INDIVIDUAL BANKRUPTCY NORMS IN THE WORKS: IBBI CHIEF
Failure to repay home
loans might drag future defaulters to dedicated bankruptcy courts as New Delhi
is seeking to put in place a broad framework on individual insolvency two years
after it revamped such laws for stressed companies. Three sets of entities will
fall under the individual insolvency code. They would include the personal
guarantor to corporate debtors, proprietary firms and other individual
borrowers, MS Sahoo, said. The work is progressing, but I cannot comment on any
timeline, said Sahoo. According to a market source, the insolvency rules to recover
bad loans from individuals could only come after the impending general
elections. The Indian Institute of Corporate Affairs (IICA) has launched the
Graduate Insolvency Programme (GIP) for individuals aspiring to join the
profession anywhere in the world. Even NCLT judges and professionals across
industries will come to take classes said Sumant Batra.
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ICAI WITHDRAWS ANNOUNCEMENT ON AUDITOR ROTATION AFTER
GOVERNMENT DIRECTIVE
The Institute of Chartered
Accountants of India on Friday withdrew an announcement regarding applicability
of rotation of auditors at companies, following a directive from the corporate
affairs ministry. In a rare instance, the ministry told ICAI to immediately
withdraw the announcement and also provide reasons for making such an
announcement, according to a letter. On Jan. 29, the ICAI issued a
clarification on applicability of rotation of auditors under the Companies Act,
2013. Under the Act, implemented by the ministry, certain class of companies
are required to rotate their auditors and there is also a cooling off period to
be followed by the auditors. In a communication on Friday, ICAI said
announcement regarding clarification on applicability of rotation of auditors
issued on Jan. 29 has been withdrawn The Corporate Laws & Corporate
Governance Committee had issued the announcement regarding clarification on the
applicability of rotation principles on a company as per Section 139 of the
Companies Act 2013 where the company ceases to fall under the ambit of Rotation
principles in subsequent years on Jan. 29, 2019. The move came after a letter
from the ministry on Friday asked the ICAI to withdraw the announcement. it is
stated that the issuance of any clarification on different provisions of
Companies Act falls in the domain of this ministry and the ICAI is neither
empowered nor competent to issue such a clarification and especially so without
prior consultation with this ministry, the letter said. Further, the ministry
has asked the ICAI to intimate the reasons for issuing such announcement
without any authority and without the specific approval of this ministry.
However, an official said that the ICAI announcement could have resulted in
companies removing or re-appointing an auditor just on the basis of
non-applicability of the rotation norms The official noted that an auditor
cannot be removed in an unfair manner and that companies should be following
the law in letter and spirit.
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SBI APPROACHES BIG 4 AUDITORS TO APPOINT RESOLUTION PROFESSIONAL
FOR RCOM
State Bank of India (SBI),
one of the major lenders to Anil Ambani’s Reliance Communications (RCom), has approached
some of the Big Four audit firms and consultants to identify and select a
resolution professional (RP) to manage insolvency proceedings of the telecom
company. SBI is considering initiating an independent application to take RCom
to the National Company Law Tribunal though the debt-ridden company had
informed stock exchanges on February 4 that it had decided to submit itself to
NCLT as it was unable to pay its debts. The lender also has the option of
waiting for RCom to initiate bankruptcy proceedings on its own and then
recommending an RP of its choice once the committee of creditors is convened,
according to sources. RCom owes banks close to Rs 40,000 crore. NCLT had
approved the appointment of consulting firm RBSA as the resolution professional
for RCom and two of its subsidiaries — Reliance Infratel and Reliance Telecom —
at the time. RCom later got a stay on the insolvency proceedings by promising
to repay Ericsson’s dues within a stipulated time frame at the national company
law appellate tribunal (NCLAT).
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ERICSSON WON’T ACCEPT SETTLEMENT FROM RCOM WITHOUT SC
DIRECTION
Swedish telecom gear maker
Ericsson will not accept any settlement offer by Reliance Communications
(RCom), unless directed by the Supreme Court, people familiar with the matter
said. The stance comes post the debt-laden telco’s offer to make payments using
income tax refunds to the company. RCom lawyers had said they are willing to
give Rs 129 crore, which is an income tax refund, and another forthcoming
refund of Rs 134 crore. This was over and above Rs 118 crore that has been
deposited with the Supreme Court registry earlier, said Anil Kher. However,
Ericsson did not respond to this suggestion and left it to the decision of the
court, the senior counsel said. People aware of developments say Rs 381 crore
is way lower than the settlement term of Rs 550 crore and therefore Ericsson is
unlikely to accept it. The operational creditor said it had settled for Rs 550
crore as settlement when total dues were over Rs 1,500 crore. The Supreme Court
has reserved orders on Ericsson’s contempt petitions against RCom and its
chairman Anil Ambani on the operator’s failure to comply with its assurance in
court to pay arrears of Rs 550 crore to its Swedish equipment supplier. This
will be the second time in recent weeks that the operator under a debt of over
Rs 40,000 crore has given Ericsson a settlement option.
