Financial Awareness – 03/09/2016
A plan that the government is considering— getting banks laden with bad debt to put the screws on some large defaulting promoters and make an example of them to persuade others to pay up quickly. “A strong message needs to go from all concerned that resolution is important for the system,” said a note on bad loans drawn up after a discussion among regulators and submitted to the government. The government and the Reserve Bank of India are in agreement that banks may need to pick up some cases of significant exposure as laid out in the note. Financial services secretary Ms.Anjuly Chib Duggal had noted, “We have the Joint Lenders’ Forum (JLF) mechanism and somewhere it seems to be a cold-feet mechanism because it doesn’t seem to be working the way it ought to”.
Stress on agricultural loans may rise if rainfall remains uneven: SBH chief
There is an increasing risk of agricultural assets of banks coming under stress if the projected rainfall continues to remain uneven, according to Mr.Santanu Mukherjee, Managing Director, State Bank of Hyderabad. There has been drought in regions like Marathwada and Hyderabad-Gulbarga regions for the last three years. “This year, even though initial rains were good, still some regions are out of its purview,” Mr.Mukherjee told. “Slowly, farmers are getting impacted leading to problems in repayment,” he said, adding that recovery efforts were also not getting full support from the government and other agencies involved.
Chennai-based Equitas Holdings, which has received licence from RBI to start a small finance bank, said it will commence the business from September 5. It hopes to start operations with a network of around 400 branches, which would be established through the year.
The extension of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 to non-banking financial companies (NBFCs) is credit positive for retail-focussed NBFCs, especially those which extend mortgage-backed loans, according to credit rating agency ICRA. Following a notification by the Finance Ministry, the Act is now applicable to NBFCs having assets of more than Rs.500 crore according to their last audited balance sheet.
The Securities and Exchange Board of India (SEBI) has written to the Govt stating several market intermediaries such as mutual funds (MFs), brokerages and even banks were facing issues adhering to the new central KYC process. Starting August 1, the government has shifted to the central KYC process, to enable common and one-time KYC for all financial market intermediaries. Central KYC is being implemented through the Central Registry of Securitisation and Asset Reconstruction and Security Interest of India ( CERSAI). In a recent letter to the Ministry of Finance, the capital market regulator has demanded slew of changes, including more time between opening a new account and making an electronic entry with the central KYC registry. As per the norms, every financial institution needs to file an electronic copy of a client’s KYC records with the central registry within three days of an account being opened.
The Commerce Minister Ms.Nirmala Sitharaman said that growth in exports will not increase substantially, but it will be slow and steady. The growth drivers would be new markets, as traditional markets have started slowing down. She said that in 2015-16 export was valued at $262.3 billion, lower by 15.5%. However from June, this fall was arrested and she attributed this to key developments, which took place in September last year. These are interest subvention scheme and government provided performance based incentive schemes. Exports to the top 15 destinations, which are catered by Indian exporters, dropped. These include, US, UAE, China, UK, Singapore, Germany, Belgium, France and others. New export markets, including Africa, Latin America and others were found and now the ministry is moving forward and taking measures, she added
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