Page 9 - BANKING FINANCE JANUARY 2016 ONLINE
P. 9
BANK UPDATE
Jaitley nudges banks to stay fit Allahabad Bank may exit
Finance minister Arun Jaitley has said certain specific banks also. The overall from insurance JV Univer-
that the recent steps taken by the gov- health of the economy and how vari-
ernment and the RBI would improve ous sectors are doing because part of sal Sompo
the asset quality of state-run banks the stress was also caused on account
within a "reasonable" time. He also of factors that are attributable to cer- Allahabad Bank has said it may par-
asked the bankers to get rid of the non- tain sectors," Jaitley said. tially or
performing assets (NPAs) and completely
clean up their balance sheets The finance minister has al- divest its
at the earliest. located Rs 7,940 crore in the stake in the
budget to recapitalise PSU insurance
Gross NPAs of public sector lenders during this fiscal. joint venture Universal Sompo Gen-
banks rose to 6.03 per cent at eral Insurance (USGI).
the end of June from 5.20 per Jaitley had said the govern-
cent in March, 2015. ment was keen to sell its USGI is a public-private venture with
stake in some state-owned Allahabad Bank holding 30 per cent
In the second quarterly performance companies, especially in the metals along with Indian Overseas Bank
review in six months, Jaitley business, but would do so only when owning 19 per cent, Karnataka Bank
brainstormed with SBI chairperson the market conditions improves. (15 pc), Dabur (10 pc) and Sompo
Arundhati Bhattacharya and other Japan Nipponkoa Insurance Inc with
PSU bank heads as well as RBI officials The banks are empowered to deal 26 per cent stake.
over rising bad loans in different sec- with wilful defaulters, Jaitley said, add-
tors, credit offtake and the status of ing that the lenders' ability to get a In a regulatory filing, Allahabad Bank
social security schemes. failed creditor to exit will increase once said its Board of Directors will hold a
the bankruptcy law gets passed. meeting in which it may deliberate
"We did have a discussion in relation to on partial/complete disinvestment of
its stake in USGI. The board will con-
Central bank gives India Inc a rupee bond booster sider appointment of consultant for
advising redrafting of existing share-
RBI recently approved a set of more years, it said. The all-in cost for such holders agreement in the joint ven-
liberal external commercial borrowing ECBs has been reduced 50 basis points ture, Allahabad Bank said.
norms, allowing Indian companies to from what was allowed earlier.
raise rupee resources from overseas "To consider according approval to
lenders, without incurring currency For long-term ECBs though, the all-in float Request or Proposal (RFP) for
risks. The new norms will be effective cost is 50 basis points higher. For ru- appointment of consultant for advis-
from April 1, 2016. pee-denominated ECBs, the rate will ing and undertaking redrafting of ex-
be commensurate with the prevailing isting shareholders agreement form-
Such rupee-denominated bonds are market conditions. ing insurance joint venture of bank
being issued in large numbers. They are namely Universal Sompo General In-
a hit with Japanese retail investors. Apart from usual lender like banks, surance Company Limited so as to
Once Indian companies start raising such rupee resources can now be bor- align the same with amended Indian
rupee resources from abroad, more rowed from sovereign wealth funds, Insurance Laws," it said in the filing.
such bonds will be issued and would pension funds and insurance compa-
help make the domestic currency more nies, according to the final guidelines. Indian government earlier in July
international. 2015 allowed the foreign investors to
The liberal approach, with fewer re- up their stake in the Indian insurance
For ECBs in foreign currency, the cen- strictions on end uses and higher all-in joint ventures to 49 per cent from
tral bank raised the limit for small cost ceiling will help for "long-term the earlier 26 per cent. The hike in
value bonds, with a minimum average foreign currency borrowings as the foreign investment limit into the in-
maturity of three years, to $50 million extended term makes repayments surance sector is expected to attract
from the existing $20 million. For ECBs more sustainable and minimizes roll long term capital, besides improving
of more than $50 million, the mini- over risks for the borrower," RBI said the overall investment climate.
mum maturity period should be five in a statement.
BANKING FINANCE | JANUARY | 2016 | 9
Copyright@ The Insurance Times. 09883398055 / 09883380339
