A group of government-appointed advisors has recommended sweeping changes to India's outdated and overburdened bankruptcy system, aiming to modernise a process that takes several years and costs investors and taxpayers billions. The changes would be the most ambitious overhaul to date of rules governing the liquidation or revival of companies in India, a country with no single bankruptcy code and where competing laws, unclear jurisdictions and inadequate resources can leave cases languishing for decades. The proposals, to be handed to the Finance Ministry as early as Monday, will impose deadlines for the first time and establish a network of insolvency professionals to lighten courts' workload and tackle delays, T.K. Viswanathan, chairman of the Bankruptcy Law Reform Committee, told Reuters. Under current rules, even deciding whether to save or liquidate an ailing company can take years, leaving it in the hands of managers who can - and do - strip assets with impunity. Under the proposed changes, a decision would have to be reached in 180 days - even 90 days for fast-track applications, Viswanathan said. "The whole essence of our exercise is that everything is done within time," he said. Foreign and domestic investors say the difficulty in exiting ventures can deter them from entering. Cases such as the protracted collapse of liquor tycoon Vijay Mallya's Kingfisher Airline empire have burnt investors. The airline was grounded in 2012 with some $1.5 billion in debt and its shares are now worthless, but creditor banks seized his former Mumbai headquarters only this year. The fate of his Goan villa is stuck in a prolonged court tussle. India ranks 130 out of 189 in the World Bank's Ease of Doing Business report, below Lesotho and Cameroon, not least because of its poor performance in resolving insolvency. The World Bank says it takes 4.3 years on average, more than twice as long as in China, with an average recovery of 25.7 cents on the dollar, one of the worst among similar size economies. 'Dead Horses'Troubled companies in India, or their creditors, largely turn to the Official Liquidator, a government-appointed officer attached to the country's high courts, who administers assets and oversees liquidation. Banks can also turn to separate Debts Recovery Tribunals (DRT), partly staffed by officials on assignment from the banks themselves and overseen by the Ministry of Finance. Both are overstretched; on visits to their offices in India's financial capital, Mumbai, computers were often off and always outnumbered by teetering pillars of files. In the cramped Mumbai office of the DRT, a tribunal considered far speedier than the courts, a Ministry of Finance letter on the notice board urged officials to move faster, as cases were "in many cases taking more than four years". Inside, officials complained they had little power to draw a line under languishing cases. "They are all dead horses," said one, gesturing to the day's case list. "They are never going to run any races, but you have to keep the dead stock." Chief among the problems is that for a single troubled company, creditors and owners can all initiate competing proceedings in different courts, tribunals and states. Current legislation - especially the Sick Industrial Companies Act of 1985 - is geared towards reviving companies, so appeals frequently follow a wind-up order, resulting in virtual paralysis. "The Official Liquidator system is a disaster. It takes a minimum of five years and can take 10 years, by which point there is virtually no value left in the asset," said Bahram Vakil, partner with law firm AZB & Partners in Mumbai and a member of the reform committee. "There is a crying need (for change). That system has completely broken down." Another committee member, M.R. Umarji, a consultant at the Indian Banks' Association and former central bank official, said staffing constraints meant it could take 15 to 20 years to wind up a company: "There are very limited numbers of persons available and there are hundreds, thousands of companies to be wound up." Proposed changes will scrap the Official Liquidator and introduce a system of registered insolvency practitioners, with a regulatory body, working under a company law tribunal. Practitioners, lawyers and drafters of the law hope it will professionalise the process, committee members said. The changes, which would probably go to parliament next year, must first overcome a mindset that is geared to avoiding, not hastening, failure. They also need to provide the means to speed it up, through initiatives to take courts online and generate a corps of insolvency practitioners. "The law can give the principles, but it requires enabling infrastructure for it to be implemented effectively," said Debanshu Mukherjee, of the Vidhi Centre for Legal Policy, a think-tank that advised the committee. "Even an efficient judge cannot work without a support system." (Reuters)