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DELHI HC ASKS NCLT REGISTRAR TO CONSIDER MCA'S PROPOSAL TO
PROVIDE ADDITIONAL OFFICE SPACE
The Delhi High Court has asked
the Registrar of the National Company Law Tribunal (NCLT) to consider the
proposal of the Ministry of Corporate Affairs (MCA) regarding alternative
accommodation for housing the Tribunal as well as the National Company Law
Appellate Tribunal (NCLAT). The Court has directed the Registrar to file its
report on the proposal within two weeks A Division Bench of Chief Justice
Rajendra Menon and V Kameswar Rao was hearing a plea by the NCLT Bar
Association and the Appellate Tribunal Bar Association seeking relief from the
day-to-day struggle faced by litigants as well as advocates in securing entry
into the premises that currently house the two Tribunals. In its affidavit
filed before the Court, MCA has stated that Mahangar Telephone Nigam Limited has
confirmed the availability of a vacant office space of 57,492 sq. ft area in
their building at the CGO Complex. It has also stated that with the approval of
NCLT President, the MCA has initiated an interim measure to set up two
additional courts and related infrastructure in office space provided in Block
12 of the CGO complex. After the Additional Solicitor General informed the
Court that the MCA had come up with a solution to the issue, the Court directed
the Ministry to file an affidavit in that regard. The matter will next be heard
on March 7.
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SC RAPS UNITECH FOR NOT COOPERATING WITH AUDITORS; WARNS OF
CONTEMPT
The Supreme Court on
Friday pulled up Unitech Limited for not cooperating with the forensic auditors
it had appointed and warned the company of initiating contempt proceedings for
obstructing judicial work. It has asked the company to provide all data, as
requisitioned by the auditors, within two weeks from today. The observations by
the court came after auditors from Grant Thornton told the court that although
they had been provided with about 45% of financial and operational data until
now, Unitech had expressed inability to provide data for the forensic imaging
of all electronic equipment since the company said it did not maintain any
databases. The data belonging to electronic equipment of only four key
personnel had been backed up, the company said. A two-judge bench led by
Justice D Y Chandrachud took strong exception to this and said that the responsibility
of compliance lay with Unitech. All data, including those belonging to
ex-employees, must be provided by the company at the earliest, the bench said. Based
on another report submitted by Grant Thornton on Friday, the top court allowed
Unitech to start the process of selling Unitech Power Transmission Limited
(UPTL) to Sterling & Wilson Private Limited. Grant Thornton has evaluated
the fair market value of the deal at Rs 98 crore. Of this, Rs 68 crore will be
deposited with the court registry, the two-judge bench said. The top court on
Friday also allowed Unitech to sell a 24-acre land parcel in Hyderabad for Rs
20 crore. The proceeds from the land parcel sale would be deposited in the
registry of the court, the two-member bench said. The court, however, turned
down a plea by Unitech to allow it to sell nearly 186 acres of land belonging
to it in Noida and said that it would look into the matter after the forensic
audit committee had submitted its report. Of the total money that has been
deposited by Unitech so far, the court, on Friday, also allowed the release of
Rs 40 crore for completion of some of the pending work.
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SEBI RATIONALISES FRAMEWORK FOR ADVISORY COMMITTEE AT MARKET
INFRA INSTITUTIONS
Market regulator Sebi on
Friday relaxed guidelines for the composition and functioning of the advisory
committee at market infrastructure institutions such as stock exchanges,
clearing corporations and depositories. In a circular, Sebi said the framework
which prescribes that the number of PIDs (public interest directors) shall not
be less than the total of number of other members put together for the
composition of the committees, quorum for the meeting of the committees and for
validity of voting on a resolution in the meeting of the committee will not be
applicable to the advisory committee The move is aimed at enabling wider
participation of members at market infrastructure institutions (MIIs), Sebi
said. The market watchdog last month issued directions regarding formation and
composition of seven mandatory committees, including advisory committee at
MIIs. In the advisory committee, trading members, clearing members and
depository participants can provide their suggestions to the concerned market infrastructure
institutions on non-regulatory and operational matters.
