The Reserve Bank of India (RBI) will issue a revised circular on stressed assets resolution in the wake of the nation’s apex court striking down the contentious February 12, 2018, directive to clean up the bad loan mess in Asia’s third largest economy. The regulator had issued the directive, armed with the Section 35AA of India's Banking Act. The new Section empowered the Union government to authorise the RBI to direct banks to resolve specific stressed assets by initiating the insolvency resolution process.
On Thursday night, after Kolkata Knight Riders vanquished Royal Challengers Bangalore at an Indian Premier League match when Andrew Russell smacked his seventh six, , scoring 48 off 13 deliveries, Sunil Gavaskar said this was a classic instance of snatching victory from the jaws of defeat. While watching the match in the evening on TV, I got many text messages from executives of Jet Airways (India) Ltd, giving a running commentary on how Indian Oil Corp Ltd stopped supplying aviation fuel to the airline that day and resumed later and its lessors were asking the India’s aviation regulator to deregister planes leased to Jet for non-payment of lease rental. (Once they are deregistered, the lessors can take them out of India and lease to other airlines.
At the risk of being in contempt of court, I would love to say that Tuesday’s Supreme Court judgment in military parlance is akin to a “surgical strike” on the Indian central bank. The judgment is a big blow to the Reserve Bank of India’s (RBI) war against rising bad loans in Asia’s third largest and the world’s fastest growing major economy. The apex court has set aside the February 12, 2018, circular of the RBI, which among other things directed banks to take the defaulting power, sugar, shipping companies to the insolvency court.
At the Mumbai launch of former Reserve Bank of India (RBI) governor YV Reddy’s latest book Indian Fiscal Federalism (co-authored by G R Reddy), governor Shaktikanta Das referred to Reddy’s tenure as “continuity and change… mixed together appropriately” -- something which Reddy himself had said on assuming office in September 2003. When Reddy’s turn came at the launch function, he spoke about the change in the approach of the new governor too. For the record, in his five-year tenure, Reddy had never cut interest rate even once but Das cut the rate at his very first monetary policy meeting.
On March 15, bad debt-laden private sector lender Lakshmi Vilas Bank raised Rs 459.59 crore equity. The money will strengthen its capital base, said a stock market notice which also scotched the speculations about three non-banking finance companies (NBFCs) -- Indiabulls Housing Finance, Edelweiss Financial Services and Srei Infrastructure -- exploring possibilities of a merger with the bank.
This is one of the many outcomes of the Reserve Bank of India’s (RBI) latest liquidity infusion move through a unique instrument. Indeed, in the past too, the RBI had infused rupee liquidity using this route but that had been done (last time in 2013) in difficult times, when the local currency was under attack. This diversifies the liquidity management toolkit of the RBI.
The CEOs of private and foreign banks in the world’s fastest growing major economy are a sulking lot these days as India’s banking regulator is planning to downsize their remuneration. Those who always feel these bankers earn a lot, particularly in comparison to their counterparts in government-owned banks, some of which have much larger balance sheets, are watching them with voyeuristic glee. Under India’s Banking Act, private and foreign lenders always need regulatory approval for the remuneration of whole-time directors and CEOs and the Reserve Bank of India (RBI) has not exactly been liberal in its approach.
A king loved walking on the streets but didn’t want his feet to get dirty. So, a hefty award was announced for the person who could solve his problem. The first aspirant came with thousands of brooms; the cloud of dust, formed over the kingdom, made the king sick.