Page 53 - Banking Finance April 2016

FEATURE

dard advances to gross advances) for the creditors that even government agen- help in making the debt recovery tri-
system as a whole rose to 10.9% at the cies such as the I-T department and bunal more effective. We need a sys-
end of March 2015 compared with 10% the excise department will be placed tem that could ensure that every case
in March last year. Nearly `7.05-lakh a notch below unsecured creditors. is dealt the way Satyam Computer Sys-
crore worth of bank loans now fall in the That would also lessen the amount of tems was treated : a sale of viable
stressed category compared with `5.91- litigation that government depart- business to Mahindra even after a fi-
lakh crore last year. ments, especially the I-T department, nancial fraud. There should be avail-
bring about in most of the bankrupt ability of talent to enable companies
“Private sector banks could settle and cases. out of insolvency like the Insolvency
exit some of the most celebrated NPAs Practitioners Association of the UK.
in quick time while public sector banks Abhijit Joshi, founding partner at
are struggling with them," says State Veritas Legal, a law firm, says the draft Although the Viswanathan Committee
Bank of India chairman Arundhati insolvency and bankruptcy code make says that associations of CAs and com-
Bhattacharya. “In a public sector set- a distinction among financial creditors pany secretaries could come up with a
up, there are certain processes that and operational creditors. They allow list of insolvency specialists, it may not
need to be followed, otherwise the insolvency resolution to be triggered in be enough or it could create conflict of
Central Vigilance Commission would the case of a single default and also interests. The proposed changes may
start hounding them. Public sector prescribe penalties for false and frivo- open up opportunities for the economy
banks do not enjoy the flexibility that lous triggers. to surge ahead, but the political im-
their private sector rivals do." passe where no legislation is getting
“All these factors will help in making enacted may delay the process, but is
But the proposed law provides a level- resolutions quicker," he says. The unlikely to get into cold storage.
playing field and enormous power to changes the code proposes will also (Source : ET)

Expectations high for upto 0.50% rate cut by RBI

With inflation under check and government sticking to its fiscal consolidation path, market expectations are that RBI
may cut interest rate by up to 0.50 per cent in its first bi-monthly monetary policy review for 2016-17 in order to
propel growth. The government has also pared the small savings interest rate by up to 1.3 per cent providing cushion
to the Reserve Bank for cutting the policy rate.

Finance Minister Arun Jaitley too had expressed desire that the RBI should cut rate, stating “I want what everybody
wants. At this stage if rate cuts do take place it’s certainly going to be helpful because you need a more efficient
economy and you need a more competitive cost of capital”. Bankers said high interest rate could make Indian economy
sluggish given that inflation is around 5 per cent. “There is possibility of RBI reducing rate by 0.25 per cent as inflation
has eased,” Bank of Maharashtra Chairman and Managing Director Sushil Muhnot told.

According to a senior official from a state-run bank, although a 25 basis points has been factored in by the market
there is also a high possibility of RBI going for a 50 basis points rate cut. Citing various factors for easing of monetary
stance, industry chambers are pitching for 0.5 per cent cut in the key interest rate. A 0.25 per cent cut in the policy
rate by the RBI is almost given, but the real impact of falling lending cost can be felt only if the central bank goes in
for a bold reduction of at least 0.50 per cent, industry body Assocham said.

Retail inflation as measured by the Consumer Price Index (CPI) eased to 5.18 per cent in February as food prices rose
at a slower pace, while Wholesale Price Index stayed in the negative territory for the 16th month in a row. Industrial
output for the third month in a row remained in the negative territory contracting 1.5 per cent in January due to poor
showing of manufacturing sector raising industry clamour for rate cut by the RBI. RBI Governor Raghuram Rajan on
March 12 said government’s sticking to fiscal consolidation roadmap of reducing deficit to 3.5 per cent of the GDP in
2016-17 was comforting.

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