|ALL INDIA INSTITUTIONS|
|State Financing Corporation (SFCs) Act,
1951-Definition of industrial concern - section - 2 (c)
Industrial Development Bank of India (IDBI
in its circular dated August 20, 1999 has reviewed the definition of `industrial
concern' under section 2(c) of the SFCs Act
and has approved the following activities under sub clause (xiii) of the
above section to enable the SFCs to financial/undertake
new industrial business activities:
Financing of vehicles is permitted only when the vehicles form part of the orginal project cost of industrial concern. The acquisition of vehicles by industrial concerns after the scheme has been implemented or by professionals like doctors, lawyers, engineers, architects for their personal use for discharging their services would continued remain outside the purview of definition of industrial concern.
It is hoped that grant of approvals/permission as above will enable the SFCs to improve their over all performance and profitability.
Please bring the contents of this circular to the notice of your offices.
Revision in Extent of Refinance
All the other provisions of the scheme remain unchanged.
Refinance to SIDCs for Infrastructure projects
National Equity Fund Scheme - Soft loan
Re-Payment/Pre-payment of Refinance-Soft Loan Scheme
SIDBI in its circular dated June 28, 1999, has advised all PLIs that prepayment/repayment of term loans covered under the above schemes can only be allowed to the borrowers if prepayment/repayments of the soft loan component of the scheme is also made. As per the guidelines issued by SIDBI for these schemes, the repayment of term loan and soft loan components of the loan is to be made at the same time. As nodal agencies, the PLIs have been advised to insist that repayment of both the components of loans be made together. If the borrower still makes the repayments only under term loan, then PLIs have to adjust the amount proportinately towards both the components. The payments to SIDBI by PLIs are also to be made correspondingly.
Refinance Scheme for Textile Industry under Technology Upgradation Fund - Relaxation
SIDBI vide its circular dated July 23, 1999 has relaxed the ceiling on project cost for eligibility under the Refinance Scheme for Textile Industry under Technology Upgradation Fund (RTUF) for SSI units. The ceiling on project cost for coverage under the scheme would now be the same as for any other SSI unit viz. Rs.12 cr., Rs. 8 cr. and Rs. 5 cr. in respect of SFCs/SIDCs in categories `A', `B' and `C' respectively.
Panel set up on regulation of FIs
The committee will review the RBI guidelines for the FIs and suggest changes. It will examine off-site supervision of institutions and the reporting procedures being followed in respect of them.
Since the operations of banking sector differ from that of financial institutions, a need to frame new norms for regulating institutions was felt. For instance, the lending and deposits pattern, the branch network, credit appraisal system and reporting structure differ between banks and institutions. The asset profile of banks is short term and that of institutions long term, and this requires a different approach for regulation.
The need to set up such committee came in the wake of the fact that currently the financial institutions are not completely regulated by the RBI, according to RBI sources.
RBI blames fund diversion by project promoters for rising NPAs
The RBI finds that diversion of funds by promoters for expansion, modernisation and setting up of new projects is one of the factors that has contributed to the rise in banks' non-performing assets (NPAs). RBI attributes government policies, import duty changes, deregulation and weak credit appraisal skills, among other factors responsible for the rise in NPAs in the banking sector.
In a status report prepared by the department of banking supervision (DBS) - released on June 29-RBI has said that the gross NPAs of the public sector banks were rising along with the net NPAS. While the gross NPAs amounted to Rs. 45,653 crore in 1997-98 up by 4.7 per cent over the previous year, the net NPAs were Rs. 21,232 crore up by 4.6 per cent.
First local area bank (LAB) in AP
The RBI is to award its first ever licence to a Local Area Bank (LAB) in Andhra Pradesh for commencing banking operations. The award of the licence to the Coastal Local Area Bank (CLAB) heralds the entry of private sector into the country's rural banking sector.
LABs are banks which would operate in a limited circle, concentrating only on two or three adjoining districts.
According to RBI requirements, a LAB must have a minimum capital of Rs.5 crore. The rules for priority lending are the same as those for other banks.
RBI allows use of IRS and FRA
According to the guidelines notified by the RBI on July 7 there will be no restriction on the tenure and size of the IRS and FRA entered into by banks.
The IRS will allow corporates to hedge their interest rate risks and also provide an opportunity to swap their old high cost loans with cheaper ones. However, the RBI has warned that while dealing with corporates, the participants should ensure that they are undertaking FRAs/IRS only for hedging their own balance sheet exposures and not for speculative purposes.
