According to the experts, corporates are consolidating their banking needs

Taking loan is a common and major requirement for all of us. We all do that and it becomes more essential when it comes to the corporates. It will improve the chances of resolution if in case the loan go bad. And on this, on a discussion on Mitigating risks, a bank said-Turning the NPA challenges into an opportunity”. Considering that the nitty-gritty of the Insolvency and Bankruptcy Code has now been ironed out, more investors will be interested in stressed asset investments in India.

However, the managing director of SBI, state bank of india said that all the challenges of these resolution process are large size of creditor community especially in the loan assets. In her words- “Adding to the complication is the multiple classes of lenders. For example, you are familiar with large housing finance companies (HFCs) we are trying to resolve with multiple classes of creditors that are governed by multiple regulators. Our big challenge is in managing this.The other challenge is the multiple banking arrangements that were created to ensure the flow of credit to needy sectors. But this has further complicated the situation at the resolution stage. There are multiple lenders with multiple security structures. How do you handle this kind of alphabet soup when you need to find a resolution? There are huge conflicts of interest,”

The whole discussion has been about the same and about whether the security will make the payments to their priority or not.

Yes Bank- SBI Doesn’t have to pay more than INR 1 for Yes bank stakes

Now, as the private lender’s net worth is only 0 and has lack of clarity on the bank’s deposit franchise because of some solvency issues, Other banks like PSU and SBI need not to pay more than INR 1 to the Yes Bank stakes. Govt is now considering a SBI let consortium for taking over the lender.

On this, Macquarie analyst Suresh Ganapathy wrote- “YES Bank has a net-worth of around Rs 25,000 crore. Its below investment grade book (BB&Below) is around Rs 30,000 crore and BBB book is at around Rs 50,000 crore. If we assume substantial proportion of BB&below book is wiped off and say 10-15 per cent of BBB book is to be written off, it implies the current net-worth of the bank is zero (after factoring in 25 per cent tax benefits). Ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Re 1,”

Now, the cost of Bank’s stock of Yes bank has risen from 26 % to 37% per share for the developement that has increased the cost of buying the stakes of the bank to INR 1,900, Crore. However, the shares of SBI had fallen around 4 % after this news and traded to 3% higher at 293.

Ganpathy said- We are unsure of YES Bank’s quality of liabilities franchise which perhaps could have been further affected due to the current solvency issues. Consolidation would have brought about a lot of integration challenges as well as legal challenges as we believe SBI Act needs to be amended for SBI to acquire a private sector bank. Even in this case, the deal will require blessings of the regulator as well as the government,”

Now the ban on cryptocurrencies are considered as disproportionated by SC

For all the people trading in cryptocurrency, there is finally a relief due to the recent verdict on the ban on crypto currency. Reserve bank of India had stated that dealing in crypto currency is not valid and legal. However, finally due to the verdict made on Wednesday, the ban on crypto currency is disproportionated. The three judges were Justice Aniruddha Bosa, R F Nariman and V Ramasubramanian.

A 180 page judgement states- “The petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality. Accordingly, the writ petitions are allowed and the Circular dated 06- 04-2018 is set aside.”

In the judgement- it is also noted that- “Till date, RBI has not come out with a stand that any of the entities regulated by it namely, the nationalized banks/scheduled commercial banks/co-operative banks/NBFCs have suffered any loss or adverse effect directly or indirectly, on account of the interface that the VC exchanges had with any of them.

On the same, commenting on the judgement of justice, Abhishek K Rastogi who is a partner at Khaitan and Co said- “This decision will change the entire regulatory landscape for cryptocurrency in India and is expected to bring the business back to India. This decision will help those investors who had used legitimate money through banking channels.”

“We have always been bullish on this segment, we believe that this sector should be open and have said that industry players are open for regulation. Crypto is a part of the country’s digital economic growth, so we welcome the Supreme Court’s judgment,”Added by Naveen Surya, Chairman Emeritus, Payments council of India.

Now you can not withdraw more than INR 50,000 from YES bank

Now, if you are an account holder of YES Bank, then you must know that The reserve bank of India has imposed a restriction on not withdrawing more than INR 50,000 per account. This is going to be valid from 5th march to 3rdApril.

