Robust review before PSU bank chiefs are selected

 BS  Manojit Saha  |  Mumbai  

September 16, 2014 Last Updated at 00:50 IST

Previous govt had selected some for appointment in PSBs to replace many CMDs EDs due for retirement in 2014-15

The Reserve Bank of India (RBI) has begun to review the performance of those appointed to or candidates for the top posts in public sector banks (PSBs).

The move to make the appointment process more robust comes after last month’s arrest of S K Jain, chairman and managing director (CMD) of Syndicate Bank last month, over graft charges. As a result, the authorities have started asking for feedback and not only from the immediate reporting heads and peers.

The previous government had selected some for appointment in PSBs to replace the many CMDs and executive directors (EDs) due for retirement in 2014-15. The present government is now doing a complete review of those selected.

Following Jain’s arrest, the Central Bureau of Investigation (CBI) found irregularities in the appointment process.Finance minister Arun Jaitley had requested both RBI and the cabinet secretary to review the appointment process.

A committee headed by the RBI governor, which includes the financial services secretary of the Union finance ministry, is set up to select the candidates. The committee sends its recommendations to the Appointments Committee of the Cabinet, chaired by the Prime Minister.

CMD posts in four PSBs are already vacant and other vacancies will arise during the financial year. The heads of Bank of Baroda and Indian Overseas Bank have competed their terms and United Bank’s CMD opted for early retirement in February. Jain was suspended following his arrest. Two more CMD posts will become vacant by the end of the month, with S L Bansal of Oriental Bank of Commerce and R K Dubey of Canara Bank completing their terms. Later in the financial year, the top post in Vijaya Bank will also get vacant.

And, a number of ED positions will also become vacant on retirements.

A committee headed by former Axis Bank chief P J Nayak has emphasised a need to make the appointments process in PSBs more transparent. Set up by RBI Governor Raghuram Rajan, it gave a report in May.

At a banking seminar here on Monday, the RBI chief agreed there was a need to change the management appointment process in PSBs, to make it more transparent. The central bank is in talks with the government to improve governance in these lenders, he said.

ET 500: Three Indian billionaires-in-waiting

Jwalit Vyas & Suraj Sowkar, ET Bureau | 16 Sep, 14

With Indian equity markets scaling new highs, the number of Indians on the global billionaires list is also on the rise. Qimat Rai Gupta of Noida-based Havells India and Irfan Razack of Bangalore-based Prestige Estate were recent entrants to the list.

A few more entrepreneurs could soon join them. They are those who started young, had the courage to do things differently and worked hard over the years to build a strong presence in their respective industries.

BHADRESH SHAH, 61
Founder and MD, AIA Engineering

Networth: Rs 5,830 cr


 

A metallurgy engineer from IIT Kanpur, Bhadresh Shah started his company with a small foundry in 1975, and transformed it into a niche manufacturer of high-chromium castings used for mining, cement and quarry industries besides power utilities.

Now with its capacity projected to double by 2015, AIA is on its way to emerging as the world leader in this business, edging past Belgian rival -Mogatteaux .

Its clients include cement giants - Lafarge of France, Holcim of Switzerland, Cemex of Mexico and mining giants Anglo Platinum and Barrick Gold.

Shah's net worth rose 211% in the past one year as demand for his company's products has risen significantly with a revival in the global economy.

Going by target prices given by analysts, it may not be a surprise if Shah enters the billionaires list over the next few days.

PRATHAP C REDDY, 81
Chairman, Apollo Hospitals
Networth: Rs 5,595 cr

A cardiologist, Chennai-based Prathap Reddy turned entrepreneur in 1979, moved by the experience of a young man died after he could not be treated in India and who lacked the resources to go to the US for treatment.

Reddy founded the first Apollo hospital in Chennai in 1979, the first such corporate venture in the field of health care in India and grew it into a chain of hospitals.

This chain now owns 40 hospitals and manages 14 hospitals in India, Sri Lanka, Bangladesh, Ghana, Nigeria, Mauritius, Qatar, Oman and Kuwait treating patients from 120 countries.

With the rising penetration of insurance in the healthcare sector and rapid expansion, Reddy's net worth has more than quadrupled in the past five years to Rs 5,595 crore.

