Merger of BoB, Vijaya, Dena banks in 4-6 months: BoB MD | WeForNews | Latest News, Blogs Merger of BoB, Vijaya, Dena banks in 4-6 months: BoB MD – WeForNews | Latest News, Blogs
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Merger of BoB, Vijaya, Dena banks in 4-6 months: BoB MD

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Merger of Bank

New Delhi, Sep 17 (IANS) As the government on Monday proposed amalgamation of Bank of Baroda (BoB), Vijaya Bank and Dena Bank into the country’s third-largest bank, BoB Managing Director P.S. Jayakumar said it may happen in four to six months.

“Going by past practices, the merger may take four to six months. It can be speeded up also…it depends,” Jayakumar told reporters after Finance Minister Arun Jaitley and Financial Services Secretary Rajeev Kumar announced the proposal here.

The envisaged amalgamation will be the first-ever three-way consolidation of banks in India, with a combined business of Rs 14.82 lakh crore. The combined entity will have a net NPA ratio at 5.71 per cent, better than public sector banks (PSB)’s average of 12.13 per cent.

“With the benefit of scale working in, with greater distribution and more opportunities for products for costumers etc., a reasonable assumption is that there will be good opportunity to come but it is something that will happen in due course,” he said.

The boards of the three state-run banks are expected to meet shortly and consider the government’s proposal and decide the merger ratio and other details of the scheme of amalgamation. The government’s shareholding will be as per the merger ratio.

Financial Services Secretary Rajeev Kumar said the biggest beneficiary of the merger is the amalgamated entity and the banking industry, as it aims to get scale, synergy and reach for the benefit of the customers.

“It is in tune with the sixth largest economy in the world. You need a global reach. Both Dena Bank and Vijaya Bank will get that global reach through BoB and BoB will get a much sounder credit culture in the Vijaya Bank. It’s futuristic where you have large global banks,” Kumar said.

BoB MD and CEO Jayakumar said while it will benefit loss-making Dena Bank, BoB will be benefited by its stronger presence in Maharashtra and Gujarat, and by having more branches in under-represented four southern states.

“BoB brings a huge foreign currency position to the table, technology is there and there are lot of things we are doing in the transformation journey which will be value to them (Vijaya Bank and Dena Bank).

“The new entity will benefit from a better CASA ratio of Dena Bank. The loan book will get diversified more into retail and MSME from a corporate exposure perspective. The loan book of BoB will go up by 40 per cent in the combined entity,” he said.

CASA ratio is the ratio of deposits in current and saving accounts to total deposits. Higher CASA ratio indicates lower cost of funds for banks.

“It is a progressive move and signifies the government’s determination to strengthen the banking sector in the country,” industry body FICCI President Rashesh Shah said.

“This merger will lead to greater operational efficiencies and the entities involved would benefit through a synergistic relationship that would leverage each other’s network, customer base and access to low-cost deposits,” he said.

Though the government has assured there will be no job cuts, Delhi State Bank Workers Organisation General Secretary Ashwani Rana opposed the decision.

“The government’s decision to merge the banks is not correct and the unions oppose it. There is no guarantee that it will benefit the banks, its employees and customers. Also, it is less likely to impact the NPA as was seen in SBI’s case. It will have an adverse impact on the current employees,” Rana said.

The National Organization of Bank Workers (NOBW) also opposes this merger, he added.

Business

Centre suspends fresh IBC proceedings till Dec

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

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Nirmala Sitharaman

New Delhi, Sep 24 : In a major relief for stressed companies amid the pandemic woes, the Centre on Thursday announced the suspension of fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) by three more months till December.

In a gazette notification, the Ministry of Corporate Affairs (MCA) said that the suspension on operation of Section 7, 9 and 10 of the IBC has been extended.

“In exercise of the powers conferred by section 10A of the Insolvency and Bankruptcy Code, 2016, the Central Government has extended the suspension of sections 7,9, 10 of the IBC for a further period of three months,” the Minister of Finance and Corporate Affairs, Nirmala Sitharaman said in a tweet.A

She said that the decision reinforces the government’s commitment to protecting businesses.

“It also gives companies breathing time to recover from financial stress,” she said.