However, in few cases like any fee or donation of college, medical expenses or any thing that is serious, you can withdraw more than INR 50,000 but for this, you need to have a special permission from RBI.

Prashant Kumar, Former chief financial officer of SBI said- “This has been done to quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation, We are working on a plan and we will disclose it in the next few days,” the official said, requesting anonymity.”

And the statement reads- “The Reserve Bank assures depositors of the bank that their interest will be fully protected and there is no need to panic. In terms of the provisions of the Banking Regulation Act, the Reserve Bank will explore and draw up a scheme in the next few days for the bank’s reconstruction or amalgamation and with the approval of the Central government, put the same in place well before the period of moratorium of 30 days ends so that the depositors are not put to hardship for a long period of time,”

It is going to be a tough time for YES bank account holders.

Same pay for 1 year for all the employees of YES bank

As we know, The reserve bank of India has stated and made a restriction on all the bank account holders of YES bank to not withdraw more than 50,000 INR from the bank till 3th April. The restriction is valid from 6th march to 3rd April. However, if there is some emergency of funds, then the request will go to the RBI and they will disbursed the money for you.

The situation has created a panic in all the bank account holders because they are not feeling that their money is safe in the bank now. And after the big failure of PNB, people are not able to trust the bank at all.

And on Saturday, the bank, State Bank of India said that 245 crore shares will be issues at a price of INR 10 each for the INR 2, 450 crore in YES bank.

All these shares will be translated to 49 % stake into the reconstructed Bank. Also, the bank, State bank of India will also not reduce the holding below 26 % before the completion of three years from the date started with the date of infusion of the capital.

The Bank said that the new board of YES bank will also have a CEO and MD as well. Apart from these two, they will have non executive chairman and non executive directors.

On this, the bank SBI stated- “All the employees of the reconstructed bank shall continue in its service with the same remuneration and on the same terms and conditions… at least for a period of one year,”

Banks are well capitalised and nothing is to worry about- CEA Subramanian

Indians are not able to decide whether they should trust the Indian banks any more or not. There are so many cases where the bank have proven the Indians wrong and now, people are not sure if they really should trust them and keep their money in the banks or to their own.

On this, the CEA, Chief Economic adviser Krishnamurthy Subramanian said that the Indians do not need to worry and all the banks are well capitalised.

He commented- “It is important to keep this in mind that the international norms for CRAR (capital to risk weighted assets ratio) is 8%. Our banks have way more capital, at 14.3%, which is about 80% greater (than globally mandated norms). Our banks on an average are very well capitalised. There is absolutely no reason to worry,”

CRAR is a metric through which we can measure the capital adequacy as in the terms of riskiness of loan which is given by the lender. He said that because of the situation which is getting worse for YES Bank holders and for the fact that they do not have anything to do by withdrawing their money at bank for more than INR 50,000 and this restriction will be there till 3rd April,2020.

On Sunday recently, the ED, Enforcement directorate has also arrested the YES Bank’s founder Rana Kapoor for the charges of money laundering.

Subramanian said- “Together with the fact that our banks are well capitalised and the fact that the deposits are well taken care of, there is absolutely no reason for anyone to worry. What I want to emphatically state is that the m-cap ratio is a totally incorrect metric for assessing the safety of the banks. No banking sector expert or banking regulator uses this measure,”

Insurance cover for lending to jewellery industry- SBI

Recently, the largest lender of India, State bank of India stated that alll the jewellery and gems industry must have insurance covered for banks to lend courageously to the sector.

According to the SBI deputy managing director-“Absence of an insurance cover is hurting lending to the gems and jewellery industry by banks. If there is an insurance cover, it will help the bank to lend courageously to the sector,”

He said that the total exposure of SBI to the gems industry must be around 20,000 crore. And on this, SBI official said- “trust of the bankers on the gems and jewellery industry is not there” because of its practices “which caused misery to the banks”.

Recently as we all know, the daimond marchant, Nirav Modi has done a fraut from Punjab National bank of around 14,000 crore. And for this, The gem and jewellery industry should be more transparent in terms of ownership, management and valuation. Some kind of credit guarantee will give freedom to the gems and jewellery exporters in the MSME segment, “For that, there is a need to create awareness among the public,”. Prasad added.

He said that the gold must be treated as a source of investment in our country and should be taken seriously now.