Top 1,000 Indian Companies Borrowed Rs. 1 Trillion Less In FY17

Mumbai: The record low bank credit growth of 5.1 per cent in FY17 was led by the top 1,000 listed corporates which saw their net loan outstanding decline by a whopping Rs. 1 trillion in the reporting year, said a report.

One-third of this massive contraction was led by just 10 companies, which cumulatively availed of Rs. 33,571 crore less in the year over the previous year, according to the report by SBI Research.

According to SBI chief economic adviser Soumya Kanti Ghosh, who penned the report, this could either be perceived as lower debt utilisation levels or prepayment through internal accruals or through asset sale. Other reasons could be QIP or private equity participation.

The RBI data showed that bank credit inched up by a tad 5.1 per cent in the year to March 2017, which was the lowest since 1951 when it had grown by a paltry 1.8 per cent which could be attributed rise in bond issuance and cheaper non-bank fund sources coupled with overall credit aversion in the economy as well as non-investment by the private sector in capacity expansion.

However, taken as a whole, results of about 3,000 listed entities for FY17, there was an 8 per cent increase on a CAGR basis in loan funds outstanding over FY15.

The outstanding loan funds as of FY15 stood at Rs. 22.8 trillion, which increased to Rs. 26.5 trillion in FY17. This was Rs. 24.2 trillion in FY16.

However, many top notch corporates reported contraction in loan funds outstanding in FY17 over FY16.

Top 1,000 Indian Companies Borrowed Rs 1 Trillion Less In FY17: Report

“About 1,000 entities in aggregate (excluding banks & finance companies) reported decline in loan funds to the extent of Rs. 1 trillion crore,” said Ghosh.

Debt contraction can either be through repayments, equity conversion or restructuring he says adding “top ten entities saw a decline of about Rs. 33,000 crore.”

Some of the best known companies that have lowered loan funds include Gail India (-48 per cent), Piramal Enterprises (-37 per cent), National Fertilizers (-37 per cent), L&T (-24 per cent) Hindalco (-20 per cent) and Jet Airways (-22 per cent). Cumulatively, these companies alone borrowed Rs. 20,000 crore less, said the report.

From a sectoral point of view, this came in amidst a double digit annual growth in EBIDTA by most of the top 10 sectors depicting all round growth in top-line, midline and bottom-line.

About 1,000 entities (excluding banks & finance) saw a steep Rs. 1,00,710 crore decline in loan funds, while the top ten entities’ loan funds decline by Rs. 33,571 crore which is 33 percent of the aggregate reduction in loan funds for all.

Hinting at a continuation of the same deleveraging trend in the times to come, the report points to the Tata Group is identifying non-core businesses for divestment.

The group is in the process of selling drug discovery services company Advinus Therapeutics. Its fertiliser business may also be up for sale along with Tata Ceramics, Tata Business Support Services, Tata Asset Management and Tata AutoComp Systems.

Other reasons for lower lonn demand may come from operational and financial restructuring, repayments, equity conversion by lenders etc, said the report.

 

Trump Calls For Removal Of Barriers For US Exports To India

Washington: US President Donald Trump said he is keen to work with Prime Minister Narendra Modi on creating a “fair and reciprocal” trading relationship between the two nations and called for the removal of “barriers” for the export of US goods into Indian markets.

“I look forward to working with you to create jobs in our countries, to grow our economies and to create a trading relationship that is fair and reciprocal,” Trump said in his remarks at the White House Rose Garden following his meeting with Modi.

Trump said it was “important” that barriers be removed to export US goods into Indian markets, “and that we reduce our trade deficit with your country.

“Referring to the GST reform to be implemented across India starting next month, Trump said it was “the largest tax overhaul in your country’s history”.

Trump Calls For Removal Of Barriers For US Exports To India

“We’re doing that also, by the way. Creating great new opportunities for your citizens. You have a big vision for improving infrastructure, and you are fighting government corruption, which is always a grave threat to democracy,” he said.

Trump expressed pleasure about an order by an Indian airline company for 100 new American planes, calling it one of the largest orders of it is kind, which will support thousands and thousands of American jobs.

