Money & Banking
RBI’s restructuring norms for NBFCs need more clarifications
The Reserve Bank of India (RBI) came out with a notification making amendments in the corporate debt restructuring (CDR) norms for non-banking financial companies (NBFCs) on 26 May 2016. The amendments have been made to the existing set of prudential norms for all the three classes of NBFCs i.e., NBFC-ND-Non SI, NBFC-ND-SI and NBFC-D .
 
While the changes made very relevant, considering the present state of affairs in the country, a need for further clarification is felt at some places. 
 
Say for instance, the framework now provides for a time limit for implementation, which will undoubtedly is a very positive change. Earlier, we have seen several restructuring packages to fail due to delay in the implementation of restructuring packages. The framework however does not talk about the consequences for the failure to implement timely.
 
Further, the provisions relating to restructuring of accounts involving fraud or malfeasance also is a positive change, this may turn out to be revival mechanism for units having merit, which otherwise would have been ignored from restructuring framework.
 
Changes made in the CDR framework
 
There are three main changes in the framework, each of which has been discussed separately.
 
1. Provisions pertaining to special regulatory treatment for asset classification omitted from the framework
 
The CDR framework provided for a special regulatory treatment for the cases of restructuring for their timely implementation. As per para 7 of the CDR framework, where a restructuring was implemented within 120 days from the date of approval of the package or date of receipt of application, as the case may be, the same was eligible for the benefits under the said paragraph, which allowed retention of asset class, i.e., standard asset could be retained as standard and sub-standard/ doubtful could be retained in the same asset category.
 
This benefit was however for only those cases of restructuring that took place before 31 March 2015 and stood unnecessarily thereafter. The RBI has now omitted the said paragraph from the framework.
 
2. Additional conditions for restructuring
Paragraph 8 of the CDR framework provided for addition conditions for restructuring, the amendments includes a few insertions in the conditions for restructuring and they are –
 
i. Time limit for implementation - All restructuring packages will now have to be implemented in a time bound manner. For CDR, joint lenders’ forum (JLF), consortium or multiple banking arrangements (MBA) - within 90 days from the date of approval, for other cases 120 days from the date of receipt of application.
 
ii. Additional contribution by promoters - Promoters to bring in additional funds upfront, which should not be less than the higher of - 20% of NBFCs' sacrifice or 2% of restructured debt. The additional funding need not be only in form of cash but unsecured loans will also do.
 
iii. Others - 
 
a. NBFCs should determine a reasonable time period during which the account is likely to become viable, based on the cash flow and the Techno Economic Viability (TEV) study;
 
b. NBFCs should be satisfied that the post restructuring repayment period is reasonable and commensurate with the estimated cash flows and required DSCR in the account as per their own Board approved policy.
 
c. Due diligence done by NBFCs in assessing the TEV and the viability of the assumptions underlying the restructured repayment terms should be clearly documented.
 
3. Restructuring of cases involving fraud/ malfeasance
Earlier, the CDR framework did not allow restructuring of cases involving fraud or malfeasance, but now the amendments provide for a curve out where cases involving fraud/ malfeasance can also be considered for restructuring provided that existing promoters are replaced by new promoters. Further, where the promoters are changed in accordance with the provisions of Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme), the account shall be eligible for the asset classification benefits under the said Prudential Norms.
 
(Abhirup Ghosh is Senior Manager at Vinod Kothari Consultants P Ltd)
 

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USD1 tn extra GDP by 2020 - If all Indians get online
Four of five Indians could afford the internet if data costs fell by 66%, according to a Facebook-commissioned report on Internet access. But Indian telecom operators already run data services at a 11% loss, making cost-cutting difficult.
 
The statistics mean that a data plan currently priced at Rs.100 should not cost more than Rs.34 if India has to make the internet affordable for 80 percent of its population.
 
But the adverse economics imply this cannot happen without intervention from the government - whose Rs.20,000 crore ($2.9 billion) plan to connect each of India’s 250,000 panchayats with broadband by 2018 is three years behind schedule.
 
The internet reached 29% of Indians - 354 million users - in September 2015, IndiaSpend reported. It could rise to 39 percent, or 462 million users, by June 2016.
 
