United Bank blames Infosys software for wrong bad loan entries

B L : 20 Feb 14

Kolkata-headquartered United Bank of India has blamed its bad loans problem on inherent deficiencies in its core banking solution (CBS) platform, which is based on Infosys’ Finacle system.

In a statement to the BSE, the public sector bank said: “The Finacle system has inherent deficiencies to correctly identify non-performing assets (or bad loans) in certain categories of borrowers like Kisan Credit Card, Restructured Accounts, Cash Credit/Over Draft continuously overdrawn for more than 90 days, Export Credit Guarantee Corporation covered accounts, etc. The deficiencies still continue in the software.”

The bank said the generation of NPAs (non-performing assets) through the system during the September-December period has given rise to a large number of standard accounts being shown as NPAs and NPA accounts being shown as performing assets.

United Bank’s gross non-performing assets jumped 194 per cent to Rs. 8,545.50 crore (including fresh slippage of Rs. 3,172 crore in the October-December quarter) as of December-end 2013 against Rs. 2,902 crore in December-end 2012.

Rise in provisioning

Huge provisioning of Rs. 1,783 crore towards bad loans saw the bank report a loss of Rs. 1,238 crore in the third quarter against a net profit of Rs. 42 crore in the year-ago period.

According to the bank, manual checking of asset classification done through system poses a challenge, particularly in case of small accounts (such as agricultural loans, Government-sponsored loans, small business loans, etc) in view of their magnitude.

“The bank has been pursuing with Infosys for a long time to rectify these deficiencies in the Finacle system and the solution to some of which will be made available very shortly,” the statement said.

Infosys’ stance

An Infosys spokesperson said: “We wish to firmly state that the (Finacle) solution has the proven ability and framework required to address the asset classification and NPA reporting as per the Income Recognition and Asset Classification norms prescribed by the RBI.”

Infosys said from time to time, it provides enhancements in features for its customer-banks to test and deploy the same in their environment to meet their business requirements.

“United Bank of India, through its application service provider HP, recently approached us with a request to implement this in their environment and we are helping the bank in this regard,” the spokesperson said.

United Bank said its Executive Directors and top management are confident of upgrading and reducing NPAs by at least Rs. 2,000 crore in the March quarter.

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The bank said the generation of NPAs through the system during the September and December quarter has given rise to a large number of standard accounts being shown as NPAs and NPA accounts being shown as performing assets.

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(This article was published in the Business Line print edition dated February 20, 2014)

All you wanted to know about the Vodafone tax case

B L : Meerasiva:17 Feb 14 

Vodafone Plc is learning that when it comes to dogged persistence, its popular pug is not a patch on the Indian taxman. Last week, the government announced that it was giving up its ‘conciliation talks’ with the global giant and was going ahead with its earlier tax demand relating to the Hutch-Vodafone deal of 2007.

Hey, you’re saying, why is Vodafone again in the dock for avoiding tax? 

Didn’t the Supreme Court let it off the hook?

 Well, it’s a long story.

What is it?

Long long ago in 2007 Vodafone International Holdings BV decided to expand its footprint in the Indian mobile phone market by buying out Hutchison Essar.

But it decided to take the roundabout route; its subsidiary exchanged cash for shares with a similar holding company for Hutchison Essar, in far off Cayman Islands. Having sewn up the deal entirely offshore, where the Indian tax authorities had no say, Vodafone then proceeded to make Zoozoo advertisements .

The deal started a ‘wherever you go, we will follow’ saga of the IT department chasing the company. The Supreme Court ruled in 2012 that Vodafone’s actions were “within the four corners of law” .

It also advised Indian taxmen to “look at” the transaction instead of “looking through” it to attribute motives to the deal. What the Indian government saw however was over ₹20,000 crore in unpaid taxes, interest and penalty slipping out of its hands.

It decided to strike fear into the heart of companies by coming up with the General Anti-Avoidance Rule (GAAR). This rule basically said that the government could dig up past deals, all the way back to 1962. .

