Gold council to aid exports on the anvil

The Centre has decided to set up a Domestic Council for Gold to aid exports of jewelry and to create an ecosystem to harness the true potential for jewelry-making in the country.

The council will represent all the jewelers of India who will be the electoral college. They will form different interest groups and elect those who will sit in the council.

The council would work towards:

  • Industry development.
  • Job creation.
  • The building of regional clusters.
  • Strengthening of value chains.

The significance of the Gold Council:

It will help in creating an ecosystem to harness the true potential for jewelry-making in the country.

Please follow and like us:

Banks finalise inter-creditor agreement to fast-track NPA resolution

With a view to fast track NPA resolution, bankers on Thursday finalized the inter-creditor agreement (ICA) framework that envisages effective communication among lenders.

The ICA mechanism is expected to be enforced this month itself.

The non-performing assets (NPAs) in the banking sector crossed Rs 9 trillion at end-December 2017 and the RBI has warned of further worsening of the situation.

The agreement, a part of Project Sashakt, will be taken to boards of respective banks and would be cleared in a couple of days, said PNB non-executive chairman Sunil Mehta after the meeting.

The meeting called by Indian Banks Association was also attended by Finance Minister Piyush Goyal, who had accepted the report of the Sunil Mehta Committee earlier this week.

Mehta said the inter-creditor agreement is a participatory process.

It makes sure that it is effective, good communication amongst banks and if anyone has a difference, then they will resolve it among themselves, he said.

The inter-creditor agreement is a framework under which a consortium of lenders would take up NPA cases.

The framework will authorize the lead bank to implement a resolution plan in 180 days and the leader would then prepare a resolution plan including impaneling turnaround specialists and other industry experts for operation turnaround of the assets within RBI’s stipulated time-frame of 180 days.

Regarding the setting of Asset Management Companies under the Project Sashakt, Mehta said the matter is being looked into and next step will be discussed in the future.

Under project Sashakt, independent asset management companies (AMCs) and steering committees would be set up for faster resolution of bad loans in the banking system.

The project is based on the recommendations of Sunil Mehta committee.

Please follow and like us:

Banks, financial institutions sign inter-creditor agreement for swift resolution of bad loans

In a bid to ensure swift resolution of non-performing assets, around 22 public sector banks (including India Post Payments Bank), 19 private lenders and 32 foreign banks on Monday signed the inter-creditor agreement (ICA) to fast-track the resolution of stressed assets. Finance Minister Piyush Goyal described the move as a ‘huge step forward’ in addressing the banking sector’s bad loans. The agreement was also signed by 12 major financial institutions like LIC, HUDCO, among others.

The inter-creditor agreement is aimed at the resolution of loan accounts with a size of ₹50 crore and above that are under the control of a group of lenders. It is part of the “Sashakt” plan approved by the government to address the problem of resolving bad loans.

The agreement is based on a recommendation by the Sunil Mehta committee that looked into the resolution of stressed assets.

The agreement says if 66% of lenders by value agree to a resolution plan, it would be binding on all lenders. The dissenting creditors will, however, have the option to sell their loans to other lenders at a discount of 15% to the liquidation value, or buy the entire portfolio paying 125% of the value agreed under the debt resolution plan by other lenders.

The agreement says each resolution plan would be submitted to an overseeing committee comprising experts from the banking industry. For dissenting creditors, the agreement says the “lead bank has the right, but not the obligation, to arrange the buyout of the loan facilities at a value that is equal to 85% of the liquidation or the resolution value —whichever is lower.”

Dissenting creditors can also exit by selling their loans to any entity at a price mutually arrived at between the lender and buyer.

The agreement has a standstill clause wherein all lenders are barred from enforcing any legal action against the borrower for recovery of dues. During the standstill period, lenders are barred from transferring or assigning their loans to anyone except a bank or finance company.

The standstill provision will be operative for 180 days from the reference date — the RBI had asked lenders to resolve their restructured loans within 180 days beginning March 1 or refer those to the bankruptcy court. However, the provision would not prevent lenders from acting against borrowers or directors for a criminal offense. Lenders are in the process of getting this inter-creditor agreement approved by their boards.

The agreement is a “huge step forward” in tackling the bad loan issue as it is drawn up by banks themselves and is a reflection of bankers’ resolve to collectively find a solution to stressed asset mess. Almost the entire banking system and prominent NBFCs like REC, PFC are joining the ICA which has held back fast and effective resolution of stressed assets for decades in the past.

The non-performing assets (NPAs) or bad loans in the banking sector crossed Rs 9 lakh crore at end-December 2017 and the Reserve Bank of India has warned of further worsening of the situation.

