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 24th 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.
- 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;
(c) feedback from complainant to check the
quality of redressal; and
(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
(c) Migration
of identified Stressed Assets and high-value Special Mention Accounts (SMAs) to
SAMV
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
(c) Consider
non-fund and tail risk embedded in project financing
(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
(c) plan
for realigning organisational resources (including HR, IT and partnerships).
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
(c) incentive & fast-track promotion
for the top performers.
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
(c)
optimal allocation of personnel to job families through an objective process
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
(c) Assign weightage for exit evaluation in
appraisal for fellowship &
training programme
Report Card promised on Public Sector Bank Reforms Agenda
was released by Finance Minister Late Shri Arun Jaitley on 28th
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-Ã -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-Ã -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.
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.”
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.
>> 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.
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)
