Indian Finance:Updated 29th Oct.16:: Finance Ministry on Bank NPA of Steel & Power:

11th November 2016:-
The RBI has further relaxations in Three Schemes:-
S4/A:
5/25:
Strategic Debt Restructuring: 
Current Status of NPA:-
29th October2016:-
Hand over Stressed Units(NPA) in Power, Steel & Shipping to well functioning Public Sector Companies.
In such cases a part of NPA Debt would be converted into Equity by respective Banks:Taking Control of those Units and appointing Well Experienced even Retired Expert Executives of the respective Area in the New Management Team:
The advantage would be no further deterioration in Assets Quality, Change of Management may help in revival of the Unit.

19th October2016:-
Public Sector Giant-"SAIL" is taking over NPA ridden "Electorsteel"

Largest Public Sector Power Generating 'NTPC' is analysing possiblity to takeover 4 to 5 Power NPA: 

• To tackle NPA Situation RBI is asking for More Skillful & thoughtful approach.

New Governer has asserted Four Stages of NPA: Identification,Recording,Reporting and Resolution.
61% NPA are in Five Sectors:
Infrastructure,Steel,Textile,Power and Telecom.
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Two Powerful Investors have joined to Invest in NPA space as follows:-
SBI+Brokefield                    US$1Billion

Piramal+Boston Bain            US$1Billion

Above Two Funds would acquire NPA of Indian Banks at Deep Discounts. 

Introduced in the Lok Sabha in May, the bill seeks to amend four legislations — 

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, 

the Recovery of Debts due to Banks and Financial Institutions Act, 1993, 

the Indian Stamp Act, 1899 

and 

the Depositories Act, 1996.

The EnPforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions Bill, 2016  as Reported by Joint Committee is listed for consideration and passing.

to give the RBI powers to regulate asset reconstruction 

companies, 

prioritise secured creditors in repayment of 

debts

 and 

provide stamp duty exemption on loans 

assigned by banks and financial institutions to 

asset reconstruction firms.


Around 70,000 cases involving more than Rs. 5 lakh

 crore are pending in Debt Recovery Tribunals (DRT) 


DRT & SARFAESI Act working in synchronization with Insolvency & Bankruptcy Code2016:

1.  Matter of Agriculture Land would with States.
2. Suggested 21 Major Amendments.
3. 30days Window to submit a view on the status of the Properties being taken over by banks & Financial Institutions.
4. Vacancy in a Tribunal, similarly placed judicial official can also hear a case related to DRT & SARFAESI.

Earlier Recommendations:-

1.  Says CDR has failed to achieve objectives; calls for cases to be settled within six months  

2.  The Finance Standing Committee of Parliament has called for immediate forensic audit of all restructured loans that had turned into bad debts.

3.  Forensic audit is also required for wilful defaults and Reserve Bank of India  has been asked to prepare guidelines for the process.

4.  The analytical reports of the forensic audit should be submitted to the panel in six months, it said in its report, which was adopted here on Friday.

5.  We have adopted the report. We will submit it to the Speaker, said

Veerappa Moily, Chairman of the panel and senior Congress MP, 

6.  The panel asked the apex bank to form empowered committees at the level of RBI, banks and borrowers to monitor large loans.

7.  As on September 2015, net NPAs of public sector banks stood at RS.2,05,024 crore and may reach Rs. 4 lakh crore by the end of this fiscal, the panel said, adding that such a huge figure raises questions on the credibility of mechanisms to deal with NPAs.

8.  The report said wilful defaulters owe public sector banks ₹ 64,335 crore, which constitutes about 21 per cent of total NPAs, and

9.  Called for making public the names of the top 30 stressed accounts of each bank, in the category of wilful defaulters.

10.There is no justification of keeping the names secret and asked the RBI to amend its guidelines, it added.

11.RBI, as a regulator, did not succeed in implementing its own guidelines, it said, and asked the apex bank to proactive and monitor the issue on a regular basis.

12.The panel also recommended the development of a vibrant bond market to finance infrastructure products.

13.Batting for large infrastructural projects, it said the Centre should revive Development Financial Institutions for long-term financing of such projects and urged the Centre to also allow Infrastructure Finance Companies to buy infrastructure projects turning into NPAs and keep them as standard assets.

14.Corporate debt restructuring (CDR) mechanisms had failed to achieve the desired objectives, adding that there should be a definite timeline of six months to settle CDR cases.

15.In 2014-15, most of the slippages came from

restructured debt.

16.On strategic debt restructuring, the report said it could empower banks to take control of the defaulting entity, and recommended that a change in management must be made mandatory in cases involving wilful default.

17.The prolonged slowdown in the economy has eroded the market for distressed assets so much so that even Asset Reconstruction Companies found it hard to offload these, the committee observed, adding that RBI should consider creating a dispensation that allows banks to write off losses in a staggered manner.

