NPA-laden PSBs crimp advance tax mop-up at 10.6% (BL, BS 19.09.17)
A steep fall in advance tax payouts by bad loan-saddled state-run banks has led to a muted 10.6% growth in overall revenue mop-up from large corporates in the megapolis in the September quarter. The overall mop-up at Rs. 69,000 Cr, up 10.64%, is tepid even though other sectors like steel and even private sector lenders have done comparatively well, income tax department sources said. Unsatisfied with the collection, the department has asked its officials to keep a close vigil on the forthcoming quarterly results by large corporates. Advance tax collections from the Mumbai zone, which is home to 45 of the top 100 corporates and is responsible for one-third of the total direct tax collections, grew only 10.64% to Rs. 69,000 Cr as of September 15. The zone had collected Rs. 62,370 Cr in the year-ago period. State-run banks have not done well this time. In contrast, private sector banks have been okay when it comes to advance tax payment, sources said, adding however, other sectors like steel have done comparatively well in the September quarter. While the country’s largest lender State Bank paid a whopping 37% less, foreign lender Citigroup also paid 34% less. In contrast, oil major HPCL and steel major Tata Steel saw their outgo jumping 70% each, while mortgage major HDFC paid 10.47% more. “Advance tax collection from the Mumbai zone is not satisfactory and hence the officials have been directed to maintain a constant vigil on quarterly results,” the newly- appointed principal chief commissioner of income tax and head of the Mumbai zone, PC Mody said. Overall, direct tax collections from the Mumbai zone grew 25% to Rs. 1.2 trillion as of September 15 from Rs. 96,000 Cr a year ago. The Mumbai zone has been targeted with mopping up Rs. 3.16 trillion for the entire fiscal in direct taxes. Urging taxpayers to voluntarily comply with the tax laws, Mody warned that delinquents will be dealt with firm hands.
Profit-push puts public sector bank staff under pressure (BL 19.09.17)
The pressure to get their banks out of the bad loans quagmire and back into profitability is bringing forth varied responses, ranging from well-meaning to knee-jerk, from senior public sector bank officials handling field formations. Be it telling branch heads and officers not to tarry in the workplace beyond office hours (aimed at curtailing operational expenses and ensuring work-life balance) to threat of salary stoppage, all appears to be par for the course during the current stressful times for bankers as well as their banks. The regional head of Bank of Baroda’s Mehsana (Gujarat) region recently asked heads of all branches under his watch to ensure optimum utilisation of all staff members during working hours and avoid late sitting. Probably believing in the dictum ‘a penny spared is a penny earned’, the senior official advised branch heads to curtail operational expenses. In this regard, a ‘do's and don’ts’ list has been prescribed — lights, air-conditioners, fans and other electrical devices should be monitored to save electricity. ACs should invariably be switched off latest by 5.30 pm; all computers (except Enterprise PC) should be shut down at close of office hours. Besides, when not in use, monitors of computers should be turned off. “We advise branches to ensure that the work should not be stretched till late evening, except during an emergency situation. We have observed that some of the branch heads are habitual in late sitting…and insisting that all officers sit late. “Late sitting beyond working hours not only affects physical and the mental condition of the staff member but also worsen qualitative aspects….They should monitor working of each staff member on a regular basis and take necessary measures/follow-up for completion of work by close of office hours,” said the official in a communication to branches. This advise from the senior official comes in the backdrop of Bank of Baroda changing the work timing of administrative offices (such as head office, corporate office, zonal office, regional office, SME loan factories, and specialised mortgage stores) to 9 am to 4 pm with effect from September 18. This change is aimed at providing more support to the operational units during business hours.
