The Reserve Bank of India (RBI), on Wednesday, issued guidelines for revitalising distressed assets by forming Joint Lenders’ Forum (JLF) and adoption of Corrective Action Plan (CAP) for operationalising the framework.
“The general principle of restructuring should be that the shareholders bear the first loss rather than the debt holders,” the RBI said.
With this in view and also to ensure more ‘skin in the game’ of promoters, the RBI suggested JLF/CDR to consider several options, including the possibility of transferring equity of the company by the promoters to the lenders “to compensate for their sacrifices” when a loan is restructured.
The RBI suggested infusion of more equity into their companies by promoters and transfer of their holdings to a security trustee or an escrow arrangement till the turnaround of the company. “This will enable a change in management control, should lenders favour it,” it said.
In case a borrower had undertaken diversification or expansion of activities, resulting in the stress on the core-business of the group, a clause for sale of non-core assets or other assets could be stipulated as a condition for restructuring the account, it said.
Banks would be required to report credit information, including classification of an account to Central Repository of Information on Large Credits (CRILC), on all their borrowers having aggregate fund and non-fund based exposure of Rs.5 crore and above with them.
As soon as an account was reported by any of the lenders to CRILC, where principal or interest payment overdue between 61 days and 90 days, they should mandatorily form a committee to be called JLF if the aggregate exposure (AE) of lenders in that account was over Rs.100 crore, the RBI said.
Lenders also hade the option to form a JLF even when the AE in an account was less than Rs.100 crore, it noted. .
All the lenders should formulate and sign an agreement incorporating the broad rules for the functioning of the JLF.
The Indian Banks’ Association (IBA) would prepare a master JLF agreement and operational guidelines for JLF which could be adopted by all lenders. The RBI said that the JLF should invite representatives of the Central/State government/project authorities/local authorities if they had a role in the implementation of the project financed.
While JLF formation and subsequent corrective actions would be mandatory in accounts having AE of Rs.100 crore and above, in other cases also the lenders would have to monitor the asset quality closely and take corrective action for effective resolution as deemed appropriate.
For accounts with AE of less than Rs.500 crore, the restructuring package should be approved by the JLF and conveyed by the lenders to the borrower within the next 15 days for implementation.
The RBI further said that for accounts with AE of Rs.500 crore and above, the techno-economic viability study and restructuring package would have to be subjected to an evaluation by an independent evaluation committee (IEC) of experts. “The IEC will look into the viability aspects after ensuring that the terms of restructuring are fair to the lenders.”
The IEC would be required to give its recommendation in these cases to the JLF within 30 days.
Thereafter, considering the views of IEC, if the JLF decided to go ahead with the restructuring, the restructuring package, including all terms and conditions as mutually agreed upon between the lenders and the borrower, would have to be approved by all the lenders and communicated to the borrower within next 15 days for implementation.
Suggests forming of Joint Lenders’ Forum and adoption of Corrective Action Plan for operationalising the framework
10)No differences with Finance Ministry: RBI Governor
Under flak from various quarters for raising rates, RBI Governor Raghuram Rajan, on Wednesday, said the central bank was committed to the ‘strongest growth possible’, and stressed it was on the same page as the Finance Ministry on this front.“Note that the RBI is committed to getting the strongest growth possible; there is no difference between us and the North Block on this,” said Dr. Rajan, who has hiked rates thrice since taking over as Governor in September.He was speaking at a fixed income industry (Fimmda-PDAI) event here where the media was not allowed and only given a copy of the speech.The North Block, which houses the Ministry of Finance, has not been pleased with the Reserve Bank’s rate increases, given their impact on investor sentiment and growth in general.Dr. Rajan justified his actions, saying the best way to foster sustainable growth in the current circumstances was through monetary stability, which was bringing down inflation over a reasonable period.The Governor, who went against the majority view of an internal panel advising on the monetary policy and surprised all by hiking rates in January, also reiterated the central bank’s determination to get retail inflation down to 8 per cent by January, 2015, and 6 per cent by January, 2016.He explained that even though some people might believe that in the short-run, the RBI’s rate hikes might impact growth, the best way for a central bank to generate growth was to bring down inflation.