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The Bank of Japan held off on expanding its massive stimulus programme on Friday, preferring to preserve its dwindling policy options in the hope that the economy can overcome the drag from China's slowdown without additional monetary support. But the central bank is likely to remain under pressure to expand its already massive asset-buying programme as slumping energy costs, weak exports, and a fragile recovery in household spending keep inflation well short of its 2 percent target. Core consumer prices fell 0.1 percent in the year to September, a second monthly drop, while household spending slid even as job availability hit a two-decade high. "The effect of the yen's weakness (on import prices) is expected to taper off and consumer prices will probably weaken further from around the year-end," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. "We forecast the BOJ will adopt more easing next January." The BOJ maintained its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($662 billion) through aggressive asset purchases. The dollar slid against the yen and the Nikkei share average lost ground after the decision, but the moves were short-lived. "This is what I would call decisive inaction on the part of the BOJ," said Stefan Worrall, cash equities manager at Credit Suisse in Tokyo. "They played this very much by the book, not leaving any room for confusion by waiting until after the market opened for its afternoon session." Markets will now focus on the BOJ's twice-yearly outlook report and Governor Haruhiko Kuroda's news conference later on Friday for clues to the timing of any future monetary easing. With the economy skirting recession, the BOJ is likely to cut its economic growth and inflation forecasts for the fiscal year that began in April. But it will only slightly alter its forecast that inflation will hit 1.9 percent next fiscal year, sources have told Reuters, allowing it to argue that Japan is on track to hit its 2 percent target. Glimmer Of HopeJapan's economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say any rebound in the current quarter will be too weak for the BOJ to achieve its 2 percent inflation target next year. Economists were split on whether the BOJ will pull the policy-easing trigger on Friday, although market bets leaned toward no action after a recent run of positive data. Some BOJ policymakers have worried that sluggish demand in emerging Asian markets could hurt both output and corporate confidence badly enough to delay planned capital investment and wage hikes. Those concerns eased somewhat after data on Thursday showed factory production rose 1.0 percent in September. BOJ officials have said economic conditions are much better now than last October, when it surprised markets by easing policy after spending took a direct hit from a sales tax hike, and companies were in no mood to raise wages. But wage growth remains subdued and households are reluctant to spend due to the rising cost of living from a weak yen, which drives up import prices. The BOJ considers "shunto" wage hike negotiations between business and labour unions, which kick off from year-end, as key to whether inflation will accelerate sustainably. "I expect the BOJ to be on hold for the rest of the year," said Koya Miyamae, senior economist at SMBC Nikko Securities. "If it was to take action this year, that would be to support wage hikes at 'shunto' and the best time to do so should have been this month." (Reuters)
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By Arshad Khan Yes Bank Ltd on Thursday (29 October) said net profit rose 26.5 per cent in the September quarter, thanks to higher net interest income (NII) and other income, and lower provisions for bad loans. Net profit stood at Rs 610.41 crore, compared with Rs 482.54 crore in the year-ago period. Analysts had expected net profit of Rs 596 crore on net interest income of Rs 1,099 crore for the quarter. “Yes Bank has delivered another consistent quarter of sustained financial performance reflected by healthy growth in net profit of 26.5 per cent and driven by steady increase in NII and stable asset quality,” Rana Kapoor, managing director and CEO of the bank, said in a press release. Other income, or income earned from fees, trading in foreign exchange and gain on revaluation or sale of investments, rose 22.25 per cent to Rs 618.10 crore from Rs 505.62 crore in the same period last year. However, net NPA (non-performing assets) grew 0.2 per cent to Rs 158.6 crore from 0.09 per cent in the same quarter a year ago. Asset quality of the bank still remained stable for the quarter. "The recent RBI approval for setting up AMC (Asset Management Company) operations and commencement of PD business will further deepen our value proposition for the company as well as retail customers," said Kapoor. "There has been no sale to ARC (Asset Reconstruction Company) during the previous four quarters. Also, the bank has not refinanced any loan through the 5/25 route," the bank said in a statement. Yes Bank said advances grew by 29 per cent Rs 80,015 crore and deposits increased by 24 per cent to Rs 99,344.3 crore compared to same quarter last year, adding net interest margin inched up 10 basis points to 3.3 per cent year-on-year but sequentially that remained flat. Corporate banking business accounted for 68.2 per cent of advances portfolio and the rest 31.8 per cent constituted by retail & business banking. The share price of the bank closed 1.95 per cent up at Rs 743.50. Sensex closed 0.75 per cent down at 26,838.
