Money & Banking
RBI asks banks to strengthen credit monitoring as NPAs jump

As per the data released by the central bank, gross NPA ratio increased to 3.1% in FY12 from 2.5% reported in FY11. Similarly, net NPA rose to 1.4% in FY12 from 1.1% compared to previous fiscal

Mumbai: The Reserve Bank of India (RBI) has said the banks need to strengthen their due diligence and credit appraisal system along with overall monitoring mechanism to contain the rising bad assets seen in the banking system, reports PTI.
"Banks need to, not only utilise effectively, the various measures put in place by the Reserve Bank and the government for the resolution and recovery of bad loans, but also have to strengthen their due diligence, credit appraisal and post-sanction loan monitoring systems to minimise and mitigate the problem of increasing non-performing assets (NPAs)," the RBI said in its report on 'Trend and Progress of Banking in 2011-12'.
The bank noted that both the NPA stock and slippage ratio has increased in the last financial year.
"During 2011-12, the NPA stock has risen. The slippage ratio of the banking system, which showed a declining trend during 2005-08, increased during 2008-12," it said.
As per the data released by the central bank, gross NPA ratio increased to 3.1% in FY12 from 2.5% reported in FY11. Similarly, net NPA rose to 1.4% in FY12 from 1.1% compared to previous fiscal.
In absolute terms, gross NPA stood at Rs1,423 billion at March 2012, while the net NPA stood at Rs649 billion.
Terming the slowdown in the economy and inadequate appraisal and monitoring of credit proposals as the major reasons behind the spurt in bad assets, the apex bank said the deterioration in asset quality is more pronounced in the case of public sector banks.
"During 2011-12, the gross NPAs of public sector banks increased at a higher rate as compared with the growth rate of NPAs at a system-level," the report said.
In addition to rise in gross NPA, fresh accretion of NPAs measured by the slippage ratio increased to 2.5% in 2011-12 from 2% reported in 2010-11.
The banking system also witnessed a rise in restructured asset in sync with the increasing NPA level in the system.
"The steep increase in gross NPAs during 2011-12 was accompanied by a considerable pick-up in the growth of restructured advances. This was mainly due to the steep increase in restructured advances by public sector banks, particularly nationalised banks," the report said.
As per data released by the RBI, total restructured assets as a percent of gross advances stood at just above 5% in FY12 from under 4% a year earlier.
In the sector wise analysis of bad asset, the report said deterioration in asset quality of public sector banks was spread across priority and non-priority sectors.
It also noted that while half of the bad asset came from priority sector, share of agriculture sector in total NPA registered an increase.


Mallya agrees on 51% stake sale in United Spirits to Diageo

The deal could entail Diageo picking up to 51% stake in United Spirits for between $1 billion and $2 billion

New Delhi: Vijay-Mallya led United Breweries (UB) Group is understood to have reached a deal with world's largest spirit maker Diageo for a stake sale in United Spirits, reports PTI.
According to sources, the deal will be announced on Friday.
However, the exact details such as the quantum of stake and valuation could not be ascertained.
When contacted, an UB Group spokesperson declined to comment.
According to different reports, the deal could entail Diageo picking up to 51% stake in USL which could be valued between $1 billion and $2 billion.
In September this year, United Spirits had confirmed that it was in talks with UK-based Diageo Plc for a stake sale.
"United Spirits and Diageo Plc confirm that the UK-based company is in discussion with it and United Breweries Holdings in respect of possible transactions to acquire an interest in the liquor firm," United Spirits had said in a filing to BSE.
USL is the world's second largest spirits maker after Diageo and markets various liquor brands including Signature, Bagpiper, Antiquity, Royal Challenge, Signature in the country.
USL's sales volumes stood at 3.13 crore cases for the first quarter ended June 30.
Mallya-led United Breweries Holdings Ltd (UBHL), the promoter of USL, holds 18.03% stake as on 30th September.
Bogged down by the troubles of group firm Kingfisher Airlines (KFA), Mallya has been forced to seek ways to raise funds as lenders to the carrier have refused to sanction further loans.
State Bank of India (SBI), the largest lender to the airlines, wants the airline's promoters to bring in a minimum of $1 billion (about Rs5,400 crore) from any source by month-end for its revival.
Already the country's aviation regulator has suspended operating permit last month.
UBHL has said the company along with its subsidiaries has significant financial exposure on various counts to KFA, which has ceased to be a subsidiary with effect from 18 February 2012 and is now an associate company.
This exposure as on 31 March 2012 included equity investment of Rs2,114.28 crore, loans and advances Rs1,048.7 crore and other receivables Rs209.08 crore, and corporate guarantees to banks/aircraft lessors Rs8,925.86 crore.


BSE Sensex, Nifty wait for fresh signals: Thursday Closing Report

If the day’s low is broken tomorrow it may bring about a short downtrend

The market ended its six-day gaining spree and closed in the red on re-emergence of worries about the global economy. Yesterday we had mentioned that we may see the upmove continuing unless the index closes below the previous day’s low. Although the index made a lower low today, it managed to close above yesterday’s low of 5,711 and settled slightly above it at 5,739. The National Stock Exchange (NSE) saw a volume of 67.77 crore shares and an advance decline ratio of 642:811.


