India in supply and distribution of ethanol.
It was also alleged that the sugar manufacturers, who had participated in the tender, manipulated the bids by quoting similar rates and in some cases identical rates through an understanding and collective action, in violation of the competition laws.
CCI in its order observed that the bidders acted in collusion to eliminate competition and also manipulated the bidding process.
The two associations are Indian Sugar Mills Association (ISMA) and Ethanol Manufacturers Association of India (EMAI).
The action was taken following a complaint lodged by India Glycols Limited and five other informants.
The case pertains to a joint tender floated by oil marketing companies (OMCs) for the supply of ethanol to comply with the government's mandatory 5 per cent blending norms.
The complainant -- India Glycol -- accused ISMA and EMAI of persuading the OMCs to come-out with a Joint Tender for the purpose of procuring ethanol. It alleged that the joint tendering was an agreement amongst horizontal players, to procure ethanol from various suppliers in breach of the competition laws, causing adverse effect on competition within India in supply and distribution of ethanol.
It was also alleged that the sugar manufacturers, who had participated in the tender, manipulated the bids by quoting similar rates and in some cases identical rates through an understanding and collective action, in violation of the competition laws.
CCI in its order observed that the bidders acted in collusion to eliminate competition and also manipulated the bidding process.
Rupee hits fresh lifetime low of 72.98 against US dollar
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Continuing its intermittent fall against the US dollar, the Indian rupee dived to another all-time low of 72.98 on Tuesday. The currency has lost over 13 per cent in value against the greenback since the beginning of the year.
The rupee slid 47 paise to settle at a record low of 72.98 against the US currency due to surging crude oil prices and escalating trade war worries.
Meanwhile, the International Monetary Fund (IMF) said that the Indian rupee has 'effectively' depreciated only 6-7 per cent this year after adjusting it to inflation, almost half of the actual drop in the value of the currency this year.
The IMF, however, warned that the rupee depreciation would jack up the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation.
Panic dollar demand from importers and speculative traders sent the home currency sinking to a historic low of 72.99 in late afternoon deals with very little chance of RBI intervention.
A sharp spike in international crude oil prices weighed on the trading front towards the tail-end session even as the US dollar fell to seven-week lows after Donald Trump announced fresh 10 per cent tariffs on Chinese imports.
US President Donald Trump Monday night announced to impose additional 10 per cent duties on Chinese imports worth USD 200 billion.
Benchmark Brent crude futures were up USD 1.14 a barrel to USD 79.19 a barrel, after hitting a high of USD 79.37 in early Asian trade.
Since Monday, the rupee has plunged by 114 paise or more than 1.5 per cent as trade war concerns resurfaced and crude oil rebounded.
The stubbornly high global crude oil prices are opening up a can of worms to heightened inflation risks and likely to disrupt government's fiscal maths along with deteriorating global financial conditions.
Considering that India is a net importer of crude oil, the impact of this imported inflation is expected to be significant.
The benchmark 10-year sovereign yield also spiked to 8.14 per cent.
At the inter-bank foreign exchange (forex) market, the rupee opened weak at 72.51 against Monday's close of 72.55 on sustained dollar demand.
However, overcoming the initial volatility, the local unit rebounded to hit a session high of 72.35 before taking a big reversal.
Reeling under an unprecedented speculative sell-off, the rupee plunged sharply to hit an all-time low of 72.99 before ending at a record low of 72.98, showing a steep loss of 47 paise, or 0.65 per cent.
It shed a whopping 67 paise against the USD yesterday.
The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 72.3796 and for the euro at 84.7657.
IMF spokesperson Gerry Rice said the currencies of many of India's trading partners, including those in the emerging markets, too have depreciated against the dollar.
"As a result, so far this year the real effective depreciation of the Indian rupee compared to December 2017, by our estimates, is between six and seven per cent," Rice said.
The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation.
He was responding to a question on the fall of the Indian currency in the last few months.
Observing that India is a relatively closed economy, he said the contribution of the net exports to growth in April to June quarter was again stronger than expected and the real depreciation of the rupee can be expected to reinforce this trend.
"On the other hand, the depreciation will obviously raise the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation," he said.
The rupee slid 47 paise to settle at a record low of 72.98 against the US currency due to surging crude oil prices and escalating trade war worries.
Meanwhile, the International Monetary Fund (IMF) said that the Indian rupee has 'effectively' depreciated only 6-7 per cent this year after adjusting it to inflation, almost half of the actual drop in the value of the currency this year.
