Indian banks start to fail

[Shahzaz ud din]

Almost 16 banks turn as defaulter in India today,

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[Path-Finder]

#FakeNews

 

[HRK]

Ache din agaye India main

 

[truthseeker2010]

Just look at faces, i feel really sorry for them, this is the real india, the real indians, far from the fantasies of bollywood and media.......

However, this is just the start........

 

[Goenitz]

@Dash
at least this is real

 

[Death Professor]

NDTV Ravish Kumar did a program on this, was a really good show. India should be glad that they still have a couple of good anchors left who raise the issue of the common people.

This is the real India, with real people having real issues. Its awful and just plain sad.

 

[AZADPAKISTAN2009]

https://www.moneycontrol.com/news/t...ry-of-cooperative-banks-in-india-4485201.html

Explained: The Unfortunate Story Of Cooperative Banks in India
The PMC Bank crisis has thrown the lives of several customers into disarray. Cooperative banks seem to fail with alarming regularity. But what are cooperative banks, why are they needed and what can be done to prevent a repeat of PMC Bank?

The Reserve Bank on September 24 capped depositor withdrawals from Punjab and Maharashtra Co-operative Bank's (PMC Bank) for six months.

The Bank has been brought under Directives, which means that for a period, it will be directly overseen by the RBI. This has however thrown the lives of thousands of customers into disarray.

But what led the RBI to take these steps and what do these proceedings tell us about co-operative banks?

PMC Bank crisis

Spread over seven states with 137 branches and 51,000 members, PMC Bank has deposits of around Rs 11,617 crore. It is among India’s top five urban co-operative banks.

As per (now suspended) Managing Director Joy Thomas, the Bank was put under regulatory restriction under Section 35A of the Banking Regulation Act, for a period of six months due to irregularities disclosed to the RBI.

Thomas also messaged depositors: "As the MD of the bank, I take the responsibility and assure all the depositors that these irregularities will be rectified before the expiry of six months."

The bank has been barred from granting, renewing and loans and advances, make any investments and accept fresh deposits, without the prior written approval from the RBI.

The sudden freeze just ahead of the festival season has upset customers and dealt a big blow to a state heavily reliant on the cooperative bank structure.

Is depositor money safe?

The central bank on September 23 also appointed JB Bhoria, as an administrator for the bank.

Bhoria told media that there is no need for panic because the bank is guaranteed under the Deposit Insurance and Credit Guarantee Corporation (DICGC), through which deposits of up to Rs one lakh are covered. Besides, the bank has own assets which are liquid.

The collapse appears to have been sudden and is shrouded in mystery. What is shocking is that news reports suggest the bank voluntarily approached the regulator asking it to initiate action, instead of the regulator initiating the process which is the practice.

Questions about the RBI’s supervision of cooperative lenders

Urban cooperative banks failures occur with alarming regularity. Their numbers fell from 1,926 in 2004 to 1,551 in 2018, as per RBI data.

The central bank forced 129 mergers and by March 2017, cooperative banks accounted for only 11 percent of the total assets of scheduled commercial banks (SCBs).

One reason why cooperative banks fail so often is their small capital base. For example, urban cooperative banks can start with a capital base of Rs 25 lakh compared to Rs 100 crore for small finance banks.

Such banks are sometimes hijacked by vested political interests. This could mean appointing political lackeys as senior bank officials and sanction of fraudulent loans which are later written off.

RBI’s supervision of cooperative banks is not as stringent as that of commercial banks. Typically, the state government audits cooperative banks while RBI inspects their books once a year.

Similar incidents in the past

Before the PMC development, there were instances of bank mergers under Section 35A. These include the merger of Bank of Rajasthan with ICICI Bank and Benares State Bank with Bank of Baroda.

In 2001, Ahmedabad’s Madhavpura Mercantile Cooperative Bank went bust. That landed another 210 urban cooperative banks in trouble and some of them had to be liquidated.