But if it were to reach 100 percent, India’s GDP could be increased by an extra $1 trillion by 2020, according to the Facebook-commissioned report, published this month. To put this in perspective, India’s GDP crossed the $2 trillion mark for the first time in 2014, according to World Bank data.
 
To optimise data costs, the report considered 500 MB data plans, classifying them “affordable” if each cost less than five percent of a person’s monthly income.
 
The report, titled “Connecting the world: Ten mechanisms for global inclusion”, is based on a study done by PricewaterhouseCoopers for Facebook.
 
Internet access drives up GDP
 
The Facebook report said that global GDP could grow by an additional $6.7 trillion by 2020, if the internet reaches every human being. If that happens, the GDP of China and India could reach $2.089 trillion - nearly a third of the hypothetical world output.
 
Also, universal internet access can bring half a billion people worldwide out of poverty, according to the report.
 
High data costs in developing countries
 
However, data costs in India, as in several other developing countries, are a major barrier.
 
While 92% people in South Asia live in range of a 2G network, no more than 17% can afford a 500 MB monthly data plan. Two other regions - sub-Saharan Africa (11%) and Middle East and North Africa (17 percent) - are comparable to South Asia. In contrast, 94% of North Americans can afford such a data plan.
 
“Prices need to drop by close to 70% of today’s average retail price for 80% of the world’s population,” said the report. In Ethiopia, a 500 MB data plan currently costs 50 times what it should for “widespread” internet affordability. (“Widespread” is defined as reaching 80% of citizens.)
 
As it stands currently, only two percent Indians can afford to watch a five-minute standard definition video daily. If you add a two-minute HD video as well, less than one percent can afford it.
 
The report said that in India, “internet usage is growing but many are disengaged and many more remain unconnected”. According to a February survey by the Pew Research Centre, 22% respondents in India said they use the internet “at least occasionally” or have a smartphone.
 
But are lower costs possible?
 
The report cited a JP Morgan analysis to show that Indian data operators make a negative margin of 11% from data sales. Giving examples of other developing countries with negative margins, the report said: “Operators in most of these markets already charge very low prices and have negative margins on data, which makes it difficult for them to cut prices further."
 
Indonesia's negative margin is 197%; in comparison, profit margins in Japan are 46%.
 
In India, nearly 70% of connections are on 2G networks, but these data services are no longer profitable for telecom operators. Bharti Airtel, for instance, needs more than 1,000 rural users per site per month to ensure its 2G data services break even. Providing voice services over 2G is more profitable - the company would need no more than 480 subscribers per site per month to break even.
 
Drawing connections with Zuckerberg’s Internet.org agenda?
 
The study done for Facebook advocates internet access in developing countries, which may be seen as connected to the social media giant’s controversial Internet.org project. The Guardian observed: “The focus on cost reductions (in the report) marries with Facebook’s own Internet.org project, which is aimed at partnering carriers in developing nations to give low-cost internet access.”
 
Internet.org had come under criticism from net neutrality advocates around the world. In India, its platform Free Basics was blocked by the Telecom Regulatory Authority of India (TRAI) in February this year. Founder Mark Zuckerberg had then written: “Connecting India is an important goal we won’t give up on, because more than a billion people in India don’t have access to the internet."
 
According to the study, which echoed Zuckerberg's thoughts, 56% of the world is still not online. Bringing them online would "create millions of new jobs, develop vast new markets, and lift millions out of poverty."
 
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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When Patients Die from the ‘Care’ They Get in Hospitals
The hospital care system is anything but what it is meant to be. A recent study of the hospital scenario, even the US, is scary. Martin Makary, a professor of surgery at the Johns Hopkins University School of Medicine who led a research, said in an interview that problems include “everything from bad doctors to more systemic issues such as communication breakdowns when patients are handed off from one department to another. People dying from the care that they receive rather than the disease for which they are seeking care,” Makary said. The study is published in a recent issue of British Medical Journal (BMJ). 
 
In 1999, the Institute of Medicine had warned of the same issues. Late Barbara Starfield had commented in her excellent article in the JAMA (Journal of American Medical Association) in 2000, showing that the medical establishment was one of the leading causes of death. Martin Makary’s figures are depressing compared to the 1999 study. In 1999, about 98,000 people had lost their lives unnecessarily in the hospital, where they went for help. That number, today, is 251,000 which translates into 700 people dying daily due to medical errors and related mistakes in US hospitals.
 