Big 4 accounting firms on IBA’s list of forensic auditors (BL 19.09.17)
The Big 4 auditors — KPMG, EY, Deloitte and PricewaterhouseCoopers — figure in the list of entities that have been empanelled by the Indian Banks’ Association (IBA) to do forensic audit of frauds in banks. The number of banking fraud cases involving ₹1 lakh and above is on the rise, increasing to 5,076 in the fiscal ending March 2017, from 4,235 in 2012-13. As many as 22,949 cases of fraud in both public and private banks came to light in the last five fiscals. Besides the Big 4, others on the list include BMR Advisors, Chokshi and Chokshi LLP, and Grant Thornton, Mukund M Chitale and Co. The IBA has empanelled 39 firms for conducting forensic audit of frauds exceeding ₹50 Cr in banks. Similarly, 73 auditing firms have been indented for forensic audit in banks where the amount involved in frauds is less than ₹50 Cr. “Prior to assignment and engagement, member banks need to invite price bids from the empanelled audit firms,” the IBA said. Concerned over high incidence of frauds in banks, the RBI had operationalised a Central Fraud Registry (CFR) as a searchable centralised database for use by banks in January 20 last year. The reasons for fraud, according to the RBI, include gaps in credit underwriting standards, liberal cash flow projection at the proposal stage, lack of continuous monitoring of cash flow and cash profits, and lack of security perfection. The other reasons are over-valuation, gold-plating of projects, diversion of funds, double financing and general credit governance issues in banks.
Bank unions ask Jaitley to withdraw FRDI Bill (BL 19.09.17)
Bank unions have requested Finance Minister Arun Jaitley to withdraw the FRDI Bill as it proposes to empower authorities with sweeping powers to wind up public sector banks and insurance companies. Already, there are many rules and legislation in place under the existing Acts that deal with winding up of financial institutions, United Forum of Bank Unions (UFBU) said in its representation to the finance minister. The Financial Resolution and Deposit Insurance (FRDI) Bill, 2017, was tabled in the Lok Sabha last month. It was referred to the 30-member committee comprising members of both the Lok Sabha and the Rajya Sabha. “The objective of this Bill is obviously to heavily empower the new authority with sweeping powers to dismantle and erase public sector financial institutions like banks and insurance companies and hence, it is apparently draconian. “We demand the withdrawal of this Bill,” it said. UFBU is an umbrella organisation of all banks unions. In a representation submitted last week, they also demanded declaration of wilful default of bank loans as criminal offence. The RBI Act should be amended to provide for publication of the names of these defaulters, suggested All India Bank Employees’ Association (AIBEA) General Secretary CH Venkatchalam.
Banks unable to sell stake in stressed power assets (BL 20.09.17)
Lenders may find it difficult to offload their stake in stressed power assets, even after taking substantial haircuts, due to lack of optimism in the power industry on the ability of State distribution companies to sign new power purchase agreements (PPAs). A number of struggling power assets, including Jaiprakash Power Ventures Limited (JPVL) of debt-laden Jaypee Group, are looking for new buyers. Lenders, including SBI, ICICI bank, IDBI, Punjab National Bank, and Central Bank of India, are looking to offload at least 30% in JPVL. While market talk suggests dozens of buyers in the fray, including power players like Tata Power, Adani Power and JSW Energy, none has formally confirmed this. Some of these firms are themselves highly leveraged and looking to sell parts of their own assets. “Even if banks agree to take substantial haircuts, both on equity and debt, with new PPAs remaining a big question, only power players who are sure they will be able to secure PPAs for these projects can emerge as buyers,” said an industry representative on conditions of anonymity. “Not many of the potential buyers currently are in a position to secure PPAs even for their own assets, therefore buying out other assets may take more than a year’s time.” Earlier this year, lenders were unable to find a strategic buyer for GMR Rajahmundry Energy Limited, a 768 MW gas-based combined cycle power project in Andhra Pradesh which has been under SDR since 2016, within a set deadline. Leading power players Tata Power and Adani Power have not been able to offload stakes in their troubled thermal power projects in Mundra, Gujarat, despite offering 51% stake at a token value of Rs. 1. Market experts believe the sale of such assets might turn out a difficult task because the debt often exceeds the enterprise value.
Karnataka Vikas Grameena Bank looking to digitise 100 villages this fiscal (BL 20.09.17)
Karnataka Vikas Grameena Bank (KVGB) is planning to convert 100 villages under its jurisdiction as ‘digital villages’ for banking activities by the end of the current financial year. KVGB is one among the few banks to take up the task of developing digital villages for banking activities soon after the demonetisation in November, according to S Ravindran, Chairman of the bank. The bank has converted 25 villages under its jurisdiction as digital villages for banking activities till now. (The bank has jurisdiction over Dharwad, Gadag, Haveri, Bagalkot, Vijayapura, Belagavi, Uttara Kannada, Udupi and Dakshina Kannada districts of Karnataka.) On the plans to develop 100 ‘digital villages’, Ravindran said that each of the 10 regional offices of the bank has been given a target of converting a minimum 10 villages into ‘digital villages’ for banking activities by December. On the existing 25 digital villages, he said the eligible population of the village are covered with bank accounts and these accounts are linked with Aadhaar. The account-holders are given RuPay and Kisan cards. Mobile banking and internet banking services are also enabled for villagers through special camps in these digital villages, he said. The bank has been motivating banking correspondents in the digital villages to ensure micro ATM transactions in large numbers. Stating that the digital banking has to reach common people and the farming community at the village level, he said cash mode of transaction is always insecure. In this connection, the bank is not only creating awareness about less-cash transactions but also popularising digital banking activities through its network of more than 500 banking correspondents, he added.