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INDIA INC RAISES RS 4.57 LAKH CRORE VIA DEBT PRIVATE PLACEMENT
IN APR-JAN FY19
Indian companies raised Rs
4.57 lakh crore through private placement of corporate bonds during the first
10 months of the current fiscal to meet business needs. Going ahead, the debt
market is expected to see further impetus on Sebi's move asking large firms to
manage a fourth of their long-term funds from the bond market, Mukund
Ranganathan, said. Firms raked in Rs 4,56,962 crore during the April-January
period of 2018-19 via private placement of corporate bonds, compared with Rs
4,87,764 crore garnered in the corresponding period last fiscal, according to
the latest data available with the Securities and Exchange Board of India
(Sebi). In the full financial year 2017-18, companies had raised 6 lakh crore
through the route. In terms of numbers, funds were raised through 1,955
issuance in the first 10 months of the current fiscal as compared with 2,200 in
the year-ago period. Going forward, we see the debt market getting a further
impetus after Sebi coming out with guidelines that required large listed
companies to raise at least 25 per cent of their long-term borrowings through
corporate bonds, which is to come into force from April 1, 2019, Ranganathan
added.
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MSME REGISTRATION NOT MANDATORY TO AVAIL DELAYED PAYMENT
PROTECTION: DELHI HIGH COURT
Finally the confusion over
the case where the micro, small and medium enterprises (MSMEs), that are not
registered under the MSMED Act at the time of execution of the contract, can be
treated as supplier or not ,is over A bench of Delhi High Court has held that registration
of MSMEs under MSMED Act is not mandatory to avail benefits under the act. There
has been ambiguity since long regarding the applicability of the MSMED Act,
2006 in cases where the entities were not registered under the MSMED Act at the
time of execution of the contract. A Judgement was passed by Justice Vibhu
Bakhru of the Delhi High Court on April 7, 2018, in the matter of M/S Ramky
Infrastructure Private Limited vs. Micro and Small Facilitation Council &
Anr. W.P.(C) 5004/2017, wherein it has been held that an entity which falls
within the definition of the micro/small enterprise will be treated as a
‘supplier’ under Section 2(n) of the MSMED Act even if it has not filed a
Memorandum as required under Section 8(1) of the MSMED Act. A small enterprise
which has a PAN and Taxes registration, a bank account of its own and an
identity cannot be denied benefit under the Act. On July 4, 2015, GCIL got
registered with the Commissioner of Industries, Government of NCT of Delhi
under ‘Small Enterprises’ category. Thereafter, GCIL made a reference to the
Council under Section 18 of the MSMED Act, claiming its outstanding dues
including interest as per MSMED Act, 2006. The Council referred the case to
Delhi International Arbitration Centre for initiating arbitration proceedings
as conciliation proceedings failed The said reference was challenged by the
Petitioner before the high court. There is no dispute in the present case that
CGIL falls within the definition of the micro/small enterprise and would be
classified as such even at the time of execution of the contract awarded by
RIL. The only controversy raised is that at the material time (at the time of
execution of the contract), GCIL had not filed a Memorandum as required under
Section 8(1) of the Act. This brings us to the central question – whether it
was mandatory for a small/medium enterprise to file the Memorandum under
Section 8(1) of the Act in order to fall within the definition of a supplier
under Section 2(n) of the Act. 24. The Petitioner had said that the disputes
between RIL and GCIL had started with regards to work orders that were entered
into in the year 2010 while at that time GCIL was not registered under the
MSMED Act. Hence, the Petitioner had appealed to not treat GCIL as a ‘supplier’
as defined under Section 2(n) of the MSMED Act, 2006. GCIL, the Respondent
however contended that it is not mandatory to be registered under the MSMED Act
at the time of rendering services or supplying products in order to qualify for
making a reference under Section 18 of the MSMED Act. The Supreme Court in the
case of Thalappalam Service Cooperative Bank Limited and Others had held that
Section 2(n) of the Act indicates that it is in two parts. The first part
states that a supplier to mean a micro or small enterprise which has filed a
memorandum with the authority referred to in sub-section (1) of Section 8 of
the MSMED Act, and the second limb refers to
(i) National Small
Industries Corporation;
(ii) the Small Industries
Development Corporation of a State or a Union territory; and
(iii) a company,
co-operative society, trust or a body engaged in selling goods produced by
micro or small enterprises and rendering services which are provided by such
enterprises. Thus, the two limbs of Section 2(n) of the MSMED Act are required
to be read to exhaust all categories.
