WEEKLY FINANCIAL SNIPPETS 11/06/2016

1. RBI FORMULATES TWO FUNDS BY BANKS TO FACE BAD LOAN SCENARIO: ReserveBank of India is finalising a formulation of two funds that will help debt ridden companies and also give a breathing space to Indian Banks saddled with sticky loan portfolio. Reserve Bank of India has written to Indian Banks’ Association to set up two different funds—one to infuse equity into the stressed companies and the other fund to give working capital finance. The first fund will be called Stressed Assets Equity Fund ( SAEF) for equity infusion. The second fund is called Stressed Asset Lending Fund ( SALF) will be strictly restricted for providing last –mile financing. Both these funds may receive contribution from the Government, Banks, Insurers, as well as local and overseas investors. The modalities are being finalised.

2. RESERVE BANK EMPOWERS MORE POWERS TO LENDERS TO TACKLE NPA SITUATION: Taking a positive view in tackling the mounting NPA situation in the country, RBI is planning to overhaul the entire strategic debt restructuring ( SDR) mechanism. This includes giving more powers to lenders while resolution process. The RBI is expected to allow Banks to convert the debt into equity to initiate an SDR but without changing the current management.

3. INDIA FACES THE PROSPECT OF 20 $ BN IN OUTFLOWS: Reserve Bank of India hassaid that around 26 $ billion Foreign Currency Non Resident ( Bank) Deposits ( FCNR- B) is due for renewal/redemption this year. Out of this, RBI estimates that around 20 $ billion may not be renewed and this will amount to outflow. RBI has said that in case of dollar volatility due to this, RBI may intervene but Banks should not take this for granted.

4. NBFC MARKET CAPITALISATION IS TWICE THAT OF PSU BANKS: Non Banking Finance Companies ( NBFCs) may have smaller scale of operations, but when it comes to market capitalisation, they are as good as private sector Banks. Ten years ago the market capitalisation of NBFCs was just 50% of Public Sector Banks’. But now as of February 2016 figures, it is twice that of PSUs. This clearly shows that NBSCs are slowly eating the markets of PSUs.

5. STATE BANK OF INDIA ACTIVATES E- FILING OF RETURNS VIA ATMs. State Bank of India became the first Bank to launch E-filing of tax returns. The Income Tax Department has initiated and launched an ATM based validation system for filing E- ITRs by tax payers. Now Electronic Verification Code ( EVC) can be generated by pre validating your Automated Teller Machine (ATM) provided by the Bank where a tax payer has an account.

6. MOODY’S INVESTORS SERVICE SAYS INDIAN BANKS NEED Rs 1.2 LAKH CRORE CAPITAL INFUSION: Moody’s has said asset quality of Indian PSU Banks will be under stress for the next 12 months due to rising provisioning and as a result Government will have to infuse Rs 1.2 Lakh Crore into PSUs by 2020 to strengthen their balance Sheets. This is much higher than the earlier plan envisaged by the Government.

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