Hong Kong branches of PNB, IOB un­der lens

Financial Chronicle - - FRONT PAGE - PRESS TRUST OF IN­DIA New Delhi

HONG Kong-based branches of Pun­jab Na­tional Bank and In­dian Over­seas Bank have been put un­der en­hanced su­per­vi­sory over­sight and barred from proac­tively so­lic­it­ing cus­tomer de­posits by the Hong Kong Mon­e­tary Au­thor­ity as the cap­i­tal ad­e­quacy ra­tio of the two lenders fell be­low the reg­u­la­tory re­quire­ments.

At the end of March 2018, to­tal cap­i­tal ra­tio as per Basel-III norms de­clined to 9.20 per cent for PNB as against 11.66 per cent at the end of March 2017, ac­cord­ing to a fil­ing by PNB.

On con­sol­i­dated ba­sis, it slipped to 9.82 per cent as against 11.98 per cent dur­ing the same pe­riod.

In­dian Over­seas Bank’s (IOB) cap­i­tal ra­tio fell to 9.25 per cent by end-March 2018 against 10.50 per cent in the year ago pe­riod. As per the RBI’s norms, the to­tal cap­i­tal ad­e­quacy, in­clud­ing coun­ter­cycli­cal buf­fer should be up­wards of 11.5 per cent.

IOB and fraud-hit PNB in sep­a­rate reg­u­la­tory fil­ings said in view of the cap­i­tal po­si­tion of the banks as on March 31, 2018 be­ing be­low the reg­u­la­tory re­quire­ment (in­clud­ing counter-cycli­cal buf­fer) of RBI, Hong Kong Mon­e­tary Au­thor­ity (HKMA) is en­hanc­ing the su­per­vi­sory ar­range­ments on their Hong Kong branches.

Both the lenders said they are re­quired to main­tain high qual­ity liq­uid as­sets in Hong Kong equiv­a­lent to 100 per cent of un­pledged de­posits. The two banks have been asked to “not to proac­tively so­licit cus­tomer de­posits,” ac- cord­ing to the fil­ings.

Whereas PNB's cap­i­tal ad­e­quacy has fallen short of the reg­u­la­tory re­quire­ment due to un­prece­dented loss in the fourth quar­ter of 2017-18,

In­dian Over­seas Bank sits on a huge amount of bad loans in its books. The two banks said trans­ac­tional de­posits such as pledged de­posits for com­mer­cial loans would be ex­cluded from this su­per­vi­sory arrangement.

It is ex­plained that IOBHK (Hong Kong branch of IOB) can con­tinue to take de­posits as mar­gin for credit that is be­ing dis­bursed and there is no re­stric­tion on ex­tend­ing credit, IOB added. Also, both the lenders will have to main­tain a po­si­tion of “net due to” its head of­fice, other branches and any direct or in­di­rect sub­sidiaries and as­so­ciates of the banks.

IOB said its Hong Kong branch op­er­ates with funds bor­rowed from In­dia and hence the HKMA reg­u­la­tory re­quire­ment does not al­ter the po­si­tion of the bank.

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