The Committee of Creditors (<keyword id="230701" type="General" weightage="80" keywordseo="coc" source="Orion">COC</keyword>) of <keyword id="6360090" type="General" weightage="100" keywordseo="reliance-capital" source="Orion">Reliance Capital</keyword> (<keyword id="411324" type="General" weightage="80" keywordseo="rcap" source="Orion">RCAP</keyword>), in its meeting held on Wednesday, has decided to reject all the binding bids that it received from the bidders on Monday. The COC is now considering sending Reliance Capital to liquidation, under the newly introduced regulation 6(A) of the IBC, whereby each individual business can be sold separately. According to sources, the decision to reject the bids had been taken as the lenders are of the opinion that the bid value offered by all the bidders is too low. For the financial services business, <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword> has special powers under section 227 of the IBC to refer companies to insolvency for debt resolution. Reliance Capital was the third financial services company that had been referred by the RBI for insolvency. The other two are DHFL and SREI. DHFL was sold to Piramal at 50 per cent of its liquidation value, while SREI's resolution process is still in progress. The rejection of the Reliance Capital bids proves that the use of section 227 by the RBI has not worked in favour of lenders of the financial services companies. Notably, Reliance Capital has received 5 bids under option 1 for the Reliance Capital Core Investment Company (CIC), as the deadline to submit binding bids ended on Monday 28 November. The option 1 bidders are Hinduja, Torrent, Oaktree, Cosmea Financial and Piramal consortium, and UAVRCL. Out of these five bidders, UVARCL has bid on a fee basis, which means that it has not submitted any resolution plan for RCAP. It will further sell RCAP assets and make payments to lenders, as and when the sale happens. No separate bids were received for Reliance General Insurance Company (RGIC) and Reliance Nippon Life Insurance Company (RNLIC) Cosmea-Piramal has offered Rs 5,231 crore for RCAP, while Hinduja's bid is Rs 5,060 crore. The size of Torrent and Oaktree's bids is Rs 4,500 crore and Rs 4,200 crore, respectively. Out of these four, the Cosmea-Piramal consortium has offered Rs 4,250 crore as the upfront payment, while Hinduja offered Rs 4,100 crore upfront to the lenders. The upfront payment by Torrent and Oaktree is in the range of Rs 1,000 crore. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/corporate-demand-boosts-hotel-demand-in-q3-jll/articleshow/95883698.cms">Corporate demand boosts hotel demand in Q3: JLL</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/former-flipkart-svps-online-shopping-platform-flash-raises-5-8-million-in-seed-round/articleshow/95884631.cms">Former Flipkart SVP's online shopping platform Flash raises $5.8 million in seed round</a>

Reliance Capital Committee of Creditor rejects all bids, considering liquidation

<keyword id="112947" type="General" weightage="100" keywordseo="srei" source="Orion">SREI</keyword> Equipment Finance Ltd has reported alleged fraudulent transactions amounting to Rs 13,110 crore, during the erstwhile management of the company, run by Hemant Kanoria and <keyword id="260027" type="General" weightage="50" keywordseo="sunil-kanoria" source="Orion">Sunil Kanoria</keyword>. In the unaudited financial results of the company for the quarter ending September 30, the transaction auditor has pegged the alleged value of the fraudulent transactions at Rs 13,110 crore. Before this, the company had reported fraudulent transactions of around Rs 5,100 crore, through two separate disclosures on the stock exchange. The administrator of the bankrupt company, which is going through <keyword id="6355809" type="General" weightage="80" keywordseo="nclt" source="Orion">NCLT</keyword> driven resolution process, has appointed BDO India LLP as the transaction auditor. In the latest disclosure, the company has said that the "transaction auditor has indicated that there are transactions amounting to Rs 13,110 crore which are fraudulent in nature under section 66 of the IBC, including transactions amounting to Rs 1,283 crore determined as undervalued transactions". The administrator has filed applications before the <keyword id="6354925" type="General" weightage="50" keywordseo="kolkata" source="Orion">Kolkata</keyword> bench of the NCLT for adjudication. In another disclosure, the company has informed that the Committee of Creditors has extended the last date for the submission of the resolution plan by the prospective resolution applicants to November 25, from November 15. Last week, NCLT approved the extension of the deadline for the completion of the resolution process to January 5, 2023. Insolvency-bound Srei Equipment Finance Ltd., along with its promoter Srei Infrastructure Finance, is being run by an administrator, which is looking into the day-to-today affairs of the companies since October 2021. After DHFL, SREI was the second financial services group that was referred by the <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword> for an NCLT-driven resolution process, by superseding the boards of two Srei companies in October 2021. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/how-singapore-tech-layoffs-are-impacting-indians/articleshow/95503709.cms">How Singapore tech layoffs are impacting Indians</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/wholesale-inflation-eases-to-20-month-low-of-8-39/articleshow/95503880.cms">Wholesale inflation eases to 20-month low of 8.39%</a>

