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QBiz: Cabinet Approves Bankruptcy Bill, Lenders to Consider Merger

Business news from across the country.

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1. Union Cabinet Approves Bill to Deal with Bankruptcy at Banks, Insurance Firms

The Union cabinet has approved a proposal to introduce a bill to deal with bankruptcy of banks, insurers and other financial services firms, seeking to shield the financial system from systemic crises and protect consumers.

The move is in line with an announcement in Finance Minister Arun Jaitley’s 2016-17 budget speech that the government intends to put in place a comprehensive resolution framework to tackle any potential crises in financial companies.

Source: Livemint

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2. Four Large Public Sector Lenders Asked to Consider Mergers

The finance ministry has asked four big lenders to explore the possibility of merging with smaller banks, as the government moves to consolidate public sector banks, a senior finance ministry official told BloombergQuint on the condition of anonymity.

The government has picked relatively stronger lenders including Punjab National Bank, Bank of Baroda, Bank of India and Canara Bank as possible acquirers in this process of consolidation, said the official. The banks have already made presentations to the government on whether they are in a position to merge with smaller banks and the synergies that various combinations may throw up.

Last year, the government approved the merger of State Bank of India with its remaining five associate banks. The consolidation process went smoothly with the merger taking effect from 1 April. In an interview to Bloomberg News earlier this month, Finance Minister Arun Jaitley said that the government would be contemplating a few more bank mergers following the merger of SBI with its associates.

Source: BloombergQuint

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3. RBI Starts Bankruptcy Proceedings: Bhushan Steel, Essar Steel, Alok Industries Among Likely Targets

The Reserve Bank of India (RBI) on Tuesday said 12 accounts representing about 25% of the gross bad loans in the banking system would be eligible for immediate reference for bankruptcy proceedings. It used one criteria for shortlisting these accounts: They should have outstanding dues of at least Rs 5,000 crore, of which at least 60% should have been classified as non-performing by banks as of 31 March 2016.

RBI did not name these 12 accounts. Mint has put together a list of likely candidates on which the Insolvency and Bankruptcy Code can be implemented, based on debt size and conversations with bankers. This list will be updated as and when more information comes in.

Source: Livemint

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4. Essar Steel to Feel the Heat of the New Bankruptcy Code

Essar Steel, a long standing trouble spot for Indian lenders, is likely to be among the 12 bad loan accounts that the Reserve Bank of India (RBI) wants banks to resolve using the Insolvency and Bankruptcy Code (IBC), said at least two people familiar with the matter.

Essar Steel is likely to be on the list as it has been a non-performing asset since fiscal year 2015-16. The company owes banks nearly Rs 45,000 crore and has been in talks to restructure its debt for some time now. In January, Prashant Ruia, chief executive officer of Essar Group told BloombergQuint that a restructuring deal was “weeks away”. This, however, has not fructified.

Source: BloombergQuint

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5. Cabinet Clears Subsidy, Crop Loans Get Cheaper

The Union Cabinet on Wednesday cleared interest subvention on short-term crop loans for the current financial year. This will enable farmers to get loans for interest as low as 4%.

For this, the exchequer’s expenditure will increase by Rs 20,339 crore.

Confirming the Cabinet approval for the expenditure, a senior official said short-term crop loans of up to Rs 3 lakh would be made available to farmers at an interest of 7%. This means they will get a subsidy of 2%, as the usual interest rate on crop loans is 9%. Prompt payers will be able to get loans at 4%.

Source: Business Standard

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6. Reliance Jio Spells Big Trouble for India's Small Telcos

When elephants fight, it is the grass that suffers. Reliance Jio Infocomm Ltd may have trained its guns on large telcos with its unlimited usage plans, but it turns out that small telcos have been hurt much more.

Since Jio’s launch, Tata Teleservices Ltd, Reliance Communications Ltd (RCom) and Aircel Ltd have all lost market share.

A loss of 50-100 basis points in market share may not seem like a big hit at first, although it counts for a lot when we consider that these companies have a market share of only between 4% and 6%.

(Source: Livemint)

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7. Infosys Braces for Bigger Cost Blow as Vishal Sikka Bulks up on Highly-Paid Talent

Infosys is paying over Rs 1 crore to more than 1,800 employees in its overseas locations, 150 of whom were hired in the previous fiscal year, data accessed by ET shows, highlighting the cost challenge India’s second largest IT services company will face as it seeks to expand its workforce in developed markets.

These salary numbers assume significance because last month Infosys announced it would hire 10,000 people in the US – a mix of freshers and experienced people – as the outsourcing industry seeks to combat the threat of rising automation as well as protectionism in its biggest market.

Source: Economic Times

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8. Tata Sons May Put Welspun Deal Under Lens Due to Concerns over Corporate Governance

Tata Sons is considering a forensic audit of last year’s purchase of Welspun Renewables Energy Pvt for Rs 9,249 crore by Tata Power Ltd because of concerns over corporate governance, allegedly inflated valuations and the unusual swiftness in execution, two persons with direct knowledge of the development told ET.

The 2016 acquisition, which made Tata Power one of India’s largest renewable companies with a capacity of 2.3 gigawatts, was a key point of friction between former Tata Sons chairman Cyrus Mistry and its largest shareholder Tata Trusts, which accused him of not sharing exact details of the talks. Tata Sons is the holding company for the conglomerate and Mistry was ousted as chairman in October after the board lost confidence in him.

Source: Economic Times

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9. RCom Chairman Anil Ambani to Draw No Salary in FY18

Reliance Communications chairman Anil Ambani will not take any salary or commission in the current financial year as the company is reeling under huge debt and credit downgrades.

The top management of the company has also decided to defer their personal pay by 21 days till the end of this year.

"Chairman, Reliance Group, Anil D Ambani voluntarily decides to draw no salary or commission from RCom in current financial year," RCom said in a statement.

Source: Business Standard

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Topics:  Infosys   RBI   Reserve Bank of India 

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