There was a huge hue and cry and GAAR was postponed to 2016. Still, the revenue officials persisted with their pet case as they felt they could net some good money in this and other high value acquisitions.

Why is it important?

Cases such as Vodafone have stirred up a global debate on the devious tax planning strategies and what governments can do to stymie them. After all, it is taxes that pad up the exchequer.

Standard methods employed by global companies are reducing the locally declared profits and shifting their profits to lower-tax locations. Governments around the world woke up to this trend , referred to as base erosion and profit shifting (BEPS).

Also, domestic firms who walk the straight and narrow path may be put at a disadvantage, as cross-border operators exploit the loopholes. There is also the moral hazard. If global biggies get away with paying no tax by employing clever accountants, wouldn’t domestic corporations be tempted to do the same?

Why should I care?

Knowing whether a company is paying its dues is important for investors because for one, it is proof that the reported profits do indeed exist.

Two, tax avoidance even within the confines of law can have big repercussions. It could knock out a company’s profits and reputation.

Finally, if you’re a law abiding citizen who pays all the dues and saves the receipts, you may be particular about checking if the company you are investing in is equally above board.

In your own dealings, if you come across grey areas in the tax rules, a penny saved in tax may lead to a pound in penalty to be paid later. Take a look at Vodafone, where demands for penalty and interest add up to two times the original tax bill.

Bottomline

Wherever you go, the taxman will follow. So when it comes to paying taxes, be faithful to the rules.

(This article was published on February 17, 2014)

பேரறிவாளன், முருகன், சாந்தன் தூக்குத் தண்டனை ரத்து: உச்ச நீதிமன்றம் தீர்ப்பு

 தி இந்து  செவ்வாய், பிப்ரவரி 18, 2014

முன்னாள் பிரதமர் ராஜீவ் காந்தி கொலை வழக்கில் குற்றவாளிகள் சாந்தன், முருகன், பேரறிவாளன் ஆகிய மூவரின் தூக்கு தண்டனை ரத்து செய்யப்பட்டது.

இந்த வழக்கில் 3 பேரின் சீராய்வு மனுவை விசாரித்த உச்ச நீதிமன்ற தலைமை நீதிபதி ப.சதாசிவம் தலைமையிலான அமர்வு, கருணை மனுக்களை நிராகரிக்க 11 ஆண்டு கால தாமதம் செய்யப்பட்டதன் அடிப்படையில் தூக்கு தண்டனை ரத்து செய்வதாக தீர்ப்பு அளித்துள்ளது.

உச்ச நீதிமன்ற தீர்ப்பு:

ராஜீவ் கொலை வழக்கில் குற்றவாளிகள் சாந்தன், பேரறிவாளன், முருகன் ஆகிய முவரின் சீராய்வு மனுக்களை விசாரித்த உச்ச நீதிமன்ற தலைமை நீதிபதி ப.சதாசிவம் தலைமையில் நீதிபதிகள் ரஞ்சன் கோகோய், எஸ்.கே.சிங் அடங்கிய அமர்வு காலை 10.30 மணிக்கு தீர்ப்பு வழங்கியது.

சாந்தன், பேரறிவாளன், முருகன் ஆகிய மூவரின் தூக்கு தண்டனையை ரத்து செய்து உத்தரவிட்ட நீதிபதிகள். தூக்கு தண்டனையை ஆயுள் தண்டனையாகவும் குறைத்து தீர்ப்பளித்தனர்.

இருப்பினும், இந்த மூன்று பேரையும் விடுதலை செய்வதில் மாநில அரசுக்கு அதிகாரம் இருக்கிறது என்றும் குற்றவியல் நடைமுறைச் சட்டப் பிரிவு 432-ஐ பயன்படுத்தி 3 பேரையும் சிறையில் இருந்து மாநில அரசு விடுவிக்கலாம் என பரிந்துரைத்தனர்.