Apollo's success is now a case study in Harvard University.

GEORGE A MUTHOOT, 59
Chairman & MD, Muthoot Finance
Networth: Rs 6,009 cr
The promoter of India's largest gold financing company, George Alexander Muthoot took charge of the business in February 1993, after his father's death.

Muthoot Finance, founded by his father in 1939, had a loyal customer base.

However, under George's leadership, the company has grown multi-fold. In the last five years, its loan book grew by Rs 7,300 crore to close to Rs 21,000 crore now while its branch network more than doubled during the same period.

In the past one year, demand for gold loans was subdued due to a slowdown and stringent regulatory norms.

But with signs of a pick-up, demand is expected to rise from the second half of this fiscal.

In anticipation, the company's stock has surged 82% since the beginning of 2014 and so has George Muthoot's networth.

Book :A tedious exercise in grandstanding

BL 14 Sep 14

Yet another tell-all only ends up being a bore-all. Not even liberal doses of the mean streak give the narrative a life

Now that it is fashionable and, more importantly, profitable to rat on your bosses à la Sanjaya Baru and Natwar Singh, one cannot blame former Comptroller and Auditor General (CAG) Vinod Rai for joining the pack.

And to be fair to someone appointing himself the “nation’s conscience keeper”, the unwavering self-righteousness of this tome is only to be expected.

It is also presumably healthy for accountants to believe they are cleansing the system.

These few noteworthy motives perhaps support the publication of this otherwise inexplicable book. Throughout its excruciating 276-page length, it is difficult to fathom what purpose it serves besides, of course, to amplify the obvious conceit of its author. And settle scores with former Prime Minister Manmohan Singh and his council of ministers, especially Kapil Sibal and Manish Tiwari, people he was clearly not inclined to cross before the Congress got wiped out in elections.

But that is nothing new. Natwar Singh did it in One Life Is Not Enough to some entertaining effect.

If it was to be a stab in the back of his bosses, Manmohan Singh and Congress president Sonia Gandhi, the former foreign minister attempted it with undisguised glee. The result was, at least in parts, an almost inadvertently amusing account.

In the case of former Prime Minister’s media advisor, Sanjaya Baru,’ he wrote The Accidental Prime Minister with a professional hack’s eye for detail and lucid prose which accounted for the book’s rip-roaring success.

Admittedly, Rai’s repertoire is limited and his knowledge of the tools of the writing trade “minimal”. But indifference to language alone cannot explain Rai’s barely concealed meanness that is only offset by the egotism natural to his ilk.

All of it made even more agonising by the tone of piety in his harangue.

Hopeless harangue

Sample him playing judge, jury and executioner to the embattled Manmohan Singh: “Mr Prime Minister, people wonder, if you were indeed convinced that spectrum allocation should be transparent, what prevented you from executing your wishes? Had you, in fact, stood steadfastly by your beliefs, the fate of the UPA II might have been different. In fact, the fate of the Indian economy itself might have been different... Instead, you engaged in a routine and ‘distanced’ handling of the entire allocation process, in spite of the fact that the then communications minister, A. Raja, had indicated to you, in writing, the action he proposed to take…”

After A Raja has repeated similar claims ad nauseam, in court and before the media, is any of this news to anyone?

That also brings me to the more serious question of Rai’s “revelations” which seem to have excited no one except the perennially excitable television anchors and the ruling Bharatiya Janata Party (BJP).

The only novelty

The BJP has since prompted its various ministers to declare that the book confirms everything they ever said about “Air India, coal blocks, 2G, CWG and Jeejaji (son-in-law, a reference to Priyanka Gandhi’s husband Robert Vadra)”.

The only novelty in Rai’s account of 2G, “the biggest scam in the history of Independent India”, besides attacks on the former Prime Minister and his various ministers, is his exhaustive defence of the staggering sum of ₹1.76 crore he computed to be the presumptive loss to the exchequer in the allocation of 2G Spectrum.

This is the figure that stuck, defined the dominant political discourse, and is generally believed to have caused the political downturn of the Congress-led UPA II.

Rai is at pains to explain his computations, albeit without much success as his own conclusions show.

