Skip to main content

NIIF may Lend a Hand to Resolve Stressed Assets

By
 NIIF may Lend a Hand to Resolve Stressed Assets
Infra fund could be roped in as investor to set up ARC to take over stressed loans
The National Investment and Infrastructure Fund (NIIF) may be roped in as an investor to set up an asset reconstruction company (ARC) that will take over the stressed loans of state-run banks, said a senior government official.
“Bankers are thinking to get NIIF as a sponsoring agency. They (banks) themselves can pitch in some capital,” the official said, adding that Asset Reconstruction Company of India Ltd, sponsored by public sector banks (PSBs), has legacy issues.
Acting finance minister Piyush Goyal had last week announced a committee under the chairmanship of Sunil Mehta, non-executive chairman of Punjab National Bank, to examine the idea of an ARC and/ or asset management company (AMC) for faster resolution of stressed assets involving multiple state-owned lenders. The committee is to give its recommendations in two weeks.
The government holds a 49% stake in NIIF, which has a proposed corpus of Rs 40,000 crore. It signed an agreement last October to raise dollar 1 billion from a wholly owned subsidiary of the Abu Dhabi Investment Authority. NIIF has a master fund and a permissible fund of funds below that, one of which could participate in the ARC.
The official cited above said the proposal to set up an ARC came from the banks themselves. “The government did not propose it as we don’t want to interfere in their (banks’) functioning,” he said.The resolution of bad loans has picked up pace through the Insolvency and Bankruptcy Code but the government feels an ARC can speed up the process.However, the government also does not view the proposed ARC as an alternative to the existing resolution system under IBC.
“The ARC can deal with small non-performing assets (NPAs) for which there are no takers,” the official said, adding that the government cannot allow small companies to flounder. “We have to resolve this. Small and medium enterprises cannot be sold to foreign firms.”The proposed ARC would also refer cases for resolution through IBC, he said.
Immediate Relief for Banks
Another official aware of the deliberations said only those cases where banks feel recovery is possible outside IBC may be transferred to such an entity. The idea behind such a structure is to provide immediate relief to banks and free up their capital for fresh lending.However, he feels some issues may need to be resolved before the ARC is set up. “There are multiple issues like what the haircut will be when these loans will be offloaded, and will there be vigilance issues if the recoveries are higher than the price at which the asset was sold off,” he said.
The Economic Times, New Delhi, 13th June 2018

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more