நீதிபதிகள் கருத்து:

முருகன், சாந்தன், பேரறிவாளன் ஆகிய மூன்று பேரின் சீராய்வு மனு மீதான விசாரணையில் மத்திய அரசு முன் வைத்த வாதத்தை ஏற்க மறுத்த உச்ச நீதிமன்றம், மத்திய அரசின் வாதத்தை ரத்து செய்ததாக அறிவித்தது.

இது தொடர்பாக நீதிபதிகள் கூறுகையில்: "தூக்கு தண்டனை கைதிகளின் துயரத்தை நிரூபிக்க வேண்டிய அவசியம் இல்லை. தூக்கு தண்டனை கைதிகளின் மனநிலை பற்றி அனைவரும் அறிவர்" என்றனர்.

நீதிபதிகள் நம்பிக்கை:

இனி வருங்காலங்களில் கருணை மனுக்கள் மீதான முடிவு காலம் தாழ்த்தாமல் எடுக்கப்படும் என நீதிமன்றம் நம்புவதாக நீதிபதிகள் தெரிவித்தனர்.

அது மட்டும் அல்லாது, கருணை மனுக்கள் மீதான முடிவை தேவையில்லாமல் காலம் தாழ்த்த வேண்டாம் என ஜனாதிபதிக்கு அவ்வப்போது மத்திய அரசும் அறிவுறுத்த வேண்டும் என உச்ச நீதிமன்றம் தெரிவித்துள்ளது.

வழக்கின் பின்னணி:

ராஜீவ் கொலை வழக்கில் குற்றம் சாட்டப்பட்ட முருகன், சாந்தன், பேரறிவாளன் ஆகியோர் தங்களது கருணை மனுக்களை குடியரசுத் தலைவர் பரிசீலிப்பதில் மிகவும் காலதாமதம் ஏற்பட்டது. எனவே, ஆயுள் தண்டனையாக குறைத்து உத்தரவிட வேண்டும் என்று உச்சநீதிமன்றத்தில் மனு தாக்கல் செய்தனர்.

இந்த மனுவை பிப்ரவரி 4-ம் தேதி விசாரித்த உச்ச நீதிமன்றத் தலைமை நீதிபதி பி.சதாசிவம் தலைமையிலான 3 நீதிபதிகள் அடங்கிய அமர்வு, தீர்ப்பை ஒத்திவைத்தது.

கடந்த ஜனவரி 21-ம் தேதி மற்றொரு வழக்கில் ‘கருணை மனுவை பரிசீலிப்பதில் தேவையற்ற தாமதம் செய்ததால், பாதிக்கப்பட்ட குற்றவாளிகளுக்கு தூக்குத் தண்டனையை ஆயுள் தண்டனையாக குறைக்கலாம்’ என உச்ச நீதிமன்றம் தீர்ப்பளித்தது. இதை மேற்கோள்காட்டியே முருகன் உள்ளிட்ட மூவரும் மனு தாக்கல் செய்திருந்தனர்.

ஆனால், மனுதாரர்களின் கோரிக்கையை கடுமையாக எதிர்த்த மத்திய அரசு, “இந்த விவகாரத்தில் முடிவெடுக்க மத்திய அரசு அளவுக்கு அதிகமான தாமதம் எதையும் செய்யவில்லை. இந்த வழக்கில் தண்டனை பெற்றவர்கள்

 இதுவரை தங்கள் செயலுக்காக சிறிதும் வருந்தவில்லை என்பதை நீதிமன்றம் கவனத்தில் கொள்ள வேண்டும்” என்று தெரிவித்திருந்தது.

இந்நிலையில், இன்று மூவரின் தூக்கு தண்டனை ரத்து செய்யப்பட்டுள்ளது.

S C grants life term to death convicts in Rajiv Gandhi case

The death convicts in the Rajiv Gandhi assassination case.

 File photo: D. Gopalakrishnan


B L  PTI  FB 18,2014

 

 

In a major relief to three condemned prisoners in the Rajiv Gandhi assassination case, the Supreme Court today commuted their death sentence to life imprisonment on the ground of 11 years delay in deciding their mercy plea by the Centre.