RBI to withdraw nominees from pvt. banks
This is in keeping with the recommendations of the Narasimham panel on financial sector reforms, which said that having its nominees on banks' boards was in conflict with RBI's regulatory rote.
As part of its supervisory role to ensure better governance by bank management, the RBI has introduced internal rating of banks .
Time limit for availment of refinance under
IDBI prepares blueprint for new millennium - no reference to state level institutions IDBI has shaped `Vision 2005' strategy to propel its growth in the new millennium and map its metamorphosis from a purely term-tending body into an integrated financial powerhouse.
The master plan, charting IDBI's phased future course during the long term and the near-term was finalised, based on reports submitted by five internal working groups.
The long-term plan envisages the IDBI entering a variety of new business like commercial and investment banking, cross border debt and equity investment international loan syndication, insurance advisory services, venture capital, securitisation and mortgage finance. To diversify into some of these sectors necessary amendments of the IDBI Act or issue of notifications permitted under the Act, would be required.
On the asset side IDBI could enter new areas like restructure financing, EPC (engineering, procurement and construction) financing and receivable financing. IDBI has also decided to resume funding non-banking finance companies (NBFCs). Restructure financing involves funding of mergers and acquisitions (M&A) as well as supplementary funding in the case of restructuring of projects and corporate groups. EPC financing involves meeting the fund requirements of large engineering contractors in big infrastructure projects. Similar credit for contracts executed abroad would also be extended which could be both by way of debt and equity.
Regulatory fine tuning is also needed where high stamp duty is an encumbering factor in securitisation business.
(There are however obviously no proposels in the game plan directed to IDBI's role vis-a-vis SFCs/SIDCs and other state level institutions.)
IDBI moves towards universal banking
There is a growing realisation, it is reported that IDBI can no longer survive as a mere term lending institution. It has already identified short term lending and non fund based business as other thrust areas. There is however, a need still of a comprehensive study as to the path along which the institution should move.
Four directors of IDBI viz Sarva Shri Dipankar Basu, Besant Raj, Tarun Das and S. K. Gupta will be interacting with the consultants, on its behalf.
IDBI to enter short term market
The funds would be raised for a tenure of three years with quarterly/semi annual call and put options after one year of holding.
The issue will be priced at a floating rate of 175-200 basis points above the Mumbai Inter- Bank Offer Rate (MIBOR).
This borrowing is part of IDBI's new overall borrowing strategy to have matching liabilities and assets in various time buckets. In the current year, IDBI has already raised three-to-six month funds through term money bonds, fixed deposit and certificate of deposits.
IDBI will also be offering assets in similar tenures to match the maturities and earn some spreads as well. In this connection it has already started giving short term loans to good corporates.
IDBI lowers exposure to steel, textile and
It has cut down its exposure to six segments out of ten, to which it had high exposures. Steel and cement apart, other segments to which exposure has been reduced are paper and paper products, man-made fibre, food products, and basic industrial chemicals. The exposure to sugar industry has been retained at 2.3 per cent.
S.H. Khan against Fl-bank merger
Financial institutions, excluding state level institutions, were capable of conducting universal banking business on their own and would not need to merge with a bank. He said the report of his working group had recommended enabling universal banking, which did not mean that each institution should start providing every service under the umbrella of universal banking.
No more loans to steel industry : ICICI
IIBI net profit up 10%
However, IIBI's non-performing assets (NPAs) to loans ratio increased by 1.3 percentage points to 14 percent. In. absolute terms, net NPA increased by 56 per cent to around Rs. 470 crore from Rs. 302 crore over the previous year. IIBI provided Rs. 14.69 crore on account of its NP Ain 1998-99 as against Rs. 6.07 crore in the previous fiscal.
According to IIBI's Chairman & Mg. Director, "extreme competitive market conditions caused a strain on financial institutions. "Besides, many of the clients had defaulted in repayments owing to severe liquidity crunch.
SIDBI sees 7.5-8.5% growth for SSIs
SIDBI to operate credit guarantee scheme
mechanism to help SSIs
SIDBI, NCAER prepare study on SSI status
Both the reports are part of the financial institution's efforts to help the Indian small sector prepare itself to face the new challenges. The challenges according to SIDBI Managing Director Dr. Sailendra Narain, were also emerging in the context of growing internationalisation of world economy under the WTO regime, intensified competition, both domestic and external, need to produce goods of international quality, stringent environmental norms and non tariff barriers imposed by trading partners.
Exim Bank to fund R & D patent registrations