Money & Banking
SBI, ICICI Bank and Axis Bank have more stressed assets than they have disclosed
State Bank of India (SBI), ICICI Bank and Axis Bank have stressed asset figures far in excess of those disclosed, based on the assumption of missing component. It will be worth closely watching the source of slippages emerging in second and third quarter of FY2017 for further evidence of the authenticity or lack thereof of the bank watchlists, says a research report from Religare Capital Markets Ltd.
"The asset watch lists declared by banks last quarter are highly subjective and differ widely in terms of stressed asset inclusion. This makes comparisons problematic and, more importantly, runs the risk of severe understatement of bad loans. We wanted to streamline the watchlists to enable a peer comparison and to garner a clearer idea of how well each bank really fares on the asset front," the report says.
Religare says, for Axis Bank, it added non-funded exposure to stressed sectors, 5:25 refinancing and the balance outstanding restructured or strategic debt restructuring (SDR) loans. Since ICICI Bank’s watch list was restricted to the top five sectors, the report says, it added exposure to other sectors (using Axis Bank's disclosures as a base) and also included restructured assets. For SBI, we incorporated the restructured assets, SDR or 5:25 exposure and potential bad power loans that had not been recognised in the bank’s watchlist, it added.
"(There are) massive gap between disclosed and derived watchlists," the report says, adding, "On running the adjustments mentioned above, we found that our derived watchlists were 35%–144% higher than those disclosed by the three banks. For ICICI Bank, our stressed list was 35% higher at Rs59,300 crore (5.5% of total exposure), followed by Axis Bank with a 39% variance at Rs31,500 crore (5.4%). SBI’s derived list was a shocker, coming in 2.4 times higher than management guidance at Rs76,500 crore (3.2%)."
According to Religare, the stocks (of these lenders) will react negatively, if more than 30% to 40% of corporate slippages come from outside the currently disclosed watchlists. It says, "We will be looking for the break-up of slippages between watchlist and non-watchlist assets, especially in second and third quarters of FY2017."
The report says, both Axis Bank and ICICI Bank have posted about 25% compound annual growth rate (CAGR) in retail loans in the last two years, while their unsecured loans have grown 25-30%. "If the corporate cycle fails to pick up and retail lending slows, we believe loan growth could come off to 12%-13% for both banks in FY18. Higher slippages from outside the watchlist and an increase in credit cost on retail and small and medium enterprises (SME) lending due to a slowdown in loan growth would keep credit cost elevated," it added.



Ravindra Shetye

3 months ago

Derived watchlist is a matter of judgement. e.g. If someone would have looked at the lending to JSW Steel (own as well as inherited from Ispat) one would have been definitely uncomfortable. However the insiders were less concerned because they were aware of the road ahead and the results ahead. Off course it is one thing in the PSU banks where the sins can be always put to the account of the past CMDs and write off bulk at one shot and be appreciated. In private Banks most of the time there is continuity and hence the management would not like to bring all sins at one time, but under a time plan.

Raj Shinestar Rock

4 months ago

thankss all

B. Yerram Raju

4 months ago

SBI walked into the trap of restructuring the SME portfolio to work with four verticals with each vertical not responsible for the decision of the other vertical. Its primacy in the SME portfolio has lost out to greed and unaccounted for drag in this business. Its due diligence, monitoring and supervision suffered a casualty. In a recent address by S.S. Mundra on Asset Quality he said: "It is not corporates alone that caused pain in the system. In several instances, the bankers have also not exercised due caution while conducting due diligence on the projects that they have financed. Some of the common shortcomings that the banks exhibited include:
 Governance deficit
 Poor credit appraisal particularly in infra financing such as highways where contracts were ‘gold plated’; Power which suffered from Faulty FSAs, absence of Pass through arrangements, lack of provision for termination payments etc.;
 Weak risk management;
 Chasing quick growth;
 Pretend and Extend" and I fully agree with him. Some banks fail to do the root cause analysis to learn from the past experiences. They have become complacent and arrogant. Unless this attitude changes, these banks are going to be a drag on the economy.

Ramesh Poapt

4 months ago

absolutely right! worst is yet to come! tighten your seatbelt1

Gopalakrishnan T V

4 months ago

The banks are taking the depositors, honest borrowers and tax payers for a ride. God save the country and the economy. There are no intentions to prevent the loot and the loot is justified, tolerated, subsidised and accommodated merrily. No one wants to fix these erring bankers and borrowers and all stake holders silently suffer as if the problem is insurmountable. though there can be a lasting solution to prevent the formation of Non performing Loans by being professional in the conduct of credit portfolio by banks and the conduct of business by the borrowers. When loot is the intention and all like minded parties join as there is no accountability of what so ever , nothing can be done but to bear the loss by the innocent and helpless masses.

Germany Waves ‘Auf Wiedersehen’ to Costly Wall Street Tax Scheme

The German Parliament voted Thursday to end a trading strategy that helps foreign investors, many of them Americans,avoid an estimated $1 billion or more a year in taxes on dividends paid by German companies.