Gujarat bank lending growth dips by half to 3.79% in Apr-Jun (BS 20.09.17)
Growth in bank lending in Gujarat fell by almost half to 3.79% in April-June, from 6.6% in January-March, according to the latest State Level Bankers’ Committee (SLBC) report. Ever since 23% growth in March 2014, bank advances have continued to decelerate quarter-on-quarter. Gross advances by banks in Gujarat stood at Rs 4,77,480 Cr in the quarter ended June, up from Rs 4,60,030 Cr in the March quarter. In comparison with the June 2016 quarter, when advances grew by 1.69%, the June 2017 quarter registered faster growth of 3.79%. Vikramaditya Singh Khichi, convener of the SLBC, Gujarat, did not attribute the fall to jitters in the run-up to the goods and services tax (GST). ”Credit offtake has moderated due to a sluggish economy. This has nothing to do with the GST,” Khichi said. Lending by nationalised banks grew 0.34% during the quarter at Rs 1,95,750 Cr, against Rs 1,95,079 Cr in the March quarter. Non-performing assets (NPAs) grew from Rs 30,475 Cr in January-March to Rs 35,342 Cr in April-June and were 7.4% of total advances, the SLBC stated. Gross advances were Rs 4,38,841 Cr and gross NPAs Rs 29,734 Cr, or 6.78% of advances in June 2016, these rose to Rs 4,60,030 Cr and Rs 30,475 Cr, or 6.62% of advances, in March 2017. According to Khichi, slippages in NPAs have been contained and these could otherwise have been higher.
Catholic Syrian Bank to raise Rs 400 Cr capital through QIB (BS 20.09.17)
Kerala-based Catholic Syrian Bank (CSB) Board has approved a proposal to raise capital by way of the qualified institutional buyer (QIB) allocating upto 40 million shares to the investors. The Bank which is seeking around Rs 400 Cr to fund its growth till March 2019, said the process will be completed by October. The development comes two months after Fairfax called off CSB's investment plan due to a valuation issue. Canadian investor Prem Watsa's Fairfax Financial Holdings was planning to invest around Rs 1,000 Cr in CSB for a 51% stake. C V R Rajendran, MD & chief executive of the CSB said that the Board has given an approval for issue preferential shares by selling upto 40 million shares. The prices will be decided by way of the book-building process. Depending upon the price, the bank may either issue 20 million shares or a little more, or if the price is good it can go upto 40 million shares also, Rajendran added. If the bank issues all the 40 million shares, it will be 33% dilution. The bank has appointed JM Financial as merchant banker and in the coming weeks, it is planning to meet the potential investors. "We require around Rs 400 Cr till March 2019 to support our growth plans," said Rajendran, who expects the process to be completed by October end. Rajendran said the Bank is looking at QIBs for raising the funds.
SBM may be First to Launch India Subsidiary (ET 19.09.17)
State Bank of Mauritius (SBM) is likely to become the first foreign bank to open a wholly-owned subsidiary almost four years after the RBI allowed overseas lenders to open local units in India. SBM is awaiting final approval from RBI and has laid out an ambitious business plan for what will be the largest market for the government-owned lender from the island nation. “We have identified 25 to 30 SME and retail clusters and our distribution is targeted around that. We expect to start 30 to 40 branches within five years in tune with the different branch formats allowed by the RBI,“ said Siby Sebastian, CEO at SBM India. SBM has already registered a local subsidiary, called SBM (India) Ltd, which will manage the local branches in the country. SBM has operations in Madagascar and Seychelles besides Mauritius. Earlier this year, it completed the acquisition of Fidelity Bank in Kenya as part of its expansion in Africa.
