July 2021 – Page 62 – IFSCCodeof.in

BOM, SIDBI and IFCI reject resolution, move NCLAT, BFSI News, ET BFSI

July 14, 2021 root Banking & Finance

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In an unusual move, lenders of Videocon Industries agreed to take the 95.85% haircut on the accounts. But not all. Out of the total 35 financial creditors, four have dissented and 12 have abstained from voting. The rest of the lenders voted for the resolution.

Out of four creditors who have decided to go against the resolution order of NCLT dated June 8, 2021, and appealed in the NCLAT, are bankers.

The dissenting financial creditors are Bank of Maharashtra, SIDBI and IFCI, while the other is ABG Shipyard, which holds O.024%.

The combined shareholding of the four dissenting creditors is around 4%.

“We are against the resolution because the quantum is very low. We do not believe that this is a fair valuation and hence we have appealed in the Appellate Tribunal,” said A S Rajeev, MD & CEO, Bank of Maharashtra.

Following are the percentage share of the creditors who rejected the Videocon Industries resolution plan:

Creditors	Share Value
Bank of Maharashtra	1.97%
SIDBI	0.053%
IFCI	1.3%
ABG Shipyard Ltd	0.024%

Videocon valuation

The resolution team of the valuation experts concluded the total dues of Videocon Industries to Rs 4,069 crore. Whereas the liquidation value was Rs 2568.13 crore. The resolution plan of Twin Star Technologies, a company owned by the chairman of Vedanta Group Anil Agarwal, was approved against the actual dues of about Rs 71,000 crore.

“We should not only look at the balance-sheet value but think about the actual receivables as well,” added Rajiv.

Resolution process

There are many cases like Siva Industries, Jet Airways where financial creditors have taken a huge haircut. But among the high profile cases, Videocon Industries resolution is the only case where lenders have taken maximum haircut till date. Even the NCLT in its order observed this and made a sharp comment.

“As per the CoC approved Resolution Plan, Assenting Secured Financial Creditors would get only 4.89%, Dissenting Secured Financial Creditors would get only 4.56%, Assenting Unsecured Financial Creditors would get only very meagre amount of 0.62%. Out of total claim amount of Rs 71,433.75 crores, claims admitted are for Rs 64,838.63 crores and the plan is approved for an amount of only Rs 2,962.02 Crores which is only 4.15% of the total outstanding claim amount and the total hair cut to all the creditors is 95.85%. Therefore, the Successful Resolution Applicant is paying almost nothing and 99.28% hair cut is provided for Operational creditors,” the order said.

The top seven creditors which hold more than 7% of the debt and voted for the resolution in Videocon:

Creditors	Share Value
State Bank of India	18.05%
IDBI Bank	16.6%
Union Bank of India + Corporation Bank + Andhra Bank	9.7%
Central Bank of India	8.43%
Bank of Baroda + Vijaya Bank + Dena Bank	6.93%
ICICI Bank	5.47%
PNB + OBC + UBI	5.02%

Liquidation takes over resolution

On one side, the top creditors want to wash away their hands and do not want to carry forward any stress, it’s the smaller lenders who are making some noise. Also, considering the huge loss to financial creditors, industry veterans and experts are criUnion Bank of India + Corporation Bank + Andhra Bankticising the whole resolution process.

Experts have been raising doubts over the whole resolution process.

In an interview with ETBFSI earlier, Siby Antony chairman of the ARC Association of India of said, “IBC is not the right solution. It is a resolution tool. If there is no resolution, automatically it goes to liquidation. That is a big problem. Resolution can be made if the underlying business is robust.”

Also, one of the top corporates Harsh Goenka has said that public money is being looted under resolutions. In the NCLT order itself, the bench has mentioned in the bracket (Hair cut or Tonsure, Total Shave).

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Union Bank of India rolls out digital vertical at BKC, Mumbai, BFSI News, ET BFSI

July 14, 2021 root Banking & Finance

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Public lender, Union Bank of India has inaugurated a digital vertical at BKC in Mumbai to accelerate its digital transformation.

The vertical will strengthen the bank’s digital footprint in BFSI space to create digital bank within bank by leveraging the strengths of the combined merged entities.

The vertical will include research and innovation apart from establishing partnerships, development, explore UI/UX avenues to ease customer conveniences and implementation of various futuristic digital platform.