“Sooner or later, the public always understands what the central bank is doing, whether for the good or for the bad,” he said.Stressing the importance of sentiment, Dr. Rajan said a central bank could cut rates ‘significantly’ if the public started expecting lower inflation.“To generate sustainable growth, we have to fight inflation first,” he said, adding that public faith in the central bank might also help reduce volatility in the rupee.On the three interest rate hikes under his leadership, Dr. Rajan said, “If we have to bring down inflation, we have to start today. We cannot wait till the public’s expectations of inflation get more entrenched and the inflationary spiral gains momentum.”However, on the business community’s demands for a rate cut, Dr. Rajan said the RBI did not believe it would lead to more investments.“First, we don’t believe the primary factor holding back investment today is high interest rates. Second, even if we cut rates, we don’t believe banks, which are paying higher deposit rates, will cut their lending rates,” he said.The governor said the current policy rate was not at a level where it could affect demand and it will gain potency only once inflation comes down because of the weak economy and strong food production. — PTI
11)Kohli, Rahane take India home easily
ASIA CUP / Mushfiqur’s century and Anamul’s innings go in vain for Bangladesh
CALLING THE SHOTS:Virat Kohli, leading the side, notched up a century to help India start its campaign with a win. —Photo: AFP
On Wednesday, though, the 25-year-old, like he has done so often lately, declared his penchant for a statesman-like role. The skipper’s 19th century, a scrumptiously hard-boiled response under stress, piloted India to a nerveless six-wicket victory with an over to spare, against Bangladesh in the Asia Cup.Earlier, Kohli’s counterpart, Mushfiqur Rahim, too, had manufactured a glitzy ton to power Bangladesh’s score to 279 for seven after being asked to bat. But success as a team would escape him.
Bangladesh’s innings was never the sputtering car despite taking its time to start. Once the engine was cranked up, the purring was symphonic. Its skipper Mushfiqur Rahim was the driving force, storming his way to a second hundred and, in the process, lifting Bangladesh’s total to 279 for seven in 50 overs against India at the Khan Shaheb Osman Ali Stadium here on Wednesday.
Before being at the receiving end of some mauling, India evicted Shamsur Rahman in the sixth over when Mohammed Shami’s snarling short-ball was met with a twirled bat and a top-edge ensued. What should have been a regulation finish nearly turned out to be tragicomic. Both Shami and Ambati Rayudu failed to call for the catch and bumped into each other, but the former clung on to the ball.
Thereafter, the Haque duo — Anamul and Mominul — displayed a flattering collection of drives. The left-handed Mominul cracked two sleek ones through cover off Varun Aaron’s first two deliveries. He established a pattern of punishment that would continue to haunt Aaron throughout the innings. Anamul was more the gun-slinger, dashing out of the crease, either for a hoick over mid-on or a slice over point.
Bhuvneshwar Kumar, trading mostly in length deliveries, sent down a sharp bumper to Anamul. While an impulsive pull found the fine-leg fence on the first occasion, a follow-up bouncer soared precariously in the air. But Shami, at fine leg, failed to arrive in time; Anamul was only on 12 then.
Mominul, though, wasn’t as lucky; he charged down to R. Ashwin, but the ball trickled off his pads to the ‘keeper K. Dinesh Karthik, who completed the stumping. That resulted in Mushfiqur’s arrival.
Anamul and Mushfiqur, like enthusiastic gold-diggers, went about plundering runs. Their 133-run partnership saw Mushfiqur indulge in staccato cuts and scything slogs over the cow-corner even as Anamul continued to rage down the wicket.
One thing that caught the eye was Ashwin’s bowling action that looked like a Sunil Narine impression. Although he never looked very threatening, along with Ravindra Jadeja, he offered some control in the middle stages. But, Virat Kohli’s tactics — of not attacking with Bhuvneshwar and persisting with Aaron, and even Ambati Rayudu — in the middle stages of the Bangladesh innings were questionable.
Despite Anamul playing on in the second over of the batting PowerPlay, Mushfiqur continued to hurtle away, merrily making use of any extra pace. At one point, he walloped Aaron for two fours and a six in the same over. But there was a minor scare in the over when the bowler’s searing beamer struck Mushfiqur on the chest. Instantly, he went down writhing in pain.
The crowd rallied around him with chants of ‘Mushfiqur...Mushfiqur’, and the 25-year-old responded.
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