SREI Equipment Finance auditor reports fraudulent transactions to the tune of ₹13,110 cr

With another round of bidding for <keyword id="6360090" type="General" weightage="100" keywordseo="reliance-capital" source="Orion">Reliance Capital</keyword> Ltd slated later this month, the question is whether the final value of the debt-laden company would be found and lenders will be able to realise their monies early or will the matter go to the apex court? Recently, the National Company Law Appellate Tribunal (NCLAT) ordered in favour of Reliance Capital lenders and allowed another round of auction for the financial services company. The lenders had approached NCLAT against an earlier order of the National Company Law Tribunal (NCLT) restraining the Committee of Creditors (<keyword id="230701" type="General" weightage="80" keywordseo="coc" source="Orion">CoC</keyword>) from extending the auction round to find higher value for the company. The initial bidding process ended on December 21, 2022 and Torrent Investments was found to be the highest bidder with Rs 8,640 crore. Soon after that, the Hinduja Group's <keyword id="1424679" type="General" weightage="80" keywordseo="iihl" source="Orion">IIHL</keyword> made an offer of Rs 9,000 crore. In its written submission before NCLAT, one of the members of CoC Vistra ITCL said: "NCLT has usurped the jurisdiction of the CoC by holding that the CoC has to vote on the Rs 8,640 crore plan of Torrent and Rs 8,110 crore plan of IIHL and that CoC has no jurisdiction to negotiate even on the figures." It further argued that NCLT has not even looked at these plans and there is no Rs 8,110 crore plan of IIHL and NCLT has substituted its opinion for that of CoC, which is not permissible under the Insolvency and Bankruptcy Code (IBC). The appellant submitted that Torrent Investments has, within a span of 24 days, increased the values of the bid from Rs 1,100 crore upfront to Rs 3,750 crore upfront and then further within 2 weeks from Rs 3,750 crore upfront to Rs 8,640 crore upfront, and the same was the case with IIHL. The appellant contended that CoC therefore clearly feels that there is more value to be discovered and the same cannot be interdicted by judicial intervention at this stage. In the next round of bidding, the minimum/reserve price will be Rs 8,000 crore cash upfront, then round one will be Rs 9,500 crore and then it will be Rs 10,000 crore and Rs 250 crore after each round, it is learnt. But the moot point is if Torrent Investments goes to the Supreme Court against the NCLAT order then there will be a legal delay in the resolution process and why would bidders participate if the matter is to be settled by the apex court. Incidentally, maximisation of the value for the stakeholders is the ground on which the IBC firmly rests. There are several examples of the success of COC's commercial wisdom and the ability to renegotiate to get a better deal for the stakeholders of a corporate debtor. For instance, in the case of DHFL which had a debt of Rs 88,000 crore, the first offer made by the Piramals to acquire was Rs 15,000 crore. But after negotiations/revision/fresh plans, the revised offer went up by Rs 22,250 crore to Rs 37,250 crore. In respect of the SREI debt (Rs 32,791 crore) resolution, the initial offer for the company was Rs 3,402 crore and National Asset Reconstruction Company Ltd (NARCL) while the value of the resolution plan after negotiation/revision/considering fresh plans the amount went up by Rs 11,465 crore to Rs 14,867 crore. The same is the case with a couple of other corporate debt resolution plans: Essar Power, the initial resolution plan value of ArcelorMittal was Rs 32,000 crore and was revised upwards by Rs 10,000 crore to Rs 42,000 crore. Bhushan Power and Steel - debt Rs 48,719 crore; first-round value was said to be Rs 15,000 crore and revised for about Rs 24,500 crore by JSW Steels; Binani Cement - debt Rs 7,500 crore; initial resolution plan value was Rs 6,932 crore and later went up to Rs 7,950 crore by Ultratech Cement; Bhushan Steel - debt Rs 59,207 crore; value of resolution plan after negotiation/revision/fresh plans Rs 35,200 crore plus 12 plus equity stake; Videocon - debt Rs 64,938 crore; first-round value about Rs 2,962 crore by <keyword id="15683960" type="General" weightage="50" keywordseo="twinstar-technologies" source="Orion">Twinstar Technologies</keyword>. After the CoC withdrew its approval of <keyword id="3244266" type="General" weightage="50" keywordseo="twinstar" source="Orion">Twinstar</keyword>'s plan, three Expressions of Interest for the company have been received, as per reports. Interestingly in the case of Reliance Capital with a debt of about Rs 25,500 crore, the value of the resolution plan after the first round was about Rs 2,591 crore. The resolution value went up to Rs 9,000 crore which was made by the Hinduja group's IIHL. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/for-many-years-after-independence-there-was-no-long-term-vision-in-health-sector-pm/articleshow/98444722.cms">For many years after Independence, there was no long term vision in health sector: PM</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/entertainment/news/amitabh-bachchan-injured-during-film-shoot-in-hyderabad/articleshow/98444560.cms">Amitabh Bachchan injured during film shoot in Hyderabad</a>