Rajkiran Rai G, MD & CEO, Union Bank of India said, “To capture the growing digital business and to build a strong digital ecosystem within the Bank, the digital vertical will aid to re-orient the Bank’s digital vision. The vision includes exploring innovative solutions and new emerging technologies such as AI, ML, 5G, Blockchain etc. Union Bank of India has already initiated major digital initiatives like CRM, Trade Finance, Video KYC that are under various implementation stages.”

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As crackdown looms, South Korea’s defiant crypto fans dig in, BFSI News, ET BFSI

July 14, 2021 root Personal Finance

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SEOUL: Yun Hae-ri, a 26-year-old South Korean cryptocurrency investor, has seen the value of a coin named Metadium nearly wiped out since she bought it in April.

Like many South Korean retail investors, Yun has thousands of won in smaller cryptocurrencies, seen as alternatives to bitcoin, which have plummeted in value as regulators crack down on the sector.

By Sept. 24, South Korea’s numerous cryptocurrency exchanges will need to disclose risk management and partner with banks to ensure trading accounts are held by real people.

The rules, analysts say, could result in exchanges delisting hundreds of such “altcoins” as they vie for tie-ups with banks.

“I have to admit that I did not look at the operator’s financial statement, but mostly invested based on the coin’s popularity and appearance on media and friends’ recommendation,” said Yun, who trades Metadium on Upbit, the country’s largest crypto exchange. She now worries Metadium could be delisted ahead of the September deadline.

The new law was passed in early March and since then, only four of more than 60 exchanges–Upbit, Bithumb, Coinone and Korbit–have secured the partnerships with banks needed to be registered as virtual asset service providers.

The law also requires them to obtain a security certificate from South Korea’s internet security agency. Only 20 exchanges had received such certificates as of May.

Metadium’s price plunged as much as 94% from early April to 32.1 won ($0.0281) in late June on Upbit, as several local cryptocurrency exchanges took dozens of altcoins off their platforms.

In late June, Upbit halted trading of 24 altcoins, such as Komodo, AdEx, Lbry Credits, Ignis, Pica and Lambda. Another major operator Bithumb nixed four coins last week.

Smaller operator Probit removed 145 coins all at once in June, sparking concern among investors that more coins could be removed as the September deadline approaches.

Both Upbit and Bithumb officials told Reuters that the delistings were part of their periodical coin reviews, not because of the new regulation.

However, both the number of listed coins and their risk profiles would be weighed by banks as factors in their choices around exchange partnerships, according to opposition lawmaker Yoon Doo-hyun’s office.

GOPAX, one of the more popular exchanges outside of Korea’s major four, said it is in talks with multiple banks and was optimistic about meeting all requirements ahead of the deadline.

‘HODL’
The regulation targets money laundering and high leverage among young South Koreans betting on a sector that has seen coins such as ether halve after rapid surges.

According to data gathered by the office of another opposition lawmaker, Kwon Eun-hee, more than two-thirds of new investors on the four major exchanges during the first quarter were under 40.

BofA Securities said in a report published in May that the estimated daily volume of South Korean cryptocurrency trading reached 1,480 trillion won in the first quarter, sometimes exceeding the combined trading volume on the KOSPI and KOSDAQ stock exchanges.

An official at the Financial Services Commission told Reuters that exchanges that didn’t meet new regulations would not necessarily need to close, but they would not be able trade in the won.

“The revised law itself is aimed at preventing illegal money laundering activities. There are laws on user protection and market stability pending and they should be able to further address issues with (cryptocurrency exchange) users,” he said.

Many investors, meanwhile, are determined to “hold on for dear life”, or “HODL” as it’s know in the cryptocurrency community.

Lee Jai-kyung, 27, who invested 40 million won ($35,156.18) in cryptocurrencies, says he has lost 56% on his holdings but has no plan on cutting his losses.

“I’m going to leave my coin investment as it is because I’ve lost so much already there’s no point in withdrawing now,” Lee said. “More than that, I’ll be holding on to it because I believe that there will be another price surge later this year.”

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China called finance apps the best thing since the invention of compass. But no longer now

July 14, 2021 root Personal Finance

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State media hailed Alipay as one of China’s four great modern inventions, putting it and bicycle sharing, e-commerce and high-speed rail up there with the compass, gunpowder, papermaking and printing.

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4 SIPs To Invest From ICICI Prudential Mutual Fund

July 14, 2021 root Personal Finance

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ICICI Prudential Midcap Fund

This fund has given a phenomenal returns of 83% in the last 1-year. Having said that most midcap mutual funds have given similar returns. Please note, before investing in midcap mutual funds, the reader should be willing to take the risk as these funds are highly volatile and returns can be all over the place.