 |
Economic slowdown is real, not just technical: SBI Research (BL, BS, FE 20.09.17)
Noting that the economy has been on a downslide since September 2016, SBI Research today said the slowdown is real and not technical and called for more public spending to arrest the slide. “We certainly believe that we are in a slowdown mode since September 2016 and a slowdown that has been prolonged to Q1 of this fiscal year is technically not short-term in nature or even transient,” SBI Research said in a report. The report said the continuing slowdown has “raised the spectre of whether slowdown is temporary or not” but stopped short of answering the question. The note comes days after BJP president Amit Shah attributed the slowdown — GDP growth slid for the sixth quarter in a row to hit a three-year low at 5.7% in the June quarter — to “technical reasons” without elaborating on the same. Shah had said growth had gone up to 7.1% after falling to 4.7% in FY14 when the UPA was in power. The report advocated upping of spends by the government as a solution to the problem at hand. “Need of the hour is to spend to grow more,” it said. “We believe the government should consciously expand spending and fiscal deficit, without disturbing the borrowing maths,” the report said. It can be noted that in the past, such moves by the government were termed as “fiscal profligacy” by rating agencies, which had also threatened to downgrade the country’s rating to junk if the Centre continued with such policies. The report admitted that after the 2008 global credit crisis, there was a surge in spending, but was unequivocal in not paying much heed to the rating agencies.
Tweak GST rules or exports will suffer: Industry tells Adhia (BS 20.09.17)
A severe slowdown in foreign orders, combined with a growing liquidity crisis, may get out of hand by the year-end if rules of export under the goods and services tax (GST) regime are not altered soon, industry bodies have warned. At a meeting with Revenue Secretary Hasmukh Adhia-led GST committee - set up to look into exporter concerns on Tuesday - trade and industry bodies pointed out that the deferment in mandatory filing of GST return forms as well as extreme difficulty in receiving tax returns was hurting exports, sources present said. This may lead to a Rs 65,000-Cr worth of exports being stuck by the end of the year, director-general of the Federation of Indian Exports Organisations (FIEO), Ajay Sahai said. Two months after the roll-out of the GST regime in July, the order books of exporters are said to have taken a hit, with estimates pegging the impact to up to 15% across industries and product categories. According to an assessment by the FIEO, the large drop was for export orders that were meant to be delivered until October. Beyond October, this may rise to 20%, as exports during Christmas and New Year may be affected. After growing in single digits in the previous three months, August exports had risen by 10.29%, up from 3.94% in July. But exporters and economists alike remain sure that the coming months would prove to be the real challenge for merchandise exports.
Jaitley holds meeting to take stock of economic issues (BL 20.09.17)
Amidst concern over the Centre’s fiscal health, the rocky rollout of the Goods and Services Tax and calls for lowering the duties on fuel, Finance Minister Arun Jaitley took stock of the economy on Tuesday. This was the second such meeting called by the Finance Minister in as many days. Once some conclusive decision is taken, a formal presentation is expected to be made to Prime Minister Narendra Modi, who will decide on possible measures to boost growth. Jaitley, along with top Finance Ministry officials, was expected to brief the Prime Minister on the economic situation including expected GDP growth and trends in revenue and expenditure for 2017-18. But, the meeting was postponed. Fresh dates for the meeting have not been proposed yet. Besides Senior Finance Ministry officials, Commerce and Industry Minister Suresh Prabhu, Railways and Coal Minister Piyush Goyal, Chief Economic Adviser Arvind Subramanian. NITI Aayog Vice-Chairman Rajiv Kumar, and Additional Principal Secretary to the Prime Minister PK Misra were present at the meeting. Sources said that the Prime Minister’s Office has also asked the Finance Ministry to hold consultations with nodal Ministries and seek their inputs as well. The series of meetings come amidst faltering growth and rising inflation while tax revenues, especially when those from GST are still uncertain.
