The Government of India announces details of Bank recap and Comprehensive Reform Plan

In order to improve the performance & image of PSBs, Govt has introduced EASE in a time bound manner. Infusion of capital depended exclusively on the extent of implementation of these reforms agenda in banks. It is therefore imperative for banks to implement these reforms agenda unfailingly.

On 24^th January 2018 the Government of India unveiled details of the re-capitalisation of Public Sector Banks (PSBs) announced in October, 2017. The capital infusion plan for 2017-18 included Rs.80,000 crore through Recap Bonds and Rs.8,139 crore as budgetary support. This plan addressed regulatory capital requirement of all PSBs and provides a significant amount towards growth capital for increasing lending to the economy.

The six key groups have provided suggestions for responsible and responsive banking, enhanced credit offtake, MSME lending, deepening financial inclusion, and NPA resolution. The Reserve Bank of India has said in its Financial Stability Report (FSR) that the gross NPA ratio of all scheduled Commercial Banks (SCBs) may increase from 9.6% in March 2017 to 10.2% by March 2018.

The Central Government was of the view that it cannot go on infusing capital in state-run banks while lenders continue to function the way they have. The recap was to be accompanied by a strong reforms package across six themes incorporating 30 action points.

The reforms agenda was based on the recommendations made at the PSB Manthan held in November, 2017 involving senior management of PSBs and representatives from Government.

The reform agenda was aimed at EASE - Enhanced Access and Service Excellence, which was focussed on six themes as under:

- Customer responsiveness,
- Responsible banking,
- Credit off take,
- PSBs as Udyami Mitra,
- Deepening financial inclusion & Digitalisation and
- Developing personnel for brand PSB.

The overarching framework for the reforms agenda is “Responsive and Responsible PSBs”.

Capital infusion by the Government was contingent on performance of PSBs on the reform. Whole Time Directors of PSBs would be assigned theme wise reforms for implementation. Their performance in this regard would be evaluated by the bank Board.

A survey by an independent agency in respect of EASE would be conducted to measure public perception about improvements in access and service quality. Results of the survey shall be made public each year.

The recap & reform agenda was sharply focused on strengthening PSBs, increasing lending to MSMEs and making it easier for MSMEs and retail customers to transact as well as significantly increasing access to banking services. It includes a commitment to banking services within 5 kms of every village, refund within 10 days of any unauthorised debit in electronic transactions, a mobile App for locating banking outlets and a mobile ATM in every underserved district.

(Source: https://pib.gov.in/newsite/PrintRelease.aspx?relid=175850 & Economic Times :https://economictimes.indiatimes.com/industry/banking/finance/banking/govt-ties-recapitalisation-of-public-sector-banks-to-action-on-reforms-agenda/articleshow/62329300.cms)

Following is the EASE Reforms Agenda as announced by the Government to be complied with:

The 30 action points have to be necessarily implemented by banks without any exception. All staff members should be aware of these reform agendas. Based on the extent of implementation of these action points, banks would be rated. Proper implementation of these action points would get the Banks good ranking. Hence Banks should endeavour to get good rating. An external agency, BCG had been appointed for the purpose by IBA.

ACTION POINTS FOR BANKING REFORMS

CUSTOMER RESPONSIVENESS

AP- 1. EASE for customer comfort:

1. Banking from home and mobile to progressively make brick-and-mortar branch visits redundant:

Promote digital banking, such as Internet banking, mobile banking, integrated mobile apps and phone banking for EASE of opening accounts and fixed deposits, nomination, sanction of overdraft facility, online loan application, e-payments, return preparation, etc.

2. Simplification of forms:

(a) Maximum two pages for KYC, and two pages for account-opening (inclusive of nomination, Form 60/61, and all other services)

(b) Online forms with auto-filling of information already held by bank, and likely default entries (e.g., current address same as permanent address)

3. Suite of financial services for one-stop access to customers, including banking-plus services such as insurance and investment:

(a) Board-approved plan

(b) Implementation, with partnerships and skilling of personnel

4. Pleasing ambience of customer service area, with proper seating, uncluttered urroundings, cleanliness, proper whitewashing and painting, etc.