The trades were exposed in a joint ProPublica investigation last month with The Washington Post and German news outlets Handelsblatt and Bayerischer Rundfunk. The report prompted widespread outrage among German lawmakers, some of whom called the maneuver "criminal."


This week's vote effectively shuts down the transactions in Germany, which had been the biggest market for such trades. They live on in more than 20 other countries across Europe and other nations where authorities attempt to collect taxes on dividends.


While German lawmakers closed the spigot on future tax losses, it remains unclear if tax officials there will be able to recoup billions of lost revenues from previous years.


Prior to Thursday's vote, experts in Germany were divided over whether the transactions 2014 engineered by large multinational banks to benefit institutional investors at the expense of German taxpayers 2014 were illegal under existing law.


The new legislation does not ban the transactions but it makes them impossible to execute the way they've been traditionally done 2014 as a riskless short-term transaction to avoid taxes.


The trades, known as dividend arbitrage, help foreign investors avoid taxes on dividend payments by lending out their German stock holdings so they do not appear on their books at dividend time. The borrowers are German banks or funds that don't have to pay the 15 percent tax that typically applies to foreign investors.


These so-called "div-arb" loans usually last just a few days around dividend time. The shares are then returned and the the short-term borrowers apply to German authorities for a refund of the taxes withheld. The tax savings are then split among the investors and middlemen who arranged the deals, giving them an extra slice of dividend payments that would otherwise go to German taxpayers.


Our story revealed that Commerzbank 2014 Germany's second-biggest bank 2014 played a key role in div-arb deals despite being part-owned by German taxpayers due a bailout. That disclosure, based on confidential documents outlining the trades, enraged lawmakers and prompted investigators in Frankfurt to open a probe into the bank's involvement in div-arb.


Reacting to the piece, the Parliament tightened some provisions of reform legislation that had been proposed by Germany's Finance Ministry. Lawmakers attached 24 changes to the law to make it even more punitive to investors who carry out such trades, driven in large measure by outrage over Commerzbank's role.


The disclosures about Commerzbank created "enough pressure in the Parliament to sharpen the bill proposed by the Finance Ministry," Gerhard Schick, deputy chairman of the Parliament's finance committee, said during debate on the measure.


As originally proposed by the Finance Ministry, the law would aim to make div-arb deals uneconomical by requiring investors to stretch out their loans to at least 45 days and to have at least 30 percent of the value of their investment at risk during that time. Now, investors participating in div-arb will have to have at least 70 percent of their investment at risk.


Australia implemented a similar change to halt the practice there. Germany's law is set to take effect retroactively to January 1.


Wolfgang Schauble, Germany's finance minister, has previously criticized the deals but said that he cannot seek to recover past taxes lost to div-arb. Tax authorities are, however, going after banks who participated in an even more nefarious form of div-arb, known as cum/ex trading.


In that arrangement, investors reclaimed even more dividend taxes than had actually been withheld by the German government. Cum/ex deals were outlawed in 2012 and are now coming back to haunt many of the country's biggest banks.


As Germany bids farewell to div-arb, however, its neighbors should take note: France, Sweden, Norway and Italy, among others, remain active markets for the trade, according to documents obtained by ProPublica.


This article was written by Cezary Podkul, with reporting contributed by Arne Meyer-Fünffinger and Pia Dangelmayer of Bayerischer Rundfunk in Berlin and Munich. Translation contributed by Jennifer Stahl.


ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.



Sunil Rebello

4 months ago

The same thing is happening now in our P notes.
All the world knew that this was a loop hole for any one (incl terrorist) to invest in our stock market.
at last the government of the day took action and plugged the hole with the help of SEBI. Therefore the SEBI head had to be given an extension to complete the filling of the hole.
now we hear that there was no proper KYC for the P notes.
The rich will always find middle men and institutions willing to help them save Tax.
only the poor and the middle class pay their share of Tax.
But with IT and Nat Grid all will slowly be exposed and closed as much as possible.
the rascals will always find ways to 'not' pay tax.. which they will call Tax Planning.