Rupee to average 64.3 against US dollar in FY18: UBS report (BS 20.09.17)
The rupee is expected to remain range bound and average at 64.3 against the US dollar in the current financial year and is likely to be lower at 65.4 in 2018-19, says a UBS report. According to the global financial services major, it has been among the better-performing currencies in the emerging markets and has appreciated 6% so far this year, but there are few triggers left for a sharp rally of the rupee from its current level. UBS' forex strategist Rohit Arora sees the rupee (as against the US dollar) at 64 with upside risks over the next three months. "For the full year, the rupee could average 64.3 in 2017 -18 and 65.4 in 2018-19," UBS said in a research note. The factors that supported the rupee this year include robust FII debt flow, a strong state election result (Uttar Pradesh), continued reform momentum, improving growth prospects and external stability. Moreover, broad weakening of the USD so far this year has also helped the rupee this year. "That said, there are few triggers for a sharp rally of the rupee from its current level," UBS said, adding that debt inflow is likely to become much slower while equity flow is likely to be constrained. According to UBS, G-Sec limits are almost fully utilised and might be raised by USD 1-1.5 billion in late September, while equity flow is likely to be constrained by elevated growth expectations. The rupee is currently hovering at 64 against the dollar.
Economic slowdown likely to worsen: Ambit (BS 20.09.17)
The government’s inability to train and educate its people, automation-led job losses, and demonetisation-induced closure of informal sector firms could seriously hurt India’s economic prospects, according to Ambit Research. The interplay of these and other factors could further accelerate the slowdown, it said in a report. “A combination of India’s long-standing shortcomings (especially its inability to train and educate its people), worldwide changes in the ability of machines to replace workers in factories, and PM Modi’s resets (especially his multi-faceted crackdown on black money) is creating serious pain for the Indian economy,” wrote Saurabh Mukherjea, CEO of Ambit Capital Pvt Ltd in his ‘The Sceptical CEO’ series. “This is leading to an economic slowdown which looks likely to accelerate as the after-effects interplay with each other,” the report noted. The slowdown is resulting in job losses, especially in the blue- collar segment, and a broad-based deterioration in the land and real estate markets. “Investors who ignore these effects and continue to pile into expensive Indian stocks are treading on water,” it said. Rural land transactions had come to a standstill at the start of the calendar year, as the cash-reliant rural economy was hit hard by demonetisation. However, from June, this has started hurting the balance sheets of home loan providers as some loans were used to buy rural lands with the hope that they could be sold off later. These loans are not getting serviced now, it said. Besides, the Real Estate (Regulation and Development) Act has ensured that project delivery deadlines have been extended, and some homebuyers have stopped paying equated monthly installments (EMI) of home loans to banks.
GST a tectonic shift, takes India closer to 8% plus growth: World Bank (FE 20.09.17)
World Bank India chief Junaid Ahmad described GST as a “tectonic shift” in the country’s taxation policy which has increased the possibility of 8% plus growth. India recorded a growth rate of 7.1% in 2016-17 and 5.7% in the first quarter of the current fiscal. “Today India is at the brink of a possibility of moving into 8% plus growth rate. Why? Because India has made a very bold step in integrating internally its nation into one market. So the shift into GST is a tectonic shift,” World Bank Country Head in India Junaid Ahmad said. If the Goods and Services Tax (GST) is implemented efficiently, the growth boost India will get is going to be huge, he said while addressing members of PHD Chamber of Commerce and Industry here. The economic corridors of India will change and that will require change in transportation as well, he added. “You (India) need systems of transport, particular multi- modal, in order to respond what GST is offering as one market. If GST is implemented efficiently, the growth boost that you will get from internal movements of goods is going to be huge,” he said. Part of it (growth boost) lies in the implementation of the GST but it also depends on how the country invests in logistics, he added. Ahmad said if integration of India’s local markets are done correctly, the gains in next 5-8 years from the internal integration will outweigh those from global integration (of markets).
Don’t be wary of funding road projects, Gadkari tells banks (BL, FE 20.09.17)
Bankers should shed their apprehension about funding road projects as most of the roadblocks to the projects from taking off have been cleared, according to Minister of Road Transport, Highways and Shipping, Nitin Gadkari. Referring to banks taking a long time to sanction/disburse loans, thereby delaying closure of projects, the minister emphasised that his ministry through its arm, National Highways Authority of India (NHAI), has the wherewithal to raise money and support road projects. “Three years back there was lot of problem with contractors and banks. There were defaults. At that time 403 projects aggregating ₹3.85 lakh Cr were stalled. And in 75% of the cases the government was responsible. “Land acquisition, environment, forest clearance, etc., were the problems. Now, we have cleared all these things. The sector is moving fast.…. And now the position is that every project is doing well,” said Gadkari at a summit organised by the Indo-American Chamber of Commerce. Now, in the new situation, Gadkari said he is expecting bankers and investors to support the projects implemented in the PPP (public-private participation) and BOT (build-operate-transfer) modes. In this regard, he underscored that his department has saved banks as projects aggregating ₹3 lakh Cr have been prevented from turning sour. “Because of the previous record (of projects getting stalled and turning sour for banks), there is some apprehension in the mind of bankers…So, I said you (bankers) please don’t bother about it. Now, the situation has changed. And so you have to change your perception.