A bench headed by Chief Justice P Sathasivam rejected the Centre’s submission that there was no unreasonable delay in deciding their mercy plea and the condemned prisoners did not go through an agonising experience as they were enjoying life behind the bars.

The bench, also comprising Justices Ranjan Gogoi and SK Singh, said they are unable to accept the Centre’s view and commuted the death sentence of convicts – Santhan, Murugan and Perarivalan – to imprisonment for life subject to remission by the Government.

It asked the Centre to give timely advice to the President so that mercy petitions can be decided without unreasonable delay.

“We implore the Government to render advice in reasonable time to the President,” the bench said, adding that “the executive should exercise its power one way or other in reasonable time”.

It said the Government should handle the cases of mercy petitions in a more systematised manner.

“We are confident that mercy plea can be decided at much faster speed than what is being done now,” the bench said.

Mercy plea by convicts

Rajiv Gandhi was killed in May 1991. His assassins were convicted by a TADA court in January 1998 and were awarded death sentence, which was confirmed by the apex court on May 11, 1999.

The bench had reserved its verdict on February 4 on the petition of the three convicts for commutation of their death sentence to life imprisonment on ground of delay in deciding their mercy plea.

Their plea was strongly opposed by the Centre which had said that it was not a fit case for the apex court to commute death sentence on the ground of delay in deciding mercy plea.

Admitting that there has been delay in deciding the mercy petitions, the Government, however, had contended that the delay was not unreasonable, unexplainable and unconscionable to commute the death penalty.

The convicts’ counsel had contested the Centre’s arguments, saying they have suffered due to the delay and the apex court should intervene and commute their death sentence to life term.

The convicts had submitted that mercy plea of other condemned prisoners, which were filed after them, were decided but their petitions were kept pending by the government.

The apex court had in May 2012 decided to adjudicate the petitions of Rajiv Gandhi killers against their death penalty and had directed that their plea, pending with the Madras High Court, be sent to it.

The court had passed the order on a petition by one L.K Venkat, seeking transfer of their plea out of Tamil Nadu on the ground that free and fair hearing would not be possible in the State due to the surcharged atmosphere in favour of the convicts.

The Madras High Court had earlier stayed their hanging slated for September 9, 2011 and issued notice to the Centre and the Tamil Nadu government.

Their main contention was that the delay of 11 years and four months in disposal of the mercy petitions made the execution of the death sentence “unduly harsh and excessive,” amounting to violation of their right to life under Article 21 of the Constitution.

The apex court had on January 21 ruled that delay by the Government in deciding mercy plea of death row convicts can be a ground for commuting their sentence and had granted life imprisonment to 15 condemned prisoners, including four aides of forest brigand Veerappan.

The court had held that prolonging execution of capital sentence has a “dehumanising effect” on condemned prisoners who have to face the “agony” of waiting for years under the shadow of death during the pendency of their mercy plea.

(This article was published on February 18, 2014)

DLF trims debt, but the onus is now on real estate to deliver

Although the company’s operating margin fell marginally to around 44%, DLF has begun churning out positive cash flows from operations. Photo: Priyanka Parashar/Mint

Vatsala Kamat  Live Mint 16 feb 14

DLF requires higher revenues from its residential properties to add to future cash flows and profitability

DLF Ltd’s December-quarter results were a mixed bag with an increase in revenues marred by an exceptional item, a provision that dragged down its net profit. The real estate firm’s settlement with the Delhi Development Authority (DDA) on an old contract came as a relief. However, the Rs.411.4 crore provisioning of a foreseeable loss led to a 49% dip in net profit to Rs.145.3 crore for the quarter compared with a year back.

DLF’s saga of high interest continues. Its interest cost of Rs.633 crore on account of its net debt of Rs.19,926 crore on 31 December also had an adverse impact on net profit. However, few positive developments since January have raised investor confidence about DLF’s ability to trim debt through sale of non-core assets.