5. Courteous & smartly attired staff: Bank-approved code of customer interface

6. Basic customer amenities :

Customer access to clean toilets and safe drinking water.

7. Uniform and attractive signage for customer assistance in languages as per RBI’s instructions

AP- 2. in grievance redressal :

8. System-driven grievance redressal mechanism with—

(a) real-time complaint status tracking by complainant;

(b) time-bound auto-escalation, compliant with time limits laid down by RBI;

(d) root cause analysis and effective action on common grievances to avoid recurrence

AP- 3.EASE for senior citizens and the differently abled:

9. Doorstep banking

10. Preference in service, or dedicated counters

11. Free cheque-book issuance, without visit

12. Online update of pension life certificate

13. Automatic benefits of senior citizens accounts

14. Visually handicapped may withdraw through authorised person

15. Providing TDS exemption forms proactively

AP- 4. Introduction of EASE Rankings on customer EASE:

16. Annual EASE Ranking survey to measure banks’ customer-responsiveness, assessed on all items, through customer survey and objective measurement

EASE Ranking Index to be to be published annually.

RESPONSIVE BANKING

AP-5. Creation of a Stressed Asset Management Vertical (SAMV):

17. (a) For focussed recovery efforts through a dedicated, specialised and motivated team for enhanced and timely recovery, under a Board approved policy delineating its scope, roles and responsibilities

(b) Appropriate staffing, with incentive structure linked directly to benchmarked enhancements in recovery levels

AP-6. Clean corporate lending through rigorous due diligence and appraisal for sanction:

(a) Ensure that necessary regulatory clearances/approvals are in place, and appropriate backward and forward linkages are tied up before disbursement

(b) Scrutinise group balance-sheet and ring-fencing of cash flows

(d) Initiate process for use of technology and analytics for comprehensive due diligence across data sources

(e) Lead banks in consortium to build capacity for techno-economic valuation, and their consortium banks to build requisite capacity to validate/assess such valuation

AP-7. Tie-up with Agencies for Specialised Monitoring (ASMs) for clean and effective post-sanction follow-up, on common engagement basis in case of consortium lending, for :

19. (a) aspects requiring domain expertise (e.g., inspection and stock audit); and

(b) large credit exposures (say, above Rs. 250 crore) and exposures of a specialised nature.

AP-8. Institute efficient practices for effective coordination in large consortium loans:

20. Observe a minimum threshold for participating in consortium loans (say,10% )

21. Adopt an SOP for the valuation process in consortium loans to synchronise date, periodicity and methodology of valuation, supported by online mechanism for sharing among consortium members

22. Model SOP for coordination among Joint Lenders’ Forum (JLF) members

AP-9. Strict segregation of pre- and post-sanction roles & responsibilities & for enhanced accountability:

23. (a) Board-approved policy for strict segregation of roles and assignment of responsibilities for appraisal, monitoring and recovery

(b) Identification, training and placement of staff

AP-10. Differentiated Banking Strategy (DBS) thr ough smaller banks & to leverage their competitive advantage for strong regional and market segment connect, covering Board-approved:

24. (a) business plan, including asset swap/sale plan to achieve desired risk weighted asset mix, with limited corporate exposure (about 25% of total risk weighted assets) and initial reduction of corporate exposure share by Mar 2019 to below 40% or by at least 15% from Sep 2017 level;

(b) branch network rationalisation plan; and

Illustrative categorisation:

• National retail banks, &

• Regional retail banks

AP-11. EASE through transparent and robust One-Time Settlement & (OTS)mechanism, for timely and better realisation through an online OTS platform

25 (a) End-to-end processing, till repayment or recovery in case of nonadherence to OTS; and

(b) Automated escalation and monitoring.

