Page 7 - Banking Finance June 2022

BANK UPDATE

million loan agreement with Japan trillion, including Rs 45,000 crore few weeks ago to discuss certain issues
Bank for International Cooperation through long-term bonds, in FY23. faced by the lenders, two senior bank
(JBIC), along with three Japanese pri- officials told.
The balance will be from the shortfall
vate financial institutions MUFG Bank,
in priority sector lending (PSL) and When contacted, Sunil Mehta, chief
the Bank of Kyoto and the Hachijuni
short-term instruments. G R Chintala, executive of the industry body Indian
Bank on the side-lines of the Quad
chairman, Nabard, said the scale of Banks Association, said, "We should
Summit.
fund raising in FY23 was similar to what have a system where the entire com-
The purpose of the loan is to support the institution did in FY22. pany is not tarnished because of a
the Indian healthcare sector related to small diversion of funds and its entire
The yield on long-term paper has hard-
combating Covid-19, including but not borrowing is declared as 'fraud'.
ened in markets in tandem with the
limited to vaccine manufacturers, phar-
change in the rate cycle and inflation.
maceutical companies, manufacturers
Outstanding long-term borrowing rose Aditya Birla ARC, Arcil
of personal protective equipment,
to Rs 2.8 trillion in March 2022 from
medical oxygen or other medical de- among companies eyeing
Rs 2.18 trillion in March 2021.
vices, hospitals, and other related ac- SBI's KSK Mahanadi loan
tivities.
Banks to seek change in Aditya Birla Asset Reconstruction Com-
Exim Bank has been supporting the pany, Kotak Mahindra Bank-backed
'Fraud' definition
healthcare sector and all the segments Phoenix ARC and Avenue Capital-
in the pharmaceutical value chain. All high-street banks will jointly move backed Arcil are among a dozen appli-
the Reserve Bank of India (RBI) to urge cants interested in acquiring a Rs
Public sector banks post a change in the sweeping definition of 3,815 crore KSK Mahanadi Power loan
'fraud' which cripples businesses, from State Bank of India, said people
81% rise in Q4 net profit
scares away financiers and results in aware of the matter.
Public sector lenders have posted an
legal tangles.
81 per cent year-on-year (YoY) increase This is the largest stressed loan sale by
A rigid regulation requires all banks to a bank seeking upfront payment from
in net profit in the fourth quarter
label a borrowing company and all its the buyer. SBI has set a Rs 1,544 crore
ended March 2022 (Q4FY22) on im-
accounts as 'fraud account (s)' when reserve price on the outstanding loan.
provement in net interest income (NII)
one lender puts a fraud tag. It sets off
and reduction in provisions for bad So far, most big-ticket distressed loan
loans. For FY22, net profit rose by 91.3 a process where lenders have to file sales were structured deals involving
police complaints and take a knock-
per cent. part payment in the form of security
which is often disproportionately receipts that would be redeemed upon
Nine of the 12 public sector banks have
higher than the size of the fraud -on recovery from defaulting borrowers.
announced results so far. NII, which is
their bottom lines.
earnings from loans minus what is paid "The timing of SBI's proposed loan sale
on deposits, rose 18.5 per cent YoY to The combined action rapidly worsens of KSK Mahanadi indicates that lend-
Rs 70,825 crore in Q4FY22. While low the fortunes of the borrowing corpo- ers are no longer confident of timely
interest rates on loans shrank interest rate, driving away creditors, suppliers, resolution under the Insolvency and
income, banks benefited from a fall in investors and other stakeholders. And Bankruptcy Code-driven process," said
the cost of funds amid abundant liquid- lenders which place all the information a lender.
ity in the system as the Reserve Bank in public domain may face legal action
KSK Mahanadi Power has been under-
of India pumped in resources to sup- - as some of the court battles bear out
going insolvency proceedings for over
port economic revival and growth. - when angry borrowers think they
two and a half years. The resolution
were disgraced without being properly
Nabard plans to raise Rs. professional, Sumit Binani, backed by
heard.
PricewaterhouseCoopers, has ex-
3.5 trillion in FY23 Bank CEOs decided to make a repre- tended the deadline to submit a firm
Nabard is planning to raise Rs 3.5-3.6 sentation to RBI at a meeting held a bid to July 8 from April 29.

BANKING FINANCE | JUNE | 2022 | 7