Days of regulatory forbearance over, says RBI Deputy Governor (BL 20.09.17)
The days of regulatory forbearance vis-à-vis NPAs are over and the microfinance sector has to grow on the basis of its own strength, according to RBI Deputy Governor NS Vishwanathan. “One of the things that we are being requested by the MFI sector is to kind of recognise the issue of NPAs in the recent past. …It is not that everybody faces the same extent of problem. “So, I think, in the same situation there are some entities that have a lower default as opposed to others,” he said. While the regulated entities can always ask for forbearance, Vishwanathan underscored that the fundamental thing that this leads to is a question of introspection as well – “as to what have we done, have we done the right thing, have we overstretched, have we extended beyond what was required because the impact is not uniform''. “The days of regulatory forbearances are over. I don’t think we are looking at any kind of regulatory forbearance. If there is capital erosion, the capital has to be met by the capital providers,” he said.
Shell cos crackdown: Govt makes public names of debarred directors (BL, BS, FE, ET 19.09.17)
Intensifying its crackdown on shell companies and their operators, the government has made public names of over 55,000 directors linked to such firms to ensure they do not get associated with similar roles again. More such names will be published soon as the government has already identified over 1.06 lakh directors for their association with shell firms which are either yet to commence any business or have failed to submit their financial statements or annual returns for three straight years. More than two lakh such companies have already been struck off the register of the companies with various ROCs (Registrar of Companies). As per the public notices issued by different ROCs, the names have been made public so far for more than 24,000 such shell companies from the Chennai region, as also of over 12,000 each from Ahmedabad and Ernakulam. Besides, similar lists of thousands of directors have been made public by the ROCs in Cuttack, Goa and Shillong, among others. However, ROCs in Delhi, Mumbai and Chandigarh are yet to publish such lists. Several of these names could also be linked to various political and corporate groups, but it could not be ascertained immediately as most of the lists only contain the names of directors and their DINs (Director Identification Numbers) and not any specific personal details. However, addresses were also mentioned for some. Earlier this month, the government had said more than 1.06 lakh directors will be disqualified for their association with shell companies. The move came close on the heels of the corporate affairs ministry cancelling the registration of 2.09 lakh companies that have not been carrying out business activities for a long period. Besides, banks have been asked to restrict operations of these companies’ bank accounts by their directors or their authorised representatives.
Govt. may soon be able to seize assets of economic offenders who flee India (BS 20.09.17)
The law ministry has given its concurrence to a draft bill that will give powers to the government to confiscate property of economic offenders and defaulters who flee India, albeit with a new provision, official sources said. It wants a "Saving Clause" to be incorporated in the Fugitive Economic Offenders Bill 2017 before it is introduced in the Lok Sabha in the ensuing winter session of Parliament, they said. A saving clause provides for certain exception(s) in a statute. It enables the repealed law to be in force with respect to some existing rights. The proposed law will be applicable in cases where the value of offences is over Rs 100 Cr. The bill flows from Finance Minister Arun Jaitley's 2017 -18 Budget speech promising legislative changes or even a new law to confiscate the assets of such fugitives. It seeks to deter economic offenders from evading the process of Indian law by fleeing the country. The bill proposes to allow the Financial Intelligence Unit (FIU), the premier technical snoop wing under the finance ministry, to file an application for the declaration of fugitive economic offender for confiscation of their assets. The courts under PMLA would be entrusted with the responsibility to try the case. The Finance Ministry had prepared the draft Cabinet note on the bill and sought the law ministry's opinion on it. The sources said the ministry, while concurring with the provisions of the bill, suggested that a "Saving Clause" be inserted since the provisions of the proposed bill will have a bearing on the provisions of existing laws. The existing laws under which such offenders are tried include Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFESI), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI) and Insolvency and Bankruptcy Code (IBC).