The IMF, however, warned that the rupee depreciation would jack up the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation.
Panic dollar demand from importers and speculative traders sent the home currency sinking to a historic low of 72.99 in late afternoon deals with very little chance of RBI intervention.
A sharp spike in international crude oil prices weighed on the trading front towards the tail-end session even as the US dollar fell to seven-week lows after Donald Trump announced fresh 10 per cent tariffs on Chinese imports.
US President Donald Trump Monday night announced to impose additional 10 per cent duties on Chinese imports worth USD 200 billion.
Benchmark Brent crude futures were up USD 1.14 a barrel to USD 79.19 a barrel, after hitting a high of USD 79.37 in early Asian trade.
Since Monday, the rupee has plunged by 114 paise or more than 1.5 per cent as trade war concerns resurfaced and crude oil rebounded.
The stubbornly high global crude oil prices are opening up a can of worms to heightened inflation risks and likely to disrupt government's fiscal maths along with deteriorating global financial conditions.
Considering that India is a net importer of crude oil, the impact of this imported inflation is expected to be significant.
The benchmark 10-year sovereign yield also spiked to 8.14 per cent.
At the inter-bank foreign exchange (forex) market, the rupee opened weak at 72.51 against Monday's close of 72.55 on sustained dollar demand.
However, overcoming the initial volatility, the local unit rebounded to hit a session high of 72.35 before taking a big reversal.
Reeling under an unprecedented speculative sell-off, the rupee plunged sharply to hit an all-time low of 72.99 before ending at a record low of 72.98, showing a steep loss of 47 paise, or 0.65 per cent.
It shed a whopping 67 paise against the USD yesterday.
The Financial Benchmarks India private limited (FBIL), meanwhile, fixed the reference rate for the dollar at 72.3796 and for the euro at 84.7657.
IMF spokesperson Gerry Rice said the currencies of many of India's trading partners, including those in the emerging markets, too have depreciated against the dollar.
"As a result, so far this year the real effective depreciation of the Indian rupee compared to December 2017, by our estimates, is between six and seven per cent," Rice said.
The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation.
He was responding to a question on the fall of the Indian currency in the last few months.
Observing that India is a relatively closed economy, he said the contribution of the net exports to growth in April to June quarter was again stronger than expected and the real depreciation of the rupee can be expected to reinforce this trend.
"On the other hand, the depreciation will obviously raise the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation," he said.
Sensex falls 294 points, Nifty closes below 11,300 level; SBI, Bajaj Auto, Tata Motors top losers
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The Sensex closed at an over month low on hectic selling in realty, PSU, power and banking counters amid rising trade tariff tensions between the US and China and weakness in the rupee.
While the Sensex tumbled by about 295 points to close at an over one-month low of 37,290, Nifty closed 98 points, or 0.87 per cent lower, to end at 11,278. During the session, it moved between 11,411 and 11,268.
The rupee fell 46 paise to close at 72.97 level, its lowest ever against the US dollar in trade today which dampened market sentiment. The Indian currency had closed at 72.51 to the dollar on Monday. Led by the sharp fall in stocks, the market capitalisation (m-cap) of BSE-listed companies plunged by Rs 2,72,549.15 crore to Rs 1,53,64,470 crore since Friday.
"Selling pressure increased on the bourses due to spike in oil prices," said Vinod Nair, Head of Research at Geojit Financial Services. Flaring up of trade tariff tensions between the US and China and weakness in the rupee have also added to weak investor sentiment.
Market sentiments were further dampened after US President Donald Trump on Monday announced imposition of new tariffs on an additional $200 billion worth of imports from China, escalating the trade war with the Asian giant.
Alleging that China has been unwilling to change its unfair trade practices, Trump said the new additional tariff structure would be effective September 24 from when it would be at 10 per cent until the year end, but would increase to 25 per cent level from January 1.
The 30-share Sensex opened on a somewhat better note at 37,660 and advanced to touch a high of 37,745 but turned choppy and hit a low of 37,242 as selling pressure gathered momentum towards the fag-end, before settling 294 points, or 0.78 per cent, down at 37,290.
This is the lowest closing since August 2 when it had settled at 37,165.
It had lost 505 points on Monday as rupee woes and trade war worries spooked investors despite the government announcing measures to stem a steep fall in the domestic currency.