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Export-Import Bank of India (Exim Bank) has extended a Line of Credit (LOC) of $87 million to the Government of the Republic of Zimbabwe, for renovation/up-gradation of Bulawayo Thermal Power Plant.The LOC Agreement to this effect was signed in New Delhi on Tuesday (October 27) by H.E. Mr. Patrick Anthony Chinamasa [M.P.], Minister of Finance and Economic Development, on behalf of the Government of Republic of Zimbabwe and Yaduvendra Mathur, IAS, Chairman & Managing Director, on behalf of Export-Import Bank of India.With the signing of the of the agreement for $87 million, Exim Bank, till date, has extended two LOCs to the Republic of Zimbabwe, at the behest of India, taking the total value of LOCs to $115.60 million. The first LOC of $28.60 million was extended in June 2013 for up-gradation of Deka Pumping Station and River Water Intake System in Zimbabwe.Exim Bank has now in place 201 Lines of Credit, covering 63 countries in Africa, Asia, Latin America, Oceania and the CIS, with credit commitments of over $12.28 billion, available for financing exports from India. Under the LOCs, Exim Bank will reimburse 100% of contract value to the Indian exporters, upfront upon the shipment of equipment and goods/ provision of services. Exim Bank's LOCs afford a risk-free, non-recourse export financing option to Indian exporters. Besides promoting India's exports, Exim Bank's LOCs enable demonstration of Indian expertise and project execution capabilities in emerging markets.(BW Online Bureau)
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Axis Bank Ltd, India's third-biggest private sector lender by assets, reported a 19 per cent increase in second-quarter profit, in line with estimates, while its bad loans remained stable. Net profit rose to Rs 1,916 crore ($295 million) for the three months to September 30 from Rs 1,611 crore a year earlier, the Mumbai-based bank said in a statement. Analysts on average had expected a net profit of Rs 1,920 crore, according to data compiled by Thomson Reuters. Gross bad loans as a percentage of total loans were little changed from the previous quarter at 1.38 per cent.(Reuters)
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The CVC has asked RBI and Indian Banks' Association (IBA) to red flag multiple transactions of smaller amounts from a single account and ensure compliance of KYC norms to check fraudulent forex transactions in the wake of alleged Rs 6,100 crore foreign remittance scam through Bank of Baroda, a top official said on Friday (23 October). "We have written to Reserve Bank of India (RBI) to say that if smaller forex transactions of less than one lakh dollars are being made than it should come to your notice," Vigilance Commissioner T M Bhasin told reporters here. He said similar communication has been sent to IBA chief, saying there may be "attempts to camouflage generation of alerts by sending small amount of money through multiple transactions of foreign exchange abroad. We have told RBI and IBA that they should tell banks to red flag transactions of smaller amount from one account." At present, an alert is generated only when foreign exchange (forex) remittance is over one lakh dollars. "IBA has also been asked to tell all member banks that they follow Know Your Customer (KYC) and Anti-Money laundering (AML) guidelines so as to check reoccurence of such (Bank of Baroda case) incidents," he said. On the recent forex scam in which about Rs 6,100 crore were remitted to Hong Kong allegedly misusing Bank of Baroda, Bhasin said Enforcement Directorate (ED) has been asked to look into the matter and if these were not genuine transactions then they should work on repatriation of the money. Bhasin said as soon as the BoB incident was reported to the Central Vigilance Commission, requests for probe was made to the CBI and ED. "Commission personally spoke to CBI and ED Directors. Very next day of the CVC's communication, Bank of Baroda's Ashok Vihar branch was raided by the CBI. They also conducted raids at 59 places and arrests were made. Today also investigation in the case is going on 24x7 basis," he said. The bank has not lost any money, said Bhasin, former Chairman and Managing Director of Indian Bank. The transactions were made in about a period of about 14 months and 90 per cent of them were through Real-Time Gross Settlement (RTGS) system, in which transactions are settled on real-time, he said. "Wherever loopholes are found, they are being plugged," the Vigilance Commissioner claimed. Both the Central Bureau of Investigation (CBI) and ED are probing transactions of Rs 6,100 crore to Hong Kong from a Bank of Baroda's Ashok Vihar branch here. The huge transaction is believed to be trade-based money laundering as the amount was transferred in the garb of payments for imports, that never took place. As per CBI probe so far, Rs 6,100 crore were transferred through nearly 8,000 transactions done between July, 2014 and July, this year. The Commission has sought a report from BoB and CBI in this regard. (PTI)
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Singapore's biggest lender DBS Group Holdingsand South African banking group FirstRand are in separate talks to buy Royal Bank of Scotland Group Plc's India unit, people with direct knowledge of the matter told Reuters. Financial details of the transaction were not immediately clear, though one of the people said the deal could fetch about $200 million. An Indian private sector lender is also likely to bid for the unit, another source directly involved in the process said, declining to give details. The sources declined to be named as the talks are not yet public. RBS, 73 percent owned by the British government, said in February it would shrink its banking operations, pulling out of about 25 countries including India to help it refocus on lending in Britain. The India business of RBS comprises corporate banking, trade finance and cash management. DBS, FirstRand and RBS declined to comment. (Reuters)
