Saturday, November 21, 2009
Thursday, November 19, 2009
Wednesday, November 18, 2009
RBI may soon issue new Norms on NPA
Nov 18, 2009
The Reserve Bank said it will soon come out with norms for
banks to augment the capital requirements that the lenders
have to keep aside against bad assets. “We will be issuing
the circular (provisioning against NPAs) so you can then see
details on that,” RBI deputy governor Usha Thorat told.
When asked about the timing of the circular, she said, “soon.”
RBI governor D Subbarao, in the second quarterly review of
the monetary policy in October, had said there is need to
increase provisioning against bad assets to not less than
70% by September 2010. “It has been advised to banks to
augment their provisioning cushions consisting of specific
provisions against NPAs as well as floating provisions,
and ensure that their total provisioning coverage ratio,
including floating provisions, is not less than 70%.
Banks should achieve this norm not later than end-September 2010,”
Subbarao said. The quarterly review noted that at present,
the provisioning requirements for NPAs range
between 10% and 100% of the outstanding amount,
depending on the age of the NPAs, the security
available and the internal policy of the bank.
Since the rates of provisioning stipulated by RBI for NPAs are
minimum and banks can make additional provisions subject
to a consistent policy based on riskiness of their credit portfolios,
it has been observed that there is a wide heterogeneity and variance
in the level of provisioning coverage ratio across different banks, RBI had said.
The Reserve Bank said it will soon come out with norms for
banks to augment the capital requirements that the lenders
have to keep aside against bad assets. “We will be issuing
the circular (provisioning against NPAs) so you can then see
details on that,” RBI deputy governor Usha Thorat told.
When asked about the timing of the circular, she said, “soon.”
RBI governor D Subbarao, in the second quarterly review of
the monetary policy in October, had said there is need to
increase provisioning against bad assets to not less than
70% by September 2010. “It has been advised to banks to
augment their provisioning cushions consisting of specific
provisions against NPAs as well as floating provisions,
and ensure that their total provisioning coverage ratio,
including floating provisions, is not less than 70%.
Banks should achieve this norm not later than end-September 2010,”
Subbarao said. The quarterly review noted that at present,
the provisioning requirements for NPAs range
between 10% and 100% of the outstanding amount,
depending on the age of the NPAs, the security
available and the internal policy of the bank.
Since the rates of provisioning stipulated by RBI for NPAs are
minimum and banks can make additional provisions subject
to a consistent policy based on riskiness of their credit portfolios,
it has been observed that there is a wide heterogeneity and variance
in the level of provisioning coverage ratio across different banks, RBI had said.
Monday, November 16, 2009
Lenders may refer STC unit to debt tribunal
Abhijit Lele / Mumbai November 16, 2009,
With very little chance of repayment from STCL,
a Bangalore-based ailing subsidiary of State Trading
Corporation, lenders are exploring an option to drag
the company to Debt Recovery Tribunal (DRT) as part
of efforts to get back dues.
STCL owes over Rs 1,300 crore to lenders including
State Bank of India (SBI) and Vijaya Bank. STCL
has raised varying amounts from eight banks, led
by Vijaya Bank to which it owes roughly Rs 290 crore.
Bangalore-based public sector bank has had to make
huge provisions for defaults from this account.
“Approaching Tribunal is one of the options before us.
A common view is yet to emerge on the use of option”,
top official of the small government-owned bank.
DRT is seen as a forum for expeditious adjudication
and recovery of debts due to banks and financial institutions .
The other banks which have advanced these amounts include
IDBI Bank, Union Bank, Canara Bank, UCO Bank, Axis Bank and YES Bank.
“Loans were given keeping in mind the ownership pattern
of the Bangalore-based company. Lenders are patiently
following up this case with the government,” said a senior
executive with other public sector bank. K C Ponnana,
managing director of STCL, was not available for comment.
STCL was set up in 1982 for promoting the cardamom trade.
But, in the past decade the company has moved to a diversified
set of commodities, with focus on metal scrap, iron ore,
blast furnace slag, spices and agricultural products.
In August, SBI had asked government-owned State
Trading Corporation of India to come up with a
‘workable solution’ for STCL to repay Rs 1,300 crore
of bank loans. The country’s largest lender had also
shot-off communication to the Reserve Bank of India
to explore various solutions for repayment.
In addition, banking sources said SBI had asked STC,
where the government holds a 91 per cent stake,
to factor in the liability before any dividend payment.
The rating assigned to STCL’s lines of credits has already
been downgraded by agency Icra. The rating agency has
downgraded STCL’s long-term rating assigned to Rs 515 crore
of fund-based limits from LBB to LC.
It had also downgraded the short-term rating of Rs 1,235 crore
of non-fund based limits from A4 to A5. The revised ratings
indicate the lowest credit quality. While STCL’s financial
results were unavailable, during the last financial year,
STC reported a 78.8 per cent drop in net profit at Rs 10.14 crore
in the quarter ended September 2009. Its net sales also dipped
by 12.38 per cent to Rs 3,609.15 crore during the period.
With very little chance of repayment from STCL,
a Bangalore-based ailing subsidiary of State Trading
Corporation, lenders are exploring an option to drag
the company to Debt Recovery Tribunal (DRT) as part
of efforts to get back dues.
STCL owes over Rs 1,300 crore to lenders including
State Bank of India (SBI) and Vijaya Bank. STCL
has raised varying amounts from eight banks, led
by Vijaya Bank to which it owes roughly Rs 290 crore.
Bangalore-based public sector bank has had to make
huge provisions for defaults from this account.
“Approaching Tribunal is one of the options before us.
A common view is yet to emerge on the use of option”,
top official of the small government-owned bank.
DRT is seen as a forum for expeditious adjudication
and recovery of debts due to banks and financial institutions .
The other banks which have advanced these amounts include
IDBI Bank, Union Bank, Canara Bank, UCO Bank, Axis Bank and YES Bank.
“Loans were given keeping in mind the ownership pattern
of the Bangalore-based company. Lenders are patiently
following up this case with the government,” said a senior
executive with other public sector bank. K C Ponnana,
managing director of STCL, was not available for comment.
STCL was set up in 1982 for promoting the cardamom trade.
But, in the past decade the company has moved to a diversified
set of commodities, with focus on metal scrap, iron ore,
blast furnace slag, spices and agricultural products.
In August, SBI had asked government-owned State
Trading Corporation of India to come up with a
‘workable solution’ for STCL to repay Rs 1,300 crore
of bank loans. The country’s largest lender had also
shot-off communication to the Reserve Bank of India
to explore various solutions for repayment.
In addition, banking sources said SBI had asked STC,
where the government holds a 91 per cent stake,
to factor in the liability before any dividend payment.
The rating assigned to STCL’s lines of credits has already
been downgraded by agency Icra. The rating agency has
downgraded STCL’s long-term rating assigned to Rs 515 crore
of fund-based limits from LBB to LC.
It had also downgraded the short-term rating of Rs 1,235 crore
of non-fund based limits from A4 to A5. The revised ratings
indicate the lowest credit quality. While STCL’s financial
results were unavailable, during the last financial year,
STC reported a 78.8 per cent drop in net profit at Rs 10.14 crore
in the quarter ended September 2009. Its net sales also dipped
by 12.38 per cent to Rs 3,609.15 crore during the period.
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