Furthering Financial Stability

AP-12. Check aggressive and imprudent lending through proactive, dynamic & systemic risk management :

26. Institute and implement Risk Appetite Framework for a structured approach to manage, measure and control risk, with following features:

(a) Cover policies, processes, controls and systems for both material and reputational risks

(b) Include a risk appetite statement, risk limits, and outline of roles and responsibilities of those overseeing implementation and monitoring

27. Institute and implement Risk Based Pricing for pricing loans, keeping in view risk-adjusted return

28. Appointment of Chief Risk Officer with requisite skills, having direct reporting lines to the MD & CEO / Risk Management Committee of the Board

29. Stress-testing to be carried out semi-annually, as per RBI’s Stress Testing Guidelines, for eight quarters, and report of the results to be presented to the Board, with particular attention to:

(a) concentration exposures at the borrower, group and sector levels, and

(b) contingency plans under the stress-test scenarios.

AP-13. Monetise realisable value from sale of non-core assets to strengthen the bank and focus on core business, as per asset-wise, time-bound Board-approved plan for:

30. (a) Exit from all ‘s trategic equity investment’ in unrelated businesses and sale of all real estate not used for bank operations; and

(b) Divestment of stake for optimal realisation of value in viable complementary businesses.

AP-14. Rationalise overseas operations with in and across PSBs for cost efficiencies and synergies in overseas markets:

31. (a) Based on competitive strength and viability

(b) Draw up Business-Unit-wise Board-approved plan, for time-boundclosure/ consolidation as per due procedure, to:

(i) Close non-viable branches;

(ii) Consolidate operations in the same geography, taking into account operations of other PSBs; and

(iii) Consolidate equity stake in joint venture having multiple PSB partners.

Ensuring Outcomes – Governance

AP-15. Board-approved strategic vision and business focus plan for five years , consistent with its Risk Appetite Framework and, where applicable,

30 Differentiated Banking Strategy

AP-16.Boards to evaluate performance of Banks’ Whole Time Directors

31. reporting to the bank chief executive on implementation of the Reforms Agenda

CREDIT OFF-TAKE

AP-17. EASE for the borrower:

32. Online application facility for home, education, vehicle and other personal loans, with 100% processing on automated basis, for timebound decision-making and transparent status-tracking

33. Digitalise non-retail credit appraisal process on end-to-end basis

34. Step up cash-flow financing substantially

35. Rationalise decision-making layers: maximum three layers

AP-18. Proactive reach-out to borrowers:

36. Dedicated feet-on-street — as against reliance on branch-based reach-in

37. Broad-base bank’s business-connect:

(i) Institute credit-plus services for handholding borrowers for improved access to finance as a result of enhanced bankability of proposals

(ii) Reach-out to entrepreneurs, in association with chambers of commerce and industry associations

AP-19. Strategy plans for key industry-based market segments:

38. Board-approved plans for key industry-based market segments:

(a) Differentiated products and services

(b) Development of industry-wise technical expertise

PSBs AS UdyamiMitra FOR MSMEs

AP-20. EASE of bill realisation for MSMEs:

39. Registration of all banks on TReDS platform for faster bill discounting

AP-21. EASE of financing for MSMEs:

40. Board-approved policy for enhanced working capital to GSTregistered MSMEs, and its roll-out

41. Enable MSME financing through cluster-based financing and FinTech:

(a) Substantially step up cluster-based lending

(b)Improve due diligence, better risk assessment and faster turnaround through FinTech (financial technology innovation for business transaction)

42. Time-bound and automated processing of MSME loan proposals, including—

(a) 15-day decision timeframe for proposals on www.udyamimitra.com, and

(b) online application facility and automated decision for all micro-enterprise

Loans

AP-22. Single-point MSME Relationship Officers:

43. Designated single-point MSME Relationship Officers for the top-20 MSME

accounts in every MSME-Specialised Branch (total 3,319 branches across

PSBs)

AP-23. Revival Framework for stressed MSMEs:

44. Identification of all SMA-1/2 MSME accounts needing help through the Revival Framework in every MSME-Specialised Branch

45. At least two meetings of the Framework Committee to be held by Mar 2018 to take up all identified cases

Deepening Financial Inclusion & Digitalisation

AP-24. EASE through near-home banking:

