The banking sector this week was shadowed largely with the bankers doing marathon meetings to decide on the 12 large corporate bad loan accounts identified by the Reserve Bank of India to be taken to the National Company Law Tribunal under the Insolvency and Bankruptcy Code.
The 12 defaulted borrowers include steel and infrastructure companies such as Lanco Infratech, Bhushan Steel, Bhushan Power and Steel, Essar Steel, Electrosteels Steel and Alok Industries among others.
Joint Lenders’ Forum led by banks including State Bank of India, Punjab National Bank and IDBI bank, for each corporate account met in a series of meetings and formally approved taking the company’s resolution process through the corporate insolvency route.
The week started with bankers kickstarting the process to finalise the decision to refer the stressed cases to the NCLT within a month’s time. Lanco Infratech was the first to officially announce its decision to be taken to NCLT by IDBI Bank led bankers.
Other cases discussed during the week were Jyoti Structures, Alok Industries, Essar, Bhushan Steel, Bhushan Power and Steel and Electrosteel Steels.
On Friday, Punjab National Bank approved taking Bhushan Power and Steel to be referred to NCLT, while Bhushan Steel informed the stock exchanges that SBI would officially be referred under the insolvency code.
During the week, the banking regulator also expanded the scope of the overseeing committee (OC) by adding three more members from the existing two to a total of five members headed by former Central Vigilance Commissioner Pradeep Kumar. The new members will come on board with effect from September 7, 2017.
It also expanded the scope of the OC beyond the S4A – scheme for sustainable structuring of stressed assets – to all assets above Rs 500 crore.
Also, with the Goods and Services Council extending the deadline for companies to file taxes by two months will provide a much needed breather to banks for setting its IT infrastructure and processes in place as the GST is set to be launched on July 1
On GST, RBI Governor Urjit Patel, at a panel discussion at a banking and financial services event, said that GST will reduce inefficiencies within states and broaden the tax base, making it an important part of the digital revolution.
The central bank chief sounded more optimistic on the job sector in the IT sector. According to him, despite pressure in the IT (information technology) sector, start-ups are creating more jobs. The pessimism regarding job losses is a judgement too soon and that he has not heard of any major job destruction while talking to corporates. Further, he said that India’s fintech industry has almost tripled its size since 2013 and the value of transactions has touched USD 30 billion already. Here, Patel also asked to maintain caution of the space that the world is yet to recover even from the 2008-09 global financial crisis.
He also said that unequivocally, India’s position should be for an open trading system despite sentiments with some of the other countries changing and that is the right position to take. India has believed in a multilateral trading system and must continue to force ourselves into that, Patel said, adding that India must continue doing so despite changes in other countries, alluding to the protectionist policies by the US and UK.
In another market news, Au Small finance bank decided to come out with its IPO (initial public offering) whose issue will open from June 28-30. The bank’s CEO Sanjay Agarwal said in an interview that the bank plans to raise Rs 1,912 crore through the public.
Demonetisation demon is still haunting the cash logistic firms as the banks are yet to pay them dues worth Rs 93 crore. Cash logistic firms are involved in the recalibration and replenishment of ATMs.
At the peak of demonetisation, when supply of replacement currency at ATMs was running low, an army of 50,000 people in 9,800 odd vans had worked around the clock to recalibrate and fill up the depleting cash machines. Sources told Moneycontrol that the logistics companies are owed a sum of Rs 93 crore by banks, only some of whom have paid up.