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

Section 7 of the IBC allows initiation of corporate insolvency resolution process by financial creditor, while Section 9 allows operational creditors to file application for initiation of insolvency process by operational creditor.

Further, a corporate debtor who has committed a default, can file for initiation of a corporate insolvency resolution process under Section 10 of IBC.

Although the decision to extend the suspension has brought much-needed relief for business stressed in the midst of the pandemic, sector experts, however, have raised concerns regarding the financial stress it may create once the suspension is revoked.

Sumit Batra, Partner at India Law Alliance, said: “Another extension of three months beyond 25.09.2020 for initiation of bankruptcy against defaulting corporate entities will further aggravate the situation and lead to an unprecedented rise in fresh filing once the suspension is revoked.”

Noting that while the logic of suspension for not being able to initiate proceedings under Section 7 and 9 of IBC, seems justified to an extent that lockdown triggered due to widespread outbreak of Covid-19 affected the paying capacity of the corporate debtors, but “why such a suspension is being imposed for applications under section 10 seems illogical”.

The intent and extent of section 10 petition is to enable the corporate debtor to initiate insolvency against themselves in order to resolve the financial stress in a time-bound manner, Batra said, adding that, therefore, Section 10 petitions should have been excluded from being covered under this suspension.

In a recent debate in the Parliament, Finance Minister Nirmala Sitharaman had defended the decision to suspend Section 10 saying that in view of the economic situation, the companies filing for bankruptcy would not have achieved high valuations and bidding amounts would have been low, thereby not achieving the desired goal.

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Oil Ministry yet to recover $510 mn from contractors under PSC: CAG

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Dharmendra Pradhan

New Delhi, Sep 23 : The Comptroller and Auditor General (CAG) has said that the Ministry of Petroleum and Natural Gas has not recovered $510 million as cost of unfinished minimum work programme (CoUMWP) from contractors in respect of 45 blocks.

The CAG report on Union Government (Economic & Service Ministries-Civil) – Compliance Audit Observations, which includes important audit findings, was presented in the Parliament on Wednesday.

It noted that the government awarded 254 blocks during the New Exploration and Licensing Policy’s (NELP) I to IX rounds for exploration of oil and gas. As per the terms and conditions of Production Sharing Contracts (PSC), contractors are required to pay the cost of unfinished minimum work programme, if the block is relinquished or terminated by government.

However, contractors of 54 relinquished blocks failed to pay the CoUMWP as specified in the PSCs.

“An amount of $510.79 million (Rs 3,652.64 crore), which was 77 per cent of the Ministry of Petroleum and Natural Gas’s (MoPNG) approved amount of $664.67 million (Rs 4,753.03 crore) on account of CoUMWP in respect of 45 blocks still remained unrecovered (September 2019),” the report said.

It added that the CoUMWP for nine blocks is yet to be worked out by Directorate General of Hydrocarbons (DGH) or yet to be approved by the ministry.

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IT Dept ignored land/flat sellers as ‘potential assessees’: CAG

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New Delhi, Sep 23 : The Comptroller and Auditor General (CAG) has said that during financial years 2014-15 to 2017-18, the IT Department did not initiate any action regarding land and flat sellers who could be potential assessees.

The Performance Audit on ‘Search and Seizure Assessments in Income Tax Department’, tabled in the Parliament on Wednesday, said: “The Department did not initiate any action in respect of sellers of land/flat/ commodities pointed out in the respective Appraisal Report, who could be potential assessees. The department also did not confirm whether these were in the tax net of the department and regularly filing returns.”

It also said that there were loopholes and deficiencies in the provisions of the Act in respect of search assessments, mainly relating to absence of specific provisions in the Act and Rules, the report said.

“In respect of certain Groups, 76.5 per cent of additions made in search assessments did not stand the test of judicial scrutiny in appeals at the level of CIT (A)/ITAT,” it said.

The report found that assessing officers (AOs), while finalising the assessments, did not take a uniform stand in making additions on account of bogus purchases, accommodation entries and in adoption of figures of assessed income or revised income.

“The additions were made arbitrarily either on lump sum amount basis or different percentage ranging from five per cent to 50 per cent under similar circumstances without proper justification,” the report said.

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