A report by Religare Capital Markets Ltd, issued about a week back, pointed out that the sale of Aman Resorts at a price that was 19% higher than the earlier deal; the settlement of the DDA issue; and the divestment of its stake in an insurance joint venture has increased investor confidence on the company’s ability to trim debt. At present, net debt is down from the end-December level to Rs.17,400 crore as guided earlier.

With this, DLF is at an inflection point where it requires higher revenues from its residential properties to add to future cash flows and profitability. This would be tough to achieve in the near term given that interest rates continue to remain high and are unlikely to soften in the next couple of quarters. Even in the December quarter, DLF sold 0.6 million sq. ft worth Rs.600 crore versus 0.9 million sq. ft worth Rs.730 crore in the year-ago period.

Although the company’s operating margin fell marginally to around 44%, DLF has begun churning out positive cash flows from operations. In spite of a rise in expenses, its operating profit rose by 7% from the year-ago period to Rs.1,144 crore. Given the challenging economic environment, the stock fell by 43% over the last one-year, which was steeper than the fall in BSE realty index, while the benchmark Sensex rose by 5%.

Now that the realty firm has addressed several negatives despite recessionary market conditions, any triggers by way of higher sales volumes and operating cash flows, could pull the stock up from the present value ofRs.142.

Kingfisher Airlines CEO Sanjay Aggarwal resigns

Sanjay Aggarwal had joined Kingfisher Airlines on 30 September 2010 from SpiceJet. Photo: Mint

 Live mint  :P.R. Sanjai   MON, FEB 17 2014. 12 37 AM 

Aggarwal is the last of the senior management executives from outside the UB Group to quit the grounded airline

Mumbai: Kingfisher Airlines Ltd’s chief executive officer (CEO) Sanjay Aggarwal has resigned, two company executives said, making him the last of the senior management executives from outside the UB Group to quit the grounded airline.

“Aggarwal has put in his papers. The management is expected to accept his resignation,” one of the two persons said. They both declined to be identified.

Mint could not immediately reach Aggarwal for comment despite repeated efforts. Kingfisher Airlines’ spokesperson declined to comment. Vijay Mallya, who is chairman of both Kingfisher Airlines and parent UB Group, also did not offer any comment.

With Aggarwal’s exit, only A. Raghunathan, chief financial officer and a UB Group man, is left in a senior position at Kingfisher.

Aggarwal had joined Kingfisher Airlines on 30 September 2010 from India’s second largest low-fare airline SpiceJet Ltd.

Aggarwal had led SpiceJet as its CEO and led the low-cost airline back to profitability. He quit the airline when media baron Kalanithi Maran of Sun TV Network Ltd bought SpiceJet in June 2010. Prior to joining SpiceJet, Aggarwal was chief operating office of Flight Options, the world’s second largest private jet provider. He had also worked for US Airways for six years.

Mallya brought in Aggarwal to help turn around the loss-making Kingfisher Airlines.

“There is nothing left in Kingfisher Airlines,” said K. Sudarshan, regional managing partner (Asia), EMA Partners International, an executive search firm.

Sudarshan said Mallya is still hopeful of reviving Kingfisher Airlines and is reportedly in talks with potential investors.

“Probably Mallya can restart the airline with a different balance sheet but with the same brand, Kingfisher Airlines, as many passengers like the airline,” Sudarshan said.

In January, Rajesh Verma resigned as executive vice-president of Kingfisher Airlines. Verma was one of the company’s longest-serving employees and had been associated with the grounded airline since June 2006.

In May, Hitesh Patel resigned as executive vice-president of Kingfisher Airlines. Patel was a key member of the start-up team responsible for the certification of Kingfisher Airlines in 2005, having joined in August 2004.

Losses at Kingfisher Airlines, which hasn’t flown since October 2012, widened to Rs.822.42 crore in the three months ended 31 December, compared with a loss of Rs.755.17 crore in the same period a year ago, the airline said on 12 February.