4G: Hold Your Excitement
In May 2010, while writing about the third generation (3G), I had stated that data-based services, including Internet, music, video or games, would rule the mobile market. Like everyone else, I, too, had great expectation from the 3G wave. Unfortunately, the 3G wave fell far short of our expectations. And, just when things started to improve a little bit, in terms of data speed and usage per subscriber, here comes 4G. 
While major operators like Bharti Airtel, Vodafone and Idea Cellular have launched their 4G services at several places, the most eagerly waited launch of Reliance Jio (RJio) is in the final stages of commercial launch. When the news last came in, Reliance Industries, the parent, had provided RJio SIM cards and devices to its employees who now can refer it to 10 people. I did a check on RJio data speed on a friend’s handset, but I am not impressed. The data speed was, indeed, much higher than 3G, but not even close to real 4G speed. This may be possible since my friend was using the mobile handset of another company rather than RJio’s LYF brand which the company recommends. I will surely write about RJio once it enters the commercial market with its 4G services through the long-term evolution (LTE) standard.
The main difference between 4G and previous standards, like 3G and 2.5G, is use of network nodes. Both, 3G and 2.5G, use packet-switched nodes for data services and circuit-switched nodes for voice calls. In 4G systems, the circuit-switched infrastructure is abandoned and only a packet-switched network is provided. Thus, in other words, in 4G, traditional voice calls are routed through Internet telephony.
In March 2008, the International Telecommunications Union-Radio communications sector (ITU-R) specified a set of requirements for 4G standards, named as International Mobile Telecommunications Advanced (IMT-Advanced) specification, setting peak speed requirements for 4G service at 100 megabits per second (Mbit/s) for high mobility communication (from trains cars) and 1 gigabit per second (Gbit/s) for low mobility communication such as pedestrians and stationary users. In short, the user of 4G should be able to get data speed of about 100Mbits/s.
Unfortunately, our experience with 3G is not that good. So, we need to take the claims of 4G data speed with a proverbial pinch of salt. One of the major reasons why the user never gets the 3G data speed as promised or advertised is lack of knowledge. Majority of users pay for 3G data service (denoted by H or HSPA+ or simply H+) but find that data network is always at 2G speed (denoted by E). The reason is that all mobile handsets are set on the default network setting of ‘GSM/WCDMA’ or ‘WCDMA Preferred’ that is nothing but 2G. Nobody informs the user to select ‘WCDMA Only’ in their mobile handset setting (for mobile network type) which is the 3G data setting. Try this; but there is no guarantee that you would receive the desired data speed. Anyway, since 3G is on its way out, let us not think much about the network and services.  
With the impending launch of RJio’s 4G across India, many think that it will finally change the usage patterns and help improve data speeds. In a test, Edelweiss found RJio beating other operators in terms of network speed. It found the data service of RJio much superior compared with incumbent players’ 4G services with indoor network speed of 3-8Mbps and outdoor speed of 15-20Mbps—about 25% higher than current operators. “However,” its report says, “superior performance can be attributed to RJio’s relatively empty network and performance may deteriorate post-commercial launch.” 
However, while we are getting ready for 4G, the next standard 5G is already being talked about, and is likely to be launched in 2020. Besides providing simply faster speeds, experts predict that 5G networks also will need to meet new use cases, such as the Internet of Things (network equipment in buildings or vehicles for web access) as well as broadcast-like services and lifeline communication in times of natural disasters.



Ramesh Iyer

4 months ago

While I agree that 3G network of most telecom operators (TSPs) is far from satisfactory even in metros, one expects better implementation of 4G from all TSPs, including R-Jio. Moreover, there are many instances of people having used VoLTE-based R-Jio's 4G network, which provides higher speeds compared to other TSPs, but one has to remember that R-Jio is yet to launch commercially, and with increase in subscribers, speeds are bound to drop. So, it's an unfair comparison with other TSPs for now. Moreover, the issue of Lyf handsets offering better speeds on R-Jio's 4G network needs to be sorted out by them, as unlike 2G or 3G, 4G comes in two flavours or standards - 4G which most TSPs have implemented, and 4G-VoLTE used by R-Jio. The latter is a new version of 4G tech, and carries both voice and data through internet protocols. So, if R-Jio adheres to industry standards on VoLTE, its speeds should be handset agnostic. If it indeed offers better speeds on its private-label brand Lyf handsets, then TRAI ought to take cognizance and ask R-Jio to ensure it complies with industry standards of 4G-VoLTE.
Moreover, there are few other mobile handset makers who offer 4G-VoLTE enabled phones now. There are plenty of options in the older 4G enabled phones by various brands though, but these won't work with R-Jio's SIM. So, when R-Jio launches commercially soon, its biggest challenge will be to push its Lyf handsets alongwith its SIM Cards. Currently its handsets are very expensive, compared to other brands which offer VoLTE-enabled handsets.

Swapnil Suryavanshi

4 months ago

Nice Article. But can Relianc RJio prove to be an alternative to all these operators?
3G is an absolute Nightmare. Hopefully 4G live up to its expectations.

Dinesh Acharya

4 months ago

My experience is BSNL broadband on fixed line is the best of the lot. For speed of nearly 2-4 Mbps(billed as 8) upto 60GB for ₹1099 + taxes is the best

M Muralidharan

4 months ago

#Airtel advertises 4G in mountains/lakes/Forests etc. Sadly though in METRO CITIES, their Voice and Data drops like dirt. The data speed is not even closer to 2G. After all, in India, anyone can easily get away with #falseadvts. Some hope when Call drop fines were brought out ended in whimper ....

ramchandran vishwanathan

4 months ago

sukanya : Airtel is right . Ask them whether they can install a booster in the building premises


Sukanya Rao

In Reply to ramchandran vishwanathan 4 months ago

Dear Mr. Vishwanathan
Thank you for your reply.

Sukanya Rao

4 months ago

Airtel has been aggressively marketing their 4G services claiming that it is available in the nooks and corners of the country. I live in the city of Mangalore and I don't receive 4G services. When I consulted Airtel service, their technician visited my apartment on the tenth floor of a building, and told me that the height of my apartment is greater than the height of their mobile tower. Since the 4G signals don't move upwards, I must use 2G services only. I own a Lenovo K3 note phone. I am wondering if this reason is true?

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