This fund is among the very old names in the midcap space and was launched in 2004. 96% of the funds are invested in midcap stocks, while the balance of the assets under management are held in cash and cash equivalents. Not a very big amount is required for investing in SIPs – in fact, investors need just Rs 1,000 every month by which they can start a Systematic Investment Plan. The expense ratio of 2.39% is on the higher side.

Investors who are keen to stay invested for a longer period of 5 years can consider the ICICI Prudential Midcap Fund.

ICICI Prudential Savings Fund

This fund tends to diversify the mix of the assets under management by investing in debt and money market instruments of various maturities with a view to maximising income while maintaining a good balance of yield, safety and liquidity.

If we see the returns from the fund over the last 1-year it is 5.15%, which is slightly more than what the big nationalized banks in the country are offering in terms of interest. The 3-year returns has also been in line with the interest rates from the banking sector at that time. The returns of the fund on 3-year basis has been around the 7.76% mark.

This fund is for those looking at high safety as well as high returns. The returns from the fund are expected to be broadly in line with interest rates in the economy.

ICICI Prudential Bluechip Fund

While we earlier recommended a midcap fund and a pure debt fund, we now recommend a largecap fund. The assets under management are invested in companies with large market capitalization to generate superior returns.

If you are looking for investing through SIPs you can do so with an amount of just Rs 100. The initial amount to is for a sum of Rs 100. In case you want to redeem the units before 1-year there is a 1% exit load as is the case with all equity mutual fund schemes.

This is one of the larger equity mutual funds in the country with assets under management of more than Rs 28,000 crores. The fund has given a 1-year returns of 47%, while the three year returns is 13.54% on an annualized basis. An SIP of Rs 10,000 each month for the last 36-months would have generated a corpus of Rs 4.87 lakhs.

ICICI Prudential Liquid Fund

ICICI Prudential Liquid Fund tends to invest almost 80 per cent of the corpus in money market securities, while the balance would be placed in high quality debt instruments. So, essentially it is a debt fund, which looks for safety along with returns.

A bulk of the money is invested in treasury bills, while the balance is invested in high quality debt instruments like commercial paper of Reliance Industries, Chennai Petroleum, Tata Power etc.

You can start an SIP in this fund with an investment of Rs 99 per month only. This is an open ended fund with sizeable assets under management of a staggering Rs 36,000 crores. Go for this fund in case you want stability of returns with safety. Expect returns near the range of bank deposits. In fact, it maybe slightly lower than bank deposits as well.

Disclaimer

Investors are advised caution before investing in the schemes above and should only invest if they are able to bear losses. Greynium Information Technologies, the author and the brokerage firm should not be held liable for any losses suffered on account of the decisions based on the above article. Please consult a professional advisor.

About the author:

Sunil Fernandes, the author of the article is a stock market expert and has spent about 27 years covering stock markets and mutual funds. He has worked with various publications including Hindustan Times, Deccan Herald, Oman Economic Review and Dalal Street Investment Journal. He was also engaged in equity research analysis.

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Reserve Bank of India – Press Releases

July 14, 2021 root Press Releases

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April 14, 2015

Dear All

Welcome to the refurbished site of the Reserve Bank of India.

The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.

With this makeover, we also take a small step into social media. We will now use Twitter (albeit one way) to send out alerts on the announcements we make and YouTube to place in public domain our press conferences, interviews of our top management, events, such as, town halls and of course, some films aimed at consumer literacy.

The site can be accessed through most browsers and devices; it also meets accessibility standards.

Please save the url of the refurbished site in your favourites as we will give up the existing site shortly and register or re-register yourselves for receiving RSS feeds for uninterrupted alerts from the Reserve Bank.

Do feel free to give us your feedback by clicking on the feedback button on the right hand corner of the refurbished site.

Thank you for your continued support.

Department of Communication

Reserve Bank of India

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ECB inches closer to ‘digital euro’, BFSI News, ET BFSI

July 14, 2021 root Banking & Finance

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Frankfurt, July 14, 2021 -The European Central Bank is expected to take the next step towards a “digital euro” Wednesday by launching the project’s exploration phase, but questions remain about potential pitfalls and benefits for eurozone citizens.

The move comes as the coronavirus pandemic has hastened a shift away from cash, and as central bankers around the world nervously track the rise of private cryptocurrencies like bitcoin.