Will Reliance Capital lenders get their dues fast or will there be legal delays

Reserve Bank Governor <keyword id="6359111" type="UNKNOWN" weightage="20" keywordseo="Shaktikanta-Das">Shaktikanta Das</keyword> on Saturday advocated the creation of a '<keyword id="1704908" type="COMPANY" weightage="20" keywordseo="Resolution-Corporation">resolution corporation</keyword>' with legislative backing for resolution and revival of stressed financial firms. The government in August 2017 had introduced the Financial Resolution and Deposit Insurance (FRDI) Bill in Parliament which, among other things, proposed setting up of a resolution corporation. However, after a year, the government decided to withdraw the bill as there were concerns raised about the protection of depositors' money if it was passed with the controversial "bail-in" clause, under which a bank's liabilities could be cancelled/modified to shore up its finances. "Going forward, we need the legislative backing to have some kind of a resolution corporation, which has to deal with resolution and revival of stressed financial firms," Governor Das said at the 7th SBI Banking and Economics Conclave. He said the regulator can issue early warning signals and flag the emerging risks. "The regulator will continue to take necessary measures, continue to engage with the management of the bank or NBFCs to identify the vulnerabilities, but there has to be a legally-backed arrangement," he noted. The governor said setting up a resolution corporation was earlier part of the FRDI Bill which the government withdrew because there were certain issues which needed closer examination. He further said the notification issued under Section 227 of the Insolvency and Bankruptcy Code (IBC) has given additional powers to the RBI to deal with non-banking financial companies (NBFCs) and housing finance companies (HFCs). By using those powers, the RBI had appointed an administrator for Dewan Housing Finance (DHFL) and that has been referred to the National Company Law Tribunal (NCLT), he said. DHFL, the third-largest pure-play mortgage player, is the first NBFC/HFC to face the corporate insolvency resolution process. Das said the resolution of DHFL is on stream now. "That is going on fairly well. We review it, we do monitor it from time to time," he added. The Reserve Bank Governor said as far as banks and other financial institutions are concerned, the approach traditionally has been to merge a failed bank with a larger lender. "While that definitely protects the depositors' interest but it also tends to pull down the balance sheet of the larger bank to which the smaller bank or the failed bank is merged," he noted. Giving the example of Yes Bank, Das said initially a market-based resolution was tried out for the lender where investors had shown interest. It was thought as the best way of going ahead with the process wherein a new investor would come in, put money and take it forward but it did not materialise, he said. "We then, without adversely impacting the balance sheet of any participating bank, worked out this arrangement of public private partnerships," the Governor said. Under the bailout plan, Yes Bank had received around Rs 10,000 crore from eight financial institutions, including Rs 6,050 crore from SBI. "The Yes Bank reconstruction scheme forged a unique public private partnership between leading financial entities of India, and it was implemented in a very quick time, which helped the bank's revival, successfully safeguarded the interest of the bank's depositors and ensured financial stability," Das said. With regard to the Punjab and Maharashtra Co-operative Bank, the RBI is engaged with all stakeholders to find out a workable solution as losses are very high, eroding deposits by more than 50 per cent, he added. Das further said the RBI's focus now is to identify the vulnerability from a very incipient stage, and then engage with the management of a bank or financial entity to ensure that the problem does not become larger. "Having said that, I must say that a bigger responsibility lies with the banks and the financial entities themselves," he emphasised. He added that many banks, both in the public and private sectors, have improved their internal risk management systems and procedures, and are able to take pre-emptive action. SEE ALSO: <a href="https://www.businessinsider.in/finance/banks/news/rbi-governnor-shaktikanta-das-explains-how-to-detect-bad-loans-off-site/articleshow/76906892.cms" style="">As RBI works from home, Governor Das is relying on off-site surveillance to 'smell the distress'</a> <a href="https://www.businessinsider.in/business/news/indian-economy-showing-signs-of-returning-to-normalcy-rbi-governor/articleshow/76905988.cms">Indian economy showing signs of returning to normalcy: RBI Governor</a>

RBI Governor advocates for a legally-backed 'resolution corporation' to deal with stressed financial firms

