Bad bank may start with Rs 60K-crore NPAs; govt may put in Rs 10K crore

Banking lobby group Indian Banks' Association (IBA) is expected to take the proposal, which is on the lines of the Sashakt panel recommendations, to the finance ministry this week.

Banks are likely to move big-ticket bad loans amounting to over Rs 60,000 crore to an asset reconstruction company (ARC), which will focus on turning around non-performing assets (NPAs) and enhancing value. Banks are likely to transfer more stressed assets going forward.

The government could invest up to 50 per cent of the capital in the “bad bank” with a contribution of about Rs 9,000-10,000 crore, said sources.

The ARC is expected to take up both old and new cases, bankers said.

Banking lobby group Indian Banks’ Association (IBA) is expected to take the proposal, which is on the lines of the Sashakt panel recommendations, to the finance ministry this week.

The panel had recommended that large bad loans could be resolved under an ARC. The IBA plan envisages setting up of three entities — an ARC, an asset management company (AMC), and an alternative investment fund (AIF) to acquire bad loans from banks with an aim to turn around those assets.

The ARC will acquire and aggregate the asset, the AMC will manage the assets — including takeover of management or restructuring of assets, and the AIF will raise funds and invest into securities floated by the ARC.

The proposed ARC will have to be backed by the government. A similar arrangement was done in the case of IDBI Bank where a stressed assets management fund was created, bankers added. The coronavirus pandemic is expected to result in a rise in NPAs of banks despite steps like allowing a 90-day moratorium on retail loans and relaxing working capital financing norms.

SBI board approves exploring 'investment opportunity' in YES Bank

A salvage plan including SBI and Life Insurance Corporation of India was being talked about and a declaration right now be made soon

Yes Bank Share : The State Bank of India board has given on a fundamental level endorsement to consider a "venture opportunity" in YES Bank. In a late night proclamation on Thursday, SBI, be that as it may, said no choice had at this point been taken to get stake in the bank.

Exceptionally put sources showed a salvage plan including SBI and Life Insurance Corporation of India (LIC) was being talked about and a declaration right now be made soon.

While the better subtleties of the arrangement are being worked out, it is foreseen that both SBI and LIC together will take a 51 percent stake in the bank, with a one-year lock-in period.

LIC as of now possesses 51 percent in IDBI Bank, which it obtained in 2018 to inject capital into the upset loan specialist.

Sources said both the state-possessed associations would hold the offers as speculation. LIC as of now possesses 8 percent in the private loan specialist.

The sources said YES Bank needed to practice its call choice on ceaseless bonds or extra level 1 (AT1) obligations of Rs 80 crore on March 5. "The bank hasn't practiced its call choice," said a source. Inability to have met the bond commitment is said to be the trigger for the purposeful activity.

As of late, CARE Ratings downsized YES Bank's appraising on bonds worth Rs 21,016 crore to acknowledge watch for negative ramifications. These bonds were at that point put under negative rating.

On the salvage plan, specialists said the need is rebuild the asset report. "Resources should be brought down to feasible worth and that overview will demonstrate how a lot of capital is required for the bank," said a financial advisor.

SBI likely to pay Essar lenders on Dec 16 as ArcelorMittal pays up

As per the resolution proposal, banks would recover over 90 per cent of their claims against Essar Steel, amounting to over 40,000 crore.

The State Bank of India (SBI), the lead banker of the bankrupt Essar Steel, is likely to settle dues of other lenders as it received Rs 40,000 crore on Friday from ArcelorMittal, which is going to takeover the company bringing to an end to the much-prolonged resolution process.

The SBI may settle the dues of all the other lenders on Monday.

The development followed the tabling of the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, in the Lok Sabha on Thursday, which also provides for protection of buyers from criminal proceedings against previous promoters of the bankrupt firm.(Share Market News)

ArcelorMittal had kept the promised Rs 42,000 crore in an escrow account, but didn't release it immediately after the Supreme Court's order in the case last month, as the company wanted immunity for Essar Steel's assets from probe against its previous promoters.

The SBI had the largest exposure to Essar Steel of over Rs 13,000 crore, while the amount approved by the committee of creditors (CoC) stood at Rs 12,161 crore. The other lenders of Essar Steel included IDBI Bank, Canara Bank and Punjab National Bank.

Both ArcelorMittal and SBI, however, are yet to respond to questions sent by IANS.

As per the resolution proposal, banks would recover over 90 per cent of their claims against Essar Steel, amounting to over 40,000 crore. The operational creditors would initially get Rs 196 crore, and another Rs 1,000 crore later, allowed by the CoC, taking the total repayment to Rs 1,196 crore.

The resolution of Essar Steel can be marked as a landmark in the 3-year-old Insolvency and Bankruptcy Code (IBC). A major roadblock in the resolution was removed by the Supreme Court on November 15 as it set aside the National Company Law Appellate Tribunal's (NCLAT) ruling that provided for equal distribution of proceeds between financial and operational creditors.

The Essar case, which was among the first 12 cases to be referred by the Reserve Bank of India (RBI) for resolution, faced several hurdles as its promoter Prashant Ruia also tried to bid for the company and moved the appellate tribunal for rejection of the ArcelorMittal's Rs 42,000 crore bid.

IDBI Bank plans to sell Rs 100-billion bad loans, exit PCA by September

Indian lenders burdened with the world's worst bad-loan ratio are stepping up effort to recover delinquent debt after the Reserve Bank of India announced tougher rules.

IDBI Bank Ltd, the lender with India’s worst-bad loan ratio, is seeking to curtail its soured debt by selling Rs 100 billion ($1.4 billion) of stressed assets and stepping up efforts to recover dues from delinquent borrowers.

“We have set up a war room to focus on recovering the non-performing loans while another team is keeping a check on loans showing early signs of stress,” Rakesh Sharma, chief executive officer of IDBI Bank said by phone. The lender wants to sell stressed loans “by June-end to quicken the pace of clean-up exercise.”

Indian lenders burdened with the world’s worst bad-loan ratio are stepping up effort to recover delinquent debt after the Reserve Bank of India announced tougher rules. The Mumbai-based lender’s turn-around efforts gathered pace after Life Insurance Corp. of India, the nation’s largest insurer, bought a controlling stake in the bank from Prime Minister Narendra Modi’s government. The insurer has infused more than 210 billion rupees into IDBI to bolster its risk buffers and bring it out of the regulator’s emergency program that restricts lending.

IDBI Bank will be out of the Reserve Bank’s prompt corrective action framework by September as bad-loan ratio narrows and profits rise, Sharma said. Banks sanctioned by the regulator are restricted from lending and expanding their network while they mend their balance sheets. IDBI’s gross bad loan ratio stood at about 30 percent as of Dec. 31, exchange filing shows.

The lender is also planning to raise about 10 billion rupees by selling its holding in National Stock Exchange and National Stock Depository Ltd. over the next month, the chief executive said on Sunday. According to Sharma the bank will also complete its sale of insurance and mutual fund units in 2019.

Business Standard