Banks to add new clause to tighten loan settlement norms

The loan defaulters who try to settle down their liabilities through one-time settlement scheme will find difficulty as public sector lenders are planning to add a clause that will bar them from withdrawing criminal cases against private persons, irrespective of a settlement.

This was decided in a recent meeting of 10 bank chiefs with officials from the Reserve Bank of India, Central Vigilance Commission and the Central Bureau of Investigation (CBI). The need to add such clause was considered necessary in view of the recent increase in cases of fraud. The officials who attended the meeting told Business Standard that there were several loopholes in the OTS scheme therefore it became necessary to take such step. Moreover banks did not have any uniform policy for the amount on which a settlement could be made.

Public sector banks mainly got into OTS schemes with borrowers in order to recover a part of the outstanding amount and minimize the losses on account of non-performing assets (NPAs). In the recent past, banks have gone in for an OTS scheme multiple times with the same borrower for the same or less than the settlement money received earlier.

According to a bank executive, “Banks have to rely on collaterals (as the underlying asset) for OTS schemes as primary securities are not available by the time the fraud surfaces. Instructions were issued for the OTS scheme and sharing of information on the borrower's accounts among the multiple financing banks.”

It has also been noticed that securities are distress-valued and, in case the collateral amount is more than the loan outstanding, the settlement is done on a lesser amount. Also, CBI officials said that the banks do not report about all the frauds.

As per RBI data, out of the 44 cases of frauds of Rs 1 crore or more, banks did not reported about 33 cases. The Central Vigilance Commissioner said, “Banks reported there is hesitation on the part of CBI to take up cases of frauds involving over Rs 1 crore.” During 2008-09, according to RBI report, public sector banks reported about only 3,425 frauds as against 3,004 in the previous year, representing an increase of 14 per cent.

Vinayak Prasad takes over as President and Country Head-Cards Management of Yes Bank

Vinayak Prasad has been appointed as President and Country Head-Cards Management of Yes Bank. Earlier Prasad was serving at ICICI Bank. There he was heading the Cards Group and was responsible for launching its premium cards business.

The new appointment corresponds with an important phase in the bank’s life cycle as it plans to expand its’ branch banking operations as a part of a strategic movement to lead the next phase of growth.

Yes bank is planning to foray into credit card business and Prasad will be instrumental in launching this segment also he will be responsible for enhancing the existing debit card, prepaid card and travel card offerings, and will be heading the bank’s entire cards product portfolio.

Prasad has an experience of over 15-years in the consumer cards business.

LIC and UIDAI are likely to sign MoU, group to provide suggestion for UID projects

A memorandum of understanding will be signed between India’s largest state run life insurer company Life Insurance Corporation (LIC) and the Unique Identification Authority of India (UIDAI). LIC is the first insurer company to sign MoU with UIDAI.

According to CNBC sources under this deal UIDAI will be able to use LIC database. However the official announcement of the deal is likely to be made today.

According to reports the Finance Ministry has set up a technical advisory group for the unique identification (UID) project, which has been renamed as Aadhar. The group is the part of budget division of the Department of Economy Affairs. The technical advisory group has seven member team headed by Nandan Nilekani.

Some of the members of the team are Securities and Exchange Board of India (Sebi) Chairman CB Bhave, IT Secretary R Chandrasekhar, Dhirendra Swarup and Nachiket Mor. The group will provide suggestion on the technical, administration and human resource issues for UID’s various projects.

The group will be helping in the projects related to goods and service tax (GST), network and pension schemes, national treasury and management of agency and expenditure information.