Regulations
SEBI moves SC to get Sahara to pay up Rs47,000 crore
The regulator has applied to the SC seeking directions against Sahara and to obtain a schedule of payment for the whole amount.
 
SEBI on Thursday moved the Supreme Court seeking the directions against the Sahara Group for non-payment of dues of Rs47,000 crore.
 
In its petition, SEBI has said that it has received complaints from buyers that Sahara is not interested in selling its properties and repaying the investors. The SC directed and allowed Sahara sell properties to make good on the obligations worth Rs47,000 crore.
 
SEBI has also sought that Sahara Group must file a report to SC about the schedule of its payment of about Rs47,000 crore balance that it is said to owe to investors.
 
Since August, Sahara has been in the process of selling its properties to be able to furnish a record amount as guarantee for the release of Sahara Group Chairman Subroto Roy. The Rs10,000 crore amount which effectively became the bail amount, was being raised by Roy, by holding meetings in the Tihar Jail complex's conference room.
 

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COMMENTS

Rajeev

2 years ago

It's just a plan and nothing else.....Keep the owner in jail....demand him to pay the refunds at any cost...he will sale all his assets at very low cost to come out....buy it an then become a king pin....and the Person "Subarata Roy" proven to be threat will no longer be stronger enough to fight back....so put some other charges on him and drag him to jail again....

Nilesh

2 years ago

Don't know why they are forcing sahara to sell his property at such lower rates.....nobody wants to sell his property which he earned with lots of hard work like vegetables on street....then why subrata roy will do so....?

Isha Patel

2 years ago

#sebi stop fooling people now. Everyone knows that #sahara and #subrataroy are innocent they always worked for the welfare of people..

Isha Patel

2 years ago

#sebi stop fooling people now. Everyone knows that #sahara and #subrataroy are innocent they always worked for the welfare of people..

manoharlalsharma

2 years ago

last news appeared in leading newspaper was that money deposited with S.E.B.I. by the SAHARA to be REFUNDED to its' Original lenders but failed to find them even after sending REMINDERS.then why SAHARA should wind up ? at DISTRESS.

Nifty, Sensex may try to push higher – Thursday closing report
Nifty may correct a bit intraday, but the trend is higher for now
 
On a volume of 101.56 crore shares on the NSE, the index witnessed a gradual up move throughout the session today. During each of the past three trading sessions the benchmark made higher percentage gains. Today the huge volume has been on the back of expiry of the October futures and options segment. Yesterday, we mentioned that as long as the Nifty remains above 8,030, the uptrend may continue.
 
S&P BSE Sensex opened at 27,099 while CNX Nifty opened at 8,085. After hitting the intra-day lows at almost the same level, the indices marched higher. Except for minor pullbacks during the day the indices traded in the positive for the entire trading session. Sensex hit a high at 27,391 and closed at 27,346 (up 248 points or0.92%) while Nifty hit a high at 8,182 and closed at 8,169 (up 79 points or 0.97%). India VIX rose 2% to close at 13.2650.
 
After trading hours on Wednesday, the government announced a relaxation of rules for foreign investment in property development and construction. Among other measures, 100% foreign direct investment (FDI) under the automatic route will be permitted in the construction development sector.
 
Global credit rating agency Moody's Investors Service said that the Government of India's and the Reserve Bank of India's recent economic, fiscal and financial measures will, if successfully implemented, sustain higher GDP growth and address some of the constraints on India's sovereign credit profile.
 
Today was the second consecutive session when SRF (11.27%) was the top gainer in ‘A’ group on the BSE and also hit a new 52-week high. The performance is on the back of good September 2014 quarter results.
 
Raymond (4.83%) was among the top two losers in ‘A’ group on the BSE. The pullback was on the back of a fall in the bottomline of September 2014 over September 2013 quarter, where the revenue from operations registered growth for the relevant quarter.
 
US Federal Reserve's statement at the conclusion of its meeting was seen as showcasing more confidence about American economic growth prospects. This helped the IT stocks back home. TCS (2.21%) and Infosys (1.72%) were among the top five gainers in the Sensex 30 pack.
 
Sesa Sterlite (1.12%) was the top loser among Sensex 30 stocks. It posted a net profit of Rs923.79 crore for the quarter ended September 2014 as compared to a net profit of Rs737.63 crore for the quarter ended September 2013. However, the revenue for the relevant quarter fell from Rs10,962.52 crore to Rs8,735.25 crore.
 
US indices closed in the red on Wednesday.
 
The Federal Reserve on Wednesday ended its monthly bond purchase program and signalled confidence that the US economic recovery would remain on track despite signs of a slowdown in many parts of the global economy. The timing and pace of rate hikes would depend on incoming economic data, the Fed said.
 