“We’re also looking forward to exporting more American energy to India as your economy grows, including major long-term contracts to purchase American natural gas, which are right now being negotiated, and we will sign them. Trying to get the price up a little bit,” he said.

US Exports To India Support 2,60,000 Jobs In America: Report

Washington: American exports to India support more than 260,000 jobs directly and indirectly in the US and the cumulative investment from the country into India reached $28.3 billion in 2015, a new report said on Monday.

India’s foreign direct investment (FDI) in the US totalled $9.2 billion as of 2015, up more than 500 per cent since 2006, said the report ‘India Matters for America/America Matters for India’, which was released by Federation of Indian Chambers of Commerce and Industry (FICCI) and East-West Centre at an event on the sidelines of Prime Minister Narendra Modi’s visit here.

“Every US state exports to India, these exports support more than 260,000 jobs directly and indirectly,” the report said.

Thirty-one states have more than 1,000 jobs dependent on exports to India, while an additional six states have 10,000 jobs or more,” said the report, adding that the cumulative investment from the US into India reached $28.3 billion in 2015.

Noting that the US is one of the largest sources of investment into India, the report said since 2000, the US invested over $20 billion in India, more than six per cent of India’s total inflow of investment.

According to the US Trade Representative, India’s direct investment in the US is led by professional, scientific, and technical services; depository institutions and manufacturing.

Among the Asia Pacific countries, India is the 7th largest investor in the US, it said.

“The study clearly brings out the multi-faceted relationship between India and the US and which has only been strengthening with time. Be it trade, investments, tourism, student exchanges or engagement in strategic sectors like defence, India and the US have continued to contribute a lot to each other’s economy,” said Pankaj Patel, FICCI president.

Stating that the defence trade between the US and India increased from $1 billion to over $15 billion, it notes that India was named a ‘Major Defence Partner’ of the United States in 2016, a status which was created to facilitate technology sharing with India to a level at par with that of the United States’ closest allies and partners.

US Exports To India Support 2,60,000 Jobs In America: Report

The signing of defence agreements such as the Defence Technology and Trade Initiative (DTTI) and the Logistics Exchange Memorandum of Agreement (LEMOA) furthered cooperation.

India conducts more bilateral exercises and personnel exchanges with the US than with any other country, 50 formal events annually, it said.

According to the report, the two-way trade between the US and India increased nearly 200 per cent since 2005, with total value from $37 billion in 2005 to $109 billion in 2015.

US exports amounted to $21.5 billion in goods and $18.1 billion in services to India in 2015.

The US is the top destination for Indian goods, 14 per cent of India’s export.

Also the US is India’s 2nd largest trading partner while India is the 9th largest goods trading partner of the US.

Further US goods imports from India increased from $1 billion in 2000 to almost $45 billion in 2015, a fourfold increase, it said.

Nearly 2,000 American multinational enterprises (MNEs) operate in India, more than from any other foreign country, and employ over a million people, according to US Bureau of Economic Analysis (BEA) estimates, it said adding that sales by these companies amounted to $76.7 billion in 2014.

There are also over 200 Indian companies in the United States. These companies have invested over $15.6 billion across 37 states and employ over 100,000 people. Sales by Indian MNEs totalled $25 billion in 2014, the report said.

More than 1.2 million US tourists visited India in 2015, accounting for over 15 per cent of all international visitors, and contributing over $3 billion to the Indian economy, it said.

In the same year, over 1 million Indians traveled to the United States.

As the 7th largest source of visitor spending in the United States, Indian tourists contributed $11.4 billion to the US economy.

Thirty-one US states saw an economic impact of $100 million or greater from spending by Indian visitors, the report noted.

The United States is also the top destination for Indian students studying abroad, with US schools hosting half of all Indian international students.

Almost 166,000 Indian students studied in the United States during the 2015/16 academic year, a 25 per cent increase over the previous year, and contributed over $5 billion to the economy.

Indian students make up 16 per cent of all international students in the US.

A majority of Indian students study at the graduate level, and 35 per cent study in a math or computer science field.

American students in India numbered over 4,000 during the 2014/15 academic year.