Mumbai, Feb 7 () Within days of hiking the deposit insurance five-folds to Rs 5 lakh per account, Finance Minister Nirmala Sitharaman on Friday said her ministry is working on the controversial Financial Resolution &amp; Deposit Insurance (FRDI) Bill, but added she is not sure when it will be tabled in the House. The government was forced to withdraw the FRDI Bill from the House after Opposition members objected to it, especially the bail-in clause to banks, which many fear is detrimental to depositors. Late finance minister Arun Jaitley in August 2017 introduced the FRDI Bill in the Lok Sabha, which had proposed a comprehensive resolution framework for revival/closure of financial institutions, including banks, insurers, NBFCs, and cooperative banks. But could not go ahead with the same. A year later in August 2018, the then finance minister Piyush Goyal was forced to withdraw the Bill, following concerns raised by the public on the 'bail-in' clause and also due to conflict of opinions with various regulators, including the Reserve Bank. The government then proposed to set up an independent resolution corporation to carry out a speedy and efficient resolution of financial firms in distress. The Bill was then referred to a joint House committee. According to the bail-in clause, proposed for the first time in the country, customers of a failing financial institution would bear a part of the cost of resolution by reducing their claims. Despite government clarifying that the bail-in clause will be sparingly used, concerns persisted among the public, and the government believed that it was one the main reasons for the spurt in cash withdrawals seen that year. The finance minister's comments assume importance given the massive five-fold hike in deposit insurance and the recent changes in the insolvency laws to include insolvency provisions for financial institutions, following which leading mortgage player DHLF was sent to NCLT last November. "We are working on the FRDI Bill; but not sure when it can get through the House," the minister told reporters here without elaborating. The minister's comment also comes a day after the Reserve Bank had clarified that the spike in deposit insurance will not hit the balance-sheets of banks as the insurance premium will go up by just 2 paise from 10 paise now. The move also comes at a time when many financial institutions, especially NBFCs and cooperative banks, are showing signs of deep stress. The bankruptcy code takes care of resolution for ailing non-financial firms, but doesn't cover deposit-taking financial companies. While DHFL became the first NBFC to be sent to NCLT last November, IL&amp;FS, much larger than the former was been taken over by the government in October 2018. There were string failures among the cooperative banks with the largest being the bankruptcy of PMC Bank with over Rs 11,800 crore of public deposits. That apart more than two dozen cooperative bank managements were superseded by the RBI in 2019 from Maharashtra alone. Many analysts argue that financial sector companies need a special resolution regime as the main purpose is to safeguard the interests of depositors and prevent prudential risks from spilling over into a systematic concern. Commenting on the impact of the deposit insurance hike on banks' bottomline, Reserve Bank deputy governor B P Kanungo on Thursday said the five-fold hike would not have much impact on bank balance-sheets. The budget had permitted the Deposit Insurance and Credit Guarantee Corporation (DICGC) to raise deposit insurance coverage to Rs 5 lakh from Rs 1 lakh. The DICGC, a wholly-owned subsidiary of the Reserve Bank of India, provides insurance cover on bank deposits. At present, the DICGC provides Rs 1 lakh insurance to a depositor regardless of the deposit amount, in case the lender fails or gets liquidated. "The premium is something, which we consider, will increase from 10 paise to 12 paise per Rs 100 for the time being. So, the impact on bank balance sheets is not likely to be much," Kanungo told reporters. According to analysts, the premium burden on banks following the insurance cover hike will go up by 20 per cent. AA BEN MRMR

Days after hiking deposit insurance, FM says working on contentious FRDI Bill

Mumbai, Dec 17 () Noted banker Uday Kotak on Tuesday said the country's financial system is currently in a Darwinian mode as only the fittest lenders are able to survive.
 The Managing Director and Chief Executive Officer of Kotak Mahindra Bank also that historically, whenever there has been a problem with a private sector lender, it has been merged with a state-run bank.
"India is in massive Darwinian mode of what I call as the survival of the fittest. 
"Sector after sector has seen that it is going to be more consolidated than ever before. Consolidation in the Indian economy is happening more out of mortality and less out of combinations," Kotak said.
 He also noted that historically, whenever there has been a problem with a private sector lender, it has been merged with a state-run bank.
According to him, the government has to "rework" the Financial Resolution Deposit Insurance (FRDI) Bill since an exit route is essential for troubled lenders.
 FRDI Bill, which had raised concerns over protection for depositors, has lapsed and the government is yet to introduce a new bill.
 "As you are allowing entry in banking, we should be thinking more about exit policy. And one of the earlier bill that was planned earlier was the FRDI Bill. We need to rework on that," Kotak said, speaking at the Times Network organised India Economic Conclave here.
 The comments come at a time when multiple lenders, especially non-banks and also cooperatives like PMC Bank are sailing through choppy waters, which has highlighted the need for a legislation to take care of exits by financial sector participants.
 Kotak also welcomed rules introduced under the Insolvency and Bankruptcy Code (IBC) wherein troubled DHFL has been referred for resolution.
 Regarding infra-lender IL&amp;FS, whose over RS 94,600-crore debt resolution process he heads, Kotak reiterated the company is confident of recovering over 50 per cent of its dues.
 He said the biggest challenge in the IL&amp;FS resolution was the distribution mechanism, which has been overcome after the Supreme Court judgement in the Essar Steel case.
 Kotak said there has been a complex web of over 340 companies in the IL&amp;FS group created over two decades which resulted in a lot of time taken by its new board.
 He said the time has come to "dramatically increase" the flow of domestic savings going into risk averse assets like fixed deposits and gold, into risk capital which can help the economy better.
 Further, Kotak said the government should choose a set of six core state-run lenders, and mark out three others where its stake would go down below 50 per cent through sales in the market and have the remaining three run as "public private partnerships". AA RAM

