<ul><li>The Enforcement Directorate today arrested <keyword id="152129" type="COMPANY" weightage="20" keywordseo="Kapil-Wadhawan">Kapil Wadhawan</keyword> the promoter of Dewan Housing Finance Ltd for reportedly diverting over ₹2,100 crore. </li><li>But this isn’t the first case to blow the Wadhawan, who were once the limelight of all the glittery Bollywood parties in Mumbai. </li><li>It was all smooth sailing until it came to light that Punjab Maharashtra Cooperative (PMC) Bank had lent a lot of money to the Wadhawans and it wasn’t coming back to bank. </li></ul>The Enforcement Directorate today arrested Kapil Wadhawan the promoter of Dewan Housing <a href="https://www.livemint.com/news/india/ed-arrests-dhfl-s-kapil-wadhawan-in-iqbal-mirchi-money-laundering-case-11580126559311.html">Finance Ltd for reportedly diverting over ₹2,100 crore.</a> Wadhawan will be in custody until January 29 and will have to undergo legal proceeding under the Prevention of Money Laundering Act. (PMLA). But this isn’t the first case to blow the Wadhawan, who were once the limelight of all the glittery Bollywood parties in Mumbai. Here’s a look at Wadhawan Empire and its fall: The Wadhawan Empire <div type="image" title="30F4080F-C360-440F-A7B5-ED4FAEB954C2" msid="73713311" hostid="261"></div>

 From the biggest fleet of Rolls Royce Phantoms in India to the <a href="https://www.businesstoday.in/current/corporate/pmc-bank-scam-cash-private-jets-rolls-royce-bentley-recovered-wadhawans-waryam-singh/story/383870.html">luxury business jet Falcon 2000,</a> the high-flying Wadhawans owned the most fabulous machines the world of hijinks has ever seen. [embed image of Rolls Royce Phantom] Rakesh Wadhawan — the billionaire promoter of DHIL — was once worth<a href="https://timesofindia.indiatimes.com/business/india-business/rise-and-fall-of-wadhawans-once-toast-of-city-party-circuit/articleshow/71430451.cms"> ₹1 billion in 2010. </a>Sarang Dewan — son of Rakesh Wadhawan and VC/MD of Housing Development &amp; Infrastructure— along with his wife Anu used to <a href="https://theprint.in/opinion/parties-over-no-lunches-why-bollywood-is-avoiding-hdil-gilded-couple-sunny-and-anu-dewan/311717/">host posh bollywood parties</a> from Karva Chauth to Christmas. It was all smooth sailing until it came to light that Punjab Maharashtra Cooperative (PMC) Bank had lent a lot of money to the Wadhawans and it wasn’t coming back to bank. PMC Bank: A billion-dollar hole in the banking system <div type="image" title="BF576ACB-EF02-4CE7-ABA5-CC5C573E0AA2" msid="73713310" hostid="261"></div>

 The crisis-ridden bank's annual report for 2018-19 nowhere mentions exposure to any real estate firm and it only talks of MSME lending and NPAs at 3.76%. Two directors — Rakesh and Sarang Wadhawan — of HDIL that set off the massive crisis at the PMC Bank by defaulting on loans worth nearly ₹6,500 crore have been arrested. They were arrested by the Economic Offences Wing of the Mumbai Police. According to the complaint, HDIL and its group companies were the beneficiaries of 44 loans or 73% of PMC's total loan book size of ₹8,880 crore - a mammoth violation of regulations which forbid banks from handing out such a large proportion of cash to one sector, let alone a single firm. The <keyword id="366872" type="PERSON" weightage="20" keywordseo="Iqbal-Mirchi">Iqbal Mirchi</keyword> case: A fraud of ₹2186 crore <div type="image" title="CE1A3028-D4C1-46B2-B3AA-0E45E0BC55D3" msid="73713304" hostid="261"></div>