India is the 4th most popular destination for US students studying abroad in the Asia Pacific, it said.

 

Trump Urges PM Modi To Fix Deficit, But Stresses Strong Ties

Washington: U.S. President Donald Trump urged Indian Prime Minister Narendra Modi to do more to relax Indian trade barriers on Monday during talks in which both leaders took great pains to stress the importance of a strong U.S.-Indian relationship.

At a closely watched first meeting between the two, Trump and PM Modi appeared to get along well. Modi pulled in Trump for a bear hug on the stage as the cameras rolled in the Rose Garden.

“I deeply appreciate your strong commitment to the enhancement of our bilateral relations,” PM Modi told him. “I am sure that under your leadership a mutually beneficial strategic partnership will gain new strength, new positivity, and will reach new heights.”

Trump was also warm but made clear he sees a need for more balance in the U.S.-India trade relationship in keeping with his campaign promise to expand American exports and create more jobs at home. Last year the U.S. trade deficit with India neared $31 billion.

Trump said he would like a trading relationship that is “fair and reciprocal.”

“It is important that barriers be removed to the export of U.S. goods into your markets and that we reduce our trade deficit with your country,” he said.

Trump said he was pleased about an Indian airline’s recent order of 100 new American planes and that the United States looked forward to exporting more energy, including major long-term contracts to purchase American natural gas.

These energy contracts “are being negotiated and we will sign – trying to get the price up a little bit,” Trump said.

PM Modi came to Washington looking to revitalize a relationship that thrived under former President Barack Obama but has appeared to flag as Trump courted India’s rival China in an effort to persuade Beijing to do more to rein in North Korea.

PM Modi effusively praised Trump, hailing his “vast and successful experience in the business world” and “great leadership” for U.S.-India ties, which he said should “lend an aggressive and forward looking agenda to our relations.”

Trump accepted PM Modi’s invitation to visit India, the White House said in a statement, but no time frame was given for the trip.

Trump Urges PM Modi To Fix Deficit, But Stresses Strong Ties

PM Modi harked back to Trump’s “Make America Great Again” campaign slogan to stress that his agenda for his country was little different than Trump’s.

“I am sure that the convergence of my vision for “New India” and President Trump’s vision for making America great again will add new dimensions to our cooperation,” he said.

Trump did not mention U.S. differences with India on immigration and the Paris climate accord.

“The future of our partnership has never looked brighter,” Trump said as both leaders underscored the importance of the defense and security relationship.

Aviation Deals

As they met, a Pentagon agency said the U.S. State Department has approved the possible sale to India of a Boeing C-17 transport aircraft with an estimated cost of $366 million.

The United States also has offered to sell a naval variant of the Predator drone made by U.S. defense contractor General Atomics Aeronautical Systems, the White House said in a statement, a deal that would be worth more than $2 billion.

The United States has become the leading supplier of defense equipment to India, signing contracts worth more than $15 billion since 2008.

On Monday evening, Trump and PM Modi had a working dinner, the first time Trump has played host to a foreign dignitary at a White House dinner.

Trump administration officials have pointed to both leaders’ impact on social media – each has more than 30 million Twitter followers – as proof they are cut from the same cloth.

“If the chemistry is good, everything else gets sorted,” said an Indian official. “The only way is up. How much up we go depends on the leaders. If they click, we go up higher.”

Trade, however, remains an irritant, and on Saturday, leading U.S. congressmen complained in a letter to Trump that high-level engagement had failed to eliminate major barriers to U.S. imports and investment and had not deterred India from imposing new ones.

Indian officials reject suggestions that PM Modi’s “Make in India” platform is protectionist and complain about the U.S. regulatory process for generic pharmaceuticals and rules on fruit imports.

They stress the future importance of the huge Indian market to U.S. firms and major growth in areas such as aviation which will offer significant opportunities for U.S. manufacturers.

Among the Indian business executives in Washington for PM Modi’s visit was Ajay Singh, chairman of Indian budget airline SpiceJet, which in January announced a deal to buy up to 205 aircraft from Boeing, worth up to $22 billion at list prices.

Singh told Reuters that according to the U.S. Department of Commerce, the deal would sustain up to 132,000 jobs.