VK Sharma, Head, Private Client Group & Capital Market Strategy at HDFC Securities said, "Trade war fears, rising crude oil prices and depreciating currency put pressure on the markets, Nifty fell almost a percent today and has lost 4% from its recent highs. The government's surprise move to merge three public sector lenders - Bank of Baroda, Dena Bank and Vijaya Bank resulted in frantic activity in markets. BOB shares fell 16% and lost Rs 5,700 crore of its market capitalisation. Dena Bank stocks went 20% up today. "
The Bank of Baroda (BoB) stock plunged today a day after the government announced the bank's merger with other public sector lenders Dena Bank and Vijaya Bank. The stock closed 17.04% or 23 points lower on the NSE. On the BSE, the stock closed 16.03% or 21 points lower at 113 level. The market capitalisation of the stock fell by Rs 5,727 crore to Rs 30,013 crore on the BSE. The M-cap of the bank stood at Rs 35,740 crore when market closed yesterday.
Top Sensex losers were SBI (4.06%), Tata Motors (3.36%) and Bajaj Auto (2.84%).
Of 30 Sensex stocks, 23 closed in the red. HUL (3.87%), YES Bank (1.43%) and Wipro (1.02%) were the top Sensex gainers.
Market breadth was negative with 869 stocks closing higher compared with 1826 falling on the BSE.
Domestic institutional investors (DIIs) sold shares worth Rs 180.36 crore, while foreign portfolio investors (FPIs) also offloaded shares to the tune of Rs 106.54 crore on Monday, provisional data showed.
Global markets
Global stock markets, particularly those in Asia, shrugged off the widely anticipated announcement of further US tariffs on Chinese goods. Japan's Nikkei 225, reopening after a national holiday, jumped 1.4 percent to 23,420. The Kospi in South Korea added 0.3 percent to 2,308. Hong Kong's Hang Seng index rose 0.6 percent to 27,084. The Shanghai Composite index rebounded 1.8 percent to 2,699. But Australia's S&P/ASX 200 shed 0.4 percent to 6,161.
Following big gains in Asia, such as a 1.4 percent increase in Japan's Nikkei 225 stock average, the rebound stalled in Europe. France's CAC 40 added 0.2 percent to 5,361, while the DAX in Germany rose 0.2 percent to 12,119. Britain's FTSE 100 was steady at 7,303. Wall Street was set for modest gains at the open too, with Dow futures and the S&P 500 up 0.2 percent.
While the Sensex tumbled by about 295 points to close at an over one-month low of 37,290, Nifty closed 98 points, or 0.87 per cent lower, to end at 11,278. During the session, it moved between 11,411 and 11,268.
The rupee fell 46 paise to close at 72.97 level, its lowest ever against the US dollar in trade today which dampened market sentiment. The Indian currency had closed at 72.51 to the dollar on Monday. Led by the sharp fall in stocks, the market capitalisation (m-cap) of BSE-listed companies plunged by Rs 2,72,549.15 crore to Rs 1,53,64,470 crore since Friday.
"Selling pressure increased on the bourses due to spike in oil prices," said Vinod Nair, Head of Research at Geojit Financial Services. Flaring up of trade tariff tensions between the US and China and weakness in the rupee have also added to weak investor sentiment.
Market sentiments were further dampened after US President Donald Trump on Monday announced imposition of new tariffs on an additional $200 billion worth of imports from China, escalating the trade war with the Asian giant.
Alleging that China has been unwilling to change its unfair trade practices, Trump said the new additional tariff structure would be effective September 24 from when it would be at 10 per cent until the year end, but would increase to 25 per cent level from January 1.
The 30-share Sensex opened on a somewhat better note at 37,660 and advanced to touch a high of 37,745 but turned choppy and hit a low of 37,242 as selling pressure gathered momentum towards the fag-end, before settling 294 points, or 0.78 per cent, down at 37,290.
This is the lowest closing since August 2 when it had settled at 37,165.
It had lost 505 points on Monday as rupee woes and trade war worries spooked investors despite the government announcing measures to stem a steep fall in the domestic currency.
VK Sharma, Head, Private Client Group & Capital Market Strategy at HDFC Securities said, "Trade war fears, rising crude oil prices and depreciating currency put pressure on the markets, Nifty fell almost a percent today and has lost 4% from its recent highs. The government's surprise move to merge three public sector lenders - Bank of Baroda, Dena Bank and Vijaya Bank resulted in frantic activity in markets. BOB shares fell 16% and lost Rs 5,700 crore of its market capitalisation. Dena Bank stocks went 20% up today. "
The Bank of Baroda (BoB) stock plunged today a day after the government announced the bank's merger with other public sector lenders Dena Bank and Vijaya Bank. The stock closed 17.04% or 23 points lower on the NSE. On the BSE, the stock closed 16.03% or 21 points lower at 113 level. The market capitalisation of the stock fell by Rs 5,727 crore to Rs 30,013 crore on the BSE. The M-cap of the bank stood at Rs 35,740 crore when market closed yesterday.