The biggest obstacle to bad loan resolution is the absence of buyers who can purchase stressed assets from banks, and the unwillingness of banks to sell their loans at a deep discount to their face value. Unless the government can solve this problem, the bad loan problem is likely to remain unresolved for some time to come.

Please follow and like us:

World Bank says India beat France to become sixth largest economy: Report

Updated World Bank figures for 2017 show that India is now the world’s sixth-biggest economy, having muscled past France, which was pushed to the seventh spot, news agency AFP reported. India’s gross domestic product (GDP) stood at $2.597 trillion at the end of 2017, compared to $2.582 trillion for France.

The US continued to be the world’s biggest economy, followed by China, Japan, and Germany. Britain remained the world’s fifth-biggest economy with a GDP of $2.622 trillion at the end of 2017.

Backed by government spending and investment, India’s economy grew at a seven-quarter high of 7.7 percent in the January-March quarter of the financial year 2018. But this did not prevent GDP growth, at 6.7 percent in 2017-18, from falling to its lowest rate in four years of the Narendra Modi government.

The finance ministry said India’s economy would clock 7.5 percent growth in 2018-19, the upper range of growth projected by the Economic Survey.

India is expected to grow at 7.4 percent in 2018 and 7.8 percent in 2019, leaving its nearest rival China behind respectively at 6.6 and 6.4 percent in the two years, the International Monetary Fund (IMF) said in April this year.

Last year in December, the World Economic League Table (WELT) 2018 released by the Centre for Economics and Business Research forecast that India would “leapfrog” Britain and France to become the world’s fifth largest economy in 2018, ahead of an oncoming major global economic shift towards Asia.

Please follow and like us:

India factory growth jumps to six-month high in June

India’s factory activity grew at its fastest pace this year in June on robust output driven by solid demand, according to a business survey that also showed input costs increased the most in nearly four years.

That points to continued strong economic activity in the quarter that ended in June after Asia’s third-largest economy grew at its quickest pace in nearly two years in January-March.

The Nikkei Manufacturing Purchasing Managers’ Index, compiled by IHS Markit, rose to 53.1 in June from May’s 51.2, the highest since December. The reading has been above the 50-mark, which separates growth from contraction, for 11 consecutive months.

Orders from international markets rose at the strongest pace since February, Dodhia added.

IHS Markit made no mention of increasing global trade tensions, which are worrying manufacturers in many countries.

The June sub-index tracking input costs jumped to nearly a four-year high of 58.6 from May’s 54.7 percent, indicating a further rise in inflationary pressures which manufacturing firms are at the moment reluctant to pass on entirely to customers.

Retail inflation is rising in India, and through May was above the Reserve Bank of India’s medium-term target of 4 seven straight months in May. This bolsters expectations the central bank, which raised the key interest rate in June, will increase it again in August.

While manufacturing firms in June increased hiring at the fastest pace since December, concerns over rising price pressures and higher interest rates pushed down the long-term output index – a gauge of optimism on future business – to an eight-month low.

Please follow and like us:

RBI issues draft guidelines on setting up board of management for cooperative banks

The Reserve Bank of India (RBI) has come out with draft guidelines on constituting a board of management (BoM) in addition to the board of directors, for urban cooperative banks (UCBs), with the aim of strengthening the governance in these banks.

As UCBs are accepting public deposits, it is imperative that a separate mechanism is put in place to protect the interests of depositors.

Existing UCBs with deposit sizes exceeding Rs100 crore shall put in place the BoM within one year, while others banks may take two years. UCBs with deposit sizes up to Rs100 crore will have BoMs of a minimum of three members, while those with deposit sizes of more than Rs100 crore will have at least five members in the BoMs. The maximum number of members in the management shall not exceed 12.

It will consist of members with special knowledge and practical experience in banking to facilitate professional management and focused attention on banking-related activities of UCBs.

The circular also said that at least 50% of the members of the BoM should have a specialization or practical experience in fields such as accountancy, agriculture, law.

The chief executive officer of the bank will be an ex-officio member of the BoD and BoM and he will be under the general superintendence, direction, and control of the board.

The BoM will be responsible for credit, risk and liquidity management of the bank. It will be responsible for the day-to-day functions, including considering loan proposals, recovery of bad loans, borrowings and overseeing audit and inspection functions.

The BoM will report to the BoD, which will continue to oversee the general direction and control of a UCB. RBI shall have powers to supersede the BoM if the functioning of BoM is found unsatisfactory.

Please follow and like us: