Regulations
Debt restructuring is a Band-Aid for a bullet wound
Religare's analysis of 10 out of 15 strategic debt restructuring -SDR cases suggest that this scheme won’t help Indian banks’ deteriorating asset health – instead it increases the risk by deferring an estimated Rs1.5 lakh crore of NPA formation. 
 
The strategic debt restructuring (SDR) is not a cure-all for deteriorating asset health of Indian banks and instead it exacerbates the risk by deferring an estimated Rs1.5 lakh crore or about $23 billion of non-performing asset (NPA) formation, which are 30-40 accounts or 2.2% of total credit, from FY16-FY17 to later years, says a research report based on analysis of 10 out of 15 SDR cases.
 
In the note, Religare Capital Markets Ltd, says, "Grim tidings from the Financial Stability Report (FSR) on stress in the system from large borrowers and weak sectors would prod the Reserve Bank of India (RBI) to tighten provisioning norms. We raise credit cost estimates across our coverage, pare target prices, and downgrade the sector to underweight."
 
"Our detailed interactions with companies under SDR, lenders, lawyers and industry experts suggest that banks may end up refinancing 30-40 ailing accounts under the scheme in the next one year, thus postponing NPA recognition of Rs1.5 lakh crore, or 2.2% of credit. We think banks have little scope to fully recover loans via the sale of assets given several pitfalls to SDR," it added.
 
 
 
Pointing out towards the inevitable massive write-offs, Religare says, SDR invocation is not treated as restructuring for asset classification or provisioning, and thus most cases have standard restructured assets with low provisions of 5%. It says, "Our analysis of 10 SDR cases invoked so far reveals that interest accruals and loss funding will push up debt by 70% from first restructuring via corporate debt restructuring (CDR) until conclusion of SDR. Banks will thus have to write-off 35-95% of interest (debt + equity) in FY17-FY18 if stressed assets find no takers. The lenient 5:25 scheme may also see slippages from cyclical sectors."
 
 
"The haircut in case of a takeover will also be high, resulting in huge provisions for banks even if the SDR is successful. Our fair enterprise value (EV) for six cases (three engineering, procurement, construction- EPC, three metal players) representing 67% of total SDR debt is 65-85% lower than the current EV," it added.
 
In its previous report too, Religare had pointed out that if banks fail to attract buyers for these troubled companies within 18 months, they would face a large Market-To-Market hit on their debt-turned-equity holding, apart from a massive surge in stressed asset formation. (Read: Strategic debt restructuring: Banks may face large losses, massive surge in stressed asset of 7 companies)
 
 
The FSR released by RBI also highlighted that levered companies’ debt as a proportion to total debt in the system has gone up by 200 basis points (bps) in the last one year. RBI’s two stress tests on credit concentration (group borrowers) and weak sectors (infrastructure, iron & steel, MSME & textile) reveal a severe impact on bank NPAs and net worth in case of defaults.
 
This, Religare feels, will make the RBI to strike back at banks. At present, banks retain existing classification on assets that have been stressed for one and a half to two years and also book income on the same. "To ensure lenders do not take undue advantage of SDR or the 5:25 schemes (most cases are concentrated in stressed sectors and/or with large group borrowers) to postpone NPAs, the RBI may require them to start building provisions for these accounts and/ or defer income recognition. This apart, the RBI’s recent list of 150 truant borrowers that may be classified as bad by FY17 would put further pressure on banks," it said.
 
 
Religare says, as of now, different banks treat the same account differently even when the structure of the loan is identical. It is this disparity in loan treatment that the central bank may like to address. "As per our discussions with industry experts, the RBI has asked banks to seek an auditor’s certificate if they wish to retain any of these loans under the standard category. Banks will have to classify such accounts as NPAs if any irregularities are found," it added.
 
According to the research note, FY2016 would be a painful year for corporate lenders. Religare cut its target price to book (P/B) multiples across its coverage that reflects the stress on bank books and adjusted its target prices for the restructuring hit. It says this would be around 50% from 20%-25% estimated earlier, due to surging debt in SDR cased and the likelihood of onerous write-offs. Religare has downgraded State Bank of India (SBI), Axis Bank and ICICI Bank to sell from buy, and for Bank of Baroda, CBK and Punjab National Bank (PNB) to sell from hold.  
 

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COMMENTS

SuchindranathAiyerS

11 months ago

Bank Mismanagement: This is one of those things that every genuine Banker knows but will never say. In India it is easier to get away with pushing NPA under the carpet because, like the Praful Patel - Mrs Antony Air India, most Banks are owned by and operated for the benefit of the Neta-Babu-Cop-Milard-Jounralist-Crony Kleptocracy via an indtrument known as Bharath Sarkar and subsidized by the sweat and blood of the Mango Man:

Weight-Loss Products That May Only Trim Your Wallet
Is losing weight on your New Year's resolution list?
 
They come in pills, powders and creams, meals and tastants (definition to come) — products whose marketers claim can help you lose weight, in many cases, without diet or exercise. Americans spend billions of dollars based on these advertising claims every year and every year marketers are called out on deceptive weight-loss claims. If you’ve penciled in “lose weight” among your New Year’s resolutions, here are a few cautionary tales: 
 
Nutrisystem
 
Has Nutrisystem reverted to making the same type of deceptive weight-loss claims that got it into trouble with the FTC in the leotard-loving days of the early 90s? That’s what a petition filed in 2015 sought the FTC to investigate. The claims at issue included losing five pounds and an inch off your waist in your first week on one of the company’s Fast 5 meal plans. Now Nutrisystem is running ads for a weight-loss program — turbo 10 — that claims you can lose 10 pounds and five inches off your waist in your first month. Whether this new system breeds more consumer complaints — hundreds have already been filed against Nutrisystem with the FTC — we’ll just have to wait and see.
 
