RBI new bad loan rules may improve prospects of loan recovery

News Network
February 14, 2018

Mumbai, Feb 14: The Reserve Bank of India’s (RBI) decision to tighten norms for resolution of stressed loans, currently estimated at over Rs10 trillion, will improve recovery prospects from bad loans but keep banks’ provisioning requirement at an elevated level, analysts said.

Late on Monday, the central bank withdrew a host of norms such as strategic debt restructuring (SDR) and scheme for sustainable structuring of stressed assets (S4A) among others, and made the process time-bound. The new rules stipulate that starting 1 March, lenders must implement a resolution plan within 180 days for accounts of at least Rs2,000 crore.

“To begin with, lenders will have to start finalizing and implementing resolution plans for cases where restructuring has been done. The fact that most cases remain in stress despite restructuring under various RBI schemes means that there is a high probability that most of these could be referred for (insolvency) proceedings,” said Udit Kariwala, senior analyst, financial institutions at India Ratings. “To that extent, provisioning cost will increase.”

He added that as per the rating agency’s analysis, at the end of September, large banks—six each from private and public sectors—are sitting on a restructured loan pool (including SDR and another scheme called 5/25) of around Rs1.9 trillion.

Accounts from highly leveraged thermal power and capital goods sectors are at high risk of landing in bankruptcy courts.

However, Krishnan Sitaraman, senior director at Crisil Ratings, said the circular in itself may not lead to materially higher provisioning on an aggregate basis, since banks are already steadily increasing their provisioning levels on bad loans owing to the resolution processes under way.

Public sector banks on an aggregate basis are looking to enhance provision coverage levels from 40-45% to 55-60%, he said.

Banks must kept aside at least 50% in the form of provision for accounts referred to bankruptcy court.

Currently, lenders are finalizing resolution plans for 11 of the 12 accounts in RBI’s first defaulter list referred to bankruptcy court. They are also filing insolvency petitions for some of the 28 accounts which were part of central bank’s second defaulter list.

Analysts said the revised rules - which, for instance, call for credit rating agencies to evaluate resolution plans will make the process of restructuring more transparent, enable lenders to get better market-linked pricing for the underlying asset, and sync bank balance sheets with expected loss from the stressed asset pool.

Still, there are some grey areas, others said.

For instance, it is not clear how lenders would work out a proposal which involves interest rate reductions or other sacrifices without a framework in place, said Manish Aggarwal, partner and head resolutions, special situations group, KPMG.

Crisil’s Sitaram said that in the long term, the new rules will improve recovery rates because the failure in meeting timeline will lead to insolvency proceedings, which has to be completed in a maximum of 270 days.

“In the past, we have the average recovery period in corporate NPA accounts extending to 4-5 years. Reduction in the recovery period will lead to higher certainty of outcome for lenders as well as preserve value better,” he said.

With the revised norms mandating an account must no longer be in default after the implementation of a resolution plan, there will be an improvement in the quality of such plans and both the debtors and lenders will have more skin in the game, according to analysts.

As per new RBI norms, in case the resolution plan involves change in the ownership structure of the defaulting firm, the account should not be in default at any point during the specified period, which is the time between implementation of the plan and the date, where up to 20% of the outstanding principal debt is repaid. If there is a default in the specified period, the account must be referred for IBC proceedings.

“With the new norms in place, there is possibility that the promoters will try to defend their assets by bringing the amount and safeguarding their assets from insolvency and bankruptcy code reference. That probability is increasing is what I feel,” said R. Subramaniakumar managing director and chief executive officer at Indian Overseas Bank.

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Agencies
April 14,2020

Mumbai, Apr 14: Activist and scholar Anand Teltumbde was arrested by the National Investigation Agency (NIA) on Tuesday after he surrendered before it in connection with the Elgar Parishad-Maoist links case.

Teltumbde surrendered at the NIA office at Cumbala Hill in south Mumbai following the Supreme Court's directives.

He was subsequently arrested by the NIA and shall be produced before a court here shortly, an official said.

Earlier, the scholar reached the NIA office in the afternoon along with his wife Rama Teltumbde and brother-in- law and Dalit leader Prakash Ambedkar.

Anand Teltumbde is the grandson-in-law of Dalit icon Dr B R Ambedkar, whose 129th birth anniversary is being observed on Tuesday.

Civil rights activist Gautam Navlakha, a co-accused in the case, also surrendered before the NIA in Delhi. His anticipatory bail plea was also rejected by the apex court.

According to the official, Navlakha will be produced before the court in Mumbai through video conference.

The Supreme Court on March 17 this year rejected the pre-arrest bail pleas of Anand Teltumbde and Gautam Navlakha, and directed them to surrender before the investigating agency.

Teltumbde, Navlakha and nine other civil liberties activists have been booked under the stringent provisions of Unlawful Activities Prevention Act (UAPA) for having alleged Maoist links and conspiring the overthrow the government.

The apex court while rejecting Teltumbde and Navlakha's bail pleas on March 17, directed them to surrender before the prosecuting agency withing a period of three weeks.

