A consortium of Indian banks led by the State Bank of India (SBI) on Tuesday moved a step closer in their attempt to recover debt from loans paid out to Vijay Mallya's now-defunct Kingfisher Airlines after the high court in London upheld an application to amend their bankruptcy petition, in favour of waiving their security over the embattled businessman's assets in India. Chief Insolvencies and Companies Court (ICC) Judge Michael Briggs handed down his judgment in favour of the banks to declare there is no public policy that prevents a waiver of security rights, as argued by Mallya's lawyers. At a virtual hearing, July 26 was set as the date for final arguments for and against granting a bankruptcy order against the 65-year-old Mallya after the banks accused him of trying to "kick matters into the long grass" and called on the "bankruptcy petition to be brought to its inevitable end".
Finance Minister Nirmala Sitharaman presented her third Budget on February 1.
Markets watchdog Sebi on Tuesday decided to tighten norms for utilisation of IPO proceeds by companies, introduce special situation funds to invest only in stressed assets and amend various regulations, including those on mutual funds and settlement proceedings. The board of Sebi, which met on Tuesday, also gave its nod for amending Foreign Portfolio Investor (FPI) regulations and introducing a provision for appointment or re-appointment of any person, including as a managing director or a whole time director or a manager, who was earlier rejected by the shareholders at a general meeting. Once the amended norms are in place, such appointments or re-appointments can only be done with the prior approval of the shareholders.
If new goals have emerged, this is the time to make fresh investments.
Prime Minister Narendra Modi on Thursday said his government is using all channels including diplomatic to bring back high-profile economic offenders, leaving them with no option but to return to the country. Speaking at a symposium on credit flow and economic growth, he asked banks to support wealth and job creators with proactive lending while promising to stand by any loans given in right earnest. "In our attempt to bring back fugitive (economic offenders), we relied on policies and law and also used diplomatic channels.
FinMin officials say an announcement could be made in the Budget.
The Budget kept away from mood dampeners such as an increase in taxes (capital gain taxes) and even the much-feared introduction of Covid cess and wealth taxes, says Nimesh Kampani, chairman, JM Financial.
With assets depreciating over time, it will lead to large haircuts for lenders and creditors, say experts
The ministry of corporate affairs (MCA) has launched a probe into the books of Edelweiss Asset Reconstruction Company (EARC) following allegations by a whistleblower of fund diversion and irregularities. The whistleblower, Paras Kuhad, a former additional solicitor general of India, had written to the Prime Minister's Office and the Reserve Bank of India (RBI). Kuhad has alleged that Edelweiss Group and Caisse de depot et placement du Qubec (CDPQ), a Canadian institutional investor, which hold stakes in the ARC, diverted funds and did not adhere to norms while making investments in EARC's instruments. Sources have indicated that a probe has been initiated, but the MCA did not comment on the issue.
Penalty must act as a deterrent. If it is too low, it could encourage the regulated entities to lap up penalty instead of complying with the norms, suggests Tamal Bandyopadhyay.
Asset Reconstruction Companies, set up to assist banks and financial institutions in reducing their non-performing assets pegged at over Rs 90,000 crore (Rs 900 billion), are all set to start operations shortly.
Inching closer to resolving the Punjab and Maharashtra Cooperative (PMC) Bank issue, the Reserve Bank on Monday came out with a draft scheme for takeover of the crisis-hit bank by the Delhi-based Unity Small Finance Bank (USFB). The draft scheme of amalgamation envisages takeover of the assets and liabilities of PMC Bank, including deposits, by USFB, thus giving a greater degree of protection for the depositors, the RBI said. In September 2019, the RBI had superseded the board of PMC Bank and placed it under regulatory restrictions, including cap on withdrawals by its customers, after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.
Experts say this further underlines the lack of investor interest in stressed assets at present.
MCA blamed its financial troubles on non-receipt of payments from the Board of Control for Cricket in India for the last 10 months.
The government liberalised FDI policy in sectors, including multi-brand retail, single-brand retail, commodity exchanges, power exchanges, broadcasting, non-banking financial institutions and asset reconstruction companies.
The bank may post a loss of Rs 1,000 crore during October-December 2019-20 quarter, an analyst commented.
The Union Budget 2016-17 has cheered the NBFC sector
Such measures are expected to further enhance the protection of investors in the securities market
The government on Monday signed the share purchase agreement with Tata Sons for the sale of national carrier Air India for Rs 18,000 crore. Earlier this month, the government had accepted an offer by Talace Pvt Ltd, a unit of the holding company of the salt-to-software conglomerate, to pay Rs 2,700 crore cash and take over Rs 15,300 crore of the airline's debt. Following that, on October 11 a Letter of Intenet (LoI) was issued to the Tata Group confirming the government's willingness to sell its 100 per cent stake in the airline.
The system envisaged under the FRDI Bill, if implemented properly, would help improve the efficiency of capital allocation without harming consumers, and without risking the stability of financial firms, says Ajay Shah.
'The concern that the bad bank may create a moral hazard for the system is extremely valid.'
Banks, through the Indian Banks' Association, have urged RBI and credit information companies to maintain a database of wilful defaulters.
Ruia, a chartered accountant whose business ranged from sugar to textiles and heavy engineering to tyres, refused to comment on queries about his interest in Air India.
The court ruled that an interim debt order in favour of SBI and other banks seeking access to funds in the Mallya's ICICI UK bank account "should remain in force" but the application to make it final should be adjourned until after the hearing of his pending bankruptcy petition.
Mallya is separately fighting extradition to India on fraud and money laundering charges worth an estimated Rs 9,000 crore
Private equity player Everstone Capital has sold Modern Foods, which it had taken over in early 2016 from Hindustan Unilever, to Mexican baking major Grupo Bimbo for an undisclosed sum.
At present, Sebi norms bar wilful defaulters from issuing convertible debt instruments.
Several of his lenders have a lot to answer for.
The high court remained unconvinced by Mallya's claim that he has been a non-resident Indian since 1988 and has lived in England since 1992, a country where he has indefinite leave to remain
Why doesn't anybody ask the PSU State Bank of India under RTI on how much they are spending on legal fees trying to recover money from me in the UK when I have offered 100 per cent payback in India, asked Mallya.
Piramal will join the JSW, Vedanta and Tata groups, which are bidding aggressively for distressed assets, especially in the infrastructure and steel sectors.
The amount of banks' non-performing assets (NPAs) or bad loans brought into the market for sale has more than doubled in the past four years.
Bad loans continue to originate mainly from state-owned banks, where the top management's responsibility is not linked to career prospects nor has legal consequences, says Debashis Basu.
The Kingfisher House has a built-up area of over 17,000 sq ft and is located in plush Vile Parle area near domestic airport in Mumbai.
Conversion of outstandings into equity even partially should be a strict no-no says Chatered Accountant S Murlidharan
Fitch Ratings on Wednesday said India's high fiscal deficit would pose a challenge in lowering the debt to GDP ratio, which is expected to rise above 90 per cent in the next five years. It said India entered the pandemic with little fiscal headroom from a rating perspective. Its general government debt/GDP ratio stood at 72 per cent in 2019, against a median of 42 per cent for 'BBB' rated peers.
While a DFI will help banks derisk their loan portfolios, creation of a bad bank will clean up their balance sheets.
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