14th September2016:- Formation of National Infrastructure Investment Fund(NIIF): with Two dedicated Funds One for Road(Highways) and another for Clean(Renewal) Energy.
High Initial Corpus Rs.40000Crores.
5th Sept.2016: Latest RBI Guidelines for Sale of Assets with a view to sell early and during Life Cycle of the Assets & Continued Responsibility of the Bank concerned:-
_________________________________________________________________________________
The Jaypee Group & Banks have found a Noble way out to Settle IBank Outstanding: Land & Buildings are offered by Jaypee Group to Banks to Settle.To avoid Stamp Duty the Land would be Ist transferred to a Separate Company and thereafter acquired by Lenders under SARFAESI Act dealing with Bad Debt
April 14,2016:
The Ministry of Finance, Govt of India is keen to create a Political & Economic Enviornment for amicable Settlement of NPA. Accordingly proposing to Amend Sarfaesi & DRT act in tune with Bank Kruptcy Law.
March 31,2016:
Today the RBI has expanded definition of Infrastructure by including More Sectors like mine etc. Moreover Now Infrastructure and other Companies are now eligible for Foreign Currency Loan. For more details see post of ECB.
March25,2016
Ironically , some of these lenders have had their loans restructured under the 5/25 scheme. The scheme was introduced in 2014 by Reserve Bank of India governor Raghuram Rajan, where loans were extended to 25 years with a condition that interest rates would be reset after every five.The 5/25 scheme involved zero sacrifice from lenders but it made repayment easier for the borrower by reducing the installment size.
Around 21% of the restructured loans as of December 2015, amounting to Rs 54,051 crore, were from the iron & steel industry. The gross non-performing assets in the steel sector as of September 2015 stood at 8.4%. This is expected to rise to nearly 12% by March 2017.The steel industry is the highest leveraged sector in India and banks are not in a position to extend fresh loans.
In a recent industry note, SBI M.D. B.Sriram had said, "We think time has come for the government to seriously
High Initial Corpus Rs.40000Crores.
5th Sept.2016: Latest RBI Guidelines for Sale of Assets with a view to sell early and during Life Cycle of the Assets & Continued Responsibility of the Bank concerned:-
- RBI has now permitted sale of Stressed Assets to Other Banks, Non banking Financial Companies & other Financial Institutions including ARCs.
- If sale of Assets Value is Rs50Crores or more: than Valuation from Two Independent Valuers are required.
- ARC must pay 15% upfront of the Sale Value.
- For balance Payments: In case ARC is issuing Security Receipts (SR) for redemption afterwards, From F.Y.2017-18 Value of such SR is more than 50%(10% from 2018-19) Provision is required.
- Valuation Rates used by Banks are normally Discounted Rates based on Cost of Equity/Average Cost of Funds/Opportunity Cost.
- At present their are 16ARC & 3 More Licences are issued by RBI.
_________________________________________________________________________________
The Jaypee Group & Banks have found a Noble way out to Settle IBank Outstanding: Land & Buildings are offered by Jaypee Group to Banks to Settle.To avoid Stamp Duty the Land would be Ist transferred to a Separate Company and thereafter acquired by Lenders under SARFAESI Act dealing with Bad Debt
April 14,2016:
The Ministry of Finance, Govt of India is keen to create a Political & Economic Enviornment for amicable Settlement of NPA. Accordingly proposing to Amend Sarfaesi & DRT act in tune with Bank Kruptcy Law.
March 31,2016:
Today the RBI has expanded definition of Infrastructure by including More Sectors like mine etc. Moreover Now Infrastructure and other Companies are now eligible for Foreign Currency Loan. For more details see post of ECB.
March25,2016
A. Steel loans worth
50k-cr may turn bad in few months
Requirement of A specialized funding body for the steel
industry on the lines of the Power Finance Corporation for the power sector.
Last week, lenders met highly
leveraged steel manufacturers and
put them on notice. Although classifying
loans to these companies as non-performing assets (NPAs) will mean banks
taking a hit on their profits, it will shift the balance of power
in favour of the lenders as they will now stop coaxing borrowers and
instead initiate recovery proceedings.
The companies that banks are holding discussions with include Essar, Bhushan, Visa and Electro Steel.
The companies that banks are holding discussions with include Essar, Bhushan, Visa and Electro Steel.
