Banks in the country have been asked by the Reserve Bank of India to use the courts to resolve bad loans which amount to a total of Rs. 2 lakh crore issues to 12 large debtors.

The apex bank directed the banks to use insolvency laws to find a solution for the debtors before resolving other problems with accounts within six months. Since these 12 debtors account for a quarter of the country’s bad loans, it is pertinent to resolve this issue prior to any other. Indian banks have among the world's worst stressed-asset ratios with total bad loans of more than $180 billion.

The Banking Regulation Act was amended last month by the government to enable the RBI to order lenders to initiate insolvency proceedings against defaulter’s ad to create committees for advising banks on recovering loans.

The RBI didn't disclose the names of the 12 largest debtors. The banks have filed just 18 cases under the insolvency provisions. The present government has set a priority to get rid of bad loans to revive the economy. Though cases have been filed, the delays in receiving verdicts have deterred lenders from taking more cases to the insolvency courts. 

Posted on: June 15, 2017, 4:56 pm

The Reserve Bank of India has reduced the risk weightage on home loans above Rs. 75 lakh to 50% from the earlier 75%. This is purported to encourage banks to lend more for housing in large cities and make high value home loans cheaper.


The RBI stated in its monetary policy – “Considering the importance of the housing sector and given its forward and backward linkages to the economy, it has been decided as a countercyclical measure, to reduce the risk weight on certain categories. It has also been decided to reduce the standard asset provisioning on such loans.”


The RBI retained the repo rate at 6.25% and the reverse repo rate at 6%. The marginal standing facility continues to remain at 6.5% and the cash reserve ratio of 4%.


It has been expected that the RBI would maintain the status quo on the rates. The RBI has maintained a neutral stance as easing of prices might be temporary. Economists have been presuming that the RBI would ease its stance from `neutral' to `accommodative' to send a message that easy money conditions would prevail. The fuel prices have been hiked since the inflation numbers were published and prices might rise further.

Posted on: June 11, 2017, 6:33 pm

The Bihar state government reduced the stamp duty on applications filed by students for student credit card from Rs, 1, 000 to Rs. 100.


As per the seven resolves of the Bihar state government, it facilitates education loan of up to Rs. 4 lakh under the student credit card scheme for all Class XII passouts who wish to pursue higher education. The government is the guarantor in such loans. Every student who secures an admission in any recognized institution are eligible for loan under this scheme.


Since the government has reduced the stamp duty upon the application, more students will be able to apply and avail of this facility. This scheme was launched on October 2 last year by the Chief Minister Nitish Kumar along with the Swayam Sahayta Bhatta (self-help allowance) and Kaushal Yuva Karyakram (skill development) under 'Arthik Hal, Yuvaon Ko Bal' programme of the state government.

The loan under student credit card scheme covers admission fees, hostel accommodation, expenses on books and other miscellaneous expenses.


The state cabinet also agreed to the proposal for Rs. 25 crore to take on lease one acre of land at Dwarka in Delhi for development of a state guesthouse by the Delhi Development Authority. 

Posted on: June 2, 2017, 2:51 pm

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In an unprecedented move, the Reserve Bank of India (RBI) is creating a post of a chief financial officer (CFO) and has sought applications for the position.

The CFO will be an executive director and his role and responsibility will include presentation and reporting of financial information of the central bank, and establish accounting policies and procedures and ensure compliance with regulations. The official will also be entrusted with communicating the RBI's expected and actual financial performance and overseeing its budget processes.

The RBI didn’t have any particular official handling these responsibilities and were being carried out internally. However, this position is now being touted to be introduced by RBI Governor Urjit Patel.

The CFO can either opt for regular appointment or a contract and will not be eligible for any career progression within the bank. The preferable candidate should be a chartered accountant aged between 45 and 55 years, who has a minimum of 15 years of experience overseeing financial operations in banks or financial sector organisations.

The gross monthly emoluments will be around Rs. 2.40 lakh, while for appointment on contract basis, cost per month will be Rs. 2 lakh with housing and Rs. 4 lakh per month without housing. 

Posted on: May 18, 2017, 12:41 pm

UCO Bank is facing business restrictions from the Reserve Bank of India (RBI) after the bank has been under tremendous losses, continuous loss of net worth and huge NPAs. It also informed the stock exchanges that the RBI has initiated action on some of its business activities over its bad loans and negative return on assets.


The bank also stated in its filing to the stock exchange that the RBI restrictions will not have any material impact on its performance without disclosing any details about the restrictions. It is purported that the restrictions will be on lending and branch expansion plans as the bank has reported losses for two successive fiscals amid severe stress on asset quality.


An official of the bank also stated that “there would be check on management compensation and directors' fees as well as the invocation of prompt corrective action (PCA) for the bank by the regulator aiming to bring it back on recovery path.


It is the second bank after IDBI Bank to follow RBI’s revision of its PCA framework which is aimed to help bring loss making banks on track.

The bank has brought down its losses to Rs. 588 crore in the fourth quarter of 2016-17.

Posted on: May 16, 2017, 5:46 am

The Asian Infrastructure Investment Bank (AIIB) approved a loan amount of USD 160 million to strengthen the power transmission and distribution system in support of the Andhra Pradesh 24x7 Power project. This is part of the government’s Power for All Program which was launched in 2014 to provide an efficient, reliable and affordable electricity supply to all consumers in selected states. Andhra Pradesh is one of the first states selected for the rollout of the Power for All program.