“The market is growing 20-25 percent a year. Even at today’s pace you need 100 more planes a year just to keep pace with the market and we are not getting anywhere close to that number.”

“As our economy grows … we can potentially create a lot of jobs for Americans in the United States,” he said.

Boeing has estimated India will need 1,850 new aircraft worth $265 billion by 2036 to meet demand for air travel.

Former RBI Governor Says Almost Resigned On Differences With P Chidambaram

New Delhi: Former Reserve Bank of India Governor Y V Reddy has written in his autobiography that he once contemplated resignation and had to even offer an unconditional apology to then Finance Minister P Chidambaram. In ‘Advice and Dissent: My Life in Public Service’, being released on Tuesday, Mr Reddy describes his differences of opinion as RBI governor with Mr Chidambaram. These led him to also think of putting in his papers. The issue concerned opening the banking system to foreign ownership, which came to a head with Mr Chidambaram in 2008.

Mr Reddy was governor of the central bank between September 2003 and September 2008.

Mr Reddy narrated an incident of a meeting where Mr Chidambaram told him: “Governor, this is a national commitment made to global financial community. How do we justify reversal of such a policy? Is it just because there is a change in the incumbency of the government? Do we review our commitments every time a governor or the RBI changes?”

Mr Reddy, according to the book, told him that “it has serious irreversible consequences. I believe it is better to go back on our commitment at this stage, in national interest.”

“But I believe that it is in our national interest,” Mr Chidambaram was quoted as telling the RBI governor.

Mr Reddy has written that he confided his troubles to then Economic Affairs Secretary Rakesh Mohan.

“‘Rakesh,’ I told him, ‘it is better I leave this job. I believe that the issue is very critical to our national interest. I think opening up of foreign banks should not be done at this stage at all. Still, if the government feels that this has to be done, it has to be done. But I will not be able to put my heart in it’,” Mr Reddy wrote.

“So, better I quietly leave the job,” Mr Reddy added.

Y V Reddy was governor of the RBI between September 2003 and September 2008

 

He also wrote that despite Mr Chidambaram’s unwillingness to relieve him as governor, “I felt that there was a growing distance between us as months passed by. His (Chidambaram) image as a reformer pushing for double-digit growth was, in his view, being dented by my caution to the extent of resisting implementation of some of his policies.”

“At one stage, he said that he was cancelling his foreign tour because he could not face them with nothing to report on reform. His frustration was confirmed later, I think in early 2008,” Mr Reddy wrote. When he met the minister, Mr Chidambaram said the RBI was not adequately reciprocating by progressing with reforms. “I expressed my unconditional apology to him and conveyed that I would keep in mind the issue of being supportive,” Mr Reddy said, describing how the matter ended.

However, on the overall experience of working as RBI Governor “closely” with Mr Chidambaram for over four years, Mr Reddy wrote: “Most of our tensions could be described as constructive or as discord that ultimately gave rise to better ideas or outcomes.”

Another contentious issue was that of farm-loan waivers, that continues to be controversial.

“I opposed the proposal made in February 2008 to write off loans to farmers amounting to Rs. 60,000 crore. I argued my case before the Finance Minister, and at one stage before the Prime Minister accompanied by the Finance Minister. Economic logic including preservation of credit culture was in favour of RBI’s position,” Mr Reddy says.

However, “I could see the government was acting out of broader concern for the welfare of farmers. I suggested that the government should pay the money to the banks on behalf of the farmers.”

Thus, a different aspect of the situation dawned on Mr Reddy.

“I believe that as governor, I could advance arguments from the point of view of money and credit, but I had no legitimacy to question the judgement of the government on social order,” he said.

In fact, the autobiography sets out Mr Reddy’s unique perspective as a central banker on the relationship between government and the RBI .

“It is hard to find the government’s version of dealing with the central banks. Since I worked in the government also, and dealt with the RBI, a part of the story relates to this,” he wrote in the introduction.

Mr Reddy, who famously described the RBI as “totally free, within the limits set by the government”, has served as the Union Finance Secretary and was the Chairman of the latest 14th Finance Commission in 2013-14.