Indian financial system in Darwinian mode, only fittest lenders survive: Uday Kotak

(Eds: Combining related stories) Mumbai, Mar 5 () In a rare move, capital-starved Yes Bank was on Thursday placed under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board. Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment. However, it will be able to pay salaries to its over 20,000 employees, the central bank said. The regulatory actions, undertaken by the RBI and the government, came hours after finance ministry sources confirmed that SBI was directed to bail out the troubled lender. For the next month, Yes Bank will led by the RBI-appointed administrator Prashant Kumar, an ex-chief financial officer of SBI. The country's financial sector is already reeling under a spate of setbacks, starting with the high quantum of dud assets at over Rs 10 lakh crore, their slow-paced resolutions despite legal teeth through bankruptcy laws, scandals at non-bank lenders like IL&amp;FS and DHFL, and also fraud at cooperative lender PMC Bank. The last lender to be placed under a similar action was PMC Bank in September last year. While the withdrawal limits have been increased over time to Rs 1 lakh now, many PMC Bank depositors are still in the lurch. There is no provision to handle insolvencies of commercial banks, and the raft of actions come even as the government is working on the FRDI (financial resolution and deposit insurance) Bill. Just like PMC and DHFL, the RBI superseded the board of Yes Bank for a period of 30 days "owing to serious deterioration in the financial position of the bank". The government took the decision of placing the bank under moratorium on an application made by the RBI, a gazette notification signed by Amit Agarwal, joint secretary in the finance ministry, said. The RBI had appointed former deputy governor R Gandhi to the bank's board last year amid the leadership turmoil, caused by the central bank's August 2018 action asking co-founder and chief executive Rana Kapoor to step down by January 2019 on corporate governance concerns. The developments come exactly a year and four days after Ravneet Gill joined the lender, after leaving German bank Deutsche Bank's India operations. Immediately on joining, Gill identified hidden stress of over Rs 10,000 crore, providing for which eroded capital buffers. The bank has been struggling to execute a capital raising plan for the last six months and had been repeatedly assuring all that it sees some hope of funds flowing in. It had also named ace investor Rakesh Jhunjunwala, GMR Group and Citax Holdings as being interested in the bank. Yes Bank's core equity tier-I ratio had slipped to 8.7 per cent as of September. The bank had pushed its December quarter results announcement to March 14, citing hindrances it may pose to the capital raising plan. "The Reserve Bank came to the conclusion that in the absence of a credible revival plan, and in public interest and the interest of the bank's depositors, it had no alternative but to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949," an RBI statement said late Thursday evening. It said the bank management had indicated that it was in talks with various investors and was also engaged with a few private equity firms for exploring opportunities to infuse capital. "These investors did hold discussions with senior officials of the Reserve Bank but for various reasons eventually did not infuse any capital. "Since a bank and market-led revival is a preferred option over a regulatory restructuring, the Reserve Bank made all efforts to facilitate such a process and gave adequate opportunity to the bank's management to draw up a credible revival plan, which did not materialise," the central bank said. In the meantime, Yes Bank was facing regular outflow of liquidity, the apex bank said, justifying its actions. As part of the moratorium directions, Yes Bank will not be able to grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment, the RBI said. However, it will be able to pay salaries to its over 20,000 employees and also rents, it clarified. The actions come hours after reports of the government directing a consortium of largest lender SBI and life insurance behemoth LIC to bail out the bank emerged. If successful, this will be the first major instance in many years where a private sector lender will be bailed out using public money, with the first instance being Global Trust Bank's amalgamation with Oriental Bank of Commerce in 2003, which was followed with IDBI Bank's takeover of United Western Bank in 2010. The news of a bailout packaged had sent the Yes Bank stock soaring. It closed 25.77 per cent up at Rs 36.85 apiece on the BSE. However, brokerages were not enthused, and couple of them pegged the value of each stock at Re 1 if such a bailout were to happen. Terming it as a "quasi sovereign bailout", J P Morgan said, "we believe forced bailout investors will likely want the bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits". Earlier this year, SBI Chairman Rajnish Kumar had said the troubled bank will "not be allowed to fail". He had also suggested that rival Kotak Mahindra Bank is best suited to take over Yes Bank. AA BEN ABMABM