If a couple of Jumbo jets had fallen from the sky daily, do you think planes would be flying regularly? That would have been prime-time and all-time news for our 24x7 electronic media. This study in the BMJ has not made it, so far, to the mainstream media. There is an epidemic of mumps at the Harvard University threatening their new entrants this time; but that does not make news because the epidemic occurred in fully vaccinated students and shows the vaccine claims to be a fraud! Spreading that truth would hurt the most powerful vaccine industry. 
 
Immunity boosting is the basis of Ayurveda; many successful doctors who were treating cancer (like Dr Scott Gerson) were almost deported from America. Cancer research has come to grief and is turning towards expensive and reductionist chemical molecules to boost the immune system to control cancer. Now billionaires are funding immune system booster research to convert “death into chronic disease status for cancer.” News media highlighted the large-heartedness of the philanthropists who have donated money for cancer research. While they are doing good, they are looking for hefty returns by way of cancer drug sales, the new ones which they can sell at phenomenal costs for a long time, as researchers are trying to make cancer a chronic illness like diabetes.
 
Kenneth Sands, director of healthcare quality at Beth Israel Deaconess Medical Centre, an affiliate of Harvard Medical School, said that the surprising thing about medical errors is that only hospital-acquired infections have shown improvement. “The overall numbers haven’t changed, and that’s discouraging and alarming,” he said. Even more glaring is the news that just about seven operations in the emergency rooms were responsible for over 80% deaths and costs! These are: upper gastro-intestinal surgeries, gall bladder removals, peptic ulcer surgery, intestinal obstructions, colonic surgeries, peritoneal adhesions and appendectomies. Almost 50% of surgeries create drug-related complications and death.
 
If doctors accept that, and report medical errors honestly, the errors will come down. Unfortunately, today, the atmosphere is such that medical errors are rarely accepted. That topic is still a taboo in hospital circles. God save the hapless patients in hospitals. So far, “patients were coming to our hospital to lose their money and their lives,” wrote a noted cancer specialist. Now, they might not die but become permanent patients for the cancer industry which is much more lucrative than quick death for cancer patients. What is lost sight of, in this whole drama, is the inexpensive plant-based immune boosters used in Ayurveda for centuries. Those could be used in research to see if they could help recovery from many simple cancers. Will our well-meaning politicians take a lead in this direction?

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COMMENTS

Ramesh Poapt

9 months ago

Great Dr Hegde!as usual..

Mahesh S Bhatt

9 months ago

Blind illogical aping of American Corrupt marketing & glorfying as right thorugh media is modern disease.

Market Economy which is supposed to be good for Country has drowned Americans to $21 trillion loss in Subprime/Stock markets meltdowns in 2008.CARTELISATION & looting common public thorough media ads has killed businesses.

Pharma industry has 80% of unwanted variations/patents & hoax medicines which we stupid Indians /global people consume runs in multi billion dollars.

They have created Market economies in sacred Education & Medical care where people lose their fortunes of whole life in months.

Emotional Blackmailing/Partial information sharing/fear psychosis generations/over treating/targets for RMO to convert OPD to In Patients/total machine diagonsis without manual diagonisis/disrepecting age of patient & treating aggressive medicines/procedures heartlessly are norms.

God also cannot bless them.Amen Mahesh Bhat

Amar Sehmi

9 months ago

Now more and more such studies and reports are bringing awareness of the Medical World Mafia who in order to make money will go to any extent.

Bibek Bhowmik

9 months ago

Having read the artivle on the medical care in hispitals, that too in the most developed nation like USA, I feel that its not lack of knowledge but lack of system. Moreover as very rughtly pointed out about the communication system while shifting the patients from Departments or to other Medics. Proper basic information, processes and Mansgement being followed need to be Boldly indicated while following such transfers.
One more thing may be observed that People working as prifessionals need to dedicate and focus in more realistic manners. Elex. gadgets and other entertainment tools need to be sidelined while on duty. (I though believe these are followed in most places). We work for livelihood but also for prifessional satisfaction, isn't it! So my appeal to all those working in such highly dependable Health-care places may please try a little more to bring back faith & Confidence of ailing people. Best way to reward these excellent medics, para medics need to be taken up in highly stature. Satisfaction of all will get back to its place again.