 The <a href="https://www.livemint.com/news/india/ed-arrests-dhfl-s-kapil-wadhawan-in-iqbal-mirchi-money-laundering-case-11580126559311.html">agency has filed a criminal case</a> against Mirchi, his family members and others to probe money laundering charges for alleged illegal dealings in purchase and sale of five properties — Ceejay House, Sahil Bungalow, Rabia Mansion, Marium Lodge and Sea View at prime Worli locations in Mumbai. "Kapil Wadhawan, being chairman and managing director of Dewan Housing Finance Ltd (DHFL), had visited London along with a city-based real estate broker to meet Iqbal Mirchi in 2010. He has been instrumental in siphoning off huge amounts of money as part of the illegal deal between Mirchi and the Wadhawans," the ED said in its remand note.(hyperlink) According to<a href="https://www.firstpost.com/business/dhfl-chief-kapil-wadhawan-siphoned-off-over-rs-2100-cr-from-hfc-to-5-shell-companies-flouting-norms-ed-7966201.html"> media reports</a>, Kapil Wadhawan reportedly purchased shares in five shell companies — Faith Realtors Private Limited, Marvel Township Private Limited, Able Realty Private Limited, Poseidon Realty Private Limited, and Random Realtors Private Limited — to give away over ₹2,100 crore loan from DHFL. ED is said to believe that Wadhawan loans siphoned funds from DHFL to shell companies who later gave loan to <keyword id="8230719" type="UNKNOWN" weightage="20" keywordseo="sunblink">Sunblink</keyword> Real Estate which was linked with Iqbal Mirchi — a dead drug lord and the brother of fugitive gangster <keyword id="4703704" type="PERSON" weightage="20" keywordseo="Dawood-Abrahim">Dawood Abrahim</keyword>. (With Agencies) See also: <a href="https://www.businessinsider.in/stock-market/markets/article/rakesh-jhunjhunwala-warren-buffett-of-india-net-worth-and-portfolio-in-january-2020/articleshow/73693467.cms">The $2.6-billion Rakesh Jhunjhunwala, called the ‘Warren Buffett of India’, has to protect an image that was built over 35 long years</a>

With Kapil Wadhawan’s arrest, the family is now accused of scams worth over a billion dollars

New Delhi, Jan 22 () SBI Life Insurance on Wednesday reported a 47.4 per cent growth in profit after tax (PAT) at Rs 389.44 crore for the third quarter ended December 2019.
 The private insurer's PAT stood at Rs 264.28 crore during the October-December period last year, the insurer said in a regulatory filing.
 Assets under management (AUM) increased to Rs 1,64,190 crore as compared to Rs 1,34,150 crore at the end December 31, 2018.
 Established in 2001, SBI Life Insurance is a joint venture between the State Bank of India and BNP Paribas Cardif SA, and is one of the leading life insurance companies in India.
 During the period ended December 31, 2019, the company classified its investment in Dewan Housing Finance Ltd (DHFL) bonds as NPA on account of default in interest and principal repayment of non-convertible debenture (NCDs) held in Unit Linked Funds, it said.
 The provision of Rs 157 crore, including Mark to Market (MTM) change in fair value of Rs 116 crore, under unit linked fund and Rs 113 crore under shareholders funds in nine month of 2019-20 has been recognized, it added.
 The company's solvency ratio was at 2.30 as on December 31, 2019 as against the regulatory requirement of 1.50, it said. DP RVK

SBI Life Q3 profit up 47 pc at Rs 390 crore

New Delhi, Feb 1 () The government has proposed to provide credit guarantee for the NBFC sector that has been facing liquidity crisis since the burst of the IL&amp;FS scam nearly one-and-a-half years ago.
 Besides, the asset-wise eligibility criterion to be admitted under the debt recovery process has been reduced, according to Budget documents.
 To address the liquidity constraints of non-banking financial companies (NBFCs) and housing finance companies (HFCs), the government proposed to set up a partial credit guarantee scheme for the sector after the Union Budget 2019-20.
 "To further this support of providing liquidity, a mechanism would be devised. The government will offer support by guaranteeing securities so floated," the Budget documents said.
 Pawan Singh, managing director and CEO, PTC India Financial Services, said, "The announcement of the government's intent to guarantee securities floated to provide liquidity for NBFCs is expected to help in tiding over the current liquidity crunch."
 The Budget also stated that the limit for NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, is proposed to be reduced from Rs 500 crore to asset size of Rs 100 crore or loan size from the existing Rs 1 crore to Rs 50 lakh.
 Tata Capital MD and CEO Rajiv Sabharwal said positive measures have been taken to boost the NBFC and HFC sector. "Enhancement of FPI limits in corporate bonds, abolishing of the dividend distribution tax regime and date extension of the partial credit guarantee scheme will increase flow of liquidity."
 Umesh Revankar, MD and CEO, Shriram Transport Finance, said that under the SARFAESI Act, the debt recovery has reduced from Rs 1 crore to Rs 50 lakh is one step ahead. "We would still expect it to be on par with banks which currently stand at Rs 1 lakh."
 Muthoot Finance MD George Alexander Muthoot said, "The Budget 2020 plays the balancing act very well. The enhancement of the partial credit guarantee scheme for NBFCs is encouraging."
 The IL&amp;FS crisis following debt defaults in 2018 had led to a contagion in the domestic NBFCs sector, followed by DHFL defaults.
 The payment defaults emanating from them resulted in a chain reaction, adversely affecting the market price of their commercial papers, panic sale by investors in debt mutual funds.
 The Economic Survey 2019-20 on Friday introduced an early-warning detection 'Health Score' system for NBFCs and HFCs and help assess the impending liquidity problems facing the companies in the sectors. KPM HRS