Asian indices showed mixed performance. Shanghai Composite (0.76%) was the top gainer while Hang Seng (0.49%) was the top loser.     
 
China's international payments were largely balanced in the third quarter with a surplus in the current account offsetting a deficit in the capital account, the latest data showed. China's current-account surplus in the three months ended September rose to $81.5 billion, compared with a revised surplus of $73.4 billion in the second quarter, the country's foreign-exchange regulator said. The nation had a capital and financial account deficit of $81.6 billion in the third quarter, indicating net outflows of investment funds, the State Administration of Foreign Exchange said. The latest data are initial estimates and will likely be revised later.
 
European indices were trading lower. US Futures too were trading in the red.

User

The Rot Called Corporate Debt Re-structuring

The government has sanctioned fresh capital for public sector banks. Will this capital too leak out into bad loans and be dumped into the opaque and another corrupt process called CDR?

 

The government of India has just announced a fresh round of capital infusion to keep unaccountable and corrupt Public Sector Banks (PSBs) alive. The money will come from taxpayers' pockets, as has happened in the past.

 

Exactly as in the past, no accountability has been imposed on the banks in return for the capital infusion. The Ministry of Finance and Reserve Bank of India (RBI) never pause to think that well-run private sector banks working within the same economic system do not need capital the way PSBs do. Why do the PSBs need all this money at regular intervals? Where is all this capital going?

 

PSBs need regular infusion of capital because they lose tens of thousands of crores in bad loans, for which PSBs are not even held accountable. Indeed, a lot of the bad loans land up in another corrupt and opaque mechanism called Corporate Debt Restructuring (CDR), run under the auspices of the so-called banking regulator, RBI. There is no tracking of what happens to restructured loans. This absolves the banks from any accountability.

 

If the Finance Ministry is interested in tracing where the capital is leaking out to and or in estimating the extent of rot in PSBs, it should investigate CDRs on priority. It will discover that CDR allows for artificially favourable asset classifications in the accounts admitted under CDR, which are otherwise bad loans.

 

This misreporting through falsely favourable artificial asset classification, without making the CDR cell accountable, has encouraged banks to push their massive bad loans into CDR. This has severely compromised the basic reason for which the CDR cell was established.

 

How widespread is the menace? A typical public sector bank has around 35% of its advances to large and mid-size corporates. Surprisingly, a large portion of this part of the credit book is being referred to CDR, which involves loans where for a two-year period there has been no income, then fresh loans are granted at a concessional pricing at 11%-12% p.a.

 

This portfolio gives returns, which are far lower than the risk-adjusted cost of capital of most banks. How much are banks giving up on their income under this dubious RBI-managed restructuring process? Unfortunately, bank-wise restructured portfolio data is not available in the public domain.

 

But those who have been involved with CDR say that “about 60% of loans to large and mid-sized corporates have been/are being restructured either bilaterally or under the CDR scheme. Thus, around 21% (60% of 35% of total loan book) of an otherwise high returns loan book is giving returns which reduces the value of business, i.e. gives a return which is lower than the cost of capital.”

 

Remember, agricultural loans contribute 18% of the loan book and are also lent at concessional rates, hence earn returns that are lower than the cost of capital. Therefore, adding the restructured loans (21%) and agricultural loans (18%), nearly 38% of the total loan book provides lower returns than the cost of capital.

 

While agricultural loans are a part of priority sector obligation, their proportion of the restructured loan book is ever increasing and at times even difficult to predict, as banks rush to use CDR as a means for hiding and kicking bad loans down the road.

 

Unfortunately, unless someone from the Modi government steps in and starts asking tough questions, this burgeoning restructured portfolio is likely to come in the way of sensible banking and monetary policy.

 

Interestingly, senior RBI officials have often mentioned that banks are indulging in evergreening of loans, (according to former Deputy Governor Dr KC Chakrabarty) as well as “putting lipstick to pigs” (according to Governor Dr. Raghuram Rajan) i.e. they are restructuring loans which really are not viable. But nobody seems to be bothered that this evergreening and beautification is happening right inside the RBI's CDR cell!

 

  1. Nobody also seems to bothered by the fallout of the way bad loans are being kicked down the road

  2. The Opportunity cost which has to be borne by everyone in the economy by way of higher priced loans

  3. Income tax paid by honest tax payers being deployed in providing more capital to banks to support bad loans.

  4. Reduced availability of credit to various sectors in the economy with small businesses being the biggest losers.

  5. Impact on monetary policy transmission.

  6. Undermining the “real” capital adequacy of PSBs, creating risk of financial instability.

 

Apart from the fact that the RBI is colluding with banks in dumping bad loans into the CDR system, it does not audit CDRs and has flawed benchmarks to assess its efficiency.

 

CDR’s efficiency is based on the number of days in which CDR is implemented. In fact, the CDR cell has a target of restructuring loans and thus, everyone in the decision making has a vested interest in seeing that CDR is implemented anyhow.

 

However, a very important criterion of “being efficient” is absent; i.e. deciding whether the loan facility really deserves restructuring or not? It would be more useful to recognise, say five deserving cases for CDR and restructuring them in one year, rather than restructuring 25 cases in 90 days, out of which 20 cases merely amount to applying “lipstick to the pig”. Any audit of the fate of restructured loans will open a can of worms. But is the Ministry of Finance, which needed to use the PSBs to make a success out of the Prime Minister’s pet project, Jan Dhan Yojana, really interested in finding out?

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COMMENTS

vswami

2 years ago

In a recent media report, the RBI chief has, n a manner of letting the cat out of the bag, voiced his concern that the culture of loan waivers must end. His viewpoints are seen to have been well made, with unbiased outlook.

To add a couple of more (for a serious look into):


1. The ongoing unbridled practice of , 'bailing out' - with no regard to the flip side namely, potential impact /adverse effect on the lawful rights and interests of the stakeholders- e.g. 'depositors' whose monies are siphoned off for such purpose.


2. The standard provisioning permitted, as a routine minimum for tax deduction, under the income-tax law, for 'bad and doubtful debts' , with no other criterion/or checks and balances, in place / to apply; which, in the ultimate analysis, has the obvious potential to breed other 'evils', such as corrupt practices in lending.

Besides,going by one’s quick but limited understanding, the primary /upfront responsibility to recover lies with the lending banks. Yes! Attachment of the property given as security by the borrower is, perhaps, the ultimate recourse. But then, that is going to essentially depend upon the quality /adequacy, in legal terms, of the security so given and accepted by the lender,- which, more often than not is done without , albeit a must, a mindful scrutiny and diligent investigation. For instance, just as others, ‘home loans’ if so given, - mostly impulsively, without a proper and intelligent scrutiny, so also expert vetting of the supporting documentation offered by borrowers,- on the security of the property of special kind known as, Flats or Apartments, for reasons known or ought to been known through wisdom to be gathered from past experience, are bound to be confronted with insoluble /irresolute mind -teasing legal problems/hurdles. This is an area in which it is for the Regulator to be of effective guidance, as so required through binding directives, to its constituents, to guard against possible disputes, ending up in infructuous court litigation (civil /criminal).
As may be readily imagined, RBI cannot, if so minded, fail to locate such instances from the open book of settled or unsettled ongoing court cases.

Gupta

2 years ago

Do not expect this Govt to change this. Modi is an administrator, not a reformer. He will work on other improvements from the Congress regime and there is lots he will do, but expecting him to clean the public sector is a pipe dream. He loves the public sector (just see the Gujarat example of last 12 years). He will continue to pump money into this sinkhole.

The ONLY solution to this problem is to privatize. That is the only way to bring in accountability. As long as PSU bankers know that their salary and promotions and perks have no correlation with their work, they will continue to create CDRs and NPAs for filling their personal pockets. Any idiot with no financial common sense can also see why every PSU bank has NPA + restructured loans of > 10%, whereas private bank average is 3-4% and foreign bank average is below 1%.

Why does this country need to have 25-30 public sector banks?

Why does RBI allow banks a "one-time" dispensation every 5 years to restructure loans even without calling it restructured or CDR. What we see as restructured or CDR are actually 2nd leg of the problem. These crook borrowers have already benefited once through the restructuring before they get the CDR label.

The best part is that RBI guidelines, yes, RBI guidelines require that when a company goes to restructuring, none of its banks can refuse to lend more money!!! Amazing, isn't it? So if we have another Kingfisher airline tomorrow where one stupid bank is willing to sink in more money, RBI will force the other banks to do so. God help the depositor's savings in these banks and the equityholder's equity.

Jai Hind... this happens only in India

manoharlalsharma

2 years ago

Once upon pole 'HEAD-LINES' were LESS COMMERCIAL BUSINESS and more GOVERNANCE,where have gone AUTHENTICITY of ?

Mahesh S Bhatt

2 years ago

Honest Pays for Rich dishonest Industrialist/Crony Capitalism drowned American Financial system & we /world is following the way more fast/dangerously.Mahesh

Rajan RG

2 years ago

I think Modi & team forgets why people has given a stable verdict for them. The expectation is the new govt should not repeat the congress govt mistakes but these people are just continuing the legacy of the congress. I thought this govt will be helpful for future generation of Indians. I lost the hope now.

Rajan RG

2 years ago

I think Modi & team forgets why people has given a stable verdict for them. The expectation is the new govt should not repeat the congress govt mistakes but these people are just continuing the legacy of the congress. I thought this govt will be helpful for future generation of Indians. I lost the hope now.

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