Top Sensex losers were SBI (4.06%), Tata Motors (3.36%) and Bajaj Auto (2.84%).
Of 30 Sensex stocks, 23 closed in the red. HUL (3.87%), YES Bank (1.43%) and Wipro (1.02%) were the top Sensex gainers.
Market breadth was negative with 869 stocks closing higher compared with 1826 falling on the BSE.
Domestic institutional investors (DIIs) sold shares worth Rs 180.36 crore, while foreign portfolio investors (FPIs) also offloaded shares to the tune of Rs 106.54 crore on Monday, provisional data showed.
Global markets
Global stock markets, particularly those in Asia, shrugged off the widely anticipated announcement of further US tariffs on Chinese goods. Japan's Nikkei 225, reopening after a national holiday, jumped 1.4 percent to 23,420. The Kospi in South Korea added 0.3 percent to 2,308. Hong Kong's Hang Seng index rose 0.6 percent to 27,084. The Shanghai Composite index rebounded 1.8 percent to 2,699. But Australia's S&P/ASX 200 shed 0.4 percent to 6,161.
Following big gains in Asia, such as a 1.4 percent increase in Japan's Nikkei 225 stock average, the rebound stalled in Europe. France's CAC 40 added 0.2 percent to 5,361, while the DAX in Germany rose 0.2 percent to 12,119. Britain's FTSE 100 was steady at 7,303. Wall Street was set for modest gains at the open too, with Dow futures and the S&P 500 up 0.2 percent.
General Awareness
Govt proposes to merge Dena Bank, Vijaya Bank and Bank of Baroda
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What to study?
For Prelims: Which three banks are being merged?
For Mains: Merger- Significance, pros and cons, concerns.
Context: The Centre has proposed the amalgamation of state-owned Bank of Baroda, Dena Bank and Vijaya Bank to create India’s third largest bank as parts of reforms in the public sector banking segment.
The proposal will now need the approval of the boards of these individual banks. The banks’ boards will shortly meet and take up the decision.
Background:
The merger of these three state-owned banks is a part of the government’s agenda of consolidation of public sector banks. The consolidation was proposed by the Alternative Mechanism.
The Union Cabinet in August 2017 approved amalgamation of Public Sector Banks through Alternative Mechanism (AM) with an aim to facilitate consolidation among the Nationalised Banks to create strong and competitive banks.
Why merger is good?
The merger benefits include getting economies of scale and reduction in the cost of doing business.
Technical inefficiency is one of the main factors responsible for banking crisis. The scale of inefficiency is more in case of small banks. Hence, merger would be good.
Mergers help small banks to gear up to international standards with innovative products and services with the accepted level of efficiency.
Mergers help many PSBs, which are geographically concentrated, to expand their coverage beyond their outreach.
A better and optimum size of the organization would help PSBs offer more and more products and services and help in integrated growth of the sector.
The size of each business entity after merger is expected to add strength to the Indian Banking System in general and Public Sector Banks in particular.
This will also end the unhealthy and intense competition going on even among public sector banks as of now. In the global market, the Indian banks will gain greater recognition and higher rating.
The volume of inter-bank transactions will come down, resulting in saving of considerable time in clearing and reconciliation of accounts.
The burden on the central government to recapitalize the public sector banks again and again will come down substantially. This will also help in meeting more stringent norms under BASEL III, especially capital adequacy ratio.
A great number of posts of CMD, ED, GM and Zonal Managers will be abolished, resulting in savings of crores of Rupee. This will also reduce unnecessary interference by board members in day to day affairs of the banks.
After mergers, bargaining strength of bank staff will become more and visible. Bank staff may look forward to better wages and service conditions in future. The wide disparities between the staff of various banks in their service conditions and monetary benefits will narrow down.
Customers will have access to fewer banks offering them wider range of products at a lower cost. From regulatory perspective, monitoring and control of less number of banks will be easier after mergers. This is at the macro level.
Concerns associated with merger:
Immediate negative impact would be from pension liability provisions (due to different employee benefit structures) and harmonisation of accounting policies for bad loans recognition.
There are many problems to adjust top leadership in institutions and the unions.