46. Banking Outlets within 5 km of every village as approved by State Level Bankers’ Committees

47. Most branch-based services through Bank Mitras for branchless banking

48. Mobile ATM in every under-served district by the district lead bank, with pre-announced programme of availability to customers at various locations

AP-25. Social security through microinsurance:

49. Massive expansion in microinsurance coverage by tagging with MSME, agricultural and other retail loan disbursements to cover borrowing individuals & employees of borrowing entities, under Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana

AP-26. EASE through digital payments:

50. RuPay debit card issuance to all Pradhan Mantri Jan Dhan Yojana accountholders

51. Aadhaar-seed all operative current & savings accounts, as per Prevention of Money-Laundering Rules

52. Enable Aadhaar-seeding through OTP on mobile

53. Massive expansion in Aadhaar-enabled payment Points of Sale through BHIM-Aadhaar devices, as per bank-wise target for deployment of 20 lakh devices

AP-27. Customer protection against cyber-frauds:

54. Ensure credit-back against unauthorised debit in electronic transaction, within 10 working days, of notification by customer, as per mandated norms

55. Real-time alerts for customer protection through data analytics, process automation and intelligent monitoring

56. Free customer-level security updates for apps and Internet-based utilities

Developing Personnel for Brand PSBs

AP-28. Reward select top-performers identified through a Performance Management System (PMS):

57. Performance Management System (PMS) based policy for rewarding select top-performers, approved by the Board, covering:

(a) classification of roles as measurable and non-measurable;

(b) objective grading framework that distinguishes top performers; and

58. Incorporate with PMS, end-to-end digitised Annual Appraisal Reports of all staff, covering both filing and assessment, beginning with the performance appraisal for 2018-19

AP-29. Specialisation through job families—Appropriately identify and

59. optimally allocate personnel to enable:

(a) identification of roles for each job family;

(b) obtaining of options; and

AP-30. Mandate annual role-based e-learning programme for all officers and a fellowship & training programme for senior executives :

60. (a) Assign weightage in appraisal for e-learning programme

(b) Develop e-learning role-based lessons with randomised, variable question bank for evaluation, and lay down minimum number of online lessons to be successfully completed annually

training programme

Report Card promised on Public Sector Bank Reforms Agenda was released by Finance Minister Late Shri Arun Jaitley on 28^th February 2019

Key Highlights:
-           Independent EASE Report validates 4R strategy & confirms banking turnaround;
-           EASE Index measures & benchmarks reform progress of each PSB on 140 metrics;
-           Team PSB delivers on Reform Agenda across all six themes: 15% rise in 3 quarters;
-           Big strides in Clean Banking — 26% rise in Responsible Banking EASE Index score

Subsequent to the announcement of EASE Reforms Agenda, BCG was onboarded through IBA to design methodology for objectively measuring performance of each PSB on the Reforms Agenda. A steering committee comprising select WTDs of PSBs, under the aegis of Indian Banks’ Association (IBA), has monitored the design and implementation of EASE Reforms Index.

The independent report was commissioned through Indian Banks’ Association and authored by BCG with Forrester Inc., Kantar IMRB and TransUnion CIBIL as knowledge partners. The report confirmed the effectiveness of Government’s 4R’s strategy in securing banking turnaround, with large 26% Index gain in Responsible Banking underpinning clean banking, and measurable progress in all six Enhance Access & Service Excellence (EASE) reform themes over the three quarters ending December 2018.

The Index measures performance of each PSB on 140 objective metrics across 6 themes and provides all PSBs a comparative evaluation showing where banks stand vis-à-vis benchmarks and peers on the Reforms Agenda. The Index follows a fully transparent scoring methodology, which enables banks to identify precisely their strengths as well as areas for improvement.

The report validates government’s 4R’s strategy and its role in fundamentally rebooting Public Sector Banks. The index and report unveiled today provides insights into how public sector banks are effectively addressing NPA problem. The report shows visible progress made on each of 4 elements of Government’s 4R’s strategy including recognition, recovery, recapitalisation and reforms.

