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LIVE: Bankers says reform plan has ‘everything we wanted’

After the Bell

Excerpts from After the Bell on CNBC-TV18 Watch the full show »

5.50 pm: With that, we’re wrapping up coverage for this live blog.But before that, here’s word coming in from Power Minister Piyush Goyal who says he is in active dialogue with ailing discoms and a turnaround plan is being formulated by the government.

“Three-four discoms will see a sea change in next 3 years,” says Goyal.

An improvement in discoms financial health will help alleviate the NPA pressure on banks.

5.46 pm: “The markets would give a thumbs-up to today’s package. The government’s decision to consider ESOPs and start measuring performance on indicators such as RoA, RoE and move away from top line growth will be seen positively,” says Prabhudas Lilladher Analyst Ajay Bodke.

Public sector shares have seen a bounceback recently following a sharp fall over the past few months, thanks to the NPA crisis.

“Today’s comprehensive plan will give investors certainty and they will likely be positive on PSB shares now,” he said. “Despite the recent bounceback, they are still trading at a steep discount on book value basis.”

5.42 pm: A revamp in the bankruptcy code has been in the works for a year now.

5.39 pm: Has enough been done today to address the country’s NPA problem? “Whatever could have been done has been done. Other changes such as tweaking the bankruptcy law, etc, should be announced in future,” says Rajendran.

5.36 pm: The government’s decision to hire personnel from the private sector is very good, says CVR Rajendran, former CMD, Andhra Bank. “I don’t think it will lead to dissonance within a public bank.”

5.35 pm: The government should look at expanding the ESOP program it is considering till the level of general managers, says consultant Ashvin Parekh.

5.32 pm: Political interference has now been almost eliminated, says Union Bank chief Arun Tiwari. “Almost everything we had asked at the Gyan Sangam has been given to us,” he says.

5.28 pm: The real big bang change will take place when the government decides to give up its mandatory majority holding position, says Ashvin Parekh.

5.25 pm: “This is a purposeful incrementalism. It is not big bang but it is helpful,” says UTI MF chief Leo Puri, who for long was a banking consultant. “Now the Bank Board Bureau will have to play a key role in transforming banks till a bank holding company takes over.”

5.23 pm: The appointment of chairmen and MDs was long overdue, says former OBC CMD SL Bansal. The revision of compensation packages for top management of banks is also good, he says.

5.21 pm: The announcement of the setup of the BBB and on reworking the KPI measurement is very good, says corporate consultant Ashvin Parekh.

5.18 pm: The government’s decision to consider tweaking compensatary incentives such as offering ESOPs, along with steps to measure efficiency, will have a positive impact on the working of public sector banks, says Rajnish Kumar of SBI.

“Going forward, if we fail to perform, we will have only ourselves to blame,” says the SBI honcho.

5.15 pm: G Padmanabhan, who was today appointed non-executive chairman of Bank of India, is now speaking with CNBC-TV18. He was earlier an executive director with the Reserve Bank of India.

5.13 pm: “This is not a quantum leap in terms of steps being announced. It is a collation of steps that were already known along with a few incremental announcements,” says CNBC-TV18’s banking editor Latha Venkatesh.

5.10 pm: The press conference has now come to an end.

5.05 pm: Some more questions now not related to the content of today’s subject: on yuan, the BRICS Bank, inflation, and of course, possible rate cuts.

5.05 pm: FM Jaitley can’t resist taking a question on the much-debated GST. Responds to a scribe asking about P Chidambaram’s questions on the proposed tax. Says the ex-FM didn’t take the same positions he is now advocating when he was in office.

5.01 pm: Reactions coming in now: Analysts view the capital infusion in good light, says it should help nudge banks’ Tier I capital and common equity tier I capital 0.2 to 0.5 percent higher.

4.57 pm: Details of the bank recapitalization programme this year now trickling in:

SBI Rs. 5,531 cr
Bank of India Rs. 2,255 cr
IDBI Bank Rs. 2,229 cr
Bank of Baroda Rs. 1,786 cr
PNB Rs. 1,732 cr
Canara Bank Rs. 947 cr
IOB Rs. 2,009 cr
United Bank Rs. 1,080 cr
Corporation Bank Rs. 857 cr
Andhra Bank Rs. 378 cr
Bank of Maharashtra Rs. 394 cr
Allahabad Bank Rs. 283 cr
Dena Bank Rs. 407 cr

4.55 pm: “With respect to consolidation, we have given banks freedom to see how they want to pursue it,” says Jayant Sinha.

4.54 pm: The FM does not give a timeline to setting up the bank holding company. Says a decision will be taken after evaluating the performance of the interim Bank Board Bureau.

4.52 pm: The address has now ended. The FM and other officials are now taking questions.