With its planes remaining on the ground, the airline had no sales in the reporting quarter, mirroring the zero sales from a year ago.

The Mumbai-based airline had accumulated losses of Rs.16,023.46 crore as on 31 March 2013 and its net worth was a negative Rs.12,919.82 crore. Kingfisher Airlines, launched in 2005, has never made a profit.

Kingfisher’s operating licence was suspended in October 2012 by aviation regulator Directorate General of Civil Aviation following a strike by the airline’s employees. The permit has since expired, although it can be renewed within two years, which is by October this year.

Meanwhile, a group of 14 lenders led by State Bank of India (SBI) that has an exposure of Rs.7,000 crore to the airline is trying to recover at least Rs.1,000 crore from it by selling assets such as buildings, helicopters and other fixed assets. The consortium collected Rs.550-600 crore in the first phase by selling pledged shares of associate companies of Kingfisher Airlines’s parent UB Group.

The Indian aviation sector is set to see increased competition as more airlines are preparing to fly. Tata Sons Ltd has floated two joint ventures to run airlines, one with Singapore Airlines Ltd for a full-service airline and another with Malaysia’s AirAsia Bhd for a low-fare carrier, after the government relaxed foreign direct investment rules for the sector. Both ventures are awaiting regulatory clearances.

Raghuram Rajan's fight against loan defaulters faces first test; SBI-led consortium moves to take control of Sai InfoSystem

Sangita Mehta, ET Bureau | 17 Feb, 2014, 04.13AM IST 

MUMBAI: A key element of Reserve Bank of India governor Raghuram Rajan's plan to cleanse the Indian banking system of bad loans is likely to be tested shortly as lenders take management control of Sai InfoSystem, the biggest defaulter in the information technology sector.

The move, which might otherwise have been tangled in legal issues, has been made easier because promoter Sunil Kakkad is untraceable. A consortium of banks led by the State Bank of India has hired Alvarez & Marsal, a top US firm that specialises in recovery from defaults and supplies management to companies in distress.

State Bank of India, IDBI Bank,Allahabad Bank, IDBI Bank,Corporation Bank% and State Bank of Bikaner & Jaipur have lent close to Rs 1,200 crore to the Gujarat-based company whose promoter has been absconding since June 2013. All banks have classified the account as a non-performing loan—one where the borrower has stopped paying dues—and classified the promoter as a wilful defaulter.

"The mandate to Alvarez & Marsal is to make maximum possible recovery either by selling assets or revive the unit by bringing professionals on board, or a combination of both," said a senior executive at one of the banks with a large exposure to the company.

Alvarez & Marsal declined to comment on the development, while officials from Sai InfoSystem could not be reached. Two officials from government-owned banks confirmed the development but didn't want to be named.

Rajan has called on bankers to change managements at defaulting companies. "Promoters do not have a divine right to stay in charge regardless of how badly they mismanage an enterprise," he had said on September 5 when he took charge as governor, outlining his strategy to restore banks' loan books to health.

FM P Chidambaram and other top government officials have also raised alarm over rising bad debt and said promoters need to be held accountable. Bad loans, most of them at state-owned lenders, rose 38 per cent to Rs 1.28 lakh crore as of September 2013 over the year earlier.

Sai InfoSystem, which has 1,400-1,500 employees, collapsed after bidding aggressively for big-ticket technology mandates from government entities such as Bharat Sanchar Nigam and Brihanmumbai Municipal Corporation and failed to deliver on time.

According to media reports, the promoters are in the US, and employees haven't been paid salaries since June last. The development at Sai InfoSystem is reminiscent of what tookplace at Rajendra Steel in the mid-1990s.

The promoter, the Batras, left the country after realising they would be unable to service debt after expanding aggressively. It took banks 10 years to recover some of the loans by selling moveable properties.

Alvarez & Marsal, with 40 offices across the world, is a turnaround and restructuring specialist with revival mandates such as those of investment banker Lehman Brothers and accounting firm Arthur Andersen.