“In computing presumptive losses, we have clearly stated that while the fact of loss to the national exchequer can hardly be denied, the quantum of loss can be debated. We sincerely believe that the government itself validated our computations by debating the loss – from the now famous ‘zero loss hypothesis’ to the Rs. 32,000 crore mentioned by the CBI,” he says.

The spice route

So, was the figure of ₹1.76 crore valid? Anyone?

After wading aimlessly through the 2G quagmire, Rai decides to spice up the narrative somewhat. Chapter VII is titled ‘The Punjabi Wedding: Commonwealth Games 2010’. Here, Rai turns to philosophy and the question of truth and justice: “It will be a great travesty of justice if the big fish get away and only some lowly engineers and officers land up in the CBI net…”

The theme of learning from past experiences runs through coal block allotment scam, the gas exploration deals and describing the civil aviation ministry’s role in running Air India to the ground. The problem is that besides the author’s self-righteous indignation, there’s nothing in the book that his target audience doesn’t already know.

But Rai clearly wants to convince a wider audience about his crusader status, a role he has taken to playing with regularity on TV and newspapers.

It also helps to have an easy mark if one is playing the sharp-shooter.

Admittedly, Manmohan Singh and his former team are eminently deserving of such target practice.

But given that this follows a spate of better written and more insightful attacks at the former regime, the law of diminishing returns blunts the edge of this particular offensive.

The cause of the ‘conscience keeper’ would have been better served if he had restricted his literary ambitions to account books.

MEET THE AUTHOR

Vinod Rai was the Comptroller and Auditor General of India who has brought about a paradigm change in the institution. He has served over 34 years in various capacities at the State and Central levels. Rai lives in New Delhi

In a tight spot, bank on your FD

BL 14 Sep 14

A loan against your FD carries lower interest rates than a personal loan and comes without processing fees

Personal loans are not the only way to meet your short-term financial needs. If you have been conscientious and put away money in fixed deposits (FDs) periodically, consider a loan against your FD. Here’s why.

Lower rates

The biggest benefit is that a loan against FDs comes at a much cheaper rate than a personal loan. Usually, banks charge an interest rate between 2-3 per cent over-and-above the FD’s interest rate. If you take a personal loan, the interest rate can even cross 20 per cent.

With the highest bank FD interest currently at 9.3 to 9.4 per cent, your FD loan rates will be cheaper by a mile.

For example, ICICI Bank and HDFC Bank offer a maximum of 9 per cent interest on their FDs. Axis Bank offers 9.2 per cent. So, in these cases, your interest rate on the loan against FDs could be capped at 12-12.2 per cent.

On personal loans, ICICI Bank charges 13.5-18 per cent, while HDFC Bank charges 15.75-20 per cent. And at Axis Bank, the interest rate can vary between 15.5 per cent and a high of 24 per cent.

The nitty-gritty

The quantum of loan that can be availed on an FD varies across banks, usually at 70-95 per cent of the principal and the interest accrued on your FD.

For example, public sector banks such as the State Bank of India and Canara Bank offer up to 90 per cent. On the other hand, HDFC Bank offers only up to 75 per cent of the deposit value.

It doesn’t matter what type of FD it is; you can get a loan against FDs of any tenure. You can even get a loan against a tax-saving deposit. The only criterion, in some cases, is that the FD should have completed and earned interest for at least three months.

It’s not just banks you can turn to for such loans. Non-banking financial companies (NBFCs) also offer loans against FDs. But with NBFCs, the quantum of loan offered is on the lower side compared to a bank.

Most NBFCs offer only up to 75 per cent of the present value of your FD. For example, Dewan Housing Finance offers 75 per cent of the value as loan amount. In the case of Mahindra Finance, it can start from 60 per cent and go up to a maximum of 75 per cent.

Payments

While a personal loan is given for a fixed tenure, there is no fixed period for loans against FD. In general, the period of your FD is the maximum tenor offered for these loans.

That is, if you have invested in a five-year deposit and are taking a loan at the end of the second year, the remaining three years will be the maximum period that would be available for you to repay the loan.