Yes Bank placed under moratorium; RBI supersedes board

The Department <keyword id="6310265" type="COMPANY" weightage="20" keywordseo="of-economic-affairs">of Economic Affairs</keyword> had earlier raised red signals over the likely collapse of IL&amp;FS in a confidential note on September 30, 2018 and expressed concerns over its impact on the Indian economy, according to a latest affidavit filed by the <keyword id="153101" type="COMPANY" weightage="20" keywordseo="Corporate-Affairs">corporate affairs</keyword> <keyword id="8787526" type="COMPANY" weightage="20" keywordseo="ministry-the-ministry">ministry.The Ministry</keyword> of Corporate Affairs (MCA) in the affidavit said the DEA had opined that if IL&amp;FS group collapses, the Indian economy may have to face repercussions as redemption pressure would continue, debt market sell-off expected, may create liquidity crunch and NBFC licenses could be cancelled. "DEA had raised red signals of the likely collapse of IL&amp;FS and had expressed its deep concern of such a collapse on the Indian economy," said MCA in the affidavit filed before the National Company Law Appellate Tribunal (NCLAT). Immediately after that, the MCA had moved the National Company Law Tribunal to take over the management of IL&amp;FS, which had a debt exposure of over Rs 91,000 crore. According to DEA, "AMCs having exposure of Rs 2,800 crores to IL&amp;FS bonds would get redemption pressure from Corporate Clients". It further added that it was impossible for such mutual fund schemes to get the redemption amounts in a short period of time. "Further, illiquid Corporate Debt Market and DHFL saga may force AMCs to sell government securities. Hence, the government securities would face a huge selling pressure so either Bond Yield will shoot up to 8.30-8.50 per cent levels or the RBI has to do OMO (open market operations). "If RBI opts for OMO, then the government's spending capacity will reduce by an equal amount," it had said. DEA said that NBFC licenses could be cancelled also. "In the wake of the IL&amp;FS crisis, as many as 1,500 smaller NBFCs may have their license cancelled because they do not have adequate capital," it had said. Moreover, there also could be liquidity crunch and recent events hitting market sentiments will lead to cost of fund for NBFCs increasing, impacting profitability. The RBI's liquidity inducing measures and announcements have helped government bond yields to drop to 8.05-8.08 levels, but corporate bond yields have risen further by about 40-50 bps post IL&amp;FS crisis. "Primary market in Corporate bonds has completely dried up as no one is willing to bar currently in expectation of further redemption from MF's," it added. Though IL&amp;FS group is not inconsequential, but exposure of the banks to the NBFC sector is about 16 per cent. "Therefore, there is a substantial public interest in ensuring financial solvency and good governance and management of this group," it added. According to the affidavit, IL&amp;FS has an aggregate debt of Rs 94,215 crore as of January 2020, in which Rs 10,173 crore (around 10.79 per cent) is collectively from public fund creditors as pension funds, provident funds, employee welfare funds, gratuity funds and army group insurance funds etc. Rs 44,075 crore debt, which is 47 per cent, is collectively from the commercial banks, the affidavit said. Moreover, the aggregate debt of its four key holding companies -- Infrastructure Leasing &amp; Financial Services (IL&amp;FS), IL&amp;FS Financial Services, IL&amp;FS <keyword id="5054155" type="DOMAIN" weightage="20" keywordseo="Transportation-Networks-Ltd">Transportation Networks Ltd</keyword> (ITNL) and IL&amp;FS <keyword id="719770" type="DOMAIN" weightage="20" keywordseo="Energy-Development-Company-Ltd">Energy Development Company Ltd</keyword> (IEDCL) - is almost 51 per cent, which is Rs 48,000 crore. IL&amp;FS group comprised of 302 entities, of which 169 entities are incorporated in India and 133 entities abroad. The new board has classified the 169 companies into different categories and has asked to release 55 companies from its protection shield of order dated October 15, 2018. In the affidavit, it has also asked the NCLAT to release nine other companies from the scope and operation of the October 2018 order so that they can discharge their debt obligations. While for rest 105 IL&amp;FS group companies, it has sought additional 270 days to complete their resolution process. Passing an interim order on October 15, 2018, the NCLAT had stayed all proceedings against IL&amp;FS group companies, whose total debt is Rs 94,215 crore. The government is conducting resolution process of IL&amp;FS based on the principles enunciated in the Insolvency and Bankruptcy Code. It has appointed retired Supreme Court judge Justice D K Jain to supervise the entire process.