Govt proposes guarantee on debt to tide over liquidity challenge in NBFC, HFC sector

<ul><li><keyword id="9171" type="PERSON" weightage="20" keywordseo="Anil-Ambani">Anil Ambani</keyword> is dealing with defaults on spectrum payments by his company <keyword id="46907" type="COMPANY" weightage="20" keywordseo="Reliance-communications">Reliance Communications</keyword> while separately battling allegations that he received a huge tax benefit from the Indian government’s Rafale deal with France. </li><li>And now, he has to contend with repeated credit <keyword id="82980" type="PERSON" weightage="20" keywordseo="Downgrades">downgrades</keyword> for three key subsidiaries: Reliance Home Finance (RHFL), Reliance Commercial Finance (RCFL) and Reliance Capital. </li><li>The downgrades will make it even harder for the companies to meet loan payments. </li></ul>Anil Ambani, the head of the indebted Reliance Group, isn’t having an easy go of it. The brother of India’s richest man, <keyword id="3820" type="PERSON" weightage="20" keywordseo="Mukesh-Ambani">Mukesh Ambani</keyword>, is dealing with defaults on spectrum payments by his company Reliance Communications while separately battling allegations that <a href="https://www.thehindu.com/news/national/anil-ambani-firm-got-1437-mn-tax-relief-from-france-after-rafale-announcement-le-monde-report/article26828271.ece">he received a huge tax benefit</a> from the Indian government’s Rafale deal with France. And now, he has to contend with repeated credit downgrades for <a href="https://economictimes.indiatimes.com/mf/mf-news/rating-cut-for-two-reliance-group-company-papers-alarms-market/articleshow/69089430.cms?from=mdr">three key subsidiaries</a>. The debt instruments of Reliance Home Finance (RHFL) and Reliance Commercial Finance (RCFL) have been downgraded by CARE Ratings, a domestic ratings agency, after the two non-banking financial companies (NBFCs) missed or delayed loan repayments. After being downgraded 10 <a href="https://www.thehindubusinessline.com/news/reliance-adags-downgrade-spells-more-trouble-for-nonow-rattles-mfs-nodebt-funds/article26973193.ece">days ago</a>, the long term debt programmes of both companies were given “D” ratings from an original rating of “BBB+”. This indicates that they could soon be in default. The subsidiaries are still reeling from the larger <a href="https://www.businessinsider.in/as-indias-shadow-banks-brace-for-a-tough-2019-the-central-bank-and-government-will-try-and-prevent-a-repeat-of-the-ilfs-crisis-by-solving-the-data-problem/articleshow/67419846.cms">liquidity crisis in the NBFC sector</a>, which was precipitated by the collapse of IL&amp;FS. In fact, since December 2018, the companies have been trying to raise cash by selling off <a href="https://economictimes.indiatimes.com/mf/mf-news/rating-cut-for-two-reliance-group-company-papers-alarms-market/articleshow/69089430.cms?from=mdr">high-quality loans.</a> CARE also gave the long-term debt programme of Reliance Capital, the investment banking subsidiary of Reliance Group, <a href="https://www.livemint.com/mutual-fund/mf-news/more-trouble-for-debt-funds-care-downgrades-reliance-commercial-finance-to-d-1556351386728.html">a D rating.</a> In response, Reliance Capital termed the action <a href="https://www.livemint.com/companies/news/rating-action-unjustified-and-unwarranted-reliance-capital-1556382626013.html">“unjustified”</a>. The shares of the company are <a href="https://www.google.com/search?rlz=1C1GCEU_enIN820IN820&amp;ei=1HvGXJuYJcTjvgSRyLLQBw&amp;q=reliance+capital+share+price&amp;oq=reliance+capital+share+price&amp;gs_l=psy-ab.3..0i131i70i250j0l9.1211.2864..2976...0.0..0.200.1547.0j10j1......0....1..gws-wiz.......0i71j0i131j0i67j0i131i67.phJoyBXRrYQ">down 4%</a> so far today. The downgrades will make it even harder for the companies to avail of funding. A number of mutual funds (MFs) and asset management companies are exposed to the three companies, and as a result, will reduce their positions. In fact, the Reliance Group’s own mutual fund wrote down the value of its holdings in <a href="https://economictimes.indiatimes.com/markets/stocks/news/reliance-mf-writes-down-debt-exposure-to-2-other-adag-firms/articleshow/69086653.cms">RHFL and RCFL</a>. MFs are already reeling from downgrades to a spate of large companies like Essel, Zee Group and DHFL. As a result, they have no choice but to <a href="https://www.businessinsider.in/indias-lehman-moment-seems-closer-as-top-mutual-funds-defer-dues/articleshow/68831689.cms">delay payouts to investors.</a> SEE ALSO: <a href="https://www.businessinsider.in/supreme-court-holds-anil-ambani-companies-guilty-of-contempt/articleshow/68074443.cms">Supreme Court holds Anil Ambani companies guilty of contempt</a> <a href="https://www.businessinsider.in/indias-lehman-moment-seems-closer-as-top-mutual-funds-defer-dues/articleshow/68831689.cms">India's 'Lehman moment' seems closer than ever as top mutual funds defer dues to investors</a>

