Banks to require up to Rs2.7 trillion under Basel III: Crisil

Crisil Ratings director Pawan Agrawal said public sector banks will account for bulk of the requirement and will need regular infusion from the government. As per the financial services firm’s report, domestic banks are comfortably placed to migrate to the new guidelines by March 2013

Mumbai: If the Basel III guidelines are implemented as per the proposed deadline set by the Reserve Bank of India (RBI), banks will require up to Rs2.7 trillion in fresh capital, reports PTI quoting a research by the leading financial services firm Crisil.

The report notes that the implementation of the new prudential norms will massively strengthen the domestic banks as it would entail capital requirements of banks to be increased significantly going up to 8%.

“Banks will need to raise equity capital of Rs1.4 trillion till March 2017 to meet their growth requirements, while complying with the guidelines. This requirement can turn out to be higher (by another Rs1.3 trillion) in case the investor appetite is low for non-equity Tier-I capital instruments,” Crisil Ratings director Pawan Agrawal said in a report here on Tuesday.

He further said public sector banks will account for bulk of the requirement and will need regular infusion from the government. As per the report, domestic banks are comfortably placed to migrate to the new guidelines by March 2013.

Last week, the RBI issued the final draft guidelines for a staggered implementation of the Basel III regulations beginning March 2013 through March 2017.

According to the proposed guidelines, the capital adequacy ratio will increase by 2.5% to 11.5% by March 2017. Also, for the first time, banks have to maintain a leverage ratio, which will determine the extent of leverage of a bank.

“The RBI norms are stricter than those proposed by the BCBS (Basel Committee on Banking Supervision), with respect to stipulated capital and leverage ratios being higher by 1% and 2% respectively, and the implementation period being shorter by two years,” the report notes.

Referring to profitability, Crisil Ratings director Ramraj Pai says higher quantum of equity capital and higher cost of non-equity capital can reduce banks’ return on equity over the long-term.

The report also notes that the banks are well placed to migrate to the Basel III requirements by March 2013 and comply with the minimum equity capital requirement of 4.5% as banks have a common equity capital ratio which is above the prescribed requirements.


HC rejects DLF plea against SEBI probe; imposes Rs2 lakh cost

DLF, in its petition, had sought quashing of SEBI’s order, issued on 20th October, for investigation into the allegations of complainant Kimsuk Krishna Sinha in 2007 against it and Sudipti Estates

New Delhi: The Delhi High Court on Tuesday imposed a cost of Rs2 lakh on realty major DLF while dismissing its plea against the Securities and Exchange Board of India’s (SEBI) order to probe an allegation that it duped a city-based businessman of Rs34 crore in collusion with its associate firm Sudipti Estates, reports PTI.

Justice Vipin Sanghi turned down DLF’s plea against the market regulator's order, saying “I dismiss the writ petition with costs quantified at Rs2 lakh. Cost to be paid within four weeks.”

The judge dismissed the DLF plea saying the SEBI order against it was “based on reasons”.

“A perusal of the impugned order (of SEBI) shows that it certainly cannot be said that it has been passed arbitrarily or is irrational. The impugned order is clearly based on reasons which are relevant and material,” it said.

DLF, in its petition, had sought quashing of SEBI’s order, issued on 20th October, for investigation into the allegations of complainant Kimsuk Krishna Sinha in 2007 against it and Sudipti Estates.

The court, in its 61 page judgement, said the SEBI Act has not put any bar on the market regulator to consider any evidence to form its opinion to order an investigation.

“There is no bar or impediment cast on the board by the SEBI Act to say that it would not entertain or look into evidence that the complainant may rely upon in support of his complaint made earlier, while considering whether or not to direct an investigation,” it said.

The high court said SEBI’s powers should not be restricted as it has been created to look into the issues pertaining to stock exchanges.

“There is no reason to put any such fetter on the powers of the board or to read such restrictions into the statute, which are clearly not there. The board is the sole authority created by law to deal with the complex issues which arise in the management and supervision of the securities markets. Any such restrictions, artificially introduced, would denude the Board of its powers and hamper its functioning,” it said.

DLF had, in its petition, said SEBI’s order was passed “erroneously and in blatant non-compliance with the principle of natural justice”. The court, however, rejected the plea.

The court also rejected the contention of DLF’s alleged associate Sudipti that SEBI has no authority to investigate its role as the firm’s shares have not been traded through the stock exchanges on which the regulator enjoys powers.

“SEBI by the impugned order has directed investigation into the allegations levelled by the complainant against the petitioner about the breach of the SEBI (disclosure of Investor Protection Guidelines) 2000, read with the relevant provisions of the Companies Act, and in relation to the disclosure of information required to be made in the red herring prospectus by the petitioner—DLF,” the court said.

SEBI had earlier ordered a probe into the issue of IPOs after the high court had asked it to look into the complaint of Mr Sinha against DLF Group and Sudipti Estates and pass an order in three months.

In the FIR lodged against Sudipti in Delhi, Mr Sinha had alleged the company and its directors/agents had “lured and compelled” him to transfer certain plots of land and did not fulfil the promise of developing the land and providing him higher returns.

The market regulator had said in its order that “the Securities and Exchange Board of India shall investigate into the allegations levelled by the complainant in respect of DLF and Sudipti Estates Pvt Limited.”

“The investigations would focus on violations, if any, of the provisions of the erstwhile SEBI (Disclosure and Investor Protection) Guidelines, 2000, read with relevant provisions of the Companies Act, 1956,” SEBI had further said.

Mr Sinha had alleged Sudipti, DLF Home Developers and DLF Estate Developers were sister concerns inextricably linked and were part of the DLF Group.

DLF has, however, maintained Sudipti is a separate legal entity owned and controlled by different individuals.

The construction major in a draft red herring prospectus (DRHP), filed for a public issue in May 2006, had mentioned that Sudipti was its associate company.

The DRHP, however, had been withdrawn and thereafter, it filed a fresh prospectus in January 2007 wherein Sudipti was not mentioned as an associate.


SEBI announces steps to expedite stake sales by promoters

The two new share sale methods announced by SEBI are the institutional placement programme and the offer for sale through the stock exchanges. The move is expected to enhance public shareholding in listed companies

Mumbai: In a move to fast-track the sale of promoters’ equity in listed companies to meet minimum public shareholding norms, the Securities and Exchange Board of India (SEBI) on Monday opened a new window for share sales and relaxed buyback rules, reports PTI.

The decision taken by the market regulator ahead of the Cabinet meeting on Wednesday will pave the way for the top 100 companies, including blue-chip PSUs like ONGC, IOC, SAIL, BHEL and NTPC, to offload their equity expeditiously.

The government is running against time to meet its ambitious disinvestment target of Rs40,000 crore for the current fiscal.

The decisions taken at SEBI’s board meeting here will provide an enabling framework for expeditious sale of PSU equities.

These include a new mechanism called an ‘Institutional Placement Programme (IPP)’ that would allow promoters to sell up to 10% of their capital through an auction.

“The following additional methods, viz. Institutional Placement Programme (IPP) and Offer for Sale of Shares through the Stock Exchange for the Purpose of Compliance with SCRR Requirements, are being introduced,” SEBI said in a statement after the board meeting.

As per government norms, at least 10% of the shareholding in all listed state-owned companies should be with the public, while in the case of private sector companies, the minimum public shareholding should be 25%.

The announcement comes within days of the government allowing foreign individuals to directly invest in the stock market with a view to boost the market sentiment.

SEBI said under the IPP mode, companies would be required to simultaneously file a red herring prospectus/prospectus with the market regulator, the Registrar of Companies and stock exchanges.

Using this method, it said “public shareholding can be increased by 10% or such lesser percentage as is required to comply with the minimum public shareholding requirement.”

Under the new mechanism, the offer would be restricted to Qualified Institutional Buyers (QIBs), it said. A minimum of 25% of the offer would be reserved for mutual funds and insurance companies.

The company or promoter would announce an indicative floor price or price band at least one day prior to the opening of the offer, it said.

Issuers shall endeavour to maximise the number of allottees in order to ensure wider distribution of shares, it said, adding that there shall be at least 10 allottees in every IPP issuance. Furthermore, no single investor shall receive allotment for more than 25% of the offer size.

The regulator also allowed the stock exchange to offer a separate window for the purpose of such sales.

The duration of this window would co-exist with the normal trading hours, it said.

As per the board decision, it said, the offer shall be for at least 1% of the paid-up capital of the company, subject to a minimum of Rs25 crore.

“Only the promoter/promoter group of companies which are active/eligible for trading would be permitted to offer their shares for sale. Promoter/promoter group of the company would not be permitted to bid for the shares,” it said.

Allotment would be done either on price priority or a clearing price basis proportionately and would be overseen by the exchanges, it added.


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