Roca Labs
 
Marketed as an alternative to expensive gastric bypass surgery, this company’s purported stomach-shrinking powders, which start at $480 for a three-to-four month supply, may only end up shrinking your wallet. A 2015 FTC complaint bellyached that Roca Labs did not possess scientific evidence to back up several of its weight-loss claims. The agency also took issue with the company’s non-disparagement provision or gag clause, which it said unfairly sought to block bad reviews.
 
 
Genesis Today and Pure Health
 
An appearance on the Dr. Oz Show catapulted Lindsey Duncan and his companies, Genesis Today and Pure Health, into the miracle weight-loss arena. On the show, Duncan pointed to a clinical study that supposedly supported claims that consumers could lose weight with his green coffee bean extract — without diet or exercise. Duncan reaped millions. But the FTC said the clinical study was severely flawed. And in 2015, Duncan agreed to refund millions — $9 million to be exact –to consumers.
 
Sensa
 
Going to the gym in 2016 may require a lifestyle change on your part. And change can be hard (that Netflix queue won’t watch itself). In 2011, Sensa claimed that its product required “no change” in lifestyle. “Simply sprinkle Sensa on, eat all the foods you love and watch the pounds come off,” was the pitch for the tastant, a substance that stimulates your sense of taste. Sensa claimed the tastant, which costs $59 for a month’s supply, helped “you feel full faster.” But the FTC said Sensa was full of it and did not have sufficient scientific evidence to support its claims (a popular refrain). Sensa, which reported U.S. sales topping $350 million, agreed to cough up some spare change and return $26.5 million to consumers.
 
L’Occitane
 
You’ve tried everything but nothing seems to work. But what’s this now, a “body slimming” cream? Might this pave the way to a skinnier you in the new year? Probably not. In 2015, the FTC mailed out more than 10,000 refund checks totaling more than $400,000 to people who purchased two cellulite creams marketed by L’Occitane. The FTC cited “flawed” studies purportedly supporting claims that the creams help consumers slim down. The seven-ounce creams cost between $44 and $48. But apparently they were not the cream of the crop.
 
Sale Slash
 
Just because fake Oprah says one weight-loss supplement is “excellent” doesn’t mean you should buy that supplement. It is, after all, not the real Oprah. “Sale Slash is a fraud trifecta,” said the FTC’s Jessica Rich in a press release announcing a 2015 action that temporarily halted Sale Slash operations. “The company made outlandish weight-loss claims for its diet pills using fake news sites, phony celebrity endorsements, and millions of unwanted spam emails,” Rich added. Premium Green Coffee and Pure Garcinia Cambogia were among the supplements touted. Purists Choice was also named as a defendant.
For more on weight loss, click here
 

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Time for kirtan/bhajan music to be recognised: Grammy-nominated Madi Das
'Bhakti Without Borders' is the debut album from Das who grew up in the Vaishnava tradition of Bhakti yoga.
 
Kolkata : For Madi Das, scoring a Grammy nomination for his album of bhajans "Bhakti Without Borders" alongside the likes of singing sensation Taylor Swift and rapper Kendrick Lamar, is a "completely strange" feeling. But Das, who spent eight years learning kirtans and bhajans in India, believes it's time the genre gets its due recognition as an important tradition.
 
 
"It is completely strange, yes (to be featured as a nominee alongside Taylor Swift and others). But also, this music has so much more history than pop or R&B. This music has been around for centuries; so is it not time for it to be recognised as a rich and important tradition?" wondered Das, a former Hollywood entertainment executive now working in the Australian film and TV industry.
 
"Bhakti Without Borders" is the debut album from Das who grew up in the Vaishnava tradition of Bhakti yoga.
 
Up for Best New Age Album (a category of non-Christian sacred music) for the 58th Annual Grammy Awards to be announced next month, the record marks only the third time that a kirtan album has been nominated; the emerging genre has never won yet.
 
Featuring 11 bhajans, it is produced by well-known kirtan artist Dave Stringer. Das sings a duet with a different female vocalist on each track.
 
"I describe my music as world music with sacred origins, like the Hindu equivalent of gospel music," Das told IANS in an email interview from Melbourne.
 
Born in Germany to an American mother and German father, Das's upbringing was an assimilation of different music genres.
 
At the age of seven, he went to a boarding school in India (in Vrindavan and Mayapur). He spent eight years learning kirtans and bhajans and becoming fluent in Hindi. He subsequently lived in Ireland, where he was exposed to traditional Celtic music. Film school brought him to the US.
 
It is this mixture of Irish and Indian music that comes through in his album. Western music influences in the US added to his repertoire to create a blend of country and eastern sounds in the album.
 
But what about the tag of 'hippie music' that is often shoved on western artistes who pick up such spiritual sounds?
 
"Perhaps because the first influences of Indian music integrating into the West harks back to the Beatles and Ravi Shankar, which took place during the hippie explosion, there is a tendency to categorise it like that.
 
"... and indeed there are still some strong hippie influences in some practitioners of modern kirtan," Das conceded.
 
But he also acknowledges there is also a "growing movement of authentic western artistes who have taken the time to study and learn the eastern traditions".
 
"And they are now creating something that has strong foundational roots in the East while still adding the more commercial broad strokes appeal to people who like Western music," Das explained.
 
At the moment, the popularity of kirtan music is "exploding" in the US what with bhakti festivals, radio shows and retreats, said Das, adding everyone can enjoy the music.
 
"If we can enjoy each other's music regardless of faith or culture, perhaps we can gain some understanding and empathy for each other... then that will put an end to intolerance," he signed off.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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