Mergers will result in shifting/closure of many ATMs, Branches and controlling offices, as it is not prudent and economical to keep so many banks concentrated in several pockets, notably in urban and metropolitan centres.
Mergers will result in immediate job losses on account of large number of people taking VRS on one side and slow down or stoppage of further recruitment on the other. This will worsen the unemployment situation further and may create law and order problems and social disturbances.
The weaknesses of the small banks may get transferred to the bigger bank also. New power centres will emerge in the changed environment. Mergers will result in clash of different organizational cultures. Conflicts will arise in the area of systems and processes too.
When a big bank books huge loss or crumbles, there will be a big jolt in the entire banking industry. Its repercussions will be felt everywhere.
Also, India right now needs more banking competition rather than more banking consolidation. In other words, it needs more banks rather than fewer banks. This does not mean that there should be a fetish about small-scale lending operations, but to know that large banks are not necessarily better banks.
Way ahead:
Merger is a good idea. However, this should be carried out with right banks for the right reasons. Merger is also tricky given the huge challenges banks face, including the bad loan problem that has plunged many public sector banks in an unprecedented crisis. Since mergers are also about people, a huge amount of planning would be required to make the consolidation process smoother. Piecemeal consolidation will not provide a lasting solution and what is required is an integrated approach from all stakeholders including the government.
What to study?
For Prelims: Which three banks are being merged?
For Mains: Merger- Significance, pros and cons, concerns.
Context: The Centre has proposed the amalgamation of state-owned Bank of Baroda, Dena Bank and Vijaya Bank to create India’s third largest bank as parts of reforms in the public sector banking segment.
The proposal will now need the approval of the boards of these individual banks. The banks’ boards will shortly meet and take up the decision.
Background:
The merger of these three state-owned banks is a part of the government’s agenda of consolidation of public sector banks. The consolidation was proposed by the Alternative Mechanism.
The Union Cabinet in August 2017 approved amalgamation of Public Sector Banks through Alternative Mechanism (AM) with an aim to facilitate consolidation among the Nationalised Banks to create strong and competitive banks.
Why merger is good?
The merger benefits include getting economies of scale and reduction in the cost of doing business.
Technical inefficiency is one of the main factors responsible for banking crisis. The scale of inefficiency is more in case of small banks. Hence, merger would be good.
Mergers help small banks to gear up to international standards with innovative products and services with the accepted level of efficiency.
Mergers help many PSBs, which are geographically concentrated, to expand their coverage beyond their outreach.
A better and optimum size of the organization would help PSBs offer more and more products and services and help in integrated growth of the sector.
The size of each business entity after merger is expected to add strength to the Indian Banking System in general and Public Sector Banks in particular.
This will also end the unhealthy and intense competition going on even among public sector banks as of now. In the global market, the Indian banks will gain greater recognition and higher rating.
The volume of inter-bank transactions will come down, resulting in saving of considerable time in clearing and reconciliation of accounts.
The burden on the central government to recapitalize the public sector banks again and again will come down substantially. This will also help in meeting more stringent norms under BASEL III, especially capital adequacy ratio.
A great number of posts of CMD, ED, GM and Zonal Managers will be abolished, resulting in savings of crores of Rupee. This will also reduce unnecessary interference by board members in day to day affairs of the banks.
After mergers, bargaining strength of bank staff will become more and visible. Bank staff may look forward to better wages and service conditions in future. The wide disparities between the staff of various banks in their service conditions and monetary benefits will narrow down.
Customers will have access to fewer banks offering them wider range of products at a lower cost. From regulatory perspective, monitoring and control of less number of banks will be easier after mergers. This is at the macro level.
Concerns associated with merger:
Immediate negative impact would be from pension liability provisions (due to different employee benefit structures) and harmonisation of accounting policies for bad loans recognition.
There are many problems to adjust top leadership in institutions and the unions.
Mergers will result in shifting/closure of many ATMs, Branches and controlling offices, as it is not prudent and economical to keep so many banks concentrated in several pockets, notably in urban and metropolitan centres.
Mergers will result in immediate job losses on account of large number of people taking VRS on one side and slow down or stoppage of further recruitment on the other. This will worsen the unemployment situation further and may create law and order problems and social disturbances.
The weaknesses of the small banks may get transferred to the bigger bank also. New power centres will emerge in the changed environment. Mergers will result in clash of different organizational cultures. Conflicts will arise in the area of systems and processes too.
When a big bank books huge loss or crumbles, there will be a big jolt in the entire banking industry. Its repercussions will be felt everywhere.