For the foregoing reasons,
dismissing the petition, the Court held that filing the Memorandum under
Section 8(1) of the MSMED Act is not mandatory for a company, co-operative
society, trust or a body which is engaged in selling goods produced by micro or
small enterprises or rendering services provided by such enterprises.
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BSE ILLIQUID STOCK OPTIONS: SEBI SLAPS RS 10 LAKH FINE ON A
FIRM FOR FRAUDULENT TRADE
Markets regulator Sebi
Friday slapped a penalty of Rs 10 lakh on Poonam Drums and Containers Pvt Ltd
for fraudulent and manipulative trading in illiquid stock options on the BSE.
The regulator observed that the entity repeatedly bought and sold stock options
and executed reversal trades with the same set of entities for same quantity
within a short span of time with substantial price difference. Sebi noted from
the trading pattern of the entity that it was deliberately making repeated
losses through reversal trades in stock options which does not make any
economic sense and is a blatant misuse of trading platform for creating
artificial volume in the illiquid stock options. The non-genuine and deceptive
transactions of entity is prima facie covered under the definition of 'fraud'
under PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations
and are thereby prohibited, Sebi said.
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ONLY SIX PSBS CROSS ‘DESIRABLE’ LEVEL OF 70% PROVISION
COVERAGE RATIO
While public sector banks
(PSBs) have substantially ramped up their loan-loss provisions and strengthened
balance sheets in the first nine months of the current financial year, only 6
out of 21 PSBs, have crossed the ‘desirable’ level of 70 per cent provision
coverage ratio (PCR) as of December-end 2018. PCR is the ratio of provisioning
to gross non-performing assets, and indicates the extent of funds a bank has
kept aside to cover loan losses. The six PSBs that had over 70 per cent PCR as
of December-end 2018 are: Bank of Maharashtra (81.08 per cent), Bank of India
(76.76 per cent), IDBI Bank (75.21 per cent), Oriental Bank of Commerce (74.99
per cent), State Bank of India (74.63 per cent), and Bank of Baroda (73.47 per
cent). Though Life Insurance Corporation of India has acquired 51 per cent
stake in IDBI Bank, the Reserve Bank of India has not yet notified the change
in its classification as a private sector bank. The five PSBs that were close
to the 70 per cent PCR mark as of December-end 2018 are: Allahabad Bank (69.64
per cent), Central Bank of India (69.52 per cent), UCO Bank (69.49 per cent),
Punjab National Bank (68.85 per cent), and Andhra Bank (68.47 per cent). The
remaining 10 PSBs have PCR ranging from 58.84 per cent (Union Bank of India)
and 66.60 per cent (Dena Bank). PCR has gone up because NCLT (National Company
Law Tribunal) cases (40 large corporate accounts referred to the tribunal by
banks as per the RBI’s list 1 and list 2) have been substantially provided for.
So, banks’ balance sheet is getting strengthened. The unprovided portion is
narrowing down. So, going forward, profitability of banks will improve (due to
write-back from recoveries), said BK Divakara.
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RBI PULLS UP YES BANK FOR MAKING PUBLIC ITS CONFIDENTIAL
REPORT
The Reserve Bank of India
has warned Yes Bank with regulatory action for making public its observation of
the bank’s risk assessment report (RAR), which had said there was no divergence
between what the bank reported as non-performing assets and that identified by
the regulator. In a late evening notice to stock exchanges, Yes Bank said the
central bank expressed its displeasure for disclosing the contents of the
report since it was supposed to be confidential and did not give the full
picture of the bank’s position to the public. Yes Bank’s stock soared 31 per
cent on Thursday, after the bank disclosed the RBI’s observation. As the RAR
report was marked ‘confidential’, it was expected that no part of the report
and information contained therein be divulged except for the information in the
form and manner of disclosure prescribed by regulations. Therefore, the press
release breaches confidentiality and violates regulatory guidelines. Moreover, NIL
divergence is not an achievement to be published and is only compliance with
the extant income recognition and asset classification norms, the Yes Bank
filing said, quoting from an RBI letter it received on Friday. The RBI letter
said the bank’s press release did not reveal many lapses and was hence a
deliberate attempt to mislead the public. The RAR also identifies several other
lapses and regulatory breaches in various areas of the bank’s functioning and the
disclosure of just one part of the RAR is viewed by RBI as a deliberate attempt
to mislead the public. The issuance of the press release has, therefore, been
viewed seriously by the RBI and could entail further regulatory actions, the
RBI was quoted as saying.