Centre boosts digital payments, wants RBI to hike MDR on debit card transactions to Rs 200 (BS, FE 19.09.17)
In a move to encourage digital transactions, the government has proposed that the RBI cap the merchant discount rate (MDR) on debit card transactions at Rs 200, sources said. The central bank is yet to release the final guidelines on MDR. According to sources, the ministry of electronics and information technology had in February made a presentation to the central bank suggesting the MDR be rationalised on a “net-cost plus” basis with an upper limit of Rs 200. The ministry’s line of reasoning was that the increase in the volume of transactions as a result of this move would more than make up for what banks lost as MDR. The MDR is the charge a merchant pays to a bank for availing of card transaction services. Currently, banks are allowed to charge an MDR no higher than 0.25% on transactions of up to Rs 1,000 and a maximum of 0.5% on transactions of values between Rs 1,000 and Rs 2,000. Bigger transactions attract an MDR of 1%. These rates are based on temporary guidelines issued by the RBI during demonetisation and extended thereafter.
`Priority Loans to Defaulting Cos Can be Called Standard' (ET 19.09.17)
The RBI has assured banks that they can classify priority loans extended to defaulting companies in the bankruptcy process as standard debt in a move aimed at ensuring that entities, which can be revived, are able to raise resources, said people with knowledge of the matter. This will come as a relief to those companies that are struggling to recast loans within the strict deadline imposed by the Insolvency and Bankruptcy Code. The central bank has, however, said this classification will be allowed only if repayments are made every month rather than later in the form of bullet payments or after a few months. The banks had sought a clarification on the difference in treatment of such loans by banks and finance companies. Priority loans take precedence over other forms of debt and are repaid before other loans in the event of liquidation. Finance companies without any existing exposure to defaulting entities are allowed to classify new loans to such entities as standard debt besides being able to charge much higher rates of interest than banks. Once the bankruptcy process against a company is initiated by admission into the National Company Law Tribunal (NCLT), banks have to set aside 50% of unpaid dues as provisions. This rises to 100% if the company has to be liquidated.
National Insurance eyeing 15-16% growth in premium this fiscal (BL 20.09.17)
National Insurance Company (NIC) is looking to reduce its exposure to loss-making group health and motor businesses. According to K Sanath Kumar, CMD, NIC, plans are afoot to grow its premium income by 15-16% during the current fiscal primarily by scaling up its retail business and increasing its footprint in the corporate segment. This apart, the company also plans to tap the ever growing pie of government business under schemes such as Pradhan Mantri Fasal Bima Yojana (crop insurance) and Pradhan Mantri Suraksha Bima Yojana by “appropriately pricing” products in these categories. Health and motor currently accounts for 78% of NIC’s ₹14,000 Cr premium income. “We need to increase the non-health and non-motor component of our business as these are basically more loss-making. We are looking at investment-driven growth rather than consumption-driven growth this fiscal,” Sanath Kumar said. NIC is aiming at a premium income collection of ₹16,000 Cr compared with ₹14,000 Cr last fiscal. While the non-life industry is growing at over 20%, NIC is looking to grow by 15-16% this fiscal. “We are looking at a carefully measured and calibrated growth so that we are not too much in the loss-making areas,” he said. The company reported a profit before tax of ₹100 Cr in the first quarter of this fiscal.
SBI Life IPO opens; raises Rs. 2,226 cr from anchor investors (BL 19.09.17)
SBI Life Insurance Company has raised Rs. 2,226 Cr from anchor investors as its initial share sale opened for public subscription today. BlackRock, Canada Pension Fund, Government of Singapore, Abu Dhabi Investment Authority, HSBC, HDFC MF, ICICI Prudential MF, Kotak MF, Reliance MF, Axis MF and UTI MF are among the 69 anchor investors. The leading insurer would allot 3.18 Cr shares to 69 anchor investors at an average price of Rs 700, garnering Rs 2,226 Cr to the company, SBI Life informed to the exchanges. SBI Life Insurance is a joint venture between India’s largest lender SBI and BNP Paribas Cardif (BNPPC) — the insurance holding company of France. SBI Life’s public issue involves its promoters offloading up to 12 Cr shares of a face value of Rs 10 each through the offer of sale route. SBI will dilute up to 8 Cr shares, while BNP Paribas Cardif SA will offload up to 4 Cr shares. The insurer is looking to raise about Rs. 8,400 Cr at the higher end of the price band which is fixed between Rs. 685-700 per share. The initial share sale offer will close on September 22..
