More NPAs to haunt banks with IL&FS Exposures:
The NCLT has asked the banks to consider their exposure to ILFS as NPAs. Earlier NCLT has restricted banks from declaring their exposure to IL&FS prompting the RBI to send circular asking banks to declare them as NPA. Early this NCLT changed its stance and RBI withdrew it circular. The banks are to consider all their lending to IL&FS as NPAs and categorize them as red, amber and green based on the company’s ability to repay. It is now known that IL&FS’s non-banking finance company IL&FS Financial Services (IFIN) reported a gross NPA ratio of 90 per cent as on December 31, 2018. The total is expected to be 99,000 crores of NPA.
Will NIIF Pay for Etihad’s Bid for Jet Airways?
At 6 pm May 10, the deadline for bidding on the Jet Airways ended. SBI informed that it had received two bids from unsolicited bidders. SBI has not revealed the names of the bidders and terms but has informed that it is revisiting the non-bidding bid of Etihad. Etihad has a 24 per cent share in Jet Airways but has clearly stated that the bid is subject to certain conditions. Etihad, cautious after its failed investments in Italian carrier Alitalia and Germany’s Air Berlin wants Jet Airway lenders to be open for further loans. It also indicated that it will not raise its minority share. Etihad has managed to rope in the National Investment and Infrastructure Fund (NIIF) started in 2015 as a joint promotor.
It is surprising that the sovereign reserve fund has been used to bail out a private company? Further, Etihad wants the lenders to look for majority bidders and also take a substantial hair cut in the deal. Given that there has only been two other bids (whose identity is not known) and Etihad sticking to its non-bidding bid, the lenders led by the SBI might be looking at an 80 per cent haircut.
RBI pilot study reveals customers against fines on non-maintaining minimum balance:
In the recently published annual report of the ombudsman scheme (2017-18) RBI had mentioned about a pilot study it had conducted in the city of Mumbai on charges levied by banks for basic banking services to ascertain customer feedback and need for rationalisation of charges. It found out that 30 per cent of the respondents that the banks did not inform about the charges while opening the account. Further, 25 per cent expressed discontent over the penalty for not maintaining a minimum balance. We do not, however, know the sample size and socio-economic background of the respondents. The charge on basic banking services goes against the principles and spirit of nationalisation and has been robbing people of their savings. RBI needs to withdraw all charges on banking services immediately.
No more free UPI transfers:
Days of free UPI transfers are over. From May 1stbanks have announced that they are going to charge for P2P (person to person) transfers on all Unified Payment Interface. Kotak Mahindra is the first bank to announce that it is going to charge every UPI transaction below or equal to Rs 1,000 will be charged Rs 2.50, and above Rs 1,000 will attract a fee of Rs 5 per transaction with an 18 per cent GST. The first 30 transfers are free. Soon more banks are to follow suit.
Videocon may washout 90,000 crore
Biggest corporate bankruptcy underway as the two main group companies– Videocon Industries Ltd (VIL) and Videocon Telecommunication Ltd. (VTL) – owe Rs.59,451.87 crore and Rs.26,673.81 crore, respectively or a staggering Rs.86,125.68 crore to Indian banks, led by the State Bank of India (SBI). SBI sent the company to NCLT after it defaulted on its payments. VIL has named a whopping 54 Indian and foreign banks, financial institutions and even a cooperative bank to whom it owes a staggering Rs 59,451.87 crore. It may be noted that the CBI had booked the then ICICI managing director Chandhana Kochar and her husband Deepak Kochar and VIL’s Venugopal Dhoot for criminal conspiracy and cheating in a loan scam.
The central agency has zeroed in on two instances of alleged quid-pro-quo. The first pertains to transactions between Videocon and NRL. According to sources, a day after a term loan of Rs 300 crore was sanctioned by ICICI Bank, Dhoot transferred an amount of Rs 64 crore to NRL through his company Supreme Energy Pvt Ltd (SEPL).
The second is a similar transaction between NRL and Nishant Kanodia’s Firstland Holdings. According to sources, the Essar Group had invested Rs 163 crore in Firstland, which in turn invested Rs 324.37 crore in NuPower between December 2010 and March 2012. Separately, in August 2015, Essar Projects India invested another Rs 250 crore in the cumulative redeemable preference shares of Matix. ICICI Bank, a key lender to the Essar Group, had around the same time, lent to Essar’s now-bankrupt US steel project in Minnesota and its UK refinery project at Stanlow. Kanodia is the son-in-law of Essar Group vice-chairman Ravi Ruia.