The mode of repayment is decided mutually between you and the bank at the time of taking the loan. You can either pay it back as equated monthly instalments, or the entire loan amount plus the interest can be deducted once the FD matures. Any remaining amount left in the deposit after such deduction will be paid back to you.

Then there’s Mahindra Finance, which has other options. One, you can pay just the interest on the loan every month and the entire principal would be deducted once the FD matures. Or you can opt for a payout after deducting both the principal and the interest amount at the time of maturity.

There is no pre-payment penalty either. Your FD will continue to earn interest during your loan period as well.

Pros and cons

While you have your choice of banks to get a personal loan at the best rate, for a loan against an FD, you are restricted to the bank or NBFC in which you have the deposit.

The drawback of a loan against FD is that the amount of loan you can take is capped.

And if your bank requires a higher margin, your loan amount will be reduced to that extent. If you have invested small amounts in multiple FDs across banks and need a big amount as loan, then approaching all these banks is a hassle.

However, the loan sanctioning process is simpler as all your details are already with the bank. This is the main reason why most banks do not charge any processing fee. Personal loans have a processing fee.

Bank fined Rs 2 lakh after glitch causes card to act up

Manish Raj, TNN | Sep 15, 2014, 01.31AM IST
CHENNAI: A student pursuing a postgraduate course at a foreign university could not pay his fees because of several failed bank transactions. Eight years after he moved the state consumer disputes redressal commission, it has fined a bank 2 lakh for deficiency in services. 

In his submissions to the commission, R Sivakumar of Adyar said his son studied at the University of Leicester. Sivakumar had availed a 'world currency card' from IDBI Bank that allowed the card holder to use it abroad for payments. He had given the card to his son. 

His son was solely dependent on the card for withdrawing cash and making payments. On October 17, 2005, he used the card at the university to pay around 588 pounds for his accommodation fees. But the transaction was declined. He made two more attempts which were declined. Despite the failed transactions, around 1188 pounds was debited from the account. Due to the failed transactions, he could not pay the fee on time. 

After informing bank officials, the amount was debited back in his account after 10 days. Sivakumar said during this period his son "lost his credibility for not paying the fee within time," and was put to "mental agony and indignity." 

IDBI Bank said the bank "duly honoured" the transactions but the merchant establishment (acquirer bank) declined it. "The case of rejection would arise when there is insufficient amount...In this case, the account had enough fund and all three transactions were honoured," said IDBI Bank. Also, after receiving the dispute form, it had credited the amount in the account, it said. 

The bench of presiding judicial member J Jayaram and member S Sambandam said the argument that the acquirer bank being at fault was "untenable." Despite explanations submitted by IDBI, deficiency in service was "patently evident." 

It then directed IDBI Bank to pay the compensation for "monetary loss, loss of reputation and credit worthiness..." along with 10,000 as case costs.

Airtel to join Google’s Android One plan

BL 14 Sep 14

 

Telecom operators, including Bharti Airtel, and e-commerce firms such as Flipkart and Amazon, are expected to be part of Google’s Android One devices strategy, which will be unveiled today.

Airtel is expected to offer free data plans bundled with handsets, adding to Google’s efforts in making mobile Internet more affordable.

The devices will be marketed by Micromax, Lava and Spice. The handset makers will sell the devices exclusively through e-commerce sites, such as Amazon and Flipkart.

Low-cost smartphones

Google had first talked about the Android One strategy in June. The Internet giant’s objective is to make quality smartphones at lower costs for emerging markets. It has picked India to launch these devices first as the smartphone market here is growing at a record pace.

While the phones are expected to be priced below ₹6,000, the tie-up with Airtel will ensure tariffs do not hinder Internet access.

Under the Android One programme, handset brands will be given a standardised hardware and software design, which until now was available only on expensive phones. Users will also get faster updates of the operating system.

One of the biggest criticisms of Android has been the lack of standards at the lower end. But with the Android One programme, device makers will make phones with minimum specifications.

Google is also bringing multi-lingual capabilities on the devices to enable users from different parts of the country use text or Internet browsing in local languages.

How Google benefits

The Android One plan will help Google reach the next billion users. The more users it gets for its services built into smartphones, the more its ad revenues will rise. Other Internet companies such as Facebook are also strategising to enable cheaper data access.