• Preamble:-  Around Rs.2.20Lac Crores of Banks Funds are blocked in NPA. These NPA's consist of from Smaller Rs1Lac to Crores of Rupees. 

• NPA has became a big Headache for Ministry of Finance, Banks and to Individual Borrowers.  In this article we are trying to discuss a way out for problems of Small Borrowers  Outstanding up-to Rs5Crores.

• Import & Export has become Powerful Tool to Create NPA:
• Is it possible to create Specific Foreign Exchange Department for Foreign Remittances.

• Current Scenario

1. The present Scenario is frustrating and very critical NPA's are increasing. Assets in the possession of the Banks are also increasing.
2. On approaching the Bank Staff they are totally Non Cooperative.And asking for payments even if lot many wrong debits and recoveries are appearing in the  Outstanding Statement provided.
3. Average Borrower's Securities are Seized.Borrower is reaching Debt Recovery Tribunal where cases are piling up and hearing Date earlier than Three years is not expected.Interest, Compounded Interest, overdue Interest and Penalties are continuing. 
4. DRT is completely in the grip of Touts, Brokers. Bank is Loading all type of Interest on the Loan itself.Loan account became unbearable.
5. Present Market Value of Collateral is Several times higher than Cost/Security Value, which may not realize through Bank auction.
6. Through Bankers only "Lower value" is realizing of the Securities pledged causing huge losses to the original Borrower.
7. Borrower is totally frustrated no way seems out?

• In such cases What to do now to get Collateral released?

1. We can take advantage of Securitzation & Reconstruction of Financial Assets act and Enforcement of Securities Act.(SRFAESAI).

2.A Scheme  can be prepared: without approaching "Debt Recovery Tribunal" for amicable Settlement of Dispute with Banks.

3.Continuous Communication with Bankers:-
My submission if a Communication Link with Bankers are established that would help in repayment of Loan and release of Securities amicably.Avoiding bitter experiences like Auction of Property etc.

4.The Scheme may be submitted to various Bank Authorities  and Authorities in Ministry of Finance Govt. of India with complete details in a Systematic Manner.

5.Detailed working bifurcating Principal, Interest, Penal Interest and other recoveries including Charges separately date wise would help.

6.Normally Recovery Statement lacks above details Systematic presentation in the Form of Dossier would definitely help.

7.Help of Consumer Court: Bank is a Service Industry. Not Charging correct Interest is equivalent to deficiency in Service. One can approach Consumer Court for such Lapses. And One Can get rectified Interest Demand.


8.Similarity in Restructuring through Bank Officials: order by DRT/BIFR:- In all these cases the proposal is of Bank only. Therefore the Bank Officials are the Common factor.Only an Order is passed on the consent of the Bank.

Therefore the Banks can pass similar orders in case of Direct request also.

In case Branch Level officials not agrees we can approach Higher Bank Officials.

The Corporate Debt Restructuring (CDR) cell:- A forum of bankers appointed by the Reserve Bank of India (RBI) formed in early 2000s,It takes a call on individual debt recast packages. All public sector and leading private lenders apart from NBFCs are its members. For a restructuring package to be approved, 75 per cent of the lenders by value and 60 per cent by number have to agree to the proposal and the promoters must infuse[  25 per cent of the fresh loan being sought as fresh capital. To increase owner's Margin

B.Systematic submission of Dossier to Bankers, emphatic follow up of the proposal would definitely bring Concrete Results.

For a Public Limited listed Company it is also possible to Convert Outstanding Public Sector Bank Loan into Equity under Strategic Debt Restructuring (SDR) discussed in following Paragraphs:-

C. Reforms in Debt Recovery Tribunal

Looking to Scenario at B above, the Govt has taken certain proactive Steps.
Indian banks may soon be able to settle their grievances with Debt Recovery Tribunals at a faster pace as proceedings go online. 
Digitising Entire Procedure of DRT System
The finance ministry is planning to computerise the entire operations of theDRTs and do away with unnecessary procedures."I have suggested to the department of financial services, since the administration of DRT is not under any judicial authority but the department looks after it, to consider the digitising of the entire procedure on a high priority basis," finance minister Arun Jaitley said at the industry lobby Indian Banks'

Association's annual general meeting in Mumbai on Monday. The minister said that DRT is one forum where the tribunal and appellate authority

can function exclusively with all the filings and proceedings shifting online."There will be provisions for only two hearings interim and final. All other procedures will be eliminated, 

The gross non-performing loans are estimated at Rs3.1 lakhcrore as of March 31, which is over 4% of the advances. DRTs were created to help financial institutions recover dues speedily without being subjected to the lengthy procedures of usual civil courts. 

The government is also working on expediting arbitration cases. "The arbitration law, which is now pending in Parliament, has provisions which facilitate cheaper and faster arbitration. A chapter on fast-track settlement of disputes is introduced.

For more details please contact undersigned

7228805981:ashok.agarwal8@gmail.com 

I invite comments from Readers