EASE report shows significant improvement in PSB performance on the back of Government’s 4R’s strategy –

Stress recognition almost complete: Standard restructured advances as a percentage of gross advances reduced from 7% in Mar-15 to 0.5% in Dec-18
GNPA trend reversed: GNPA reduced by Rs 31,168 crore, GNPA ratio have started declining after peaking in Mar-18 and has declined for three successive quarters post Mar-18.
Record recovery: IBC has led to record recovery- Rs 98,493 crore recovered by PSBs in first nine months of FY19, YOY growth of 103%.
PSB balance-sheet strengthened: PSB balance sheets strengthened through infusion of Rs 3.19 lakh crore including infusion by Government and market raising. This has helped five banks to come out of PCA restrictions and improve PCR from 46% in FY15 to 69% in Dec-18 leading to reduced risk.
Stress indicators improving: Fresh slippages reduced by Rs 58,000 crore in first nine months of FY19 compared to same period previous FY, Stock of overdue account reduced by 47%, credit risk weighted assets to gross advances reduced by 11%.

Reforms: Multiple reforms implemented covering wider financial system and PSBs.

CLEAN Banking

EASE index tracks multiple steps are taken by PSBs to institutionalise CLEAN banking and avoid recurrence of NPA problem in future. This includes limiting consortiums to smaller efficient groups, special agencies for monitoring large loans, rationalisation of unviable overseas operations, strong risk appetite framework, focus on strong credit appraisals.

Smart Banking

PSB Reforms EASE Agenda lays strong emphasis on speedy and responsive customer service with an objective to drive SMART Banking. EASE Index shows that PSBs are significantly driving SMART Banking and initial results of the reforms are visible

SMART Banking leading to usage of triangulated data and risk minimisation

Diligence across data sources, process digitilisation and analytics enabling robust underwriting, Fraud risk mitigation, Credit process compliance, and importantly customer ease.

PCA banks show 30% improvement in responsible banking theme of EASE Index

Underlying causes of weakness in PCA banks getting substantially addressed

6 banks without Stressed Asset Verticals fully operationalised SAMV
Recovery of Rs 35,405 crore in three qrtrs (72% YoY growth)
Corporate exposure reduced from 49% in Mar-18 to 40% in Dec-18 as per focus segment strategy

EASE Index: Sustainable Reform ingrained in PSBs

The Index provides all PSBs a comparative evaluation showing where banks stand vis-à-vis benchmarks and peers on the Reforms Agenda. The Index follows a fully transparent scoring methodology, which enables banks to identify precisely their strengths as well as areas for improvement. Through periodic updates and by providing bank-specific scorecards and inter-bank comparisons, all PSBs are enabled to keep track of their progress on key reform priorities across time. The goal is to continue driving change by spurring healthy competition among PSBs and also by encouraging them to learn from each other.

The number of initiatives under progress in each PSB concern different departments and are at different levels of progress. EASE Reforms Index provides a robust framework to track the progress of reforms not only across the PSBs but also within the PSBs. The methodology of EASE Reforms Index is shared transparently with PSBs. They can leverage the same and can create customised index for tracking reforms based on bank’s priorities, set up centralised teams to comprehensively drive EASE Reforms Agenda and link performance metrics of concerned employees to achievement on metrics covered in EASE Reforms Index. With this, the EASE Reforms will get ingrained further and will catalyse PSB performance on multiple dimensions.

Performance of PSB on EASE Index

PSBs have shown strong trajectory in their performance over 3 quarters post the launch of EASE Reforms Agenda. Overall score of PSBs increased by 15% between Mar-18 and Dec-18 with average score of PSBs improving from 56.3 to 64.5. Significant progress is seen across themes, with highest growth being in Responsible banking.

Some of the key areas with strong progress across themes are:

§ Responsible Banking: PSBs strengthened large credit appraisal, monitoring, recovery processes and improved their risk management and capital management practices.

