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Government to infuse Rs 83,000 crore in banks by March: Jaitley 

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Arun Jaitley

New Delhi, Dec 20: Finance Minister Arun Jaitley on Thursday said the government will infuse Rs 83,000 crore in public sector banks in the remaining part of the fiscal taking the total recapitalisation of banks during the year to Rs 1.06 lakh crore.These banks, including Punjab National Bank, will be provided capital to strengthen their base.

There are three to four banks namely State Bank of India, Bank of Baroda, Indian Bank and Vijaya Bank that have maintained regulatory capital even higher than the prescribed minimum and would not need any capital infusion.

“Today we have asked for the parliamentary sanction for (issuing) additional recapitalisation bonds of Rs 41,000 crore… As of today, of the Rs 65,000 crore recapitalisation plan for 2018-19, Rs 42,000 crore is still remaining.

“Therefore, with this additional Rs 41,000 crore, we will now have Rs 83,000 crore for the balance year and that will make this year’s recap to a total of Rs 1.06 lakh crore,” Jaitley said after tabling the Supplementary Demands for Grants in the Lok Sabha.

The second batch of Supplementary Demands for Grants for 2018-19 involving a gross spending of Rs 85,948.86 crore includes the package of Rs 41,000 crore for banks. It will not require any additional cash outgo as the capital infusion is planned through bonds.

Jaitley said the distribution process for the Rs 83,000 crore capital infusion in state-run banks will be decided on the basis of performance of banks by the Department of Financial Services (DFS). About Rs 23,000 crore have already been infused this fiscal.

Capital infusion will be done under four heads to help banks meet regulatory capital norms, help better performing banks under RBI’s Prompt Corrective Action (PCA) to get out of it, facilitate non-PCA banks that are near the “red-line” and to strengthen amalgamated banks.

Financial Services Secretary Rajeev Kumar said the capital infusion will help at least four of the total 11 PCA banks meet their regulatory capital norms. Overall strengthening of the banks will encourage lending and thereby economic growth of the country.

“We have made provisions to give capital to 4-5 banks (in PCA) depending on performance and on the Q2 and Q3 results. The figures will be decided (later) but there are chances that we equip at least 3 to 5 banks to meet the norms,” he said.

As per the current regulatory norms, the PCA banks will have to achieve 9 per cent Capital to Risk-weighted Asset Ratio (CRAR), 1.875 per cent Capital Conservation Buffer and the 6 per cent net non-performing assets (NPA) threshold to come out of PCA and restart lending.

“About the PCA banks, the performances we are looking at is the lower level and declining trend of net NPAs, whichever PCA bank has shown better performance in terms of reduction in NPAs and the improvements in return on assets. Name of these banks will be worked out.”

Kumar said there are three non-PCA banks that are near the threshold and in the danger of falling into the PCA category. These banks, including Punjab National Bank, will be provided capital to strengthen their base, he said.

 

“The process of NPA recognition that started in 2015 is almost complete. The last quarter has showed improved performance. While recognition of NPAs peaked at 7 per cent in March 2015, it has now come down to 0.59 per cent as of September 2018,” Jaitley said.

The government had initiated a comprehensive clean-up of the banking system under its 4R’s approach of recognition, resolution, recapitalisation and reforms. Since 2015-16 till end of this fiscal, the total capital infusion in public sector banks will be over Rs 3 lakh crore.

“The NPAs recognition is complete, recapitalisation is in full swing, it has been enhanced further, recovery is also in full swing, the last H1 (April-September 2018) recovery is to the tune of Rs 60,726 crore,” Kumar said.

The trend is likely to continue as the creditor-debtor relationship has changed because of the Insolvency and Bankruptcy Code (IBC) and debarment of the connected parties, he said.

“PSBs are showing tremendous improvement in terms of recognition, in terms of provisioning, recovery, reforms and therefore this is the time that we empower them and equip them with the capital so that the banks are ready to support the fastest growing economy,” he added.

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Markets open on positive note

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Sensex Nifty Equity

Mumbai, Feb 20: The 30-scrip Sensitive Index (Sensex) on Wednesday opened on a positive note during the morning session of the trade.