IL&FS crisis was red-flagged in 2018 'confidential' note by the DEA

<ul><li>RBI maintained its status quo and left interest rates unaltered. </li><li>It relaxed NPA classification for real estate sector loans. It also said banks need to maintain extra CRR for loans to housing and MSMEs. </li><li>RBI also said that it will maintain accomodative stance as long as it is necessary. </li><li>Manufacturing PMI is scaling to a near eight year high of 55.3 in January 2020. </li></ul> India’s central bank today kept the base interest rates unchanged at 5.15%. However, it also provided a huge relief to the real estate sector wherein this sector’s loans will be given an extra year before they will be classified as non-performing assets. It means that builders have extra time to stay solvent before their loans land in the 'bad debt' pile of banks. This move will also ensure that housing finance companies which are stressed with bad loans, will not have to bear more brunt. In addition, the Reserve Bank of India (RBI) also wants banks and other finance companies to lend more for buying homes. The policy also said that banks will not have to maintain their cash reserve ratio for extra loans that will given to auto, housing sector and MSMSe. CRR is the amount that banks have to maintain with the Reserve Bank of India (RBI) at all times. Today's monetary policy also said that it will maintain its accomodative stance as long as it is necessary. "While this will be beneficial to banks which can be incentivized to lend more to these sectors, the present state of excess liquidity may not really warrant such action on a large scale. However, to the extent that resources are freed from CRR they can be invested even in the reverse repo auctions at the limit to accrue a net gain," said a report by CARE Ratings. Stock market gains The stock market which has been trading flat all morning spiked after the announcement. The BSE Sensex gained 189 points and Nifty gained 39 points. Stocks like HDFC gained by 1.71% while DHFL which is in insolvency process also gained by 5%. RBI also said that its inflation projection for the second half of the current year at 5.1-4.7% was overshot in December - but is likely to soften going forward. "First, food inflation is likely to soften from the high levels of December and the decline is expected to become more pronounced during Q4:2019-20 as onion prices fall rapidly in response to arrivals of late kharif and rabi harvests. Higher vegetables production, despite the early loss due to unseasonal rain, is also likely to have a salutary impact on food inflation," the policy document said. Even as the RBI governor indicated that any more rate cuts will depend on data, few economists believe that it is possible - since inflation is still high at 5.45%. “As expected the central bank has maintained status-quo, to evaluate the inflationary environment and achieve the desired fiscal developments.We believe any further rate cuts would be delayed. The policy makers are keenly watching the implications of all the past policy announcements including the well-balanced Budget 2020. The five fold cut in the past The RBI has been more than generous last calendar year while setting its base rate. It cut its repo rate - the rate at which it lends to banks - by five times, consecutively. This credit policy however, it was widely expected to maintain its status quo and leave interest rates unaltered like it did in its last and final policy of 2019. In December, CPI inflation spiked to an unexpected five-year high of 7.35%. This inflation pushed by vegetable prices had gone beyond the upper band of RBI’s expectations. Consequently, it has become wary of taking chances. null 
 
 
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 A crude awakening When it cut its rates five times last year, it was cushioned by benign inflation rates. Inflation of food and non-food items both can be affected if the Reserve Bank of India (RBI) decides to release liquidity into the system by tinkering interest rates. Since it was low, it had the option to cut its rates. All this changed last month. However, the spike in inflation seems to be coming down. Since India is a net exporter of crude oil, the scare of a possible war like situation has kept economists on the edge. However, that worry has passed and crude oil prices fell to $55 a barrel - and inflation is subdued yet again. In spite of this, analysts expected the RBI is expected to keep base rates unchanged at 5.15%. For one, its endgame has been achieved. “The previous rate cuts were transmitted by the banks to borrowers as evident from the low marginal cost in banks lending rates,” said a report by Brickwork Ratings. This is an effect of the many rate cuts and though slow banks have started transmitting them to their borrowers. A job well done The need for the central bank to push for growth might be reducing. Due to various government stimuli, many macroeconomic indicators like index of industrial production (IIP) and core sector performance have improved. “This, coupled with manufacturing PMI is scaling to a near eight year high of 55.3 in January 2020, growth is likely to rebound next fiscal. We expect GDP growth of 5.5-6% in 2020-21,” said Brickwork Ratings report. This forecast is much lower than what the government’s economic survey has predicted India’s GDP growth to be - at 6-6.5%. If that is achieved, then the RBI might not have to stress itself with the job of halting India’s massive slowdown.