Also, India right now needs more banking competition rather than more banking consolidation. In other words, it needs more banks rather than fewer banks. This does not mean that there should be a fetish about small-scale lending operations, but to know that large banks are not necessarily better banks.
Way ahead:
Merger is a good idea. However, this should be carried out with right banks for the right reasons. Merger is also tricky given the huge challenges banks face, including the bad loan problem that has plunged many public sector banks in an unprecedented crisis. Since mergers are also about people, a huge amount of planning would be required to make the consolidation process smoother. Piecemeal consolidation will not provide a lasting solution and what is required is an integrated approach from all stakeholders including the government.
For Prelims: Which three banks are being merged?
For Mains: Merger- Significance, pros and cons, concerns.
Context: The Centre has proposed the amalgamation of state-owned Bank of Baroda, Dena Bank and Vijaya Bank to create India’s third largest bank as parts of reforms in the public sector banking segment.
The proposal will now need the approval of the boards of these individual banks. The banks’ boards will shortly meet and take up the decision.
Background:
The merger of these three state-owned banks is a part of the government’s agenda of consolidation of public sector banks. The consolidation was proposed by the Alternative Mechanism.
The Union Cabinet in August 2017 approved amalgamation of Public Sector Banks through Alternative Mechanism (AM) with an aim to facilitate consolidation among the Nationalised Banks to create strong and competitive banks.
Why merger is good?
The merger benefits include getting economies of scale and reduction in the cost of doing business.
Technical inefficiency is one of the main factors responsible for banking crisis. The scale of inefficiency is more in case of small banks. Hence, merger would be good.
Mergers help small banks to gear up to international standards with innovative products and services with the accepted level of efficiency.
Mergers help many PSBs, which are geographically concentrated, to expand their coverage beyond their outreach.
A better and optimum size of the organization would help PSBs offer more and more products and services and help in integrated growth of the sector.
The size of each business entity after merger is expected to add strength to the Indian Banking System in general and Public Sector Banks in particular.
This will also end the unhealthy and intense competition going on even among public sector banks as of now. In the global market, the Indian banks will gain greater recognition and higher rating.
The volume of inter-bank transactions will come down, resulting in saving of considerable time in clearing and reconciliation of accounts.
The burden on the central government to recapitalize the public sector banks again and again will come down substantially. This will also help in meeting more stringent norms under BASEL III, especially capital adequacy ratio.
A great number of posts of CMD, ED, GM and Zonal Managers will be abolished, resulting in savings of crores of Rupee. This will also reduce unnecessary interference by board members in day to day affairs of the banks.
After mergers, bargaining strength of bank staff will become more and visible. Bank staff may look forward to better wages and service conditions in future. The wide disparities between the staff of various banks in their service conditions and monetary benefits will narrow down.
Customers will have access to fewer banks offering them wider range of products at a lower cost. From regulatory perspective, monitoring and control of less number of banks will be easier after mergers. This is at the macro level.
Concerns associated with merger:
Immediate negative impact would be from pension liability provisions (due to different employee benefit structures) and harmonisation of accounting policies for bad loans recognition.
There are many problems to adjust top leadership in institutions and the unions.
Mergers will result in shifting/closure of many ATMs, Branches and controlling offices, as it is not prudent and economical to keep so many banks concentrated in several pockets, notably in urban and metropolitan centres.
Mergers will result in immediate job losses on account of large number of people taking VRS on one side and slow down or stoppage of further recruitment on the other. This will worsen the unemployment situation further and may create law and order problems and social disturbances.
The weaknesses of the small banks may get transferred to the bigger bank also. New power centres will emerge in the changed environment. Mergers will result in clash of different organizational cultures. Conflicts will arise in the area of systems and processes too.
When a big bank books huge loss or crumbles, there will be a big jolt in the entire banking industry. Its repercussions will be felt everywhere.
Also, India right now needs more banking competition rather than more banking consolidation. In other words, it needs more banks rather than fewer banks. This does not mean that there should be a fetish about small-scale lending operations, but to know that large banks are not necessarily better banks.
Way ahead:
Merger is a good idea. However, this should be carried out with right banks for the right reasons. Merger is also tricky given the huge challenges banks face, including the bad loan problem that has plunged many public sector banks in an unprecedented crisis. Since mergers are also about people, a huge amount of planning would be required to make the consolidation process smoother. Piecemeal consolidation will not provide a lasting solution and what is required is an integrated approach from all stakeholders including the government.
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