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‘AUTHORISED DEALERS CAN OFFER UP TO $1 MN FOREX DERIVATIVE
CONTRACTS TO USERS’
Authorised dealers can offer
foreign exchange derivative contracts up to $1 million to users - retail or
non-retail - to hedge their exposure to the exchange rate of Rupee against a
foreign currency on account of current and capital account transactions
permissible under Foreign Exchange Management Act (FEMA), 1999, according to
the Reserve Bank of India’s draft circular on Hedging of foreign exchange risk
by Residents and Non-Residents. Non-retail users include insurance companies,
mutual funds, pension funds and other collective investment schemes, entities
regulated by RBI, financial institutions, companies (meeting any one criteria:
listed on an exchange in India or any Financial Action Task Force jurisdiction;
networth of Rs 200 crore or its equivalent; the notional amount of the user’s
outstanding foreign exchange derivatives exceeded $250 million or equivalent at
any point in each of the previous four quarters). Non-retail users will also
include foreign banks, central banks, international and supranational
institutions and similar international organisations; and foreign institutions
whose main activity is to invest /transact in financial instruments. Any user
who is otherwise eligible to be classified as a non-retail user shall have the
option to get classified as a retail user. Eligible products in the case of
non-retail users will be any derivative contract, which the authorised dealer
(AD) can price and value independently and is approved by the board of the
dealer, provided that the same is not a leveraged derivative. Eligible products
in the case of retail users will be forwards, purchase of call and put options
(Only European options), purchase of call and put spreads, swaps. While
offering contracts involving Rupee, and during the life of such contracts, ADs
have to ensure that: the contract is for the purpose of hedging; the notional
and tenor of the contract does not exceed the value and tenor of the exposure;
the same exposure has not been hedged using any another derivative contract.
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WIPRO GETS RELAXATION FROM SEBI FOR BUYBACK PROGRAMME
Markets regulator Sebi on Friday
granted certain exemptions to Wipro from the buyback norms in case of the IT
firm's proposed share repurchase programme, according to an order by the
watchdog. Wipro in November 2018 had filed an application with the Securities
and Exchange Board of India (Sebi) to seek exemption from the strict
enforcement of the buyback norms for the merger of its four wholly-owned
subsidiaries with itself. The IT firm said its scheme of amalgamation is
pending for sanction of the NCLT (National Company Law Tribunal) and
considering the backlog of cases at NCLT, there could be delays and the firm
cannot anticipate the time that it may take to complete the merger process.
Under regulation 24 (ii) of buy back norms, the firm cannot make public
announcement for buy back during the pendency of any scheme of amalgamation
Therefore, Wipro asked for exemption from such norms so that it can place a
proposal for buyback of equity shares for the consideration of its board of
directors. Sebi has granted exemption/relaxation to the company, viz Wipro,
from ensuring compliance with the requirement of Regulation 24(ii)of the
buyback Regulations 2018, according to the order. However, the exemption will
be subject to certain conditions like the proposed buyback, if approved by the
company's board of directors will be in accordance with the relevant provisions
of the Companies Act and buy back Regulations, Sebi said.
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MUTUAL FUNDS SEEK COMMON INVESTOR KITTY FOR PAYING CREDIT
RATING AGENCIES
The Securities and
Exchange Board of India’s (Sebi) plan to make the credit rating agencies’
business model less issuer-oriented through a proposed subscription-like
platform on exchanges is unlikely to have the desired result, according to
mutual fund (MF) industry officials. Fund managers say that the market
regulator would need to take more measures to resolve the possible conflict of
interests that can creep up in an issuer-pay model. We need a framework where
rating agencies are rotated after a certain time-frame, like auditors.
Additionally, instead of issuer choosing the rating agency, the regulator could
put in a system where it assigns rating agencies to the issuer, a fixed income
fund manager said, requesting anonymity. They add that creating a
subscription-like platform on exchange for ratings is not a feasible idea
either. Putting an explicit pay structure for ratings may not find many takers
within the investor community. Just like mutual funds have pooled in their
resources for investor education, the debt market participants can pool in a
certain share of their assets towards rating fees, said Dwijendra Srivastava.
According to reports, a proposal being mooted involves creating a platform on
exchanges where an issuer files its draft prospectus. The rating agencies would
then analyse the issuer’s financials and other relevant fundamentals. The
investors would pay the rating agencies they choose to see their ratings. A new
investor of that paper can choose to continue with the same rating agency or
pick up another one. Fund managers added that Indian rating agencies’ ability
to assess companies is itself questionable as they tend to be aggressive in
giving highest ratings to issuers. They pointed out that compared to developed
markets like US where only a handful of companies are rated AAA, India has
60-70 AAA-rated companies.