Microfinance providers to curb excess, multiple lending in the sector (BL 19.09.17)
To address multiple and over lending issues in the microfinance space, micro-credit providers, including microfinance institutions (MFIs), small finance banks (SFBs) and banks will voluntarily abide by a mutually agreed code of conduct (MACC), whereby they will not lend to a client who already has current loans from three micro-credit lenders. According to MACC, which was released by Microfinance Institutions Network (MFIN), microfinance providers have to validate total indebtedness of a client from a credit bureau. Further, they have to ensure that a loan given under the Joint Liability Group (JLG) model is restricted to ₹60,000 per customer. An JLG comprises up to10 individuals who come together for getting a bank loan on individual basis or through group mechanism against mutual guarantee. Generally, the members of an JLG engage in a similar type of economic activity in agriculture and allied sectors. If loan to a specific customer exceeds ₹60,000 or the loan takes the total debt of the borrower above ₹60,000, then such a loan will be given as an individual loan without involving the JLG. Signatories to MACC will also have to provide key information to the client before lending, which is in line with the RBI’s Fair Practices Code (FPC), and include them in the contractual documents such as loan sanction letter and loan card. The entities will have to communicate all terms and conditions to the clients and take measures to ensure that they fully understand the products, process and terms of the contract.
Loans for affordable homes at 16% of total housing credit: Icra (FE 20.09.17)
Rating agency Icra said that the total loan book of all housing finance companies (HFCs) in the affordable housing segment, at Rs 1.26 lakh Cr, constituted 16% of the total housing finance credit as on June 30, 2017. It added that new HFCs — which have started operations in the last four to five years — constituted around 3% of the overall book. While the overall asset quality indicators for the affordable housing HFCs remained stable, there has been a deterioration in the asset quality of the smaller HFCs with gross NPAs increasing to 3.3% as on March 2017 (2.6% as on March 2016) and further to over 5% in Q1 FY18. This increase, Icra said, can be attributed partly to better portfolio seasoning and partly to slippages on account of the cash shortage following demonetisation. “The borrower segment for these new HFCs includes low to middle income, self-employed and cash salaried borrowers with limited income buffers to absorb shocks. Thus, the portfolio vulnerability is high for these players,” it explained. Overall, Icra expects gross NPAs for all affordable HFCs to remain around 2.5%-3% over the medium term; though asset quality for the newer players would be weaker.
Insurance Firms Use Chatbots to Sell Policies, and Help You (ET 19.09.17)
Insurance companies are increasingly using artificial intelligence to sell policies and assist customers with insurance advice. Today, chatbots -a computer programme that carries out conversations via auditory or textual methods -have partly replaced humans at insurance firms to answer customer queries, giving recommendations and issuing policy documents. ICICI Lombard is using a program called MyRA to underwrite two-wheeler insurance as well as fire and burglary insurance for SMEs and offer them quotations in real time. It completes transactions including payment receipt without human intervention. “MyRA has engaged in 65,000 interactions with customers and has successfully sold over 750 policies through chatbot without any human intervention,“ said an ICICI Lombard spokesperson. “The SME-focused chatbot has been utilised in 4,000 cases in less than six months of launch.“ If the chatbot does not have answers to queries, it refers those to human agents. Other insurance companies including PNB Metlife, Apollo Munich, Birla Sun Life, IndiaFirst and HDFC Life have either launched chatbots or are in the process of doing so, as they increase investments in technology, big data and automation for better customer service.
 |
Profitability of steel mills may improve in near term: ICRA (BS 20.09.17)
The profitability of domestic steel mills is likely to improve in the near term due to firm prices of the metal and substantial export growth, a report said. Buoyant global steel prices have benefited Indian mills to increasingly tap overseas markets, as reflected in a 57% Y-o-Y growth in exports during Apr-Aug 2017, helping the domestic steel industry operate at a capacity utilisation of above 80% in the current fiscal. This is expected to improve the profitability of domestic steel mills in the near term, said the report by rating agency ICRA. Domestic steel prices have registered a healthy growth of 14% during the last three months due to a sharp recovery in international steel prices and improvement in local demand growth. Steel prices have reported a healthy growth of 14% since June 2017, aided not only by a sharp recovery in international steel prices but also by an improvement in domestic demand growth to 4.4% in Apr-Aug 2017, from 2.6% in FY17.
No comments:
Post a Comment