Bibek Bhowmik

9 months ago

Having read the artivle on the medical care in hispitals, that too in the most developed nation like USA, I feel that its not lack of knowledge but lack of system. Moreover as very rughtly pointed out about the communication system while shifting the patients from Departments or to other Medics. Proper basic information, processes and Mansgement being followed need to be Boldly indicated while following such transfers.
One more thing may be observed that People working as prifessionals need to dedicate and focus in more realistic manners. Elex. gadgets and other entertainment tools need to be sidelined while on duty. (I though believe these are followed in most places). We work for livelihood but also for prifessional satisfaction, isn't it! So my appeal to all those working in such highly dependable Health-care places may please try a little more to bring back faith & Confidence of ailing people. Best way to reward these excellent medics, para medics need to be taken up in highly stature. Satisfaction of all will get back to its place again.

Sumitha Manivel

9 months ago

The medical system has it's faults. However it is unfair and misleading to persistently highlight only the negatives and selectively quote only sources that he agrees with as the author has done in this article and just about every single article he has written in the past. There are innumerable doctors who do an excellent job. While it is good to warn people about flaws in the system, a sense of balance is required. Scaremongering is dangerous, if someone who should see a doctor refuses to do it could lead to serious problems. I am very disappointed with moneylife editors for allowing this sort of negativity. Someone with no training in cancer care, virology or epidemiology is writing on these subjects. Moneylife claims to be unbiased, is this article unbiased?

REPLY

Meenal Mamdani

In Reply to Sumitha Manivel 9 months ago

I heartily second your comments about this article and the propensity of this author to hyperbole and throwing the baby out with the bath water.
I have repeatedly requested MLFoundation executive trustees to not provide a platform for this author and others like him. By doing so, they unknowingly give credibility to his eccentric opinions. Alas, I have not been able to persuade them. Perhaps if they were to see more comments like yours, the trustees would reconsider their decision.

Sumitha Manivel

In Reply to Meenal Mamdani 9 months ago

The editor of Moneylife is failing in his duty to readers by allowing alarmist, unbalanced articles of this sort. The author is entitled to his views and he propagates them with missionary zeal. However, has the editor has to protect the interests of readers. Can he not imagine how a reader suffering from cancer will feel on reading this piece or numerous other pieces like this. Also, the author repeatedly attacks big pharma as being the devil incarnate. Lion stockletter has four big pharma companies on its list! Where is the integrity in that?

Thiagarajan Sundaravadivelu

In Reply to Sumitha Manivel 8 months ago

Completely Agree with your opinion, Correctly pointed out.

Meenal Mamdani

In Reply to Sumitha Manivel 9 months ago

I heartily second your comments about this article and the propensity of this author to hyperbole and throwing the baby out with the bath water.
I have repeatedly requested MLFoundation executive trustees to not provide a platform for this author and others like him. By doing so, they unknowingly give credibility to his eccentric opinions. Alas, I have not been able to persuade them. Perhaps if they were to see more comments like yours, the trustees would reconsider their decision.

Thiagarajan Sundaravadivelu

In Reply to Meenal Mamdani 8 months ago

I am new member to MLF, i agree to your comments, he is an excentric.

Meenal Mamdani

In Reply to Sumitha Manivel 9 months ago

I heartily second your comments about this article and the propensity of this author to hyperbole and throwing the baby out with the bath water.
I have repeatedly requested MLFoundation executive trustees to not provide a platform for this author and others like him. By doing so, they unknowingly give credibility to his eccentric opinions. Alas, I have not been able to persuade them. Perhaps if they were to see more comments like yours, the trustees would reconsider their decision.

R Balakrishnan

9 months ago

The medical industry is a monster. Kudos to Dr Hegde for opening our eyes, again and again. Unfortunately, when a medical emergency comes, we are left with no choices and convenience becomes the over riding concern. Not rational, but that is what happens.

sundararaman gopalakrishnan

9 months ago

Good article as usual from Dr Hegde and an eye opener of the lack of scruples in the modern medical industry..All is fair if the returns are " consistent and good"!!

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