What purpose do cooperative banks serve

It is important to note that cooperative banks were set up to allow ease of access to credit and ensure financial inclusion. Shutting down or merging such banks is easy, but a lazy option.

After all, India is still an underbanked country.

Preventive measures

Experts believe suggestions from the high powered committee on Urban Cooperative Banks (UCBs), formed under former deputy governor R Gandhi must be taken into account.

The suggestions made in this report include:

- RBI having more power over cooperative banks.

- Empowering the RBI to implement resolution techniques such as winding-up and liquidating banks, without involving other regulators under the cooperative societies’ laws.

- Urban cooperative banks voluntarily wanting to convert into small finance banks should be allowed to do so if they fulfil the central bank’s criteria.

 

[Death Professor]

the threads should be merged.

https://defence.pk/pdf/threads/almost-16-banks-turn-as-defaulter-in-india-today.637778/

 

[BringHarmony]

Weird title. Banks do not exactly become defaulters. Banks can have liquidity crisis or loss. This is because default means not paying a loan. Banks don’t exactly take loans.

Source of this news?

@Nilgiri do banks in India take loans to operate?

 

[AZADPAKISTAN2009]

Cost of maintaining 1 million army in Kashmiri taking tool
The end could be near

 

[AZADPAKISTAN2009]

Maintaining 1 million troops in Kashmiri taking it's toll

 

[Nilgiri]

Weird title. Banks do not exactly become defaulters. Banks can have liquidity crisis or loss. This is because default means not paying a loan. Banks don’t exactly take loans.

Source of this news?

@Nilgiri do banks in India take loans to operate?

I didnt get your tag for some reason.

Anyway yes its an ongoing (NPA-driven) liquidity issue in NBFC sector....prompted by bad management of big customers (of the bank) in real estate etc going bust (given these banks are overall quite small and thus quite vulnerable/sensitive to such clients):

https://indianexpress.com/article/b...-its-close-links-with-hdil-promoters-6032577/

As for uneducated title and drama here....I really wouldn't expect much quality discussion or even much basic economic literacy from 40 billion dollar market cap folks (recently driven down quickly from 100 billion level) with constant IMF replenishment drama...esp if they are talking about far more steady and long term sustainable 2 trillion dollar one.

 

[BringHarmony]

Alright, a little of review reveals the reality.

From the first video :

It seems these Banks are having restrictions put on them by India's federal bank to limit withdrawals by customer for a certain period of time. Pretty bad for anyone having money there! The silver lining is that the money is not lost though..

A bit of search reveals even more details..

https://www.indiatoday.in/business/...o-rs-10-000-for-six-months-1603506-2019-09-26

It seems that this restriction was placed to prevent loss of deposited money due to irregularities in the bank operation.

Few more interesting facts. This restriction was applied to something called as "Co-operative bank". A bit more of search reveals that these are India's equivalent of Credit Unions.

Now I know credit unions and have financed money from them for a number of my real estate investments. These are usually less regulated and have a separate mechanism for protection of accounts there than high-street banks. It seems in India, they are also regulated by their Federal Bank.

In all, this thread and title is gross mis-representation of facts. No wonder the original poster was so reluctant to link to the real source of the story.
@Nilgiri, any comments?

So yes, this is Misrepresented if not fake news.

 

[Taimoor Khan]

Almost 16 banks turn as defaulter in India today,

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That old lady!

And they want to bring prosperity in indian occupied Kashmir, fight Pakistan! Jokers.

 

[BringHarmony]

Anyway yes its an ongoing (NPA-driven) liquidity issue in NBFC sector....prompted by bad management of big customers (of the bank) in real estate etc going bust (given these banks are overall quite small and thus quite vulnerable/sensitive to such clients):

Ah! So it is similar to the credit union exposure to bad credit in real estate as it happens here?
I remember, reading sometimes back that Toronto and Vancouver have a number of credit union who issued loans to less than prime customers for investing in real estate.

Yours truely also flipped condos in '16 with a bad credit score and credit unions All hail the church of Vancity!