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FinMin asks six public sector banks to improve on PCA parameters

Earlier, a Finance ministry official had said all the six banks were expected to come out of PCA over the next two quarters or by June.

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Ministry of Finance

New Delhi, Feb 14 (IANS) The Finance Ministry has asked the six remaining public sector banks, currently under Prompt Corrective Action (PCA), to improve on seven parameters to get the government’s support for coming out of the PCA framework.

“We have told these banks to improve upon net interest margins (NIMs), CASA (current account savings account), RWA (Risk Weighted Assets), NPA recognisation, divergence (disparity in loan recognisation), operating profit and non-core asset selling to be able to get our support for being out of the PCA,” official sources said.

Earlier, a Finance ministry official had said all the six banks were expected to come out of PCA over the next two quarters or by June.

Out of a total of 11 banks put under PCA last year, three have already moved out while another two will merge with a stronger entity. This leaves six in the list of weak banks that also face restrictions on lending.

The recent recapitalization has taken care of the banks’ tier-I core capital requirements. As per Basel III norms, all banks need to meet both risk-based capital minimum Common Equity Tier 1 (CET1) requirement of 4.5 per cent and the target level CET1 requirement of 7 per cent.

The government had infused capital in banks that was used to increase provisions and lower the net NPA ratio enabling RBI to lift restrictions on the three banks – Bank of Maharashtra, Bank of India and Oriental Bank of Commerce.

Breaching net NPA ratio of 6 per cent is one of the conditions that trigger restrictions. The immediate impact of banks under PCA is loan growth is impacted since they cannot lend to below AAA rated corporates.

CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio indicates a lower cost of funds, because banks do not usually give any interests on current account deposits and the interest on saving accounts is usually very low: 3-4 per cent.

Last year, while the government allocated Rs 88,139 crore for bank recapitalization (predominantly through recap bonds), Rs 52,311 crore was allocated to 11 PSU banks under PCA. Since then Bank of Maharashtra, Bank of India and Oriental Bank of Commerce have moved out of PCA and IDBI Bank has been taken over by LIC and Dena Bank is being merged with Vijaya and Bank of Baroda and are by default out of PCA.

The Reserve Bank has specified certain regulatory trigger points as a part of PCA Framework in terms of three parameters — capital to risk weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA), for initiation of certain structured and discretionary actions in respect of banks hitting such trigger points.

Recently, when BoI, BoM and OBC were taken out of the PCA, they were falling short of meeting the RoA norms. But since none of these banks have met the requirement for ‘return on assets’, it appears that the trigger has been diluted.

An official said the norm for RoA as per the PCA rules is that the bank should not make losses for two years straight, but a lot of banks will have to report losses for FY19 as well.

The banks under PCA are Allahabad Bank, United Bank of India, Corporation Bank, UCO Bank, Central Bank of India and Indian Overseas Bank.

Under the PCA, banks face restrictions on distributing dividends and remitting profits. Besides, the lenders are stopped from expanding their branch networks and need to maintain higher provisions. Management compensation and directors fees are also capped.

The recovery plan, as presented by these banks, include cost cutting, reducing branches size, closing foreign branches, shrinking corporate loan book as well as selling risky assets to other lenders.

Business

TikTok threatens legal action against Trump executive order

The company said it will pursue ‘all remedies available’ including going to the U.S. courts.

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Tik Tok

TikTok is threatening legal action against the US after Donald Trump ordered firms to stop doing business with the Chinese app within 45 days.

The company said it was “shocked” by an executive order from the US President outlining the ban.

TikTok said it would “pursue all remedies available” to “ensure the rule of law is not discarded”.

Mr Trump issued a similar order against China’s WeChat in a major escalation in Washington’s stand-off with Beijing.

WeChat’s owner, Tencent, said: “We are reviewing the executive order to get a full understanding.”

As well as WeChat, Tencent is also a leading gaming company and its investments include a 40% stake in Epic Games – the company behind the hugely popular Fortnite video game.

The president has already threatened to ban TikTok in the US, citing national security concerns, and the company is now in talks to sell its American business to Microsoft. They have until 15 September to reach a deal – a deadline set by Mr Trump.