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The global banking industry is currently in the grip of a perfect storm of disruption. Every component of the conventional banking model is under stress from the opportunities presented by the shift to a digital economy. Banking leaders everywhere are under intense pressure to conceptualize and implement a cohesive transformation strategy that will reinvent a classic business to thrive in a brand new normal.In order to ensure success, every transformation program will have to adopt a dual 'Renew & New' strategy. Banks need a transformation framework that renews current models, processes and systems, while simultaneously adding new capabilities and technologies relevant for digital competence. Based on our experience of working with banks of varying size and technological maturity, we believe there are five best practices crucial to a successful 'Renew & New' transformation.Best Practice #1 - Unify and optimize requirementsThere needs to be a concerted effort to unify, wherever possible, the diverse range of requirements coming from business, at the planning stage itself. In our experience, we have seen that it is possible to unify and optimize requirements focusing on commonality to distil a common pool of changes that can accommodate every requirement. For example, in multi-country Finacle transformations, we have observed that many market-specific business requirements can be fulfilled without deploying individual systems or processes for each geography. Here, we focus on working with the bank's technology and business teams to devise a unified approach to enabling all requirements while reducing the number of changes to be made.Best Practice #2 - Industrialize transformationIndustrialization refers to the automation of the transformation journey. Breaking down the transformation process into a sequence of steps makes it easier to identify processes that can be automated. Then it's on to drilling down into the details of automation - identifying common processes, assessing what needs to be done, understanding how to improve efficiency etc., with a focus on minimizing manual intervention wherever possible. A well-articulated automation strategy, clearly defined in terms of process workflows, ensures that the transformation process is streamlined and also easily replicated by users. Industrialization played a critical role in Finacle's transformation strategy for one of India's large private sector banks. As a result, in a matter of just over a decade, the bank was able to register a 35X growth in number of branches, 28X growth in number of customers, 52X growth in accounts and 24X growth in internet banking customers, among others.Best Practice #3 - Consolidate existing systemsOver the years, banks have built up a patchwork of applications, many of which are redundant or superfluous. Several traditional processes need to be completely re-engineered for the digital era. Transformation offers a huge opportunity for banks to rationalize and consolidate their systems landscape. Besides eliminating legacy satellite systems, the focus should be on centralizing operations across product lines to enhance agility and efficiency. Component and API-based banking solutions give banks the flexibility to redesign applications and processes to address changing market dynamics and business priorities.Best Practice #4 - Choose partners, not vendorsThe core focus of transformation should be on business outcomes rather than technology. The engagement model during transformation can no longer be based on traditional vendor-buyer dynamics. The emphasis has to be on building sustainable long-term partnerships that can deliver measurable value in terms of agility, efficiency, customer experience, market share etc. Productive partnerships will be those that go beyond the brief of designing and implementing solutions to actually cooperating on developing new ideas that can deliver unique competitive advantage.Best Practice #5 - Strengthen and streamline complianceCreating a robust regulation and compliance framework is a critical challenge in any banking transformation, more so in the context of a multi-country implementation. The focus should not only be on incorporating all essential regulatory requirements into the platform, but also on streamlining compliance across different enterprise layers. Wherever possible, regulatory and compliance processes need to be standardized across business lines and geographies, so that banks can connect the dots across the organization. Finacle's multi-country implementation in one of the largest banks in Africa is enabling its over 9 million customers to bank seamlessly across five countries.The overarching objective of any transformation strategy is to create an enterprise framework comprising ofinfrastructure, processes, products and channels,which enables banks to embrace new technologies and innovate continuously. The technology platform must give banks the agility to enter new markets, target new segments, launch innovative products and services. The journey to this preferred end-state is unique to every bank, based on their existing technology architecture and immediate business priorities. But regardless of size, profileor priority, every bank can leverage the aforementionedbest practices to streamline transformation even in the case of multi-country implementations.The author, Sheenam Ohrie, is head - delivery, support and testing at Infosys Finacle
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