RBI to allow recast of working capital loan  
Banks will 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. 
 
The restructured 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.  

RBI panel wants BIFR abolition, SICA repeal 
The Advisory 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. 
 
The group, 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. 
 
The group 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 
proceedings 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 trustee. 

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. 
 
OTS scheme for NPAs 
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. 
 
Bankers feel 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 OTS scheme. 
 
Cash Reserve Ratio 
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. 

Govt. to take over RBI's equity holding in State Bank 
The government 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 SBI Act. 
 
IDBI registers 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. 
 
SIDBI to 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". 
 
SIDBI had 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. 
 
SIDBI has 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. 
 
Total income 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 in disbursements. 
 
Rs.100 cr aid for revival of Orissa sick units sought 
The Utkal 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. 
 
Shri P.K. 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 package. 
 
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. 
 
The Chamber 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.