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Sunday, May 4, 2014

Indian banks will have to raise Rs 3 lakh crore in external capital

Indian banks will be required to raise Rs 3 lakh crore in external capital in the next four years, which was a huge challenge, a top bank official said.

"Indian banks will be required to raise Rs 3 trillion in external capital in next four years. Expansion of capital to this extent will affect the returns on the equity of these banks, especially public sector banks," Indian Overseas Bank DGM Vairam Somasundaram said at a seminar here.

"It will be difficult for the government to find such a large amount to capitalise the public sector banks. The situation of the private sector banks will not be much different, leading to merger and consolidation of the banks," he opined.

RBI's directive to implement the Basel III norms by 2018 March, was also a big challenge, he said.

According to Somasundaram, the financial inclusion target laid down by the government by 2016, increasing competition among banks, huge spending on technology, emergence of mobile service providers like Airtel into the banking sector and lack of experienced employees are among the other challenges before the banks in future.

K S Harikumar, Chief Regional Manager, Manappuram Finance Ltd said along with Basel 111 implementation, fresh banking licences also will be a threat to existing banks.

He was of the opinion that the private banks in Kerala may merge together within next five years to "overcome competition."

Increasing NPAs will be a major challenge for the Indian banks. It was estimated that the NPA will grow to Rs 12,5000 crore by 2018, he added.

Source: Economic Times
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Public sector banks to sell Rs 2,000 crore of bad loans to asset reconstruction companies

A clutch of public sector banks, including the country's largest lender State Bank of India, is trying to sell about Rs 2,000 crore of bad loans to asset reconstruction companies, reflecting mounting pressure from stressed assets.

People with knowledge of the matter said UCO Bank wants to offload Rs 1,000 crore of outstanding loans, while State Bank of Hyderabad has already called an auction for Rs 700 crore. Also on the list are Canara Bank and State Bank of India, though they are selling a smaller portfolio of sticky loans. This is the first time in a decade that banks are eager to sell stressed loans in the beginning of the year. Until now, lenders were selling bad loans only in last quarter to clean their balance sheets. The gross non-performing assets, or bad loans prior to making provisions, for calendar year 2013 stood at Rs 2,43,210 crore, up 35% on a y-o-y basis.

Some analysts say lenders want to benefit from the one-time dispensation given by the Reserve Bank of India on sale of such loans. The RBI had said in February that if banks sell assets to ARCs below the net book value, losses incurred due to this could be amortised over two years. The offer is until March 2015. "This move is likely to encourage banks to sell assets when there is a value in it," Siby Antony, managing director and chief executive at Edelweiss ARC, told ET. "So far, only vintage assets were sold when the only resolution with ARCs was asset stripping." Another factor encouraging banks to offload bad assets is the RBI view that ARCs should be construed as a supportive system for stressed assets rather than the last resort to dispose of NPAs.

ARCs, on the other hand, are working towards resolution of loans acquired from banks. ARCs will have to demonstrate their capabilities, else banks that have reposed confidence in them will not come back to sell stressed assets, said P Rudran, MD and CEO, Asset Reconstruction Company of India, popularly known as Arcil.

"All recovery efforts will be in consultation with the selling bank because they may give inputs that we may not be aware of at the time of due-diligence of the account or resolution of account." Banks sold Rs50,000 crore of outstanding bad loans to ARCs in 2013-14, compared with Rs 12,500 crore a year ago.

Source: Economic Times
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SKS Microfinance says Vikram Akula no more its promoter

SKS Microfinance said it will cease to treat a few entities, including Vikram Akula and Sequoia Capital India Growth Investments, as its promoters.

Mauritius Unitus Corporation and Mutual Benefit Trusts are the other entities that have been removed from the promoters list.

" ... taking cognisance of their (entities) requests and instructions, the company shall cease to treat them as its promoters with immediate effect," SKS Microfinance, the only listed microfinance company, said in a filing to the BSE.

The micro-lender said that Mauritius Unitus Corporation and Sequoia Capital India Growth Investments have entirely divested their shareholding in the company and do not currently hold any equity shares.

Akula was previously the executive chairman of the board of directors of the company. He resigned as a director of the company on November 23, 2011 and currently holds only 10 equity shares, the filing said, adding that he does not have any special rights in the company through formal or informal arrangements.

"Akula has informed the company through an e-mail dated April 24 2014, that he is not a promoter of the company," the filing said.

The company's Mutual Benefit Trusts include SKS Mutual Benefit Trust Medak, Sangareddy, Jogipet, Narayankhed and Sadasivapet.

"The Mutual Benefit Trusts do not have any special rights in the company through formal or informal arrangements, except such rights that are available to every public shareholder of the company," the company said.

Source: Economic Times
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