Developing personnel for brand PSB: PSBs initiated roll out of Job-families, deployed online learning platforms, increased measurability in appraisals, etc.
Deepening FI and digitalization: PSBs ensured Bank Mitras remain active, widened their bouquet of services, focused on improving adoption digital transactions, improved Aadhaar / mobile seeding
Credit off-take and PSB as UdyamiMitra for MSMEs: PBSs reduced loan processing time in retail, focused on revival of stressed MSMEs, drove adoption of TReDS, and deployed dedicated marketing teams & relationship managers, etc.
Customer responsiveness: PSBs focused on improving customer satisfaction, identifying and reducing complaints in top-5 complaint categories, reducing complaint resolution time.

(Source: Press Information Bureau, Government of India, Ministry of Finance dt 28-February-2019)

EASE 2.0 scheme: Comprehensive public sector bank reform on the cards

A host of measures are on the cards for transformation of public sector banks (PSBs). While consolidation topped the agenda, a list of directions was separately worked out for state-owned lenders to focus on risk assessment, enhanced early warning signals in cases of stressed assets and bringing in new fintech players.

PSBs have already been asked to carry out an internal assessment for shortlisting ideal candidates for possible mergers or acquisitions. In this direction Mega Merger of 10 Banks into four has already been announced in August 2019 after which the total no. of Public Sector Banks shall come down to 12.

The new performance parameters that may be introduced this year through the EASE programme include more stringent early warning signals (EWS) to tackle stressed assets, effective coordination in large value loans and bringing in new financial technology players to deepen financial inclusion and digitalisation.

Another suggestion is to reconstitute the management committee of the board which takes decisions on large value loans and have representation from risk management.

Separately, the Banks Board Bureau (BBB) has selected around 80 chief general managers (CGMs) from all PSBs who will be trained in globally acclaimed management institutes such as the Kellogg School of Management in the United States. “This is to create a pipeline for future heads in PSBs and also to address the knowledge gap in key functioning areas of banks.”

(Source:https://economictimes.indiatimes.com/industry/banking/finance/banking/psb-reforms-via-ease-2-0-scheme-on-the-cards/articleshow/69450858.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst)

SEVERAL ADMINISTRATIVE REFORMS ANNOUNCED are:
>> Bank managements made accountable to boards
>> Bank board committees to appraise performance of GM and above, including that of MD
>> Bank boards given the flexibility to introduce CGM level as per business needs
>> Span of control made manageable in large PSBs, post consolidation.
>> Banks will recruit chief risk officers from market to market-linked compensation to attract best talent
>> Boards will decide system of individual development plans for all senior executive positions
>> To ensure sufficient tenure, boards given flexibility to prescribe residual service of 2 years for GM and above
>> Flexibility given to boards of large public sector banks to enhance sitting fees of non-official directors
>> Boards given the mandate to reduce/rationalise board committees for better functioning
>> Risk management committees given the mandate to fix accountability for compliance of risk appetite framework
>> Longer terms given to directors on management committees of boards to enable them to contribute effectively
>> MCB loan sanction thresholds enhanced by 100% to enable focussed attention to higher value loan proposals
>> Non-official director's role made analogous to that of independent director
>> Bank boards given the mandate for training of directors, both for induction and for specialised purposes
>> Bank boards to evaluate non-official directors (NOD) performance annually on peer-review basis
>> Executive directors' strength in larger banks has been raised to four for better functional focus and thrust to technology
>> Creation of leadership pipeline to be facilitated under bank boards' leadership development programme.

Performance of EASE Reforms (1.0 and 2.0) Journey:-

EASE 2.0 which was built on the foundation laid in EASE 1.0 and furthered the progress on reforms. Reform Action Points in EASE 2.0 aimed at making the reforms journey irreversible, strengthening processes and systems, and driving outcomes. Public Sector Banks have shown significant improvement in the Action Points of the EASE Reforms Agenda since its introduction.

Following the completion of recognition of legacy stress as NPA, PSBs have returned to profitability with sound financial health and institutionalised systems to prevent the recurrence of past weaknesses.