Ironically , some of these lenders have had their loans restructured under the 5/25 scheme. The scheme was introduced in 2014 by Reserve Bank of India governor Raghuram Rajan, where loans were extended to 25 years with a condition that interest rates would be reset after every five.The 5/25 scheme involved zero sacrifice from lenders but it made repayment easier for the borrower by reducing the installment size.
Around 21% of the restructured loans as of December 2015, amounting to Rs 54,051 crore, were from the iron & steel industry. The gross non-performing assets in the steel sector as of September 2015 stood at 8.4%. This is expected to rise to nearly 12% by March 2017.The steel industry is the highest leveraged sector in India and banks are not in a position to extend fresh loans.
In a recent industry note, SBI M.D. B.Sriram had said, "We think time has come for the government to seriously
look into the possibility of setting up a
funding agency for the steel sector, as well, on the same lines of PFC or
REC for the power sector.
The 26 nationalized banks, which are expecting a Rs 25,000 crore government bailout in the coming financial year, have lost at least Rs 30,873 crore to frauds in four years 2011-12 to 2014-15. According to finance ministry documents, these losses are only due to frauds of Rs 1 lakh or more. Some of these cases are being probed by investigating agencies.
The 26 nationalized banks, which are expecting a Rs 25,000 crore government bailout in the coming financial year, have lost at least Rs 30,873 crore to frauds in four years 2011-12 to 2014-15. According to finance ministry documents, these losses are only due to frauds of Rs 1 lakh or more. Some of these cases are being probed by investigating agencies.
B.Vijay-Mallya and
his advisers are working to revise a debt repayment
Offer that has
been rejected by banks to make it more acceptable to them, people aware of the
development said.
He's conducting a review of his assets in consultation
with a legal firm that has financial expertise and may make an
offer of staggered payments or a one-time settlement.
Banks are
ready for the negotiation if he is willing to
pay the entire principal amount that he owes banks,"should also tell us how much of the interest
component he can repay, we
can't waive that off. His settlement offer
should include a significant portion of the interest component too as it
has crossed over Rs 3,000 crore."
Pledged his assets and given his
personal guarantee, but he is not even
willing to give his assets under oath; that matter is also pending at DRT
(debt recovery tribunal)," said
Mallya's statement, banks have already
recovered Rs 1,244 crore from the sale of pledged shares.
An additional Rs 600 crore has been held as a
deposit by the Karnataka High Court since July 2013 and a further sum
of Rs 650 crore belongingto United
Breweries Holdings has been similarly held since early 2014.
A.
In an airfield in southern India, seven planes of the failed Kingfisher
India
most aero revenue from an Airbus A330's international turnaround after
London's Heathrow.
B.New Asset Management Fund:-
Crisil' s move is the latest in the sling of rating downgrades that Indian public sector lenders have witnessed from domestic and global rating agencies.
Standard & Poor's, New York termed the Budget credit negative for the public sector lenders after the government fell short of the market's expectation on capital infusion.
The government has allocated only Rs 25,000 crore for recapitalization of the banks compared with expectations of Rs 35,000 crore.
The NPA pain in the sector may not be over post the
Foreign brokerage Morgan Stanley did a stress test on the Indian
The high pre-provision operating profit (PPoP)
Long Term Investment in Share Market may be a boon to an alert Investor
Few of the things are very clear and each Investor can take advantage as under:-
A.
In an airfield in southern India, seven planes of the failed Kingfisher
Airlines rust away -- relics of a former
billionaire's ambition and
emblems of the complex regulations that
hamper Indian aviation.
The decaying aircraft, damaged by floods in
Chennai late last year, were
part of the fleet of India's once second-largest
airline. India
is one of the world's most under-penetrated
aviation markets.
Provincial taxes of as much as 30 percent
mean jet fuel prices in some
Indian cities are the highest in the world. A
liter (.26 gallons) costs
77 cents in New Delhi, versus 52 cents in New
York and 62 cents in
Sydney.
Higher airport
tariffs also means the Indira Gandhi
International
Airport, which services India's
capital, generates themost aero revenue from an Airbus A330's international turnaround after
London's Heathrow.
also hurt by a regulation that prevented
foreign carriers
from owning stakes in domestic operators.B.New Asset Management Fund:-
kotak-mahindra-canada-pension-to-buy-out-npas/
To set up $525 million stressed asset fund
The move is aimed
at tapping the opportunity in the growing stressed
asset market in
India The move is aimed at tapping the
opportunity in the growing stressed asset market in India
The Kotak
Mahindra group and Canada Pension Plan Investment Board
(CPPIB) have
decided to set up a stressed asset fund with a total
investment of
$525 million, with the CPPIB having the ability to invest up to $450
million. The fund will buy big-ticket non-performing assets (NPAs) from banks
and help the units turn around. The fund will be jointly set up by the Kotak
Investment Advisor, a wholly-owned subsidiary of Kotak Mahindra Bank, and
CPPIB. The move is aimed at tapping the opportunity in the growing stressed asset
market in India. Stressed assets — gross non-performing assets plus
restructured advances in the countrys banking system were at 11.1 per cent of
gross advances as of end September. Public sector banks recorded highest level
of stressed assets at 14.1 per cent.