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TWO DIRECTORS AMIT CHANDRA, RANENDRA SEN LEAVE AT TATA SONS
BOARD MEET
The board of directors of
Tata Sons met on Friday. It also happened to be the last meeting for two of its
directors — Amit Chandra and Ranendra Sen. Sen, a non-executive independent
director on the board, left as he reached his retirement age. But for Chandra,
it was a formal acceptance of his resignation. With the two exits, the
nine-member board of Tata group’s holding company (excluding Chairman N
Chandrasekaran) will reduce to seven. It now comprises Venu Srinivasan, group
chairman and managing director of TVS group; Harish Manwani, former group chairman
of Unilever; Farida Khambatta, former member of IFC’s management group; Ralf
Speth, CEO of Jaguar Land Rover; Ajay Piramal, chairman of Piramal and Shriram
groups; Bhaskar Bhat, CEO of Titan; and Saurabh Agarwal, group CFO of Tata
Sons. Chandra had expressed his desire to step down as non-executive director
of Tata Sons last year, citing personal reasons. His term was coming to an end
in March. The managing director of Bain Capital had already stepped down as a
trustee of various Tata Trusts. Chandra was also the only representative on the
Tata Sons board representing the trusts.
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LIC MAY INFUSE UP TO RS 12,000 CRORE IN IDBI BANK TO HELP IT
MEET PROVISIONING FOR NPAS IN Q4
IDBI Bank has sounded out
its new owner LIC seeking another tranche of up to Rs 12,000 crore to meet its
huge provisioning requirements amid mounting losses. The fresh support is
required to cover for non-performing assets (NPAs) in the January-March quarter.
Life Insurance Corporation of India (LIC) completed acquisition of 51 per cent
controlling stake in IDBI Bank on January 21. The bank received total capital
of Rs 21,624 crore from the insurer in the four-month period prior to
formalisation of acquisition.
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ICAI BETS BIG ON ARTIFICIAL INTELLIGENCE, DATA ANALYTICS
The Institute of Cost
Accountants of India (ICAI), that primarily trains students in cost and
management accountancy and works towards developing the profession, is keen on imparting
skills related to emerging areas such as data analytics to tap future
opportunities, Amit Anand Apte said. ICAI is the second largest cost and
management accounting body in the world with over 75,000 members and five lakh
students. We are focussing on future avenues While cost and management
accountancy is our core competency, apart from this we must also focus on new
areas like artificial intelligence, data analytics, forensic audit or
information system audits, he said, adding that ICAI has recently launched a
course on data analytics. Besides, he said in the last couple of years there
has been a rise in demand for insolvency professionals and valuation
professionals and ICAI has been conducting training for these roles as well.
Recently, it also partnered with the Union ministry of corporate affairs to
train around one lakh students on the soon-to-be launched GST Accountants
course over the next one to one-and-half years. These GST accountants are
expected to cater to the SME sector, he said.
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RBI LIFTS CAP ON FPI INVESTMENTS IN CORPORATE BONDS
The Reserve Bank of India withdrew
the 20 percent limit on investments by foreign portfolio investors in corporate
bonds. As part of the review of FPI investments in corporate debt undertaken in
April 2018, it was stipulated that no FPI should have an exposure of more than
20 percent of its corporate bond portfolio to a single corporate, including
exposure to entities related to the corporate bonds. As part of the review of
FPI investments in corporate debt undertaken in April 2018, it was stipulated
that no FPI should have an exposure of more than 20 percent of its corporate
bond portfolio to a single corporate, including exposure to entities related to
the corporate. While the provision was aimed at incentivising FPIs to maintain
a portfolio of assets, market feedback indicates that they instead have been
constrained by this stipulation, the RBI said. In order to encourage a wider
spectrum of investors to access the Indian corporate debt market, it has been
decided to withdraw this provision with immediate effect, the central bank
said. The RBI said the directions in this regard have been issued the Foreign
Exchange Management Act.
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FIIS 'GETTING SERIOUS' ABOUT ENVIRONMENTAL, SOCIAL AND
GOVERNANCE PERFORMANCE OF COS: PROTIVITI
With foreign institutional
investors 'getting serious' about environment, social and governance standards
when it comes to investing, it's time for India Inc. to take notice feel senior
executives of Protiviti, a US-based global consultancy. Globally, companies are
making the transition from corporate social responsibility to ESG, as investors
are looking beyond numbers to understand how a company functions, Robert B
Hirth, told. FIIs have turned cautious on India, and have been net sellers in
the last one year, which also saw many marquee corporate names coming under
scanner for poor governance. FIIs have a huge presence in India, and they take
the parameters very seriously, said Sanjeev Agarwal. Commonly known as ESG, the
concept has come into focus in the last fortnight with the launch of India's
first fund based on these principles. The Avendus India ESG Fund will invest $1
billion in companies it will pick from a list of top 100 firms by market
capitalisation. Around the same time, another fund based on ESG was announced
by ex-Tata Sons senior executives, and Ajit Dayal's Quantum Advisors. This fund
too will invest $1 billion, but will focus on mid cap firms. Globally, over $20
trillion of assets use the ESG criteria when it comes to investing.