The project is co-financed with the World Bank.

AIIB promotes energy efficiency which involves upgrading the existing transmission and distribution networks and encourages its members to turn towards a low-carbon energy mix for the same. AIIB has been working closely with India and plans to invest and provide loans for future projects in the country as well.

The project aims to strengthen the transmission and distribution network, increasing network capacity, improving system reliability and supporting operational reforms to improve the commercial performance of the state's distribution companies. This will help improve the economic development of Andhra Pradesh as well as India by increasing delivery of reliable, grid-based electricity to households, business and the agricultural sector.

Posted on: May 5, 2017, 3:49 pm

The largest lender in the country, State Bank of India (SBI) plans to increase its stake in SBI Card to 74 per cent by the end of June 2017. The stake will be increased by first quarter of next financial year after overcoming some regulatory issues.

The approval for increasing the bank’s stake in its two credit card joint ventures with General Electric Company to 74% has been given.

The bank has approval to infuse Rs. 1, 160 crore in the two JVs - SBI Cards and Payment Services Pvt. Ltd. (SBICPSL) and GE Capital Business Processes Management Services Ltd (GECBPMSL) through purchase of equity shares from GE Capital so as to increase SBI's stake in both the companies to 74%. Currently, SBI holds 60% stake in SBICPSL and 40% in GECBPMSL.

SBI Card has around 4.3 million users. It’s latest offering - 'Unnati' is targeted at all SBI customers, including Jan Dhan account holders throughout the country. The new card is being launched in the era of digitization where new users are sought to undergo cashless transactions which will help transform India into a digital economy.

It is aimed to issue the card to people with balance of Rs. 25, 000 which will be offered through network of 20, 000 plus SBI branches. This card will be offered free at zero annual fee for four years to promote digitization. It will cater to the credit card requirements of new users and those without any credit history.

Posted on: March 31, 2017, 12:17 pm

The Reserve Bank of India (RBI) has put four public sector banks, including IDBI Bank and Indian Overseas Bank under watch and advised them to stay off risky assets so that their financial health is not stressed further. Though UCO Bank is said to also be in the list, the fourth bank could not be ascertained as of yet.

The RBI had carried out asset quality review (AQR) which will come to an end on March 31. The financial health of these lenders is not said to be improving and may remain so even after the AQR. These banks are suffering losses and have been advised to improve their financials by looking for capital infusion and creating a self-sustaining model by selling assets.

The gross NPA of Indian Overseas Bank (IOB) increased by 52% to Rs. 34, 502.13 crore at the end of December 2016, while the loss stood at Rs. 554 crore.

The gross NPA of IDBI Bank grew to 80% to Rs. 35, 245 crore and it booked a loss Rs. 2, 255 crore. The government shifted IDBI Bank's MD and CEO Kishor Kharat to Indian Bank. M K Jain, MD and CEO of Indian Bank, was in turn moved to IDBI Bank. UCO Bank is also expected to remain under stress during the fourth quarter ending March 31. Its gross NPA during the third quarter surged by 49% to Rs. 2, 181.26 crore and the loss was Rs. 437 crore.

Posted on: March 26, 2017, 9:30 am

Finance minister Arun Jaitley today ruled out farm loan waivers by the Centre. He further stated that states can utilise their own resources in this regard. The rationale given for this decision is that the Centre cannot adopt a selective approach by helping one state and not the others.


Jaitley said in the Rajya Sabha - "This issue (loan waiver) has cropped up in several states. The Centre has its policies for agriculture sector under which we provide interest subvention and other support. We will continue to give all that. If a state has its own resources and want to go ahead in that direction (waiving farm loans), it will have to find its resources. The situation where the Centre will help one state and not the others will not arise.”

Agriculture Minister, Radha Mohan Singh has stated that the BJP government in Uttar Pradesh will waive off loans of small and marginal farmers as has been promised in party's state election manifesto in the recent assembly polls.

The Oppositions party led by Congress had demanded that the BJP led government should announce a loan waiver for farmers across the country as was done by the UPA in 2006 and not just for Uttar Pradesh where the BJP has returned to power with a major mandate.

Posted on: March 26, 2017, 9:21 am

With Bangladesh’s Prime Minister, Sheikh Hasina visiting New Delhi next month, it is being expected that India will announce a large credit line amounting to $4 billion to Bangladesh.

There will be some agreements that will be signed between the two countries. One would be to get India on board as an adviser in implementing the Rosatom-Bangladesh nuclear power plant in Rooppur.

India had extended a similar credit line in September 2016 to Vietnam. It was a $500 million credit line for Hanoi to build its defense.

There will some defense agreements (seven MoUs) that will be executed between the two nations. One is for training crews of the Bangladesh Navy. China has played a key role in Bangladesh Navy's modernization and the deal to train Bangladeshi crew is seen as an attempt to leverage capacity-building cooperation with countries in the region to block Chinese demands for access.

There will be another deal that will be signed between the nations. This is for the implementation of Bangladesh's first nuclear power project at Rooppur. In November 2016, India had proposed it be made part of the agreement between Bangladesh and Rosatom for advisory support. Almost US$ 1 billion is likely to be allocated for infrastructure development of the project. The Rooppur project is being established by Russia's Rosatom, with Russia and Bangladesh approving the draft inter-governmental agreement last week.


Posted on: March 26, 2017, 9:16 am


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