Report Card promised on Public Sector Bank Reforms Agenda released;

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

Union Minister of Finance & Corporate Affairs ShriArunJaitleytoday released the first report on EASE Reforms Index that independently measures progress on the Public Sector Banks (PSB) Reforms Agenda announced last January on 140 objective, benchmarked metrics. The publishing of the independent report commissioned through Indian Banks’ Association and authored by BCG with Forrester Inc., Kantar IMRB and TransUnion CIBIL as knowledge partners, 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. Individual bank scorecards including customer feedback survey make transparent bank efforts and commit each bank to fully institutionalising reforms on a sustained basis to avoid recurrence of stress in banks in future.

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 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. 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 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 ₹ 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- ₹ 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 ₹ 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 ₹ 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 ₹ 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.

 

EASE Reforms Index benchmarks public sector bank performance, validating the 4R strategy and driving institutionalised reform. The document reports an independent assessment via the EASE Reforms Index that benchmarks each public sector bank on 140 objective metrics across six themes, producing bank-specific scorecards and peer comparisons to identify strengths and gaps. It validates the Government's 4R strategy-recognition, recovery, recapitalisation and reforms-by showing measurable improvements in asset quality, recoveries, capitalisation and risk metrics, and documents thematic progress in Clean Banking, Smart Banking and Responsible Banking aimed at institutionalising sustainable reforms and preventing future stress.