Public Sector Banks have shown important enhancement in the Action Points of the EASE Reforms Agenda since its introduction. The improved financial condition of PSBs reflects in many parameters such as:

Gross NPAs reduced from Rs 8.96 lakh crore (14.6%) in March-2018 to Rs 7.17 lakh crore (11.3%) in December-2019;
A sharp decline in fraud occurrence from 0.65% of advances during FY10-FY14 to 0.20% in FY18-FY20; due to fraud prevention reforms and proactive checking of legacy NPA
Record recovery of Rs 2.04 lakh crore in FY19-9MFY20 driven by newly setup dedicated stressed account management verticals in PSBs that have recovered Rs 1.21 lakh crore in the same period;
Number of PSBs under PCA down to four;
12 PSBs reporting profits in 9MFY20;
CRAR 340 bps above the regulatory minimum; and
The highest provision coverage ratio of 77.5% in nearly eight years.

Performance of PSB on EASE 2.0 Index

Like in the previous year, progress made by PSBs was tracked quarterly through a published EASE Reforms Index leading up to the annual review. In addition to the inclusion of the EASE Reforms Index in the evaluation of Whole Time Directors of PSBs, it has now been made part of the annual appraisal of PSB leadership up to two levels below the Whole Time Directors.

PSBs have shown a healthy trajectory in their performance over three quarters since the launch of EASE 2.0 Reforms Agenda. The overall score of PSBs increased by 35% between March-2019 and December-2019, with the average EASE index score improving from 49.1 to 66.3 out of 100. Significant progress is seen across six themes of the Reforms Agenda, with the highest improvement seen in the themes of ‘Responsible Banking’ and ‘PSBs as Udyamimitra for MSMEs’.

State Bank of India,

Bank of Baroda and

Oriental Bank of Commerce are the front-runners for the best performing banks.

The final EASE 2.0 index will be published after declaration of bank results for the financial year.

Major Reform achievements over March 2018 to December 2019

Significant improvement in customer outreach through dedicated marketing force and external partnerships. The number of dedicated marketing employees has increased from 8,920 to 17,617

Turnaround time for loans reduced by 67% from the average of nearly 30 days to nearly 10 days
80% of PSB customers now have access to 35+ services on mobile/ Internet banking, 23 services on call center. The availability of services has nearly doubled over last 18 months.
Improvement in the availability of regional languages in call-centers has increased four-fold
Complaint redressal turnaround time reduced from the average of 9 days to 6 days
20 branch-equivalent services made available by PSBs through Bank Mitras
For prudential lending, PSBs are now systematically keeping watch on adherence to risk-based pricing, and cases with deviation have reduced from 59% to 23%, and have put in place data-driven risk-scoring for appraisal of high-value loans that factors in group-entities.
Most PSBs have deployed IT-based EWS systems leveraging third-party data, which have enabled early, time-bound action in stressed accounts. Monitoring has also been strengthened by deploying Agencies for Specialised Monitoring, and proactively monitoring listed entities based on published financials. Slippage into NPA has reduced from 3.90 lakh crore in 12-months ending March-18 to 1.88 lakh crore in 12-months ending December-19.
PSBs have adopted digital platforms such as online OTS, e-Bक्रय, e-DRT for expedited recovery. 87% of one-time settlement (OTS) cases are now tracked through dedicated IT systems.
PSBs have adopted new ways of credit. 63% of all PSB inland bills are now discounted through online TReDS
40% YoY growth in the quarterly value of loans disbursed through psbloansin59minutes.com (Dec-20)
The Government has introduced several governance reforms. The governance reforms include arm’s length selection of top bank management through Banks Board Bureau, introduction of non-executive chairpersons, broader talent pool for such selections, empowered bank Boards, strengthening of the Board committees system, enhancing the effectiveness of non-official directors, and leadership development and succession planning for the top two levels below the Board. In larger PSBs, Executive Director strength has been increased, and Boards are empowered to introduce CGM level for increased business.

EASE 3.0

Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman unveiled EASE 3.0, the Public Sector Bank (PSB) Reforms Agenda 2020-21 for smart, tech-enabled banking, and the PSB EASE Reforms Annual Report 2019-20 on February 26, 2020 during an event in New Delhi. The function was organised by IBA (Indian Banks Association). Minister of State for Finance and Corporate Affairs Anurag Thakur was the guest of honour for the event. Finance Secretary Rajiv Kumar, Secretary Designate cum Special Secretary (Financial Services) Debashish Panda and Chairman IBA, Rajnish Kumar also graced the unveiling event.