Anil Ambani’s woes get compounded with a series of downgrades for three Reliance Group subsidiaries

New Delhi, Feb 14 () Markets regulator Sebi has sought explanation from erstwhile managing director and CEO, and chairman of CARE Rating for their interference in the rating process of entities including DHFL, IL&amp;FS and Yes Bank, sources said. In a letter on February 12, the Securities and Exchange Board of India (Sebi) has also asked why the officials should not be debarred from associating as key managerial person or director of any registered intermediary and listed company, they added. In addition, the regulator has asked CARE Rating's board to initiate action against the officials and all the staff members involved in the rating process of the IL&amp;FS debt, the sources said. Incidentally, on the same day, the rating agency announced that S B Mainak resigned as its chairman. The Sebi action comes after the regulator received the forensic audit report on February 11, which was commissioned after a whistleblower complaint. The forensic report, prepared by EY, has scrutinised calls, WhatsApp messages and e-mails, and recorded statements of staff members. The audit reportedly revealed the involvement of former chairman and former MD and CEO Rajesh Mokashi. Mokashi was forced to go on leave in July and after five months, he stepped down from the company in December. Sebi, in December 2019, slapped a penalty of Rs 25 lakh each on ICRA, CARE Ratings Ltd and India Ratings &amp; Research Pvt Ltd and had said the default by IL&amp;FS occurred due to "lethargic indifference and needless procrastination and laxity" of the rating agencies. Now, the regulator is considering to increase penalty on rating agencies in connection with lapses on their parts in assigning credit ratings to non-convertible debentures of IL&amp;FS. Officials believe that the fine imposed by the Sebi on these rating agencies was quite low given the seriousness of the lapses on their part following which fresh notices were sent to them. The crisis at diversified IL&amp;FS, whose board was superseded by the government, came to light in September 2018 and since then, the company as well as related entities have come under the regulatory lens. According to the CRA Regulations, the rating has to be true, fair, appropriate and accurate and the rating agencies need to follow proper rating process. Besides, rating agencies need to have professional rating committees and all rating decisions, including the decisions regarding changes in rating should be taken by this committee. Moreover, the norms mandate credit rating agencies (CRAs) to ensure total separation between the business development and the analytical or ratings vertical and therefore, no management interference permitted in rating process. SP HRS

Sebi seeks explanation from former CARE Rating chairman, MD for interference in ratings