4.48 pm: The BBB will be the first step to setting up a bank holding company. In future, we will look at setting up a bank holding company, which will hold all the government stakes in banks and may take over some of the government’s current role in their management.

4.47 pm: Along with our new KPI framework, we are increasing our performance linked bonus for top management of PSBs and are also considering offering employee stock options.

4.46 pm: “For governance reforms, we conducted a Gyan Sangam in January this year with bank chiefs. The FM holds quarterly meetings with banks.”

All major decisions are taken by bank boards.

4.43 pm: We have announced a set of new key performance indicators (KPIs), on the basis of which bank performances will be evaluated.

4.42 pm: PSBs are now telling us that they want to recruit people from the market for mid-level management. We are seeing how this can be made possible.

4.41 pm: The PM has pledged zero political interference with PSBs. We are happy to announce that this is now practised and you will find no cases of interference.

4.40 pm: We need to deepen our corporate bond market and strengthen asset restructuring companies.

4.38 pm: Iron & steel is the largest sector with NPAs, at Rs 32,000 crore. It is plagued with external problems. We recently hiked duty in order to elevate some of its pain.

4.37 pm: “We are also starting the process of dialoge with discoms.”

4.36 pm: “We have set up a cell in the Department of Financial Services to monitor all projects. We have been able to pinpoint problems with each project and will review what each stakeholders need to do, including government, promoter and regulator.”

4.34 pm: “Is the situation as bad as it seems?” Adhia asks. “The answer is no. In 2001, gross NPAs peaked out at 13 percent. Today, they are at about 6 percent.”

4.34 pm: “The fourth part of our strategy is de-stressing the situation for banks.”

4.30 pm: Banks have a requirement for Rs 1.8 lakh crore over the next four years to meet capital requirements. “Of this, we will provide Rs 70,000 crore. They can raise Rs 1.1 lakh crore from the market.”

The allocation for each public bank has been worked out. Part of the allocation will depend on banks’ requirements while some would depend on their performance.

4.29pm: For recapitalization, we have already agreed to provide Rs 25,000 crore for public sector banks this fiscal, says Adhia.

4.26 pm: On the Bank Board Bureau, a chairman will be appointed who will be a distinguished banker or regulator.

“The BBB will replace the existing appointments board, which functions as a search committee for fulltime directors for PSBs,” he says. “The BBB will also be a link between the government and banks and will engaged with banks to evolve strategies for them.”

4.25 pm: We will also announce non-executive chairmen for five public sector banks in six months, says Secretary Adhia.

4.23 pm: We are happy to announce five key personnels, including Bank of Baroda, Punjab National Bank, IDBI Bank, Canara Bank.

Two of these are from the private sector.

4.22 pm: “We are announcing a seven step program,” says Adhia

4.21 pm: “We believe this will be the most important set of reforms announced since banks were nationalized in 1969,” says Jayant Sinha, before handing over the mic to Financial Services Secretary Hasmukh Adhia.

4.20 pm: This will be a bottoms-up transformation process where banks themselves will make changes in order to transform themselves.

4.20 pm: “We have discussed with all stakeholders: banks, investors, consultants, etc to create our programme.”

4.18 pm: We have announced a number of steps already such as recapitalization, Jayant Sinha says. “But it was important for us to put more resources in the hands of banks to make them more competitive.”

4.16 pm: FM says: We are announcing a policy where each bank will be monitored now on key performance parameters.

As a first step towards bank holding company, we had proposed a Bank Board Bureau and its structure will be announced today.

Some announce with respect to personnel will also be made.

Mic handed over to MoS Finance Jayant Sinha.

4.15 pm: The highway sector is showing signs of recovering, steel faces external problems, for sugar, we have already announced some steps and we are monitoring the situation when it comes to power and discom sectors.

4.14 pm: Steel, power, highways, discoms and sugar sectors have been predominantly responsible for the stress facing PSBs, the FM says. “To resolve the current problem, you need to deal with the banks as well as the sectors themselves.”

4.13 pm: The government is striving to reduce the level of political interference in the commercial working of public banks, the FM says.

4.11 pm: “In the last few years, public sector banks have faced a challening situation, partly on account of slowdown in some sectors. The government has been reviving the health of PSBs. There is no cause for panic,” he says.

“The nature of the problem is such that with some initiatives we’ve taken, it has partly been fixed and is capable of being fixed.”

4.10: Finance Minister Arun Jaitley is now speaking.

4.08 pm: The press conference is about get under way in a few minutes.

4.06 pm: Flashes coming in the government has named its PSB revamp programme ‘Indradhanush’.

4.00 pm: Welcome to the live coverage of the programme where the government is expected to announce a slew of measures to boost the country’s struggling public sector banks.

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