Thursday / May 23.


fsMUMBAI: The Reserve Bank has relaxed norms for refinancing of infrastructure loans which banks want to be tagged as standard assets. From April 2015, the moment a loan is restructured, banks will have to classify them as bad loan. RBI had made an exception to the rule by allowing banks to classify infrastructure loans as standard assets if half of the outstanding loans are refinanced by a new set of lenders in the form of take-out financing. On Thursday, the central bank relaxed this norm by allowing standard tag if 25 per cent of the outstanding is met through take-out financing. Also, an infrastructure loan that is refinanced can be tagged as standard asset provided promoters are willing to invest more equity in the project. But the standard tag will be applicable only if the project has started commercial operation, the central bank said on Thursday. It said this dispensation would be only for infrastructure loans above Rs 1,000 crore and for loans that are not restructured in the past. RBI decided to relax take-out financing norm from 50 per cent after bankers said it is difficult to adhere to because a significant number of banks are already part of the consortium or multiple banking arrangement of big project loans. RBI has said a project would not be classified as restructured provided it has started commercial operation after achieving date of commencement of commercial operation ( DCCO). Last month, RBI gave more flexibility to banks in structuring infrastructure loans since a majority of the loans were disbursed for a shorter tenure even as it is known that companies take a long time to execute infrastructure projects. http://economictimes.indiatimes.com/news/economy/finance/rbi-reworks-rules-for-long-term-infrastructure-refinancing-loans/articleshow/39827617.cms?prtpage=1





Mumbai: The Reserve Bank of India on Thursday said the proposed Bharat Bill Payment System (BBPS) will function as a tiered structure for operating the country’s bill payment system. It will have a single brand image providing convenience of ‘anytime anywhere’ payment to customers. The BBPS will offer inter-operable and accessible services through a network of agents, enabling multiple payment modes and providing instant confirmation of payment. Hence, it has been decided that the existing players in the online commerce segment catering to the requirements of bill payments as well as aggregation of payment services (in relation to bill payments) will be a part of BBPS, the RBI said in its draft guidelines on the subject. The central bank added that participants in the BBPS will include authorised entities – such as the entity operating the BBPS itself, the Bharat Bill Payment Operating Units (BBPOUs) as well as their agents, payment gateways, banks, billers and service providers – and other entities as required under the BBPS. In future, the scope of BBPS could be extended to include services that require repetitive payments, such as school/university fees and municipal taxes. Other e-commerce services can also be brought under its purview as decided from time to time by the RBI. http://www.thehindubusinessline.com/todays-paper/tp-news/rbi-issues-guidelines-on-unified-bill-payment-system/article6293110.ece




Mumbai: In a significant easing of guidelines for refinancing project loans, where the reworked loan will not be considered a restructured asset, the Reserve Bank of India (RBI) has dropped the threshold for partial take-out financing by new lenders to a minimum of 25% of the outstanding loan from 50% now. The 50% limit was proving to be a hurdle for new lenders to enter a consortium as most of the larger banks were already members. The central bank has also tried to ensure promoters have enough skin in the game by saying they must bring in additional equity, if needed, to pare the debt and make the debt-equity ratio and debt service coverage ratio acceptable to the banks. Also, the RBI now has no objection to the loan having been restructured in the past as long as it is a standard asset on the books of existing lenders at the time of refinancing. Vikram Limaye, managing director and CEO, IDFC, observed that the new rules clarified the issue that banks were facing of genuine refinancing being classified as restructured loans. “The new guidelines will facilitate refinancing,” Limaye told FE. Recasts will not be treated as restructured assets, either on the books of existing or the new lenders provided the aggregate exposure of all lenders to the project is over Rs 1,000 crore. However, the restructuring facility will be available only once for a project. MS Raghavan, CMD, IDBI Bank, said the new rules would also make it easier for firms to service the debt. http://www.financialexpress.com/news/in-boost-to-infra-sector-rbi-eases-lending-norms/1277520




Mumbai: The growth of asset reconstruction companies (ARCs) in India will moderate to 30 per cent in the next 12 months, according to credit rating agency Crisil. This is because of the amendments to the regulations announced by the Reserve Bank of India on Tuesday. “ARCs have witnessed very high growth in recent times, riding on business opportunities emanating from higher non-performing assets (NPAs) in the banking sector. Their assets under management (AUM) have increased four-fold to Rs. 42,000 crore in the year to June 30, 2014,” said Crisil in a statement. The RBI has tightened the rules for ARCs to improve discipline and transparency in the sale and purchase of bad or non-performing loans. As per the new rules, ARCs will have to pay upfront 15 per cent of the bid value of non-performing loans, against five per cent earlier. Also, those planning to buy bad loans will get more time (at least two weeks) to carry out due diligence before bidding for stressed assets. In addition, ARCs will get up to six months instead of one year to plan recoveries from the non-performing assets acquired. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/new-rbi-norms-will-temper-growth-of-asset-reconstruction-firms-crisil/article6293045.ece