New Delhi, May 5 () SBI Life on Tuesday reported a nearly 16 per cent rise in its net profit at Rs 530.67 crore for the quarter to March 2020. The private sector insurer had a net profit of Rs 457.68 crore in the corresponding period a year ago. Its net premium income during the March quarter of FY'20 increased to Rs 11,862.98 crore from Rs 11,333.02 crore a year earlier, SBI Life said in a regulatory filing. However, its total income during the quarter under review slipped to Rs 5,674.91 crore from Rs 15,600.97 crore in the same quarter of 2018-19, mainly because of loss in investment income. The insurer witnessed a loss of Rs 6,677.19 crore in its investment income during January-March, as against a gain of Rs 4,150.73 crore in the same quarter of the previous fiscal. For the entire fiscal year (2019-20), SBI Life's net profit grew by 7 per cent to Rs 1,420 crore from Rs 1,330 crore in 2018-19, it said in a release. The gross written premium for the year moved up by 23 per cent to Rs 40,630 crore from Rs 32,990 crore. It total income fell to Rs 43,842.84 crore in FY20 from Rs 44,261.15 crore a year ago, mainly attributable to fall in investment income. Whereas, investment income reduced to Rs 2,996.79 crore in 2019-20, the same was at Rs 11,208.05 crore in the year-ago period. "During the year ended March 31, 2020, the company has classified its investment in Dewan Housing Finance Ltd (DHFL) bonds as NPA on account of default in interest and principal repayment of non-convertible debenture (NCDs). The company has made 100 per cent NPA provision of Rs 0.53 billion on the said bonds in unit linked portfolio," it said. SBI Life said its new business premium (NBP) has shown steady growth of 20 per cent on the year to Rs 16,590 crore during the fiscal ended March 2020. The company has increased its private market share based on NBP from 19 per cent in FY 2019 to 20.5 per cent in FY2020. The company has registered a growth in savings and protection business reflecting balanced product mix. Total protection new business premium has increased by 27 per cent from Rs 1,640 crore in FY 2019 to Rs 2,080 crore in FY 2020, it said. Its net worth increased by 15 per cent to Rs 8,740 crore as on March 31, 2020, from Rs 7,580 crore by March 2019. The solvency ratio as on March 31, 2020 was at 1.95 as against the regulatory requirement of 1.50, SBI Life said. Solvency ratio is an indicator of surplus capital an insurer is required to hold at any point of time. It is the ratio of the amount of available solvency margin to the amount of required solvency margin. On COVID-19 resulting in significant impact on global and India's economic environment including volatility in the capital markets, it said the company has assessed the overall impact of this pandemic on its business and financials, including valuation of assets, policy liabilities and solvency for the year ended March 31, 2020. The company will continue to closely monitor any future developments relating to COVID-19 which may have any impact on its business and financial position, SBI Life said. Stock of SBI Life closed nearly 4 per cent up at Rs 715.65 apiece on the BSE. KPM MKJ

SBI Life Q4 net profit rises 16% to Rs 531 cr for Mar qtr

<ul><li>On 23 September, the <keyword id="30067" type="ORGANIZATION" weightage="20" keywordseo="RBI">RBI</keyword> and <keyword id="35210" type="ORGANIZATION" weightage="20" keywordseo="sebi">SEBI</keyword> said that they were monitoring the situation in financial markets and would work to prevent any adverse developments. </li><li>The situation in question refers to a recent plunge in stock markets owing to the selloff in <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword> securities of mortgage lenders DHFL and Indiabulls as well as the potential default of IL&amp;FS. </li><li>The <keyword id="6354731" type="DOMAIN" weightage="20" keywordseo="state-bank-of-india">State Bank of India</keyword> (SBI), India’s largest bank, also announced that it would extend funds to <keyword id="6354598" type="UNKNOWN" weightage="20" keywordseo="NBFCs">NBFCs</keyword> if they encountered <keyword id="6355375" type="DEFINITION" weightage="20" keywordseo="Liquidity">liquidity</keyword> problems.</li></ul> It’s not everyday that a country’s financial watchdogs have to step in to reassure investors that a debt default crisis won’t take place. On 23 September, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) - the country’s central bank and markets regulator, respectively - issued a statement explaining that they were monitoring the situation in financial markets and would work to prevent any crises or adverse developments. The situation in question refers to a plunge in stock markets on 21 September - owing to the selloff in debt securities of mortgage lenders Dewan Housing Finance and Indiabulls Housing Finance - and the potential default of IL&amp;FS, the country’s largest infrastructure lender. Foreign investors have also been exiting their investments, pulling out <a href="https://www.financialexpress.com/economy/fpis-sell-bonds-worth-1-bn-so-far-in-september-on-weak-rupee/1321000/">$1 billion</a> from bond markets in the month so far as the rupee has weakened. The panicked selling of shares and debt instruments of non-banking financial companies (NBFCs) such as the ones mentioned above comes amid fears that they will face a liquidity shortage in the event that IL&amp;FS defaults on its loans. The State Bank of India (SBI), India’s largest bank, announced that it would extend funds to NBFCs if they encountered liquidity problems. Even Finance Minister Arun Jaitley weighed in this morning to ensure that the government would take appropriate action where necessary. 
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 The IL&amp;FS conundrum IL&amp;FS was recently downgraded to a “default” rating by ICRA, the Indian arm of Moody’s, after it wasn’t able to make its payments on loans from IDBI Bank and SIDBI, inter-corporate deposits and commercial paper. Its collapse will pose a problem for India’s financial markets given the fact that it owes a lot of money to domestic lenders and that its securities are held by a number of mutual funds, pension funds and insurers. The RBI will meet the company’s shareholders this week to discuss a resolution plan. The infrastructure lender, which has total liabilities of over ₹900 billion- could see one of its major shareholders, LIC or Japan’s Orix Corp, take a majority stake ahead of a turnaround. The board of IL&amp;FS will meet on 29 September to approve a plan to raise ₹40-₹50 billion of share capital and sell ₹200 billion worth of assets to meet its immediate debt obligations. The Indian government will also reportedly step into facilitate the sale of IL&amp;FS’s assets to state-owned companies so it can raise funds quickly.