NPAs in the
banking system surged in the October-December quarter with
the Reserve Bank
of India identifying certain accounts that banks were asked to classify
as NPAs. The January-March quarter is expected to throw up more bad
loans as most banks had classified only 50 per cent of what RBI mandated
in Q3. The banking regulator is forcing banks to come clean on NPAs,
and said it will clean up bank balance sheets by March 2017. S Sriniwasan, CEO,
Kotak Special Situations Credit Fund, said: The current
environment has created a much larger opportunity that requires significant
capital commitment. We are delighted to have a world-class
institution such
as CPPIB put patient capital to work, backed by strong and active asset
management, to capitalise on the stressed assets market.
The asset
reconstruction industry has limited capital and there is an urgent need for
substantial capital to buy NPAs from banks, as and when these loans get
sold at fair value. This pool of capital with a flexible mandate will work
alongside the ARC, and positions us to comprehensively address the
capital needs of both the borrowers and the selling lenders,†said
Eshwar Karra, CEO, Phoenix ARC. Phoenix, which manages assets worth Rs
4,000 crore, will provide advisory services to KIAL.
C.NEW DELHI:March 2016
Domestic rating agency Crisil has downgraded eight public sector banks and
revised the outlook to negative for five others.
Crisil joins a
long list of rating agencies which have either downgraded the public sector
lenders or have projected a negative outlook for them.
"Actions are
driven by expectations that asset quality problems being faced by PSBs
will remain acute and continue through most of the next financial year.
The resultant impact on profitability and capitalisation can further dent
their credit profiles over the medium term," the rating agency said in a
report.
The banks that
were downgraded include
Bank of India (AA+/Negative from AAA/Negative),
Central Bank of India (AA-/Negative from AA/Negative),
Syndicate Bank
(AA from AA+/Stable; placed on rating watch with negative implications),
UCO Bank (AA/Negative from AA+/Negative),
Indian Overseas Bank (A+/Negative
from AA-/Negative),
Corporations Bank (AA- from AA+/Stable),
Dena
Bank
"A significant stress in the corporate loan book
of PSBs is expected
to result in their weak assets ballooning to Rs 7.1 lakh crore by March 31,
2017 (11.3 percent of total loan book) from around Rs 4.0 lakh crore as on
March 31, 2015 (7.2 percent of loan book)," the agency said.
Crisil' s move is the latest in the sling of rating downgrades that Indian public sector lenders have witnessed from domestic and global rating agencies.
Standard & Poor's, New York termed the Budget credit negative for the public sector lenders after the government fell short of the market's expectation on capital infusion.
The government has allocated only Rs 25,000 crore for recapitalization of the banks compared with expectations of Rs 35,000 crore.
The NPA pain in the sector may not be over post the
fourth quarter
numbers as it sees the bad loans ballooning to Rs
7,00,000 crore by
the end of this financial year.
"Over the
next few quarters, slippages to NPAs will remain high drivenby stretched cash
flows of highly leveraged companies (mainly in the vulnerable
sectors such as infrastructure, metals and real estate continued proactive
recognition of stressed assets by banks, and limited ability of banks in the
current environment to recover from exposures to
large companies that have slipped into NPAs," Crisil said.
Foreign brokerage Morgan Stanley did a stress test on the Indian
banks to assess the exact impact should the
banks record their bad loans properly and provide for them by FY19.
The brokerage found that as collateral[a1] values stay weak and revenues remain under pressure due to weak nominal GDP larger companies may start defaulting over the next few quarters.
The brokerage found that as collateral[a1] values stay weak and revenues remain under pressure due to weak nominal GDP larger companies may start defaulting over the next few quarters.
The high pre-provision operating profit (PPoP)
margin at these banks would help them manage
significantly higher badloans without big dilution.
Dharmesh Mehta,Axis Capital.
Dharmesh Mehta,Axis Capital.
