allow recast of working capital loan
soon be able to restructure their non-performing assets (NPA) with greater
ease. The leeway given to banks to restructure term loans for projects
will be applicable to working capital loans also as long as the loans
are backed by securities.
Under the proposed
relaxations, banks whose borrowers are unable to meet the repayment
schedule as per the original loan agreement will be allowed to enter
into a fresh agreement. However, the bank will have to show upfront
the losses suffered on account of restructuring these loans. For instance,
if a bank agrees to defer the repayment period and/or lower the interest
rate under the restructuring package, the bank will have to make a provision
to the extent of the lower returns obtained from such assets.
loans would either be categorised as `restructured standard assets'
if a standard asset is restructured from becoming an NPA or `restructured
substandard assets' if a substandard asset is restructured.
wants BIFR abolition, SICA repeal
group on bankruptcy laws, constituted by the Reserve Bank of India, has
called for setting up of bankruptcy institutions, repeal of the Sick Industrial
Company (Special Provisions) Act (SICA) and abolition of the Board of Industrial
& Financial Reconstruction (BIFR). The cases pending before BIFR should
be transferred to the bankruptcy court.
chaired by Shri N.L. Mitra, director, Centre for Business Law Studies submitted
its report to Shri Y.V. Reddy, Chairman standing committee on international
financial standards and codes and Deputy Governor, RBI on 17.05.2001.
has identified "cash test" as the immediate trigger point to invoke the
bankruptcy code. It is in favour of raising the minimum default limit to
Rs.1 lakh from the present level of Rs.500. In other words, the moment
a company is unable to clear a debt of Rs.1 lakh or more, bankruptcy
can be initiated. The group has suggested that the bankruptcy court should
appoint the trustee from professional bodies like chartered accountant
firms, law firms, cost accountants etc.
The role of
the trustee (bankruptcy institutions) will be as administrator and regulator
to the bankrupt entity. It also said that office of the official liquidator
should be closed and all powers and functions should be exercised by the
The group has
also pitched for special provisions for bank and financial institutions.
To speed up proceedings, the group is also in favour of a dedicated bench
at every high court to deal with bankruptcy issues.
The one time
settlement (OTS) scheme for non-performing assets (NPAs) announced by the
Reserve Bank of India would make action against willful defaulters more
difficult according to bankers. It would provide an escape route to several
companies which defaulted on loans availed from one Indian bank, had applied
for fresh loans approvals from a different bank and then defaulted on that
loan also. Under the scheme, the no dues certificate (NDC) granted will
enable such companies or promoters to get substantial portion of outstanding
interest written off by one bank without preventing them from approaching
other banks for fresh credit once again. Such habitual defaulters would
only add to the already large NPA figure.
these companies should be asked to clear off total dues to banks before
being granted NDCs or alternatively, be forced to go through a cooling-off
period before becoming eligible for fresh loans. Further, NDC should clearly
spell out the fact that the borrower had availed of the concession under
RBI in its
circular dated May 12, 2001 has decided to reduce CRR for all scheduled
commercial banks one half of one percentage point to 7.5 p.c. w.e.f. 19.05.2001.
This step will augment lendable resources of banks by about Rs.4,500 crore.
take over RBI's equity holding in State Bank
has agreed to take over RBI's equity holding in State Bank of India. It
has also given firm indications that the proposed amendment to the SBI
Act-that will enable the country's largest commercial bank to raise capital
from either the domestic or international market will be pursued in the
monsoon session of Parliament. The RBI has a 59.7 percent equity stake
in SBI and this cannot go below 55 percent without an amendment of the
27% decline in net profit
IDBI has reported
a 27 percent drop in net profit to Rs.691 crore in 2000-01 against Rs.947
crore in the previous year. The board, however, has decided to maintain
the dividend at 45 percent on its enhanced capital base following a 3:5
bonus issue. The FI's profits from its core lending biz work out to Rs.174
crore if capital gains from disinvestments of IDBI's stake in SIDBI and
capital gains through sale of shares in the secondary market are excluded.
The FI has earned capital gains of Rs. 460 crore by divesting 51 percent
of its shareholding in SIDBI in favour of various public sector banks through
a negotiated deal. The overall assets of the institute have shrunk to Rs.71,783
crore - decline of 0.7 percent from the previous year's.
set up technology bank
SIDBI is to
set up a technology bank to meet the needs of the small scale sector. SIDBI,
Chairman & Managing Director, Shri P.B. Nimbalkar said "We are considering
conversion of the Technology Bureau For Small Enterprises (TBSE) into a
full-fledged technology bank".
set up TBSE in 1995 in association with the United Nations - Asian and
Pacific centre for transfer of technology. The technology bureau provides
customised services to facilitate transfer of technology and joint venture
collaborations. SIDBI is also planning to hire professional help to restructure
its organisation which will submit a blueprint to SIDBI on its gameplan
for the next five years on issues like operation functions, new product
mix and new ventures. SIDBI's board has also proposed a 15 percent dividend
amounting to Rs.67.50 crore to IDBI on the paid up capital of Rs. 450 crore.
registered a 3.9 percent growth in its net profit at Rs.477 crore for the
fiscal ended 2000-2001 from Rs.459 crore in the preceding fiscal.
grew by 1.3 percent to Rs.1,619 crore as compared with the income of Rs.1,598
crore during the previous year. The bank's net worth increased to Rs.3,771
crore recording a growth of 40.4 percent. Total assets of the bank increased
to Rs.17,090 crore. Net non-performing assets (NPA) had declined to 1.23
percent from 1.33 percent reported last year.
For this fiscal,
SIDBI has set a target of Rs.11,000 crore in sanctions and Rs. 7,000 crore
cr aid for revival of Orissa sick units sought
Chamber of Commerce and Industry (UCCI), a representative body of Orissa
entrepreneurs, has sought Rs.100 crore soft loan from the central government
for the revival of sick industrial units in the state.
Das, Vice President UCCI has proposed that a joint committee of bankers
and representatives of industry associations should be formed to prepare
sickness evaluation report and select units for assistance under the revival
He said that
the terms of special cyclone rehabilitation scheme, under which industry
is being charged interest at a concessional rate of 11 percent, be extended
for another year. The scheme expires on October 30.
has also demanded a special venture capital fund of Rs.500 crore under
the banner of Laghu Udyog Nirman Nidhi for providing equity capital support
to the small scale industries and has asked for necessary steps to extend
the purview of fire insurance cover to include the damage of assets due
to super cyclone and floods in the state.