India’s main financial regulators and its largest bank are trying to calm investors amid fears of a liquidity crisis

MUMBAI <keyword id="222693" type="COMPANY" weightage="40" keywordseo="The-National">The National</keyword> Housing Bank is considering a proposal that seeks to allow lenders to give up to 90% of the property value as <keyword id="6354730" type="UNKNOWN" weightage="40" keywordseo="Home-loan">home loan</keyword>. The proposal is for above Rs 20 lakh loans that carry mortgage guarantee cover. 
 At present, lenders offer maximum 80% of the property value as home loan. “We will discuss the matter of increasing LTV (loan-to-value) ratio for loans that carry mortgage guarantee cover from companies registered with the RBI,” said RV Verma, chairman and managing director of National Housing Bank (NHB), the regulator for <keyword id="100080" type="ORGANIZATION" weightage="40" keywordseo="housing-finance">housing finance</keyword> companies. Housing <keyword id="25455" type="ORGANIZATION" weightage="40" keywordseo="finance">finance</keyword> companies (HFCs) enter into a contract with mortgage guarantee companies at the time of loan origination. 
 
The measure helps mitigate default risk. This can also prove financially viable when they securitise home loan portfolios. People with knowledge of the matter said NHB’s efforts are aimed at increasing the LTV ratio for loans above Rs 20 lakh to 90% from 80% now. LTV ratio at 90% means a home loan borrower can avail a loan of Rs 90 lakh against a property value of Rs 1 crore. 
 
Securitisation means selling loan portfolios to other lenders to obtain an upfront payment sacrificing some costs. Recently, Dewan Housing Finance (DHFL) concluded the first-ever mortgage guaranteebacked securitisation deal for a pool of Rs 37.83 crore home loans coming from 288 loan accounts, a person familiar with the matter told ET. Each loan is below Rs 25 lakh, falling in the priority sector category. 
 DHFL is said to have sold the portfolio to India’s largest private sector lender <keyword id="6653" type="CITY" weightage="40" keywordseo="ICICI-bank">ICICI Bank</keyword> after taking 30% (of loan size) mortgage-backed guarantee from <keyword id="1125471" type="COMPANY" weightage="40" keywordseo="India-Mortgage-Guarantee-Corporation">India Mortgage Guarantee Corporation</keyword>. This will help the bank attain its priority sector lending target mandated at 40% of net bank credit. 
 IMGC is the country’s first mortgage guarantee company. It was established in 2012 as a joint venture with NHB, Asian Development Bank, International Finance Corp and Genworth Financial. Its guarantee can be invoked if DHFL borrowers default on those loans. <keyword id="6431877" type="COMPANY" weightage="40" keywordseo="Care-Ratings">Care Ratings</keyword> has given the loan pool an AAA (SO) rating. Structured obligation (SO) is an issue-specific rating. 
 As a company, DHFL has a rating of AA+. DHFL has assigned the pool to a special purpose vehicle, Nirmaan RMBS Trust – Series IV – 2014, which has issued a passthrough certificate where the bank has invested. “Mortgage-backed guarantee is an important <keyword id="444072" type="ORGANIZATION" weightage="40" keywordseo="risk-management">risk management</keyword> tool for housing finance lending,” said Vijay Agrawal, joint general manager at Care Ratings. “This will pave the way for future growth in this space.” According to NHB’s Verma, mortgagebacked guarantee provides protection from possible defaults, long-term lending for home loans up to 20 – 25 years. 
 