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DEBIT/CREDIT CARDS OUTSTANDING CROSS BILLION MARK; USAGE
HOVERS AROUND 54 PER CENT
The number of debit and
credit cards outstanding in the country crossed one billion in 2018 and
remained above that level throughout the second half of 2018, show data
released by the Reserve Bank of India (RBI). Even so, there was a limited growth
in the number of times these cards were used to make actual digital
transactions. The volume of point-of-sale (POS) transactions as a share of
total cards outstanding rose to only 54.5% in December 2018 from 47.4% in
December 2017. RBI does not share data on the volume or value of card
transactions made through the e-commerce channel. If e-commerce transactions
were added to POS transactions, card usage figures would likely go up. Card
usage at ATMs, on the other hand, are nearly commensurate with the number of
cards in the system. During the last three months of 2018, the volume of card
transactions at ATMs ranged between 81% and 92% of the number of cards in
circulation. This ties in with the fact that the cash in circulation (CIC)
touched a new high of 20.4 lakh crore earlier this year. Now only 13%
transactions happen at branches and rest all are either on digital channel or
the ATM channel.
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INDIA NEEDS TO BOOST PRIVATE INVESTMENT FOR GROWTH, SAYS UDAY
KOTAK
India should kick-start
private investment via policy measures or tax breaks if it does not want to
stay stuck at a 7% growth rate Uday Kotak, Kotak told. India has the
fundamental capacity and we need to create a situation where the ground
capacity will be growing at somewhere between 8 and 9%, he said on the
sidelines of an event organised by Kotak Mahindra Bank Ltd. The Reserve Bank of
India earlier in the month moderated its growth forecast to 7.2-7.4% for the
April-September period, after economic growth in the country fell to a
worse-than-expected 7.1% in the July-September quarter. We have got to really
fix that piece because the key is private investment, Kotak said, late on
Thursday in the interview. The government's decision in November 2016 to
suddenly ban large banknotes, so-called demonetisation, and the abrupt
implementation of goods and services tax (GST) six months later, hit businesses
hard. The infrastructure logjam that has occurred due to a lack of liquidity in
the system, also needs to be removed, said Kotak, whom the government
hand-picked to lead major infrastructure financing and construction firm
IL&FS after a string of defaults from the firm triggered fears of a
liquidity crisis in the non-banking financial company (NBFC) sector. The
IL&FS imbroglio dried up lending from NBFCs at a time when private
companies were already dealing with reluctant banks wary of lending due to
their massive bad debt woes. Kotak said that due to the IL&FS debacle, the
current situation was fragile, but he added that it was more due to investor
fears than a systemic problem.
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RBI NEEDS TO BE MORE TRANSPARENT ON DECISIONS LIKE YES BANK:
JEFFERIES
There is a need for the
Reserve Bank to be more transparent on decisions like curtailing the term of
Yes Bank's managing director and chief executive Rana Kapoor, a foreign
brokerage said Friday. This comes two days after the private sector lender
reported that the RBI had not find any divergence or under reporting of non-performing
assets for fiscal year 2017-18. The question of why the RBI ordered Kapoor to
go remains unanswered. We believe it is time for the RBI to increase
transparency on decisions that have a significant impact on minority
shareholders, Jefferies, the brokerage, said in a note. The brokerage pointed
out that the Yes Bank stock, which gained since the zero divergence news, had
lost 30 percent following the RBI curtailing the term of Kapoor in September
last year. It can be noted that the terms of both Kapoor as well as Shikha
Sharma, the head of its larger rival Axis Bank, were curtailed by the
regulator. No reasons were communicated officially for the action. Both the
banks were found to have under reported their stock of NPAs by a cumulative Rs
10,000 crore each for two consecutive fiscal years by the RBI, leading to a
wide speculation if this was the reason for the removal. The brokerage said it
thought the refusal to allow the reappointment of Kapoor by the RBI was taken
by it as a black swan event. The central bank said these happenings reinforce
its grave concerns and regulatory discomfort with the role of Kapoor in the
governance, management and superintendence of Yes Bank.