Mumbai: Reserve Bank Governor Raghuram Rajan has warned that global markets are at the risk of a “crash”, due to the lingering of competitive loose monetary policies being followed by the developed economies. Warning that the current build-up of financial sector imbalances may cause sudden price reversals and sharp spikes in volatility, Rajan said, “We are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost”. In an interview to London-based Central Banking Journal on Wednesday, he said, “Unfortunately, a number of macro-economists have not fully learnt the lessons of the great financial crisis. They still do not pay enough attention — en passant — to the financial sector. Financial sector crises are not as predictable. The risks build up until, wham, it hits you.” http://www.business-standard.com/article/reuters/rbi-governor-warns-of-global-market-crash-114080601376_1.html





Public sector banks, of late, have been aggressively selling their bad loans to asset reconstruction companies (ARCs) in a bid to lessen their pile of bad loans. But this may come to a standstill after the RBI’s new directive to securitisation and reconstruction companies. Here’s why. Sale of bad loans to ARCs gained momentum in 2013-14 mainly because banks were able to obtain better prices for these sales. ARCs which usually offer to take the loan off the banks’ books at a discount, were paying 55-60 per cent of the value of loans, as against just 30 per cent in the past. This significant jump in pricing was possible due to a shift in deals from the cash route to the security receipts route. So, instead of taking an upfront cash payment, banks were willing to accept delayed payment in the form of ‘security receipts’ or SRs. ARCs were thus making a down payment of minimum 5 per cent and the balance 95 per cent was paid to the bank against the SR. But the RBI has now raised the bar, by demanding a minimum of 15 per cent down-payment from ARCs. This is likely to dissuade ARCs from offering a better price, since they will now have to make a higher upfront payment. http://www.thehindubusinessline.com/todays-paper/tp-money-banking/now-banks-cannot-offload-bad-loans-that-easily/article6293044.ece





Mumbai: YES Bank on Thursday agreed not to make any changes in the composition of its board till the hearing on the petition filed by Madhu Kapur questioning the appointment of six directors is going on in the Bombay High Court. This comes after the court expressed displeasure over the appointment of retired Indian Administrative Service officer Radha Singh as the non-executive chairperson. Singh was earlier an independent director on the bank’s board and is currently also the chair of the newly constituted corporate social responsibility board sub-committee. She has been associated with the bank since April 2008. YES Bank has given an assurance that it will not make any changes and in turn asked the court not to pass an order regarding the same or put it on record. The counsel of Madhu Kapur, widow of the bank’s promoter and co-founder Ashok Kapur, questioned the appointment. Kapur is the second-largest shareholder who has taken YES Bank to court claiming her right as the bank’s co-promoter was violated. http://www.business-standard.com/article/finance/radha-singh-appointed-chairperson-of-yes-bank-114080701401_1.html




Kolkata: At a time when most banks have switched focus on expanding their retail housing finance business to preserve asset quality in an uncertain economic environment, ING Vysya Bank appears to buck the trend. The private sector lender has significantly scaled down its incremental disbursal of home loans because of lower pricing and rising incidence of pre-payment. “The difference in terms of pricing between home loan today and an average self-employed customer would be in the range of 150 to 200 basis points. So, that is one of the key reasons why the focus has to be more on loan against property compared to home loans… Secondly, on a commercial basis, because of higher incidence of foreclosure we decided to stay away from it (housing finance),” Mahesh Dayani, country head – retail assets at ING Vysya Bank, told analysts during a recent interaction. While the bank has not exited the retail housing finance business, it is neither stepping up the incremental acquisition of home loan borrowers. In the first three months of this financial year, housing loans constituted only nine per cent of ING Vysya Bank’s aggregate mortgage disbursals compared to 30 per cent in 2013-14 and 60 per cent in 2012-13. The share of home loans in the lender’s mortgage book is now below 60 per cent compared to 90 per cent earlier. http://www.business-standard.com/article/finance/ing-vysya-bank-stays-away-from-retail-housing-finance-114080401021_1.html