"I still want to be in private banks and
SBI as a whole. I do not need to go elsewhere because the fear there is
much more and we do not evenknow what is happening. At least in private
sector banks, you have got a very strong retail push, which is also
insulating some part of their balance sheets.423.90.
Long Term Investment in Share Market may be a boon to an alert Investor
- Over the period of time lot many effective reforms are carried out in the Banking Sector. Reforms like Effective Branch Computerization. Specialized branches like branches for Small Businesses to Corporate Accounts to Industrial Finance Branches .
- Stringent norms for declaring a debt as NPA. Provisioning of Debts, Corporate Debt Restructuring have resulted in Controlling NPAs
- Under valued Stocks of Nationalized Banks like Oriental Bank of Commerce & Dena Bank are very good buy. To create a Strong Portfolio over a period of time.
- Their Commercial Property valuation is also not Considered. Very Large Branch Net Work. Trained Staff members. Fool proof working Systems.
- Powerful Internal Controls supported with various Internal and Statutory Audits have created a comfortable enviornment for Growth.
- Very high frequency of introducing New Products, attractive, cost effective and competitive with Contemporary Foreign and Private Banks.
- Extra Ordinary Net work of Branches and ATMs. ensuring Service Quality."SBI is having Branches and ATMS at every nook & corner of the Each and Every City and Village". In a light vein SBI ATM's are frequently used as Land Mark for Addresses.
- These Banks are also Meeting Capital Adequacy norms.
- ICICI Bank are other good buy.
-
Improving operating environment, Stable Asset Risk and Capital,Stable Funding and Liquidity.Also stable profitability and efficiency and the government support has supported a stable outlook for the sector, it said adding the recovery in the asset quality would be U-shaped rather than V-shaped, because corporate balance sheets remain highly leveraged
- Low inflation and the Gradual implementation of Structural Reforms. An accommodative Monetary policy should support the growth environment,"
- The capital levels of public sector (PSU) Banks are low and the government's announcement of injecting Rs 70,000 crore into PSU banks over the next four years is "clear positive".
-
Ability to access equity capital markets remains key ifthe PSU banks have to address their capital shortfall," it said, adding high capital levels are a credit strength of the private-sector banks.
C. Power Companies:-The National
Democratic Alliance (NDA) government at the Centre is likely to put on states the onus of
restructuring the debt of power distribution
companies. Under the new financial restructuring plan (FRP)for
discoms, the state governments are to take over the entire debt of these
firms.
The biggest advantage of this Scheme is Onus on State Govt. and not on Banks.
Banks and other lenders would not be asked to restructure any part of the loans, said senior central and state government officials.
The biggest advantage of this Scheme is Onus on State Govt. and not on Banks.
Banks and other lenders would not be asked to restructure any part of the loans, said senior central and state government officials.
To enable states
to take over the entire debt, the Centre will also relax the
borrowing limit for state governments. "States are being given a relaxation of
25 basis points to one percentage point in their FiscalResponsibility
and Budget Management (FRBM) limit. This will help them absorb the losses
and issue bonds in the short term," focusing on the
eight states that together account for the biggest chunk of
the total accumulated debt of Rs 3.17 lakh crore. These
are Rajasthan,
Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana,Jharkhand, Bihar
and Telangana.
if a state
government failed to honour the bond
terms or
defaulted on the dividend payment, the Centre would divert the tax devolution
amount from that state's kitty to the bond owners.
The tax
devolution from the Centre to states is 42 per cent of the total divisible pool
offered. A portion of it will be deducted from the Centre's share in
the state's revenue and used for paying dividends.
Centre was ready to
relax the borrowing limit for states.
FRBM places
limits on the deficit a state can have. A relaxation on this will translate
into states being allowed more fiscal deficit in their public accounts.
The current FRBM limit is three per cent. The amount of relaxation could
vary on the basis of the amount of debt held by the state concerned.
For instance, if a state gets 3.25 per cent relaxation,its borrowing
limit will be close to six per cent.
"There is no
debt servicing by the Centre; only the borrowing limit is increased.
interest payment
that we will have to make annually could cause the state's
finances to slip into the red,"
* 100% debt to be taken over by states; if
less is taken over, the balance to be serviced through reforms and
tariff hike
* State governments to issue sovereign
guarantee bonds
* No part of debt to be serviced by banks or
financial institutions
* Centre to relax borrowing limit for states
* If states default on dividend payment to
bonds owners, part of their tax devolution fund to be used for payment
to bond owners
