Banks must take firm steps to recover NPAs: FM

NEW DELHI, March 18, 2013, DHNS:

Soared to Rs 1.55 lakh cr as of Dec 2012

 Concerned over the rising bad loans of public sector banks, Finance Minister P Chidambaram on Monday said the lenders must take firm steps to recover non-performing assets (NPAs) without hurting industry.
 “While we understand why NPAs have risen and the restructured accounts have risen, we also wish the banks to take strong steps to recover their dues, I think the promoters have a duty to bring in additional money and the companies have a duty to pay their dues to banks. We cannot have an affluent promoter and a sick company,” Chidambaram told reporters after meeting heads of PSU banks and financial institutions. 

Slow economic growth and inability of companies to payback their loans have contributed to increase in non-performing assets of the banks. This has also given rise to large scale debt-restructuring by banks. 

Gross NPAs of PSU banks have risen from Rs 71,080 crore as on March 2011, to Rs 1.55 lakh crore as on December 2012. Chidambaram also said that as many as 215 infrastructure projects across five sectors worth Rs 7 lakh are facing delays, underscoring the slow pace of implementation of industrial projects in the country. 

He, however, said that certain projects in iron and steel and coal sector have started moving of late. The real problem exists in road and power projects. There are about 68 new projects in the road sector while 40 in power sector are either not moving or moving at a slow pace. “We have to get them going,” he added. 

Such projects usually face hurdles due to delay in clearance from multiple authorities, leading to time and cost overruns. Analysts estimate that poor infrastructure facilities in the country remove about two percentage points from gross domestic product growth. The government has set up a ministerial panel to fast-track such projects.

 Chidambaram also said that the finance ministry and the Reserve Bank of India are investigating the money laundering allegations made against three private-sector banks, but no such complaint has been made against any state-run banks. On the tight cash situation of banks, the finance minister said that he was in talks with the RBI governor D Subbarao and that he expected the RBI to take steps to address the liquidity shortage in the banking system when it meets to review its monetary policy on Tuesday.

 Chidambaram's remarks have renewed hopes among investors that the RBI will also cut the cash reserve ratio of banks to help them with adequate cash in hand.

http://www.deccanherald.com/content/319847/banks-must-take-firm-steps.html

New Sarfaesi to break loan pricing deadlock

Published: Friday, Dec 14, 2012, 1:58 IST 
By Megha Mandavia & Aswathy Varughese | Place: Mumbai | Agency: DNA

Revival of financially sick businesses has just become easier. For, the long-standing deadlock between banks with bad loans to sell and asset reconstruction companies (ARCs) over pricing issues may end finally.

This week’s amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) now allow ARCs to convert defaulting company’s debt into equity.

Asset Reconstruction Company (India) Ltd or Arcil, India’s biggest ARC, said it may now be able to offer better deals to banks for bad loans. 
R K Bansal (pictured), executive director of IDBI Bank, said other ARCs may follow suit. “They can now pay a better price to banks to buy ailing assets as they will now have more wherewithal to recover their dues.”
The ARC sector has been asset-starved for the past two years. Banks had been expecting higher prices for their bad loans than what ARCs were ready to offer. 
Arcil’s MD and CEO P Rudran said, “At the due diligence stage, we won’t decide on pricing. But, if we are able to assess the value (of the non-performing asset or bad loan concerned), then, perhaps, we would be able to pay a little more. We may reduce the discount. Revivals will focus onbusiness viability. We will help as per the requirements of the ailing company concerned. We will resell the stake the moment such a company recovers.”
But some doubt if everything would be hunky dory for ARCs now. P H Ravikumar, MD and CEO of Invent Assets Securitisation and Reconstruction, for one, said acquisition of bad loans from banks still remains a challenge. 
“More than the pricing issue, the deadlock lies in banks’ under-provisioning for bad loans. If a non-performing asset is under-provided, it will reflect in the price at which banks are willing to give ARCs the bad loans,” said Ravikumar. 
megha.mandavia@dnaindia.net , aswathy.rachel@dnaindia.net

http://www.dnaindia.com/money/report_new-sarfaesi-to-break-loan-pricing-deadlock_1777355

NPA recovery Bill won’t shake things up

Published: Friday, Dec 14, 2012, 2:08 IST 
By Megha Mandavia | Place: Mumbai | Agency: DNA

The pain of bad loans does not seem to be going away anytime soon. A new amendment passed by the Lok Sabha on Monday making auctioning of borrower security easier may not actually translate into any substantial or even immediate reduction in these loans for public sector banks.

The key provision in the new Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) now allows banks to bid for the unrealised security against the value of non-performing assets (NPA) if it is unable to secure a decent value of the assets at the auction. This will help banks offset outstanding NPAs against the ‘realisation’ and sell them later at a better price.

“It certainly helps because many auctions don’t go through due to cartelisation by bidders and legal issues. But the impact will not be substantial on non-performing assets because every time we don’t have that much collateral to sell,” pointed out BA Prabhakar, chairman and managing director at Andhra Bank.

PSU banks are plagued by rising levels of non-performing assets with a slowing economy and loose lending norms. Gross NPA levels at all listed banks in the quarter ended September on an average stood close to 3%, which are expected to go up to as much as 4.5% in the next one year.

The recent changes will no doubt hasten the recovery process, but a substantial impact on bad loans will not be visible, bankers and analysts said. “We don’t see this as a material change – the difference is largely optical and it is likely that the market will see through these cosmetic accounting changes,” said Seshadri Sen, an analyst with JP Morgan. “Our negative view on PSU banks is underpinned by expectations of continued momentum in incremental delinquency, a view that remains unchanged.”

Large public sector banks are continuing to lend aggressively to stressed sectors such as real estate, iron and steel, textiles, infra and agriculture, thus increasing the risk factor in the banking system, even though bankers are tracking recoveries on a daily basis now.

“The amendment will definitely help increase recoveries, but won’t reduce the NPAs immediately. The change will happen only over a period of time. All these changes are just enablers which help us put more pressure on willful defaulters,” said RK Bansal, executive director with IDBI Bank.

http://www.dnaindia.com/money/report_npa-recovery-bill-wont-shake-things-up_1777362

We may differ with RBI, but come to a consensus: D K Mittal

Interview with Secretary, Financial Services

Vrishti Beniwal / New Delhi Mar 22, 2012, 00:24 IST

People are bound to have different opinions in any system, but they ultimately reach an understanding, says D K Mittal, secretary, financial services. In an interview withVrishti Beniwal, he defends rumours about differences between the government and the banking regulator over issues ranging from new bank licences to bank account portability. Edited excerpts:

Some key financial-sector Bills will be tabled in this session. Can we expect these before the recess?
It will be difficult. But after the recess, certainly we would have the Banking Regulation Bill, Insurance Amendment Bill, Microfinance Bill, Nabard Bill, Sidbi Bill, NHB Bill and SARFAESI Amendment Bill in Parliament.