The market opened lower tracking weak global cues. The US markets tanked over 2% on Wednesday as investors shifted their attention to the “fiscal cliff” or the economic realities facing the country and how president Obama would tackle it. Economic concerns of the US and the unending Eurozone debt crisis saw the Asian market trading down in morning trade today.


The Nifty started off 51 points lower at 5,709 and the Sensex resumed trade at 18,780, down 122 points from its previous close. The benchmarks fell to their lows in initial trade itself wherein the Nifty went back to 5,694 and the Sensex dropped to 18,736. Stocks of realty, power, banking and IT sectors led the market down in early trade.


Select buying helped the benchmarks make a gradual upward journey, though still in the red. The market hit its high in late morning trade with the Nifty rising to 5,743 and the Sensex going up to 18,865.


However, selling pressure in capital goods, oil & gas and power stocks saw the indices come off the highs in subsequent trade. The market was seen moving sideways in post-noon trade.


The market snapped its six-day winning spree to settle lower on global worries. The Nifty lost 21 points (0.37%) to settle at 5,739 and the Sensex finished the session at 18,846, down 56 points (0.30%).


The broader indices settled mixed today. The BSE Mid-cap index closed 0.13% up while the BSE Small-cap index lost 0.21%.


The sectoral gainers were led by BSE Realty (up2.03%); BSE Auto (up 1.01%); BSE Fast Moving Consumer Goods (up 0.20%); BSE Consumer Goods (up 0.15%) and BSE TECk (up 0.10%). The main losers were BSE Capital Goods (down 1.35%); BSE Healthcare (down0.70%); BSE Power (down 0.68%); BSE Oil & Gas (down 0.50%) and BSE Bankex (down 0.37%).


Ten of the 30 stocks on the Sensex closed in the positive. The chief gainers were Tata Motors (up 5.52%); Wipro (up 1.97%); Bharti Airtel (up 1.90%); State Bank of India (up 1.32%) and Tata Steel (up 0.42%). The top losers were Tata Power (down 2.12%); Larsen & Toubro (down 2.04%); GAIL India (down 1.98%); ICICI Bank (down 1.48%) and Dr Reddy’s Laboratories (down 1.35%).


The top two A Group gainers on the BSE were—Tata Motors (up 5.52%) and Unitech (up 5.46%).

The top two A Group losers on the BSE were—IPCA Laboratories (down 5.87%) and Cadila Healthcare (down 3.45%).


The top two B Group gainers on the BSE were—Compucom Software (up 20%) and Varun Industries (up 20%).

The top two B Group losers on the BSE were—Fact Enterprise (down 19.96%) and Kanpur Plastipack (down 16.71%).


Out of the 50 stocks listed on the Nifty, 15 stocks settled in the positive. The key gainers were Tata Motors (up 5.51%); Bharti Airtel (up 2.10%); Wipro (up 1.83%); Asian Paints (up 1.32%) and SBI (up 1.26%). The main laggards on the index were L&T (down 1.97%); GAIL (down 1.91%); IDFC (down 1.86%); Reliance Infrastructure (down 1.74%) and Tata Power (down 1.64%).


Markets in Asia closed sharply lower on concerns about the global economy and the lingering Eurozone debt crisis. After the US presidential elections, it now China’s turn, as the country gears up for its once-in-a-decade leadership change.


The Shanghai Composite tanked 1.63%; the hang Seng tumbled 2.41%; the Jakarta Composite declined 0.52%; the KLSE Composite fell 0.27%; the Nikkei 225 dropped 1.51%; the Straits Times lost 1.02%; the Seoul Composite slipped 1.19% and the Taiwan Weighted settled 0.61% lower.


At the time of writing, the key European indices were in the positive and the US stock futures were trading with marginal gains.


Back home, foreign institutional investors were net buyers of stocks aggregating Rs728.45 crore while domestic institutional investors were net sellers of equities totalling Rs196.95 crore.


Financial Services firm GE Capital India today agreed to sell its mortgage loan business arms to Magma FinCorp for undisclosed amount. This marks GE Capital's exit from the mortgage loan business in India. Until the completion of the transactions, GE Money mortgage customers in India will continue to be serviced by the GE Money team. Magma closed 1.83% higher at Rs66.70 on the NSE.


Giving some relief to cancer patients, pharma major Cipla on Thursday slashed prices of its three generic cancer drugs by up to 64%. Drugs under the brand names Erlocip, Docetax and Capegard are used for treating lung and pancreatic cancer, breast cancer, head & neck cancer, gastric cancer, bladder, colorectal and colon cancers, Cipla said. The stock declined 0.76% to settle at Rs393.35 on the NSE.


GTL Infrastructure has said that it has completed the restructuring of foreign currency convertible bonds (FCCBs) worth $320 million. The zero coupon FCCBs were due on 29 November 2012. Of the $320 million, 35% would be mandatorily converted into equity at a premium of about 28% over Wednesday’s closing price, the company said in statement. The stock jumped 5.73% to close at Rs8.30 on the NSE.


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