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FOREX RESERVES DIP $2.1 BN TO $398.1 BN ON FALL IN FOREIGN
CURRENCY ASSETS
The country's foreign
exchange reserves declined by USD 2.119 billion to USD 398.122 billion in the
week to February 8, due to fall in foreign currency assets according to the RBI
data. In the reporting week, foreign currency assets, a major component of the
overall reserves, fell by USD 2.448 billion to USD 370.981 billion. Gold
reserves remained unchanged at USD 22.686 billion in the reporting week, the
data showed. The special drawing rights with the International Monetary Fund
(IMF) decreased by USD 8 million to USD 1.462 billion. The country's reserve
position with the IMF increased by USD 337.3 million to USD 2.991 billion, the
apex bank said.
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RUPEE EXTENDS SLIDE, DOWN 7 PAISE TO 71.23 VS DOLLAR
The rupee slipped by 7
paise to close at 71.23 against the US dollar Friday, pressured by heavy
foreign capital outflows and firming oil prices. This is the third straight
session of loss for the domestic currency, during which it has depreciated by
53 paise. On a weekly-basis, the rupee registered a loss of 8 paise. At the
Interbank Foreign Exchange (forex) market, the rupee opened lower at 71.22 and
fell further to touch the day's low of 71.44. The local unit covered some lost
ground, before finally ending at 71.23 per dollar, down by 7 paise against its
previous close. On Thursday, the rupee had tumbled 36 paise to close at 71.16
per US dollar. Foreign portfolio investors (FPIs) sold shares worth a net Rs 966.43
crore, while domestic institutional investors (DIIs) bought equities to the
tune of Rs 853.25 crore Friday, provisional data showed.
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INDIA IN STIMULUS MODE: FUNDS BET BIG ON SHORT-TENURE BONDS
POST RATE CUT
This week’s data showing
further easing in inflation has raised the odds of the central bank adding to
last week’s cut as early as April just when investors including HDFC Standard
Life Insurance Co. are concerned that the looming supply of sovereign debt will
push up long-end yields. The bond demand-supply dynamics are likely to
deteriorate going ahead, negating a big move down in long-term yields, said
Puneet Pal, deputy head for fixed income at DHFL Pramerica Asset Managers Pvt.
The fund favors maturities of less than or equal to four years, he said.
Worries about the supply overhang emerged after Prime Minister Narendra Modi’s
government announced a record 7.1-trillion-rupee borrowing program on Feb. 1.
The debt sale is in addition to states selling more paper to fund slippages
from farm-loan waivers. The yield on the benchmark 10-year bonds, for instance,
is up five basis points this month. In comparison, the five- and three-year
yields have fallen at least 22 basis points in the period. The other uncertainty
plaguing investors is how proactive the Reserve Bank of India will be in
extending its bond purchases. HSBC Holding Plc. estimates the RBI may buy
between 1.8 trillion to 2 trillion rupees of debt in the year starting April 1,
versus the 2.7 trillion rupees it likely spent so far this fiscal. The market
is concerned about the quantum and pace of bond purchases for the next year,
said Lakshmi Iyer. That’s the reason why we’re not seeing as enthused a rally,
especially in the 10-year benchmark. Concerns about liquidity continue to
linger months after defaults by an infrastructure lender pushed up borrowing
costs for businesses. With liquidity typically turning tight with the
April-March fiscal year nearing an end, another credit event -- should it occur
-- will worsen the crunch, investors said. That’s another reason driving them
to shorter and liquid papers. The crisis that began after the IL&FS default
in September is not over yet, said Pankaj Pathak. The widening of spreads
between corporate and sovereign yields reflects lack of confidence in the
credit market.
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FACEBOOK ACCESSING USER DATA AGAIN, THIS TIME TO DEFEND
WORKERS
Facebook gathers
intelligence from its platform to identify people who threaten the firm or its
workers, the social network said Thursday in response to media reports of the
security tactic. that it interviewed more than a dozen former Facebook security
employees, some of whom questioned the ethics of what was portrayed as an unclearly
defined practice at the leading social network. Facebook spokesman Anthony
Harrison told AFP that the company’s physical security team exists to keep
workers safe and that strict processes are in place to protect people’s
privacy. Any suggestion our on-site physical security team has overstepped is
absolutely false, Harrison said. They use industry-standard measures to assess
and address credible threats of violence against our employees and our company,
and refer these threats to law enforcement when necessary.
#For Source of Information copy and paste the heading in google.
Thanks & Regards,
CS Meetesh Shiroya
Thanks & Regards,
CS Meetesh Shiroya
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