Here’s a look at what a digital euro would mean for the 19-nation club.

– What is a digital euro? – A digital euro, sometimes dubbed “e-euro”, would be an electronic version of euro notes and coins.

It would for the first time allow individuals (and companies) to have deposits directly with the ECB. This could be safer than with commercial banks, which could go bust, or than holding cash that could be stolen or lost.

The ECB has promised that any future digital euro would be “a fast, easy and secure way” to make payments. The service would be free and payments could be made by card or smartphone.

This would allow the Frankfurt-based institution to compete with foreign card companies such as Visa and Mastercard or digital payment services like PayPal, sectors where no strong European players have emerged.

A digital euro would “complement cash, not replace it”, the ECB has stressed.

The ECB is still studying which technology is best suited to develop the digital currency.

– Why now? – The Covid-19 pandemic has accelerated a decline in the use of cash as customers try to avoid contact.

The ECB is also wary of falling behind virtual money issued by private actors like bitcoin and Facebook’s yet-to-be-launched diem, formerly known as libra.

And there’s pressure to keep up with digital currency pilot projects launched by other central banks, before the ECB misses the boat and consumers end up putting their money elsewhere.

If people in the eurozone were to switch en masse to virtual currencies that operate outside the ECB’s reach it could hamper the effectiveness of its monetary policy measures.

– What are the risks? – Citizens might avoid traditional accounts in favour of going digital, weakening retail banks in the euro area.

The risk would be higher in times of crisis, when savers might be tempted to flee to the safety of a digital euro and trigger a run on banks.

To avoid this, the ECB will likely cap the number of e-euros people could hold in digital wallets, with executive board member Fabio Panetta suggesting a threshold of around 3,000 euros ($3,500).

Concerns about privacy and ensuring the digital euro can’t be used for money laundering will also be part of the ECB’s thinking as it weighs the pros and cons in the months ahead.

A key challenge that might emerge is that users “would have to be convinced to switch to a new payment method that is hardly different from existing ones”, said Deutsche Bank analyst Heike Mai.

– Who else is doing it? – Privately issued digital currencies have been around for years and tend to be highly volatile. They are also under growing scrutiny from regulators.

Bitcoin hit a record high of nearly $65,000 in April but has since plummeted by around 50 percent, largely because of a Chinese crackdown on cryptocurrency trading.

So-called stablecoins are seen as less volatile because they are pegged to traditional currencies like the US dollar or the euro. This is the route Facebook has chosen for its highly anticipated diem project.

Many central banks are looking into offering their own virtual money — known as Central Bank Digital Currency (CBDC) — as a stable and risk-free alternative.

The Chinese central bank has started trials with a digital renminbi, while the Bank of England has created a task force to research a possible “britcoin”.

The US Federal Reserve and the Bank of Japan are also exploring CBDCs.

– When can I spend mine? – Having completed the preliminary research and a public consultation, the ECB is expected to move to a formal investigation phase focused on the design of a digital euro next, set to take around two years.

Panetta told the Financial Times that if the project is then given the go-ahead, it would take another three years to get the digital currency ready for use — meaning the rollout is not expected before 2026.

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Debt market development an unfinished agenda, says Finance Secretary Somanathan

July 14, 2021 root Banking & Finance

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The Finance Ministry is fully conscious that the debt market in India is not as well developed as it should it be, according to T.V. Somanathan, Finance Secretary. He said that government’s ‘Aatmanirbhar’ campaign should not be seen as India turning “protectionist” and highlighted that incremental protectionism maybe needed as a “transitional measure” in a few sectors to support “an infant that must grow up”.

Addressing the NCAER organised India Policy Forum 2021, Somanathan noted that the development of the debt market continues to be “somewhat handicapped” by two regulators who look at things very differently.

It maybe recalled that SEBI has been making a case for the unification of the G-Sec and corporate bond markets. It had contended that a unified market would enable trading of government securities (G-secs) on the same platform as corporate bonds, thereby utilising common infrastructure for trading, clearing, settlement and holding of securities. It is perceived that the RBI, which is the government debt manager, is not on the same page as SEBI on this front.

BANKING REFORMS

Meanwhile, Somanathan said the government continues to work on its stated position that most of the public sector banks will be eventually privatised. “Banking will be one of the sectors where a bare minimum of the public sector will remain. This is the government’s stated policy,” he said.