RBI Governor Shaktikanta Das gives a massive relief to the realty sector - that the Union Budget did not

Mumbai, Dec 31 () When the Narendra Modi government, stumped by the sudden resignation of Urjit Patel, parachuted retired bureaucrat Shaktikanta Das to RBI in December 2018, many expected a great lull in the public acrimony that marred the days of his academically more illustrious predecessors Patel and Raghuram Rajan.
 And 'the history graduate', as Das was parodied in his initial days, did not disappoint as the 25th governor of the central bank. He completed one year at the helm on December 12.
 But challenges are galore for the nation's chief money man as Das' record-setting rate cuts did not alleviate credit crisis, especially in the shadow banking space, and now turmoil in the cooperative banks sector due to the PMC scam.
 Also, falling growth and spiralling inflation are the other critical challenges facing the Reserve Bank of India (RBI) in the New Year.
 So far this fiscal, bank credit has grown just 7.8 per cent, against 13.6 per cent a year ago and might plunge to a 58-year low of 6.5-7 per cent by March, if the latest projections are anything to go by.
 It was in fiscal 1962 when credit demand was lower than this on record. At that time, it stood at 5.4 per cent.
 Ironically, the more the Reserve Bank of India (RBI) slashed rates, the faster the economy turtled, hitting a 25-quarter low of 4.5 per cent in the September quarter.
 Even as it eased the rates, the RBI slashed growth estimates by an unprecedented 240 basis points since the rate cutting cycle began in February to a low of 5 per cent.
 Similar has been its loss of face on the inflation front, which, after hovering under the glide path for a few years, has suddenly screeched up and is now pegged sharply higher at 5.1-4.7 per cent for 2020.
 Das, who as the economic affairs secretary managed the note ban mayhem with elan both for the government and the RBI, could temper the raising tempers between the central bank and the government, was primarily because he gave in a lot of space to North Block.
 Be it the historic cash transfers by setting up the Bimal Jalan panel in December 2018 itself or taking some of the crippled state-run banks out of the RBI radar or in getting a new NPA framework in place by June 2019 or in opening a special financing window for MSMEs.
 Under his governorship, Das silenced the ever-hungry market and North Block mandarins with 135 basis points reduction in interest rates through five successive rate cuts.
 However, the central bank's youngest Deputy Governor ever -- Viral Acharya -- quit six months before his three-year term was to end in June 2019.
 But those who know Das, including the RBI staff, fully back his working style and glasnost.
 RBI Central Board member Sachin Chaturvedi described Das as a person who brings in pragmatism, commitment, transparency and sincerity to the table.
 "Das has succeeded in getting government and other functionaries together and has made the board a cohesive platform," he told .
 Das also settled the autonomy issue -- most contentious of all -- and had said that so far as decision-making is concerned or taking a final call on any issue, they are taken by the RBI and is more than 100 per cent autonomous in decision-making.
 "Nobody interferes in my decision-making," Das said in September.
 The RBI, under Das, has been instrumental in diversifying liquidity management toolkit by launching the dollar-rupee swap auctions -- buying dollars and releasing equivalent amount of rupees into the system to ease liquidity.
 And the latest in containing rupee volatility and bond spikes are the open market operations twist under which RBI buys and sells equal quantum of gilts.
 Allowing non-residents to participate in rupee interest rate derivatives markets and making NEFT 24x7 and free are among the other decisions this year.
 RBI also put its foot down when it declined to raise the retirement age of private sector bank CEOs from 75 years, refused green-signal to Indiabulls' takeover bid for the crippled Lakshmi Vilas Bank and said no to Uday Kotak's convoluted stake dilution move at Kotak Mahindra Bank. The last matter is now before the Bombay High Court.
 The apex bank also got regulatory powers of the NHB following the crisis at DHFL, also the first non-banking finance company to be referred for insolvency proceedings.
 It also forced banks to link all fresh retail loans to an external benchmark, following which repo rate was made as their benchmark for loan pricing.
 While the RBI should be credited for seeing the slowdown coming and cutting rates, the apparent fault was in not anticipating severity of the economic slump.
 However, the central bank unexpectedly paused rate cuts in December. It indicates the RBI is waiting for the budget on quality of fiscal deficit and quantum of off-balance-sheet borrowings, among others.
 Having worked with three finance ministers, Das also made the long and stormy RBI board meetings into non-events in no time with his consultative process even as he made it clear that the central bank is not a "cheer leader" for anyone.
 All said, it is difficult to say now whether it has been a year of floccinaucinihilipilification or that Das maintained a Panglossian countenance, smiling away at every difficulty.
 Monetary Policy Committee's Chetan Ghate had used the 29-letter word --floccinaucinihilipilification -- which refers to an action of estimating something as worthless.
 The New Year might have a clear if not direct answer to Panglossian ways. BEN HV RAM BAL ANS
ANS

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