Farm loan waivers have only added to the gigantic non-performing assets (NPAs), or bad loans, of banks. Mr Reddy has emphasised elsewhere that there is no “political economy consensus” on tackling the mounting problem of bad loans of banks, which cannot be resolved by their simple recapitalisation.

Ready Or Not, Businesses Brace For GST, Biggest-Ever Tax Reform

Meerut: Businessman Pankaj Jain is so worried about the impending launch of a new sales tax in India that he is thinking of shutting down his tiny textile factory for a month to give himself time to adjust.

Jain is one of millions of small business owners who face wrenching change from India’s biggest tax reform since independence that will unify the country’s $2 trillion economy and 1.3 billion people into a common market.

But he is simply not ready for a regime that from July 1 will for the first time tax the bed linen his 10 workers make, and require him to file his taxes every month online.

On the desk in his tiny office in Meerut, two hours drive northeast of New Delhi, lay two calculators. Turning to open a metal cabinet, he pulled out a hand-written ledger to show how he keeps his books.

“We will have to hire an accountant – and get a computer,” the thickset 52-year-old told Reuters, as a dozen ancient power looms clattered away in the ramshackle workshop next door.

Prime Minister Narendra Modi’s government says that by replacing several federal and state taxes, the new Goods and Services Tax (GST) will make life simpler for business.

To drive home the point, Bollywood superstar Amitabh Bachchan has appeared in a promotional video in which he weaves a cat’s cradle between the fingers of his hands – symbolising India’s thicket of old taxes.

With a flourish, the tangle is gone and Bachchan proclaims: “One nation, one tax, one market!”

An employee works at a textile mill in Meerut.

Not So Simple

By tearing down barriers between India’s 29 states, the GST should deliver efficiency gains to larger businesses. HSBC estimates the reform could add 0.4 percent to economic growth.

Yet at the local chapter of the Indian Industries Association, which groups 6,500 smaller enterprises nationwide, the talk is about how to cope in the aftermath of the GST rollout.

“In the initial months, there may be utter confusion,” said chairman Ashok Malhotra, who runs one firm that manufactures voltage stabilisers and a second that makes timing equipment for boxing contests.

A big concern is the Indian GST’s sheer complexity – with rates of 5, 12, 18 and 28 percent, and myriad exceptions, it contrasts with simpler, flatter and broader sales taxes in other countries.

The official schedule of GST rates runs to 213 pages and has undergone repeated last-minute changes.

“Rubber goods are taxed at 12 percent; sporting goods at 18 percent. I make rubber sporting goods – so what tax am I supposed to pay?” asks Anurag Agarwal, the local IIA secretary.

Grace Period?

The top government official responsible for coordinating the GST rollout rebuts complaints from bosses that the tax is too complex, adding that the IT back-end that will drive it – crunching up to 5 billion invoices a month – is robust.

“It is a technological marvel, as well as a fiscal marvel,” Revenue Secretary Hasmukh Adhia told Reuters in an interview.

The government will, however, allow firms to file simplified returns for July and August. From September they must file a total of 37 online returns annually – three each month and one at the year’s end – for each state they operate in.

One particular concern is how a new feature of the GST, the input tax credit, will work. This allows a company to claim refunds on its inputs and means it should only pay tax on the value it adds.

The structure will encourage companies to buy from suppliers that are GST-compliant, so that tax credits can flow down a supply chain.

That spells bad news for small firms hesitating to shift into the formal economy. The government estimates smaller companies account for 45 percent of manufacturing and employ more than 117 million people.

Adhia played down the risk of job losses, however, saying this would be offset by new service sector jobs.

Demonetisation 2.0

The prospect of disruption is drawing comparisons with PM Modi’s decision last November to scrap high-value bank notes that made up 86 percent of the cash in circulation, in a bid to purge illicit “black money” from the system.

The note ban caused severe disruption to India’s cash-driven economy and slammed the brakes on growth, which slowed to a two-year low in the quarter to March.

“It could throw the business out of gear – it can affect your volumes by at least 30 percent,” said the head of one large cement company in the Delhi region.

