Category: Banking & Finance

Oaktree Capital has fired a fresh salvo, asking the Committee of Creditors to consider its additional offer of ₹1,700 crore for Dewan Housing Finance Corporation Ltd.

In a letter to the CoC, Oaktree Capital said: “…we committed to provide additional interest income of ₹1,700 crore, a right we reserved in our resolution plan, that commitment is being ignored. If the second highest bidder was awarded the opportunity to provide additional interest income, we should be permitted the same opportunity, and should derive the same benefit in the evaluation of the bids.”

The global alternative investment management firm has further contended that the ₹1,000 crore of value it has prescribed to the life insurance subsidiary – Pramerica Life Insurance – is not being considered.

It has sought that the ascribed value should be given credit for “what it is” – upfront cash to the benefit of the financial creditors.

“We have respected the resolution process, answered your questions, provided clarifications when they were required, and accommodated the concerns of all stakeholders,” Oaktree further said in the letter.

Bone of contention

The bone of contention for Oaktree has been that the additional interest income it has offered through an e-mail on December 24 has not been considered by the CoC, despite a similar increase by the second higher bidder, which is Piramal Capital and Housing Finance Ltd.

Clarifying once again on its resolution plan, Oaktree Capital said the upfront cash recovery has been undervalued by ₹2,700 crore. It also said its bid offers a significantly higher fair market, which is higher by ₹4,503 crore than Piramal’s offer.

It has also stressed that its bid is unconditional and fully implementable, and it has committed to infuse capital in DHFL through equity and debt. It has also promised to turnaround the operations of DHFL on a standalone basis, going concern basis without merging it with another entity.

“As you vote on the resolution plans, the burden on responsibility as a guardian of public money and a repository of faith for all DHFL stakeholders is clear,” Oaktree further said in the letter, urging them to vote in favour of the highest bid.

Voting for the resolution plans is expected to get over next week, and the winning bid is likely to be announced later this month.

Life Insurance Corporation (LIC) of India has launched a fresh campaign to revive lapsed individual life cover policies.

“To encourage continuation of risk cover in the current circumstances of the pandemic and high risk, LIC brings an excellent opportunity for its policyholders to revive their lapsed policies,” it said in a statement on Thursday.

The special revival campaign was launched on January 7 and will continue till March 6.

“Policies of specific eligible plans can be revived within five years from date of the first unpaid premium, subject to terms and conditions. Certain concession in health requirements is also being offered subject to eligibility,” it further said.

Most policies can be revived only on the basis of a declaration of good health and a Covid questionnaire to be submitted by the proposer or life assured.

LIC has also authorised its 1,526 satellite offices to revive policies, where special medical tests are not required.

It is also offering concession of up to 30 per cent in late fees for eligible policies. It, however, said that high-risk plans such as term assurance, health insurance and multiple risk policies are not eligible for the concession,

“The campaign is launched to benefit those policy holders who were not able to pay premiums due to unavoidable circumstances and their policy lapsed,” LIC further said.

It had previously also launched a similar campaign to revive lapsed policies between August 10 and October 9, 2020.

LIC currently services almost 30 crore policies across the country.

Advances by banks seem to be slowly on the rise as provisional data from the third quarter suggest. While asset quality continues to remain a concern, lenders say it is likely to be better than previously estimated.

“Restructuring requests are lower than expected and largely lesser than the provisioning for it. Most borrowers have shown a willingness to pay. The pain is likely to be lesser than initially thought of but everyone is cautious,” said a banker who did not wish to be named.

Collection efficiencies

The loan restructuring window came to an end last month and with economic activity on the mend, collection efficiencies are expected to improve further.

A clearer picture will emerge when banks start to report their performance for the September to December 2020 quarter later this month.

Provisional data being reported by banks to the stock exchanges indicate that advances growth, which had been muted in previous quarters, is now picking up.

HDFC Bank reported a 16 per cent growth in advances at ₹10.82-lakh crore as on December 31, 2020, compared to ₹9.36-lakh crore a year ago, while Bandhan Bank Bandhan Bank reported a 23 per cent growth in loans and advances at ₹80,255 crore in the third quarter of this fiscal compared to a year ago.

Most lenders, including NBFCs, have said their disbursements are slowly inching back to pre-Covid levels, but many say credit demand is muted for fresh expansion plans.

“With bounce in high frequency-led indicators, increased spending and consumption, we expect credit growth to rise quarter-on-quarter by three per cent to four per cent translating to seven per cent to nine per cent year-on-year growth. SME lending (under ECLGS), some pick-up in industry and service sector credit, robust momentum in credit card and other retail loans will provide support,” said ICICI Securities in a report.

Motilal Oswal Institutional Equities said in a report that loan growth is likely to pick up, led by improving consumer sentiment and a good festival season. “On the other hand, wholesale lending remains muted. Growth is driven by a secured retail book as the bank remains cautious of higher stress in the unsecured portfolio,” it said.

It, however, said it remains watchful of asset quality as banks recognise non-performing loans from moratorium and overdue loans. “Although, overall trends have fared better than earlier expected, led by sharp improvement in collection efficiency,”it said.

Economic impact

The Reserve Bank of India’s Report on Trend and Progress of Banking in India in 2019-20 has cautioned that the asset quality of the banking system may deteriorate sharply, going forward, due to the uncertainty induced by Covid-19 and its real economic impact.