For instance, Facebook has the Internet.org platform under which it is partnering with telecom firms, device makers and developers to make Internet services affordable. In India, Facebook is offering free access even to users with feature phones.

According to research firm IDC, smartphone sales in India grew almost three-fold to over 44 million in 2013. In the second quarter of 2014, 18.42 million smartphones were shipped. Though Samsung is the leader with 29 per cent market share, Micromax (18 per cent), Karbonn (8 per cent) and Lava (6 per cent) are closing in. The Android One devices could propel the Indian brands further up in the market.

While Android is the dominant OS, the challenge could come from newer platforms such as Firefox. Intex recently launched a phone with the Firefox OS, for ₹2,000. It will be interesting to see how Google responds to this challenge.

Aravind Sitaraman quits Cisco after 18-year stint

BL 15 Sep 14

Aravind Sitaraman, President – Inclusive Growth, Cisco Systems, has ended his 18-year stint with Cisco and will leave the company on September 20.

Sitaraman said he plans to work with start-ups in Bangalore, Pune, Chennai and Hyderabad, and advise them on technology strategy.

“It is my fond hope that before I die, we can create the next Cisco, Microsoft, Facebook or Google out of India. I want to empower start-ups to be able to achieve technology excellence that can propel them into that space. I have been approached by start-ups across the country, who want me as their technology advisor and on their Board and I will be happy to start working with them,” Sitaraman toldBusinessLine.

He will also be working with universities in Bangalore and Pune to create entrepreneurs and successful start-ups. “I will be working with the universities to try to create a unique model of entrepreneurship in India,” he said.

A computer scientist with over 29 years of experience, Sitaraman was one of Cisco Systems’ leading inventors, with 57 patents. As the Managing Director of the Cisco Development Organisation, he managed the company’s R&D activities in India from 2007-09.

He sponsored the Innovation Hub to incubate new technologies and in 2009, started the Emerging Countries Solutions and Services Business Unit.

He led Cisco India’s CSR efforts and launched several successful programmes, including ‘Feed-a-Child’ and ‘Adopt-a-School.’ He rehabilitated tsunami victims in South India, helped flood relief efforts in Karnataka in 2009, and became the Executive Sponsor for Project Samudaya, a volunteer-led programme to rehabilitate villages through technology and build 3,323 homes, one hospital and two schools.

In October 2010, he was appointed President, Inclusive Growth. Recognising his social contribution, the Karnataka Government conferred on him its highest civilian decoration, the Rajyotsava Award, in 2012. Sitaraman led a team of 15-20 engineers and sales staff in his role as President, Inclusive Growth.

Asked if the inclusive business unit was being disbanded, given the company’s moves to restructure operations, he said: “Not at all. Inclusive Growth will be absorbed under a different business unit and will continue its good work.” However, Sitaraman declined to say which business unit.

During the company’s earnings call last month, John Chambers, CEO of Cisco Systems, announced that FY15 will see restructuring actions that will impact up to 6,000 employees or about 8 per cent of Cisco’s global workforce.

Top CEOs Name Their Favorite Books - Part -3

ExxonMobil CEO Rex Tillerson: "Atlas Shrugged" by Ayn Rand

Tillerson — chief executive, oil king, and maker of $28 million a year — lists "Atlas Shrugged" as his favorite book.

He's one of many powerful people, including Paul Ryan, to name the book as a fave, which might not be too surprising considering its content.

"If you're not familiar with the novel, it depicts a world where corporate CEOs and one-percenters are the selfless heroes upon which our society depends," Salon writes, "and basically everyone else — journalists, legislators, government employees, the poor — are the villains trying to drag the rich down out of spite, when we should be kissing their rings in gratitude that they allow us to exist."

While it's certainly a thought-provoking text, we question some of its business advice.

IMAX CEO Richard Gelfond: "Life" by Keith Richards and James Fox

Widescreen exec Gelfond loves the autobiography of Rolling Stones guitarist Keith Richards — a memoir full of drug busts and rock and roll.

"The guy's had an incredibly eclectic and interesting life that no one else has ever lived," Gelfond said

BI 14 Sep 14