Finance Minister Smt. Sitharaman exhorted Public Sector Banks (PSBs) to have one-to-one interface with their customers through branch-based banking and not rely so much on credit ratings agencies.

She said that banks need to connect with their customers by leveraging technology but not exclusively only through the interface of technology. she asked the bankers to focus more at the grassroot level.

Smt. Sitharaman further exhorted banks to be friendlier to its customers by using local language in bank branch. She said that PSBs have played a great role in enabling financial inclusion in the country.

What is EASE 3.0:

Ease (Enhanced Access and Service Excellence) 3.0 reform agenda aims at providing smart, tech-enabled public sector banking for aspiring India.
New features that customers of public sector banks may experience under EASE 3.0 reforms agenda include facilities like:
1. Palm Banking for “End-to-end digital delivery of financial service”.
2. “Banking on Go” via EASE banking outlets at frequently visited spots like malls, stations, complexes, and campuses.

The idea behind EASE 3.0 agenda:

The Ministry has the idea of establishing paperless and digitally enabled banking at places where people visit the most. The government aims to focus on digitalization in the Public Sector Banks (PSBs) among themes that include responsible banking, PSBs as Udyami Mitra, customer responsiveness, credit take-off, and deep financial inclusions.

EASE 3.0 — Smart, Tech-enabled Banking for Aspiring India

Over the last five years, PSBs have not only cleaned up legacy stress and addressed underlying systemic weaknesses but have emerged stronger as a result of comprehensive and institutionalized EASE reforms. EASE 3.0 sets the agenda and roadmap for FY21 for their transformation into digital and data-driven NextGen Banking of the Future for an aspiring India.

With EASE 1.0 and 2.0 laying a firm foundation of robust banking and institutionalised systems, PSBs are set to transform into digital- and data-driven NextGen banks. EASE 3.0 emphasizes on the use of digital, analytics & AI, FinTech partnerships across customer service, convenient banking, end-to-end digitalised processes for loan sourcing and processing, analytics-driven risk management as well as decision support systems for HR.

Key Reform Action Points in EASE 3.0 include:

Dial-a-loan: Digitally-enabled doorstep facilitation for initiation of retail and MSME loans. Customers will have the facility to register loan requests through digitally-enabled channels
Customer-need driven credit offers by larger PSBs to existing customers through analytics, e.g., for EMI on expenses like holidays/school-fees/jewellery/consumer durables, home loan takeovers, loan-against-property post home loan closure, working capital enhancement based on sales jump
Partnerships with FinTechs and E-commerce companies for customer-need driven credit offers
Credit@click: End-to-end digitalised, time-bound retail and MSME lending by larger PSBs, leveraging Account Aggregators, FinTechs and PSBloansin59minutes.com
Cash-flow-based MSME credit by larger PSBs, using FinTech, Account Aggregator and other third-party data and transactions-based underwriting models
Tech-enabled agriculture lending
Palm banking: End-to-end digitalised delivery of a full bouquet of financial services in regional languages and with industry-best service quality
EASE Banking Outlets: On-the-spot banking at frequently visited places such as train stations, bus stands, malls, hospitals, etc. through paperless and digitally-enabled banking outlets and kiosks

PSBs have already started taking steps based on the reforms agenda. During the event, several digitally enabled banking solutions, such as tablet-banking, digitally-driven agriculture lending, paperless and digitally-enabled EASE bank outlets, were demonstrated by the PSBs. Progress of PSBs will continue to be tracked on metrics linked to Reform Action Points, and their progress will be published through a quarterly index.

The goal is to continue driving change by spurring healthy competition among PSBs and also by encouraging them to learn from each other.

(Source: Press Information Bureau, Government of India, Ministry of Finance dt. 26-February-2020)

Rakesh Khare Blogs

Wednesday, March 4, 2020

Enhanced Access & Service Excellence (EASE) Reforms for Public Sector Banks

EASE 2.0 scheme: Comprehensive public sector bank reform on the cards

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