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It is expected the contours for the amalgamation of Bank of Baroda (BoB), Vijaya Bank and Dena Bank would be finalised soon and it would be placed before the parliament for approval in the ongoing winter session. The decision of amalgamation was taken by the Alternative Mechanism’ (AM) headed by Finance Minister Arun Jaitley, which included Railways Minister Piyush Goyal and Defence Minister Nirmala Sitharaman. The government has already set aside the funds to facilitate the amalgamation.
New Big Bank
The new entity from the amalgamation will have a combined business of Rs 14.82 lakh crore, making it the third largest bank after SBI and ICICI Bank.
The net NPA ratio of the new entity will be at 5.71 per cent. This is significantly better than the public sector bank (PSB) average of 12.13 per cent.
The Provision Coverage Ratio (PCR) would be better at 67.5 per cent against the average of 63.7 per cent and cost to income ratio would come down to 48.94 per cent as compared to average 53.92 per cent.
Capital Adequacy Ratio (CAR) at 12.25 per cent will be significantly above the regulatory requirement of 10.87 per cent.
Net NPA Ratio
Net NPA Ratio is an indicator of the overall quality of the bank’s loan book. Net NPA ratio is the ratio of Net NPA to loans given.
Provision Coverage Ratio (PCR)
Provision Coverage Ratio refers to the prescribed percentage of funds to be set aside by banks for covering prospective losses due to bad loans.
Cost to Income Ratio
Cost to Income Ratio is an important parameter to determine the profitability of the banks. It is calculated by the dividing the operating expenses of the bank by the net income of the bank (Interest Income + other Income).
Capital Adequacy Ratio (CAR)
Capital Adequacy ratio is the measure of the bank’s available capital. It is expressed as a ratio of a percentage of a bank’s risk-weighted credit exposures.
The Reserve Bank of India (RBI) has shortlisted six major IT firms to set up a wide-based digital Public Credit Registry (PCR) for capturing details of all borrowers and wilful defaulters. The RBI will now seek request for proposal from the six vendors.
Shortlisted IT Firms
The firms shortlisted by the RBI are TCS, Wipro, IBM India, Capgemini Technology Services India, Dun & Bradstreet Information Services India, and Mindtree Ltd.
Public Credit Registry
Public Credit Registry is a digital registry of authenticated granular credit information and will work as a financial information infrastructure providing access to various stakeholders and enrich the existing credit information ecosystem. It would be mandatory for reporting for all material events for each loan, notwithstanding any threshold in the loan amount or type of borrower to the Public Credit Registry.
The public credit Registry will also allow borrowers to access their own credit information and seek corrections to the credit information reported on them.
Why there was a need of Public credit registry?
At present, there are multiple granular credit information repositories in India, with each having somewhat distinct objectives and coverage. Lack of integrated comprehensive information had become a bottleneck in tackling bad loans. Public credit registry will fill this gap.
Credit Management in India
Within RBI, CRILC (Central Repository of Information on Large Credits) is a borrower-level supervisory dataset that keeps the record of loans of Rs 5 crore and above. In India, there are four privately owned credit information companies (CICs). They are CIBIL, Equifax, Experian and High Mark Credit Information Services. The RBI has also mandated all its regulated entities to submit credit information individually to all four CICs.