QBiz: Bank NPAs Surge $1 Trillion, Policies to Shape Make in India

Catch the latest business stories from the papers.

Not declaring a loan as an NPA adds to the financial woes of banks. (Photo: iStockphoto)

1. Listed Banks’ NPAs Surge by Rs 1 Trillion in Dec Quarter: Livemint

Publicly traded banks in India added nearly Rs 1 trillion in bad loans in the quarter ended 31 December, amounting to a 29 percent increase in the stock of deteriorated debt from end-September, as lenders responded to a central bank call to accelerate recognition of stressed assets, according to Livemint.

Raghuram Rajan, governor of the Reserve Bank of India (RBI), set banks a March 2017 deadline to clean up their balance sheets and has nudged them to treat some troubled loan accounts as bad and make provisions for them by the end of this March.

The central bank expects the clean-up, which started in the December quarter, will restore the health of banks, revive lending and, in turn, boost economic growth.

2. Corporate Earnings Take a Knock in Q3: BS

India Inc and equity investors might have to wait longer for a recovery in corporate growth and earnings, reports Business Standard.

During the October-December quarter of this financial year, the combined net sales of 2,561 companies declined 4.4 percent on a year-on-year basis, a higher rate than 4.3 percent in the September quarter and 3.6 percent in the June quarter.

Operating profit rose 1.1 percent, aided by lower costs amid a slide in global commodity and energy prices, while net profit declined 1.7 percent.

If financial and energy firms are removed from the sample, the picture improves a little. The remaining 2,100 companies reported net profit growth of 3.3 percent from a year earlier, on lower tax outgo, while net sales remained stagnant, rising only 0.7 percent on a year-on-year basis.

3. Telecom Ministry Seeks 10-Year Tax Holiday for Make in India Drive: ET

The telecom ministry has reportedly proposed a 10-year tax holiday for mega projects in the sector as part of its recommendations for the upcoming Union Budget that are aimed at attracting fresh investments for the Make in India programme, reports the Economic Times.

The ministry also suggested excise duty exemption for a range of electronic equipment, which would help lead to the creation of a much-needed manufacturing ecosystem in the country.

According to senior ministry officials quoted in the report, a 10-year tax holiday in a block of 15 years may draw fresh investments of over $1 billion (Rs 6,800 crore) over three years.

4. Snapdeal Raises $200 Mn from Canadian Pension Fund, Iron Pillar: Livemint

India’s second largest e-commerce firm Snapdeal is said to have raised $200 million in fresh funds from investors led by Canada’s Ontario Teachers’ Pension Plan, according to Livemint.

Venture capital fund Iron Pillar and other investors also participated in the round.

In August, Snapdeal raised $500 million mainly from Chinese e-commerce firm Alibaba Group, Foxconn Technology Group and existing investor Softbank Group, which valued the Delhi-based firm at about $4.8 billion post money.

The company did not disclose the current valuation.

5. Jaitley Hints at Big Banking Reforms, but No Full Divestment from PSBs: HBL

Finance Minister Arun Jaitley has hinted at major banking reforms in the forthcoming Budget and assured foreign investors that retrospective taxation will be a thing of the past, reports the Hindu Business Line.

With the Budget scheduled for 29 February, he did not elaborate on what the shape of the banking reforms will be.

We have two tax disputes with large corporates. This we are working to settle amicably. And also, the legacy issues in the tax system will be sorted out.

<b>Arun Jaitley, Finance Minister</b>

The government, Jaitley said, would maintain an arm’s length in the functioning of banks but will not divest completely from public sector banks.

6. Service Tax to be Raised to 16 Percent But With Broader Credit: FE

The rate of service tax could go up to a flat 16 percent from an effective 14.5 percent now in the coming Budget, but the government would try to soften the resultant blow to businesses and consumers with a broadening of the credit base and an increase in the turnover threshold for the tax net, from Rs 10 lakh at present to Rs 25 lakh, reports the Financial Express.

The rate hike, in step with the need to align the service tax with the proposed GST rate of 18-20 percent , would still yield significant additional revenue to the government.

If the tax is hiked to 16 percent, it would mean a rate rise of over 3.5 percentage points in a short span of nine months.

Since the tax’s launch in 1994, at a rate of 5 percent on a small set of services, the steepest rate hike previously was in 2003-04. On 1 June last year, the rate went up from 12.36 percent to a flat 14 percent (in the process, eduction and higher-eduction cesses were subsumed in the rate) and 0.5 percent Swatch Bharat cess was levied on 1 November.

7. Taxman Extends Cairn India Share Freeze: FE

Around the same time that Prime Minister Narendra Modi was renewing his promise to end the retrospective tax regime — he did this while in London in November last year and then before a French delegation in the capital in January — the taxman sent a notice to the UK-based Cairn UK Holdings, renewing the freeze on the sale of its shares for another three months, according to a Financial Express report.

In January, Modi had made his strongest-ever statement on the retro tax, telling the India-France Business Summit, “Retrospective tax is a matter of past… We are ensuring that neither this government nor the future governments can open this chapter.”

The freeze relates to shares of Cairn India that Cairn UK Holdings was planning to sell to the Vedanta group two years ago — the shares, worth $1 billion then, are valued at around $300 million now.

8. Tata Steel SEZ to Invest over Rs 2,000 Crore in Developing Infra: ET

Tata Steel India Managing Director TV Narendran has said the first phase of Kalinganagar plant in Odisha is scheduled to start commercial production at the beginning of next financial year, while the second phase ramp up with happen once demand gets better.

According to an Economic Times report, the steelmaker has spent more than Rs 25000 crore in the last 10 years to build a 6 million tonne steelmaking plant in Odisha. The commissioning of first phase of 3 mt has faced several delays until date.

Indian steel industry is under tremendous pressure as China, Russia, Japan and South Korea continue to flood the market with cheap steel. Indian government has taken steps to reduce the flow of these imports.

9. How Policies Can Shape Make In India: Livemint

An analysis by Livemint outlines the various reforms the NDA government can undertake to ensure the success of the flagship Make in India.

The National Democratic Alliance (NDA) government has identified labour reforms as one of the key measures to improve the ease of doing business in India. Though many of the reforms were initiated by the previous United Progressive Alliance (UPA) government, whose 10-year tenure ended in 2014, they remained unimplemented in the face of resistance from vocal trade unions and a lack of political will. Ever since the NDA government came to power in May 2014, it has been trying to make changes in labour laws though it has been accused by both workers’ unions and opposition political parties of being partial towards industrialists.