The Trump administration claims that the Chinese government has access to user information gathered by TikTok, which the company has denied.

TikTok, which is owned by China’s ByteDance, said it had attempted to engage with the US government for nearly a year “in good faith”.

However, it said: “What we encountered instead was that the administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.”

The executive orders against the short-video sharing platform and the messaging service WeChat are the latest measure in an increasingly broad Trump administration campaign against China.

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Patanjali chasing profits, exploiting people’s fear: Madras HC

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Baba Ramdev

Chennai, Aug 6 : Coming down heavily on yoga guru Ramdev’s Patanjali Ayurved Ltd for “chasing profits by exploiting people’s fear and panic” to sell its immunity booster tablet Coronil, the Madras High Court on Thursday slapped a penalty of Rs 10 lakh on it.

The court also refused to vacate the interim injunction restraining Patanjali from using the name Coronil for its tablet in a trade mark infringement case.

The case was filed by city-based company Arudra Engineers Private Ltd that had registered the trademarks “Coronil-92 B and Coronil-213 SPL” in 1993 and holds rights over them till 2027.

The company sells an anti-corrosion product – a chemical agent that undertakes to sanitise and clean heavy industrial machinery and containment units at factories.

Apart from Patanjali, the other defendant in the case was Divya Yog Mandir Trust that makes the tablet.

The court order came in the petition filed by Patanjali and Divya Yog to vacate the interim injunction against the use of the name Coronil for its tablet.

The court said: “Insofar as costs are concerned, the defendants have repeatedly projected that they are Rs 10,000 crore company. However, they are still chasing further profits by exploiting the fear and panic among the general public by projecting a cure for the coronavirus, when actually their ‘Coronil Tablet’ is not a cure but rather an immunity booster for cough, cold and fever.”

“The defendants must realize that there are organisations which are helping the people in this critical period without seeking recognition and it would only be appropriate that they are made to pay costs to them,” it ruled.

The court ordered Patanjali and Divya Yog to pay jointly Rs 5 lakh each to the Dean, Adyar Cancer Institute, Chennai and to the Dean, Government Yoga and Naturopathy Medical College & Hospital, Chennai.

In both the organisations, treatment are accorded free of cost without any claim to either trademark, trade name, patent or design, but only with service as a motto, the court said.

“Costs to be paid on or before 21.08.2020, and a memo in this regard, to be filed before the Registry, High Court Madras, on or before 25.08.2020,” it ordered.

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Q1FY21 results: Vodafone Idea loss widens by 422.37 per cent YoY to Rs 25,460 crore

Average Revenue per User (ARPU) dropped to Rs 114 in Q1FY21 as against Rs 121 in Q4FY20.

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Vodafone, Idea

Vodafone Idea Ltd. announced its quarterly results on Thursday post market hours. The company posted a consolidated net loss of Rs 25,460 crore for Q1FY21, which increased by 422.37 per cent, as compared to Q1FY20 when it reported a consolidated loss of Rs 4873.9 crore.

The consolidated net sales reported in Q1FY21 came in at Rs 10,659.3 crore, which declined by 5.42 per cent YoY from Rs 11,269.9 crore in Q1FY20. At EBITDA level, the company stood at Rs 4,098.4 crore in Q1FY21 that increased by 10.28 per cent YoY. For Q1FY20, it posted an EBITDA of Rs 3,716.3 crore.

EBITDA margin as of Q1FY21 was at 38.45 per cent that increased by 5.47 per cent YoY. The net profit margin in Q1FY21 came in at -238.85 per cent, which declined by 195.60 per cent YoY. The net profit margin in Q1FY20 was at -43.25 per cent.

The company recorded exceptional cost of Rs 19,923.2 crore which includes merger related cost, licence fee, spectrum usage charges (SUC) on adjusted gross revenue (AGR).

Average Revenue per User (ARPU) dropped to Rs 114 in Q1FY21 as against Rs 121 in Q4FY20.

Q1FY21 was turned out to be a challenging quarter for the company as availability of recharges due to store closure due to lockdown and ability of customers to recharge on account of economic slowdown were affected.

The share closed with drop of 0.72 per cent at Rs 8.25 on BSE.

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