He was responding to the suggestion by Montek Singh Ahluwalia (a key member of the erstwhile Congress-led UPA government) that the government must now focus on getting the banking sector reforms done. He highlighted that while the reforms pursued earlier brought in the more easy part of aligning the regulatory framework with Basel norms, the more difficult part of putting the public sector banking system competitively on a par with the private sector banking system was not done as yet.

While the good thing is that private sector banks have been liberalised and allowed to expand, the public sector banks remain under strict government control, Ahluwalia noted.

Ahluwalia suggested that the government must implement the P J Nayak Committee report recommendations so that the control of the Finance Ministry on the public sector banks (PSBs) are reduced and would also ensure that the RBI’s regulatory powers on PSBs come on a par with what the central bank had in the case of private sector banks.

PROTECTIONISM

Somanathan, who prefaced his remarks at the meeting with a disclaimer that they were his personal views and not that of the government, he asserted that the government was not looking to turn “protectionist” through the Aatmanirbhar Abhiyan campaign. He, however, noted that government was open to incremental protectionism in certain areas of the economy as a transitional measure for “an infant that must grow up”.

“I know that some of our infants refuse to grow up. But if we can get some of them to grow up, then there is a case in some areas”, Somanathan said.

He underscored the need to distinguish between the multilateral trade liberalisation that happened in the nineties and early part of first decade of this century and the FTAs India has signed with a particular group of countries in the last 20 years.

“The evidence is that some of FTAs have had very large trade diversionary effects. Because some members of FTA are adept practitioners of non-tariff barriers, the benefit side of FTA has not picked up as we thought it would. The important issue for us now is not free trade vs protectionism.

There is no tilt to protectionism (via Aatmanirbhar Abhiyan) but to ensure critical supply chains are available locally and don’t have to depend on imports for intermediate goods needed to make drugs and essential devices or things like that,” he added.

Somanathan said temporary protection to a few targeted industries that have potential to become winners may be appropriate in the current times.

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Bad bank incorporated in Mumbai, RBI licence likely soon, BFSI News, ET BFSI

July 14, 2021 root Banking & Finance

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The bad bank, which was proposed in the Union Budget this year, is moving fast to start operations.

The bad bank was registered as National Asset Reconstruction Co Ltd on July 7 with the Registrar of Companies, Mumbai with a paid-up capital of Rs 74.6 crore.

Lenders now plan to approach the Reserve Bank of India for a licence to start operations of the national asset reconstruction company, or bad bank, which was incorporated recently.

Taking shape

State-owned Canara Bank will be the lead sponsor of National Asset Reconstruction Company Limited with a 12 per cent stake in the entity.

The bad bank will be headed by Padmakumar Madhavan Nair, a stressed assets expert from the State Bank of India (SBI), as the managing director. Indian Banks’ Association chief executive Sunil Mehta, SBI deputy managing director Salee Sukumaran Nair and Canara Bank’s representative Ajit Krishnan Nair are the other directors of the bad bank.

Nair has been picked up for the CEO post of the proposed bad bank NARCL as he has a long exposure of handling resolution of stressed assets, they said. He will be joining the company on deputation basis for the moment.

Banks have identified 22 bad loans totalling Rs 89,000 crore to be transferred to the NARCL in the initial phase.

The State Bank of India plans to transfer bad loans worth around Rs 20,000 crore to the bad bank.

The Budget announcement

Finance Minister Nirmala Sitharaman in the budget for 2021-22 had announced that an asset reconstruction company or a bad bank would be set up to consolidate and take over existing stressed assets of lenders and undertake their resolution. Bad bank refers to a financial institution that takes over bad assets of lenders and undertakes resolution.

The new entity is being created in collaboration with both public and private sector banks. Sitharaman in the Budget 2021-22 had mentioned that the high level of provisioning by public sector banks of their stressed assets called for measures to clean up the bank books. “An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech. It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation, she added. National Asset Reconstruction Company Ltd (NARCL) will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

Government guarantees

The government guarantee would be invoked if there is a loss against the threshold value. Last year, Indian Banks’ Association had made a proposal for the creation of a bad bank for swift resolution of non-performing assets (NPAs). The government accepted the proposal and decided to go for the asset reconstruction company (ARC) and asset management company (AMC) model for this. The Reserve Bank of India has said that loans classified as fraud cannot be sold to NARCL. As per the annual report of the RBI, about 1.9 lakh crore of loans have been classified as fraud as of March 2020.

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