Back in Meerut, Pankaj Jain worries that hiring an accountant and charging 5 percent GST on his bedsheets could eat up to two-thirds of his annual profits of Rs. 4-5 lakhs.

“I know my costs will go up, but I don’t know about my income,” he said. “I might even have to shut up shop completely and go into trading.”

 

Charting the Indian banking sector’s future

The Indian banking sector is at a critical juncture in its evolution. It is now clear that the slump in credit growth and increase in stressed assets has affected the profitability of all banks, and threatens the very survival of some of them.

State-owned banks account for more than three-fourths of the stressed asset load, which is now far higher than their net worth. Provision levels are inadequate, as the banks hold only 28% of gross non-performing assets and restructured assets, as provisions. There is a $110 billion gap between the stressed assets in the system and the provisions made. Shifts in consumer preferences, combined with changes in technology and regulations, have created a perfect storm. The way out will depend to a large extent on the speed and direction of stakeholder reactions.

The core challenge is that many of the public sector banks (PSBs) are undifferentiated, sub-scale, and with limited capabilities to be full universal banks. About 80% of them own only 25% of the assets. They also operate in virtually every market segment with very limited sector or vertical-focused specialization. In fact, they focus on the same customer segments, offer similar products, and very often compete only on price. Some of this is because PSBs face challenges that impede them from competing effectively. They have to shoulder a disproportionate share of social and nation-building obligations. Policies on compensation and human resources reduce management autonomy, and inhibit their ability to attract and manage talent.

The recent bank consolidation debates often ignore the underlying challenges of India’s banking industry structure. While it is clear that an industry with over 20 undifferentiated, state-owned banks is not working, a country of India’s scale and diversity needs more and varied banks. The industry plays a fundamental role in the delivery of social schemes which are critical at this stage of India’s economic development.

Empirical evidence from bad-loan crises in other parts of the world suggests that resolution often coincides with a consolidation of the banks. To that extent, it is probably inevitable in India. However, our argument is that consolidation by itself is not enough. The perils of force-fitting state-owned institutions are well documented; a lasting solution will need to offer the banks more freedom with capital and talent. Targeting a robust “end-state” industry structure and thinking beyond consolidation, are necessary for this to happen. And even as consolidation happens, innovation from existing and new players need to be encouraged to serve the large and diverse needs of the country. If well executed, such a restructuring could catalyse a transformation of India’s banking sector.

State-owned banks account for more than three-fourths of the stressed asset load, which is now far higher than their net worth. Photo: Pradeep Gaur/Mint

PSB reform is a complex issue and there could be several paths to building a robust industry structure. One option could be to continue the status quo, where the 21 PSBs (after the merger of State Bank of India with its associates and Bharatiya Mahila Bank) operate as before, but with greater autonomy for their boards. This option will have limited impact on improving the stability and performance of the system. A far more effective but disruptive option, would be to create mega-PSBs by consolidating entities into three or four players. While this would enhance their performance, it would be extremely challenging to implement.

Given the ground realities, the target end-state of the industry could well be a hybrid approach, creating one or two global banks and two to three large national banks through mergers. This would ensure that India has three to five banks, each with sizeable global or national presence. These large banks would offer a full-range of commercial banking services to corporate, small and medium enterprises (SMEs), retail, mass banking and international customers. The remaining banks could continue under government ownership, but eschew lending to large corporates. They could specialize, with focus on select products or geographies, largely for retail and SME customers. Alternatively, they could shed their public ownership and chart a growth plan that best suits their expertise.

Identifying anchor banks for consolidation would be a logical first step to restructuring. The top three or four high-performing PSBs with sizeable scale (including international presence), better balance sheets, progressive management and global aspirations, could be the anchors. National-scale players could be anchored by PSBs with strong national or regional brands, a multi-state presence and stronger balance sheets than regional counterparts. Some regionally focused banks could be grown through mergers to bring them to national stature.

