Indian banking systems rating Debts Laws (Amendment) Bill

INDIAN BANKING SYSTEM RATING

Global ratings firm Moody's on 9 November 2011 downgraded the entire Indian banking system's rating outlook from stable to negative indicating a deterioration in asset quality in the months ahead. In September 2011, Standard & Poor's (S&P) downgraded the country's largest lender, the State Bank of India, by one notch. Arguing its case for the outlook downgrade the Moody's mentioned that with asset quality was anticipated to deteriorate over the next 12-18 months, thereby causing an increase in provisioning needs for the banks in financial year 2012 and 2013. 

The Moody's decision was announced at a time when the Eurozone financial system is in turmoil and a large number of European banks are in dire straits. The government rejected it claiming that the country's lending institutions are much healthier than their global counterparts. Indian bankers termed the move unwarranted and premature at this point of time. The market apprehended that the downgrade by the Moody's would render overseas borrowings costlier for Indian banks.

FRESH CAPITAL TO BE INFUSED IN SBI

Union FinanceMinistry has taken decision to torecapitalise State Bank of India(SBI). Funds would be provided tothe PSU lender to enable it to achievecompliance with capital adequacy ratio(CAR) norms. Fresh capital is to be infused in SBI. The government willinject Rs 3,000-4000 crore into SBIduring the current fiscal 2011-12 tohelp it achieve an 8 per cent capitaladequacy ratio (CAR).Recapitalisation of banks is acontinuing process and thegovernment will continue to providefunds to PSU lenders through theBudget to ensure that they can meetsolvency requirements. According toestimates, SBI needs about Rs 20000crore of fresh capital to maintain thepace of growth without sacrificingsolvency margin norms. Thegovernment holds a 59 per cent stakein the country’s largest bank, SBI.

NIRYAT BANDHU SCHEME

The Director General of ForeignTrade (DGFT) announcedintroduction of a new Niryat Bandhuscheme for international businessmentoring for young turks ininternational business enterprises. Theofficer (Niryat Bandhu) wouldfunction in the mentoring’ arena andwould be a handholding experiment forthe young turks in internationalbusiness enterprises. Under thescheme, officers of DGFT will beinvesting time and knowledge tomentor the interested individuals whowant to conduct the business in a legalway. The DGFT also announced thatit became India’s first digital signatureenabled department. According to thenew Foreign Trade Policy (FTP)unveiled, a higher level of encrypted2048 bit Digital Signature has beenintroduced. Digital certificate providesa high level of security for onlinecommunication such that only intendedrecipient can read it. It providesauthentication, privacy, non-repudiationand integrity in the virtual world.Also, import of radioimmunoassay kitswas classified in the restrictedcategory as per ITC HS-ImportSchedule.Since the import item is intended forthe diagnosis of disease/disorders inhumans and animals, the import policyregime for this item was liberalised tofree subject to prior permission ofAtomic Energy Regulatory Board.The procedure for transfer or sale ofimported firearms was also simplified.For sale/transfer of imported firearmsprior permission from DGFT is notrequired after 10 years of import.Further, this condition of 10 yearswould not apply if importer attains 60years of age. Local police licensingauthorities or District Magistrates cangive permission of sale/ transferdirectly. Even for Shooters category,sale/transfer of imported weaponswould not require approval fromDGFT. For the first time in the historyof foreign trade formulation, the drafttext for amendment of HBP v1 wasuploaded on the website of DGFTseeking suggestions on the draft.

ENFORCEMENT OF SECURITY INTEREST AND RECOVERY OF DEBTS 

LAWS(AMENDMENT) BILL, 2011APPROVED

The Union Cabinet of India approvedthe introduction of the Enforcement ofSecurity Interest and Recovery ofDebts Laws (Amendment) Bill, 2011in the winter session of Parliament.The Bill seeks to amend theSecuritisation and Reconstruction ofFinancial Assets and Enforcement ofSecurity Interest (SARFAESI) Actand Recovery of Debts due to Banks& Financial Institutions (RDBF) Actso as to strengthen the regulatory andinstitutional framework related torecovery of debts due to banks andfinancial institutions through theEnforcement of Security Interest andRecovery of Debts Laws(Amendment) Bill, 2011.The proposedamendments would enable banks toimprove their operational efficiency,deploy more funds for creditdisbursement to retail investors, homeloan borrowers, etc. without fearingfor recovery, thus bringing aboutequity. Further, mandatory registrationof subsisting security interest(equitable mortgages) would promoteinnovation in credit information.The suggested amendments wouldstrengthen the ability of banks torecover debts due from theborrowers, enhance the ability of thebanks to extend credit to bothcorporate and retail borrowers, reducethe cost of funds for banks and theircustomers and reduce the level of nonperformingassets. The banks andfinancial institutions (FIs) were facingnumerous problems in recovery ofdefaulted loans on account of delaysin disposal of recovery proceedings.The Government, therefore, enactedthe RDBF Act in 1993 andSARFAESI Act in 2002 for thepurpose of expeditious recovery ofnon-performing assets (NPAs) of thebanks and FIs.

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 Industrial and Commercial Bank of China Limited, the world's largest bank by profit, balance sheet as well as market value has been included in the Second Schedule to the Reserve Bank of India Act, 1934, on 2nd Feb 2012.

GOVT TO INFUSE Rs. 3000 CRORE CAPITAL IN NABARD

The Union Cabinet today approved the proposal for augmenting the capital base of National Bank for Agriculture and Rural Development (NABARD) by infusing Rs.3,000 crore as Government equity in two instlaments of Rs.1,000 crore in 2011-12 and Rs.2,000 crore during 2012-13. This would raise the paid up capital to Rs.5,000 crore. Presently, the authorised capital of NABARD is Rs.5,000 crore, of which, the paid up capital is Rs.2,000 crore. The Government of India holds 99% share capital of NABARD.