The BSE Sensex opened at 35,564.93 before touching a high of 35,581.14 and a low of 35,520.21.

It was trading at 35,528.69 up by 176.08 points or 0.50 per cent from its Tuesday’s close at 35,352.61.

On the other hand, the broader 50-scrip Nifty at the National Stock Exchange (NSE) opened at 10,655.45 after closing at 10,604.35.

The Nifty is trading at 10,656.25 in the morning.

IANS

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PF funds’ investment in IL&FS bonds have no government guarantee: Finance Ministry

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IL&FS Financial Service

New Delhi, Feb 19 (IANS) The provident and pension fund trusts that invested in the IL&FS bonds now fear loss of money as the debt-ridden company’s bonds are unsecured debt, and the Finance Ministry says superannuated bonds do not carry any government guarantee and all such instruments have to face all market-related risks.

“Since these are investments in bonds, the government does not ensure any guarantee on them as such and if these are invested in stock markets, they carry the market risks as applicable. It is between the bond issuer and bond holders…,” the Finance Ministry said in response to IANS queries.

Thousands of crores of money of more than 15 lakh employees of both public and private sector companies have exposure to IL&FS bonds.

However, queries sent to the EPFO Commissioner and Labour Minister Santosh Gangwar remained unanswered.

Over 50 funds that manage retirement benefits of over 15 lakh employees have exposure to IL&FS. PF trusts of state electricity boards, public sector undertakings (PSUs) and banks are among them. The provident and pension fund trusts have filed intervening applications in the National Company Law Appellate Tribunal (NCLAT) stating that they stand to lose all the money since the bonds are under unsecured debt.

Usually, retirement funds have a low-risk appetite and invest in “AAA” rated bonds (which IL&FS bonds used to be once upon a time) and get assured returns with low interest rates.

The worries of pension and provident fund trusts come from the classification of IL&FS profiling its companies as to which can meet the dues obligations. Many important trust managing funds of PSUs like MMTC, IOC, Hudco, SBI and IDBI are among those filing petitions. From private sector, HUL and Asian Paints are among the petitioners.

IL&FS is currently under resolution process at the National Company Law Tribunal (NCLT). The process will decide under Section 53 of the IBC the order of priority for distribution of proceeds of the process.

The beleaguered company has informed the NCLT that of the 302 entities in the group, 169 are Indian companies, out of which only 22 are emerging as those which can meet all obligations (green), while 10 firms can pay to only secured creditors (Amber). There are 38 companies of IL&FS (red) which cannot meet any obligations of payment, and 120 entities are still being assessed.

These PF and provident funds trusts are worried that if payment is limited to secured creditors, then only financial creditors like banks will receive the dues while unsecured bond-holders will be get any payments.

IL&FS bonds attracted investments by PF trusts as it had the shareholding of SBI and LIC giving its bonds the comfort factor.

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Sachin Bansal invests Rs 650 crore in Ola

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Sachin-Bansal

Bengaluru, Feb 19 (IANS) Internet entrepreneur and Flipkart co-founder Sachin Bansal has invested Rs 650 crore, or about $92 million, in ride-hailing platform Ola in his personal capacity as investor, the company said in a statement on Tuesday.

This investment is part of Ola’s larger Series J funding round. It is also the largest investment by an individual in Ola to date, it said.

“Ola is one of India’s most promising consumer businesses that is creating deep impact and lasting value for the ecosystem. On one hand, they have emerged as a global force in the mobility space and on the other, they continue to build deeper for various needs of a billion Indians through their platform, becoming a trusted household name today,” Bansal said.

He further said he has known Ola founder Bhavish Aggarwal as entrepreneur and friend over the years and that he has great respect for what he and the team at Ola have built in 8 years.

“We are extremely thrilled to have Sachin onboard Ola as an investor. Sachin is an icon of entrepreneurship and his experience of building one of India’s most respected businesses ground up, is unparalleled,” Ola CEO Bhavish Aggarwal said.

Ola integrates city transportation for customers and drivers onto a mobile technology platform ensuring convenient, transparent, safe and quick service fulfilment, the statement added.

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