Restructuring of banks is a multi-year journey. Aligning the sequencing of the consolidation is essential for success. The first set of mergers could be initiated by global and national anchors. Each anchor could select one or more consolidation partner, based on expected benefits from the merger and the relative ease of implementation. How smoothly the mergers are implemented would depend largely on the capital requirement, level of digitization and technological-commonality among the banks. Banks could opt for a 12- to 18-month “smart merger”, prioritizing easier decisions, and stagger more complex ones. Selecting the right architecture is vital to the process. The choice of merger-architecture could well determine the speed of business and functional integration after the merger.

While consolidation is required to address the challenges, it is not a solution by itself. The merged entities will need more oxygen to survive and thrive. Capital infusion to address stressed assets challenges, building a motivated and capable leadership team to ensure successful integration, and forging strategic partnerships to build new capabilities are crucial for success. Many leading state-owned institutions have relied on partnerships with private institutions in the past (e.g. SBI Cards was launched through a joint venture between SBI and GE Capital). Bank consolidation could offer degrees of freedom to bring new capabilities.

Alongside the mergers, avenues for privatization need to be explored for at least a few PSBs. The Bank Investment Company (BIC) with a holding structure that provides greater autonomy to boards and reduces government shareholding to below 51% in select PSBs has been talked about earlier. Overall, rationalizing the PSB industry-structure is as essential as consolidation to make sure India’s banks are able to thrive in a tough environment.

 

BANK FAIL Lloyds Bank suffers online banking glitch leaving customers locked out of accounts

LLOYDS Bank customers have complained of being shut out of their online accounts for more than two hours, as the bank suffers a technical glitch.

The bank has confirmed that its online site is down, although there is a workaround in place and its mobile and tablet apps are working as normal.

Customers have taken to social media to ask the bank what’s going on, with one saying: “Your site has been down for nearly 2 hours now – what are your IT guys doing?”

Lloyds confirmed that its online site is down, although its mobile and tablet apps are working as normal

Another tweeted: “Lloyds Bank website goes down as I’m trying to pay 3 rather large builders for their work.”

Lloyds Bank told The Sun Online: “We are currently experiencing some problems and as a result, some Lloyds Banking Group websites are temporarily unavailable.

“We are working to resolve the issue as quickly as possible, and apologise for any inconvenience caused.”

This week in banking: Focus on 12 large NPA accounts; Au Small finance bank launches IPO

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.

This week in banking: Focus on 12 large NPA accounts; Au Small finance bank launches IPO

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.

GST

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.

RBI Expands Oversight Committee; Inducts Three-Member On Panel

Mumbai: The Reserve Bank has expanded the oversight committee by appointing three more members to the high-level panel that will vet the process to resolve mounting bad loans bogging down the banking sector.

Former chief vigilance commissioner Pradeep Kumar will head the now 5-member panel that will work through multiple benches, RBI said in a statement.

The expansion follows promulgation of the Banking Regulation (Amendment) Ordinance, 2017 last month. The ordinance had outlined the reconstitution of the Overseeing Committee (OC) with an expanded mandate.

RBI is concerned over the growing bad loans which has soared above Rs 8 lakh crore.

“The Reserve Bank has since brought the OC under its aegis. The OC will, for the present, have five members, including a chairman, and will work through multiple benches as may be necessary and constituted by the Chairman to opine on the cases referred to it by the banks,” it said.

The reconstituted OC will work with an expanded mandate to review, in addition to cases being restructured under the Scheme for Sustainable Structuring of Stressed Assets (S4A), resolution of other cases where the aggregate exposure of the banking sector to the borrowing entity is greater than Rs. 500 crore, it said.

“The circular advising the banks of the above changes and other details of the process to be followed by banks for resolution of identified stressed assets within six months will be issued separately,” it said.

Besides Kumar, the other members of the committee are former SBI Chairman Janki Ballabh, former Canara Bank Chairman and Managing Director M B N Rao, former Chairman and Managing of L&T Finance Y M Deosthalee and S Raman, member Sebi.

Raman would be inducted into the panel from September 7, 2017 after he completes the term at Sebi.

On May 22, RBI had said it will reconstitute the OC under its aegis to operationalise the banking ordinance for resolving the issue of bad loans that have soared to over Rs. 8 lakh crore.

The ordinance authorises RBI to issue directions to banks to initiate insolvency resolution process in respect of a default under the provisions of the IBC.