Page 8 - Banking Finance January 2018

BANK UPDATE

Finance Minitry asks PSU RBI allows banks a level-playing field in ECB refinance
banks to gearup Reserve Bank of India has permitted overseas branches and subsidiaries of In-
dian banks to refinance the existing external com-
The Union finance ministry has urged mercial borrowings (ECBs), giving them a level-play-
nationalised ing field vis-à-vis their global counterparts.
banks to
improve They can refinance ECBs of AAA-rated companies
as well as Navratna and Maharatna public sector
their per-
formance, undertakings, by raising fresh ECBs, the RBI said in a statement on developmen-
resolve tal and regulatory policies.
stressed assets and lower their de- "The decision in allowing subsidiaries of Indian banks abroad to refinance AAA-
pendence on the government for rated corporates will provide a fair and just opportunity to Indian banks to book
capital. and retain good quality assets," State Bank of India Chairman Rajnish Kumar said.
Terming the high level of non-per- Currently, Indian corporate are permitted to refinance their existing ECBs at a
forming assets as a legacy issue, lower all-in-cost. The overseas branches/subsidiaries of Indian banks are, how-
Union minister of state for finance ever, not permitted to extend such refinance.
Shiv Pratap Shukla has said the Rs In order to provide a level-playing field, it has been decided, in consultation with
2,11,000-crore recapitalisation deci- the government, to permit the overseas branches/subsidiaries of Indian banks
sion was aimed at fixing the problems to refinance ECBs. The revised guidelines will be issued within a week, the cen-
of state-owned banks.
tral bank said.
"The non-performing assets of banks
have not happened in our time. I am Andhra Bank launches scheme to push entrepreneur-
aware that some of the banks are in
a weak financial position. The govern- ship
ment has tried to fix the problem Andhra Bank launched a new scheme for self-help groups (SHGs) to encourage
(through recapitalisation) and even entrepreneurship. The scheme, Pattabhi Sitaramayya - Self Business Group (PS-
the banks were not anticipating that SBG), has been introduced to commemorate the 138th birth anniversary of its
the government would help them so founder Bhogaraju Pattabhi Sitaramayya, and the Silver Jubilee of the SHG-Bank
much," said Shukla at the annual ses- linkage programme in the country.
sion of the Merchants Chamber of Under the scheme, SHGs having five years of association with Andhra Bank and
Commerce and Industry on Wednes- having successfully completed three credit rotations with good repayment record
day. and an aptitude for entrepreneurship, will be eligible for a loan. Finance in the
"Banks should not expect the govern- form of working capital and term loan can be extended to the group or in indi-
ment to come to its aid every time. vidual capacity within the group to the extent of Rs.25 lakh without any collat-
They should try to stand up on their eral security on easier terms and conditions, according to a release.
own. The government has urged the
banks to quickly improve their bal- Banks seeks tax break for NPA
ance sheet and resolve NPAs," said In a pre-budget meeting with finance minister Arun Jaitley and senior finance
Shukla. ministry officials, banks sought tax breaks for haircuts

Gross NPAs in public sector banks rose taken during the resolution of non-performing assets.
from 5.43 per cent (Rs 2,78,466 Banks have also sought a replacement of the monthly
crore) in March 2015 to 13.69 per reporting requirement to the tax department with an-
cent (Rs 7,33,137 crore) as of June nual reporting. They have also demanded that the time
2017. As the banks provided to cover for recognition of bad debts be aligned. At present, it
the losses, this hurt their bottomline is 180 days, according to Reserve Bank of India norms,
and the capital eroded as risk and 90 days, under the Income Tax Act. They also suggested incentivizing digital
weighted assets increased.
transactions, the finance ministry said in a statement.

8 | 2018 | JANUARY | BANKING FINANCE

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