Category: Banking & Finance

About ₹43,000 crore of debt of bankrupt Infrastructure Leasing and Financial Services (IL&FS) has been addressed, and the new board and management expects that this would increase to ₹50,000 crore by the end of September this year.

It has also raised the estimate for overall debt recovery to ₹61,000 crore.

“The group has also enhanced its estimates of aggregate debt recovery to ₹61,000 crore – an increase of ₹5,000 crore over its earlier estimate of ₹56,000 crore,” said Uday Kotak, Chairman of the board of IL&FS, on Thursday.

The increased estimate represents resolution of nearly 62 per cent of overall fund-based and non-fund based group debt of about ₹99,000 crore as of October 2018.

“The aggregate debt of ₹43,000 crore addressed till date represents nearly 71 per cent of the overall revised targeted recovery value of ₹61,000 crore and 44 per cent of the overall debt of over ₹99,000 crore (as of October 2018),” said a statement by IL&FS, adding that the recovery target is higher than the average recovery observed under IBC since its inception.

“The upgrade in potentially addressable debt by ₹5,000 crore (to ₹61,000 crore) has been largely on account of improved valuations, better operating performance, and enhanced recoveries from non-group exposures,” it further said.

Of the total 347 entities under IL&FS Group (as of October 2018), a total of 186 entities stand resolved till date, while the remaining 161 entities are under various stages of resolution.

Sale of entities

CS Rajan, MD, IL&FS, said that by September-end the number of entities would come down to double-digits. This would be done by a combination of liquidation, closure of some entities, and sale of some entities.

The ₹43,000 crore of debt addressed includes ₹26,800 crore of completed entity monetisation initiatives and accrued cash balance, ₹14,350 crore of additional net recovery expected from resolution and restructuring applications filed with NCLT, and ₹1,926 crore from Supreme Court verdict passed in favour of Rapid Metro Gurgaon.

IL&FS said that by September 2021 it expects to address about ₹8,000 crore of additional debt by initiatives, including monetisation of stake in ONGC Tripura, Warora Chandrapur and Karyavattom Stadium; Phase 2 of InvIT, including 5 Road SPVs; and receipt of expected settlement claims from road authorities for Khed Sinnar Expressway and Srinagar Sonmarg Tunnel.

Additional recovery

Post-September 2021, it expects additional recovery of over ₹9,950 crore.

State Bank of India (SBI), on Thursday, clarified that it has stopped recovering charges in Basic Savings Bank Deposit Accounts (BSBDAs) on all digital transactions with effect from September 15, 2020, while retaining charges on cash withdrawals over and above four free withdrawals allowed per month.

Systematic breach

This clarification comes in the wake of Ashish Das, Professor, Department of Mathematics, IIT-Bombay, claiming in a recent report that there had been systematic breach in RBI regulations on BSBDAs by a few banks, most notably SBI, which hosts the maximum number of BSBDAs, by charging ₹17.70 for every debit transaction (even via digital means) beyond four a month.

“This imposition of service charges resulted in undue collections to the tune of over ₹300 crore from among nearly 12 crore BSBDA holders of SBI during the period 2015-20, of which, the period 2018-19 alone saw collection of ₹72 crore, and the period 2019-20, ₹158 crore,” Das alleged in the report, ‘Regulating Basic Savings Bank Deposit Accounts: Do We Need to Care for These Marginalised Depositors?’

SBI, in a statement, said the Reserve Bank of India, in August 2012, mandated that banks are free to levy reasonable charges in BSBD accounts beyond four free transactions. The availment of such additional services shall be at the option of the customers, it added.

Accordingly, SBI introduced charges for debit transactions beyond four free transactions in BSBD accounts with effect from June 15, 2016, with prior intimation to the customers.

India’s largest commercial bank observed that the Central Board of Direct Taxes (CBDT), in August 2020, advised banks to refund the charges collected, if any, on or after January 1, 2020, on transactions carried out using the digital mode and not to impose charges on future transactions carried out through such modes.

SBI emphasised that: “In terms of CBDT directives, SBI has refunded the charges recovered in respect of all the digital transactions to the BSBD customers with effect from January 1, 2020, to September 14, 2020.

“SBI has stopped recovering charges in such accounts on all digital transactions with effect from September 15, 2020, while retaining charges on cash withdrawals over and above four free withdrawals allowed per month,

The objective is also to encourage BSBD account holders, including PMJDY (Pradhan Mantri Jan Dhan Yojana) account holders, to adopt digital payment through the prescribed modes vis-à-vis the cash transactions, it added.

The bank said it has also waived fees levied on SMS services and on maintenance of monthly average balance to all its Savings Bank account holders.

The Reserve Bank of India (RBI) has decided to set up a new Regulations Review Authority (RRA 2.0) to streamline regulatory instructions, reduce compliance burden of the regulated entities by simplifying procedures, and reduce reporting requirements, wherever possible.

The authority has been constituted considering the developments in the regulatory functions of the central bank over the past two decades and evolution of the regulatory perimeter, the RBI said in a statement

M Rajeshwar Rao, Deputy Governor, has been appointed as the Regulations Review Authority. The authority will be set up for a period of one year from May 1, unless its tenure is extended by the Reserve Bank.

Terms of reference

The terms of reference of RRA 2.0 include making regulatory and supervisory instructions more effective by removing redundancies and duplications, if any; and to obtain feedback from regulated entities on simplification of procedures and enhancement of ease of compliance.

The authority will seek to reduce compliance burden on regulated entities by streamlining the reporting mechanism; revoking obsolete instructions if necessary and obviating paper-based submission of returns wherever possible.

The RRA will examine and suggest the changes required in dissemination process of RBI circulars/ instructions (this would entail suggestions on the areas where the manner of issuing circulars, their updation and website linkages).

The authority will engage internally as well as externally with all regulated entities and other stakeholders to facilitate the process. The RBI had set up the first RRA initially for a period of one year from April 1, 1999, for reviewing the regulations, circulars, reporting systems, based on the feedback from public, banks and financial institutions. The then Deputy Governor YV Reddy was the RRA.

The recommendations of the RRA enabled streamlining and increasing the effectiveness of several procedures, simplifying regulatory prescriptions, paved the way for issuance of master circular, and reduced reporting burden on regulated entities, the RBI said in the statement.