The duo later sought extension of the time.

On April 9, the Supreme Court extended the time by one week by way of last chance.

The activists were booked initially by Pune Police following violence that erupted at Koregaon-Bhima there.

According to police, the activists made inflammatory speeches and provocative statements at the Elgar Parishad meet held in Pune on December 31, 2017, which triggered violence the next day.

The police also said these activists were active members of banned Maoist groups.

The case was later transferred to NIA. Teltumbde and Navlakha were given interim protection by the Bombay High Court while their pre-arrest bail pleas were being heard.

After the high court rejected their applications, the duo approached the Supreme Court.

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News Network
February 27,2020

Washington, Feb 27: President Donald Trump has said that the US' relationship with India is "extraordinary" right now and a lot of progress was made in bilateral ties during his maiden official visit to the country where America will be doing a lot of business.

Talking to reporters, after his return from India on Wednesday, Trump said, "He (Prime Minister Narendra Modi) is a great gentleman, a great leader. It's an incredible country."

President Trump visited India from February 24 to 25. He was accompanied by first lady Melania Trump, daughter Ivanka Trump, son-in-law Jared Kushner and the top brass of his administration, including national security advisor Robert O'Brien.

They visited Ahmedabad, Agra and New Delhi before leaving for Washington on Tuesday.

During his stay, he addressed a massive rally in Ahmedabad, visited Agra and held official meetings in New Delhi.

The US President was feted at the world's largest cricket stadium in the "Namaste Trump" event in Ahmedabad and was cheered by tens of thousands of people.

"We were treated very, very well and we really enjoyed it. A lot of tremendous progress was made in terms of relationship - our relationship with India is extraordinary right now," he said.

"We are going to be doing a lot of business with India, they are sending billions and billions of dollars now to the United States," Trump said in response to a question.

In a tweet, his daughter Ivanka said that, Trump announced that US international development finance corporation "will establish a permanent presence in India to strengthen our economic ties, improve development plus further women's economic empowerment through WGDP (Women's Global Development and Prosperity Initiative)!"

On her arrival from India, she thanked PM Modi for "your warm hospitality as we visited your beautiful country and celebrated the strength, spirit and unity of the US and India!"

"Throughout our visit we saw monumental achievements of human creativity and proof of the infinite capacity of the human heart!" she said.

The first lady tweeted two pictures of her with Trump facing the Taj Mahal in Agra.

"One of the Seven Wonders of the World, the breathtaking Taj Mahal!" she said.

President Trump "reaffirmed the strong strategic partnership, vibrant economic ties and expanding security relationship between our two countries. Wonderful trip, but glad to be home! Thank you India!" said White House press secretary Stephanie Grisham.

During the visit, India and the US on Tuesday finalised defence deals worth $3 billion under which 30 military helicopters will be procured from two American defence majors for Indian armed forces.

The deals will include procurement of 24 MH-60 Romeo helicopters by India from the US at a cost of $2.6 billion. Another contract to acquire six AH-64E Apache helicopters for $800 million from the US is also on the table.

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coastaldigest.com news network
August 7,2020

 

Kozhikode: An Air India Express flight from Dubai with 190 people on board overshot the Kozhikode tabletop runway on landing there today. The Boeing 737 “fell off” the runway into the valley, broke into two causing death and devastation. 

According to reports, around 20 people were dead including two pilots.

An Air India spokesperson said: “Air India Express flight IX 1344 operated by Boeing 737 aircraft from Dubai to Calicut overshot the runway at Kozhikode at 7.41 pm Friday. No fire reported at the time of landing. There are 174 passengers, 10 infants, two pilots and five cabin crew on board. Rescue operations are on and passengers are being taken to hospital for medical care. We will soon share the update in this regard.”

The Directorate General of Civil Aviation (DGCA) is probing this accident. “Prima facie, the aircraft landed beyond the touchdown point and fell into a valley. It has broken into two. We suspect some casualties. More information is awaited,” said a senior DGCA official.

Taking to twitter, defence minister Rajnath Singh wrote: “Devastating news from Kozhikode, Kerala. I am deeply anguished by the loss of lives due to an accident carrying several passengers on Air India flight. In this hour of grief, my thoughts are with the bereaved families. I pray for the speedy recovery of the injured.”

Foreign minister S Jaishankar tweeted: “Deeply distressed to hear about the Air India Express tragedy at Kozhikode. Prayers are with the bereaved families and those injured. We are ascertaining further details.”

While, senior BJP leader from Kerala K J Alphons tweeted: “Second tragedy of the day in Kerala: Air India Express skids off the run way at Kozhikode, front portion splits , pilot dies and lots of passengers injured . All passengers evacuated. Very lucky the aircraft didn’t catch fire.”

More details are awaited.

Watch video | Air India flight from Dubai skids off runway in Kerala, splits into two pic.twitter.com/qgGxEEG2e3

— coastaldigest.com (@coastaldigest) August 7, 2020

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