Image: Thinkstock

Home Buyers May Soon Get 90% Loan In India

When thinking of safe savings, most of us always home in on fixed deposits (<keyword id="6568461" type="CITY" weightage="20" keywordseo="FDs">FDs</keyword>) offered by banks. And rightly so, because such FDs have many advantages, such as: interest rates ranging from 8.5% to 9.5%, tax savings, and the facility of premature withdrawal, if required. But have you ever considered <keyword id="603034" type="COMPANY" weightage="20" keywordseo="corporate-FDs">corporate FDs</keyword>, which offer higher returns? 
 
Recently, some Indian banks reduced the interest rates on deposits by 0.25%–0.75%, which has made corporate FDs even more lucrative. 
 
What exactly are Corporate FDs? 
 Corporate FDs, or non-convertible debentures (NCDs), are similar to bank FDs except that they are offered by corporates and not financial institutions or banks. Corporate FDs are, basically, fundraising exercises through which a corporation raises <keyword id="6354840" type="PERSON" weightage="20" keywordseo="money">money</keyword> for running its business. Here, the investor’s (your) money is used for repaying existing loans, expanding businesses, optimizing business plans, and other similar activities. Some of the popular corporate offering FDs come from Mahindra <keyword id="25455" type="ORGANIZATION" weightage="20" keywordseo="finance">Finance</keyword>, Gati, DHFL, PNB Housing and Bajaj Finance. 
 
What’s good about Corporate FDs 
The first question on your mind must be: what makes corporate FDs better than regular FDs? And the answer to the same lies in the points below. 
 
· Rate of interest: Corporate FDs offer higher interest rates than those of a bank, in the range 9%–13%. Some companies offer even higher interest rates to senior citizens. 
 
· Credit ratings: Corporate FDs are rated by independent rating agencies, such as CRISIL, ICRA and CARE, which assess the credit worthiness of the issuing companies. On the other hand, credit ratings are not applicable in the case of bank FDs. 
 
· Interest payments: Investors can choose the frequency of interest payments: monthly, quarterly, half-yearly, annually, or on a cumulative basis. This option offers investors with an additional source of income. 
 
Not all is hunky dory about Corporate FDs 
Before you take a plunge in Corporate FDs market, you should measure its pros against the below-mentioned cons. 
 
· FD term: Banks offer multiple term options for investing, starting from 30 days. On the other hand, the typical time frame of a corporate FD ranges from 1 year to 8 years. 
 
· Withdrawals: Bank FDs are easy to withdraw, whereas withdrawing from a corporate FD can take up to a few weeks. 
 
· FD <keyword id="35450" type="COMPANY" weightage="20" keywordseo="insurance">insurance</keyword>: RBI’s Deposit Insurance and Credit Guarantee Corporation (DICGC) insures bank deposits of up to Rs 1 lakh. The same cannot be said though for the Corporate FDs. 
 
· Risk Quotient: Corporate FDs come with higher risk as they are unsecured. If a company defaults, the investor stands to lose significant amount of the invested money. To minimize risk, it is advisable to invest in companies with high credit ratings. 
 
Make a note of, when investing … 
 Before investing in a corporate FD, one of the good initial filters is checking the company’s <keyword id="142429" type="EVENT" weightage="20" keywordseo="Credit-Rating">credit rating</keyword> and the corresponding rating agency. The investor can check the company’s track record in dealing with investors and depositors. Hence, credit ratings and investor goodwill should be the key deciding factors. 
 
Go for the Corporate FD if you: 
 
- are comfortable with lower or no liquidity 
- have seen the credit ratings and are comfortable with the sector and the brand (company) 
- are seeking returns higher than bank FDs 
 
 
Table 1: Pros and Cons 
 
 
 
Table 2: Some of the current corporate FDs 
 
 
Image: Indiatimes 
 
(About the author: This article has been written by Naveen Kukreja, Director, Paisabazaar.com)

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