NEW DELHI: Life Insurance Corporation, the country’s biggest insurer, is under the government scanner for “procedural lapses” in investments it made in some firms, a senior finance ministry official has told ET. An investigation was carried out after it emerged that LIC bought shares of some firms at higher prices and sold them at considerably lower prices, the official added. “Some procedural lapses and policy issues were observed, which were pointed out to LIC and are being looked at,” he said. This comes days after CBI arrested Syndicate Bank chairman SK Jain on allegations of taking a bribe to enhance credit limit of some companies. Independently, the insurer is examining allegations of proximity and dealings between a serving executive director and Pawan Bansal, a CA and managing director of Altius Finserve, who has since been arrested in the Syndicate Bank bribery case. http://articles.economictimes.indiatimes.com/2014-08-07/news/52555906_1_life-insurance-corporation-senior-lic-executive-life-fund





After buying bad loans at breakneck speed for a about a year, asset reconstruction companies (ARCs) are expected to moderate the growth in their assets under management. With a sharp rise in non-performing loans, commercial banks began to put a large chunk of these on the block, an opportunity seized by ARCs. The assets under management of ARCs rose fourfold to Rs 42,000 crore in the year ended June 30 this year, according to rating agency CRISIL. The assets under management of ARCs are expected to touch Rs 55,000 crore by June-end, 2015. Now, the growth is expected to be moderate and the ambitious pricing, frequent till June-end, is expected to give way to a reasonable and rationale approach for bidding. The focus would be on raising capital and funds for running business and strengthening recovery functions, including teams of specialists, said the chief of a large ARC, backed by commercial banks. CRISIL said through the next 12 months, the growth was expected to moderate to 30 per cent, owing to various changes in norms for ARCs, announced by the Reserve Bank of India on Tuesday. http://www.business-standard.com/article/finance/moderate-growth-likely-for-asset-reconstruction-firms-114080701378_1.html





MUMBAI: Capital market regulator Sebi today imposed a total penalty of Rs 25 lakh on Capital Trade Links and its seven promoters for not making disclosures within the stipulated timeline to the stock exchanges. The Securities and Exchange Board of India (Sebi) has slapped a penalty of Rs 10 lakh on Capital Trade Links for failure to make yearly disclosures to the stock exchange in the prescribed timeline, between the years 2002 to 2011. In a separate order, it has slapped Rs 10 lakh on the company’s seven promoters which is “to be paid jointly and severally” by them. Of these promoters, Harish Chandra Agrawal has also been imposed with a penalty of Rs 5 lakh. With this the total penalty on the company and the promoters amount to Rs 25 lakh. Besides Harish Chandra Agrawal, other six promoters are — Udit Agrawal, Rashmi Agrawal, Suresh Chand Agrawal, Harish Agrawal (HUF), Suresh Chand Agrawal (HUF) and Madhur Agrawal. Capital Trade Links is listed on the Delhi Stock Exchange (DSE). Sebi found that the promoters had disclosed their aggregate shareholdings for 2012 and 2013 to the stock exchange with a delay of 541 days and 174 days respectively. Moreover, Harish Chandra Agrawal had failed to make timely disclosures regarding increase in his stake in 2005. http://economictimes.indiatimes.com/markets/regulation/sebi-slaps-rs-25-lakh-fine-on-capital-trade-links-promoters/articleshow/39827839.cms?prtpage=1




NEW DELHI: The Securities and Exchange Board of India ( Sebi) is set to approve guidelines for Real Estate Investment Trust ( REITs) and Infrastructure Investment Trusts ( InvITs) at its board meeting on August 10 in the capital. The Narendra Modi government had announced plans for such trusts in the July 10 Budget presented by finance minister Arun Jaitley. The trusts will allow companies engaged in infrastructure and real estate to raise longterm resources at competitive rates. The trust structure is aimed at creating a framework of fast-track, investment-friendly and predictable public private partnerships (PPPs) to build large-scale projects that are of vital importance for India. To raise long-term capital, the new guidelines will incentivise the creation of such trusts so that investors have a lower tax burden, apart from avoiding multiple taxation at different levels. “The proposed move will help in unlocking funds from completed projects in infrastructure and real estate. The promoters of such projects, particularly the completed ones, would be able to sell their stake to the trust, which, in turn, can raise long-term, tax-free funds from unit holders,” said an investment banker involved in consultations before the guidelines were drafted. http://economictimes.indiatimes.com/markets/regulation/real-estate-investment-trusts-and-infrastructure-investment-trusts-to-get-sebi-push/articleshow/39846308.cms?prtpage=1

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