Tides of 8.10.2015
1.
State-run Indian Overseas Bank said on Monday the Reserve Bank
of India (RBI) had ordered a so-called "prompt corrective action",
adding the action would not have any material impact on its performance. The
lender did not give details of the action but said the directions given by the
RBI were for improving the internal control of the bank and for the purpose of
consolidation of its activities. Under RBI rules a prompt corrective action is
triggered if a lender sees its capital base eroding, a sharp jump in bad loan
ratios or its return on assets dropping below 0.25 percent.
2.
Export organisations have asked the government
for higher export incentives, cheaper credit, faster reimbursements of input
taxes and lower transaction costs to help deal with the crisis of continuously
falling exports. In a review meeting chaired by Commerce Secretary Rita Teaotia
and attended by 27 export organisations on Wednesday, exporters made a strong
case for the government coming to their aid. “The major issues highlighted by
the export councils related to early refund of the duty drawback amounts,
credit of interest subvention, increase in the incentives under the existing
schemes and agreements with specific countries to promote exports of certain
items,” a Commerce Ministry release said.
3.
With rainfall below average across most parts of
the country, the impact on the agriculture sector is making bankers nervous.
The total exposure of banks to the sector has shot up to
Rs. 8,07,800 crore from Rs. 7,20,400 crore
in August last year.With the India Meteorological Department pegging the
monsoon deficit at 14 per cent below the long-period average, bankers are being
forced to restructure some of these loans in a bid to keep non-performing
assets (NPA) in check.“There could be problems where the rain deficiency is over
20 per cent. It is also a State subject as to which region is declared drought
zone and, accordingly, banks will have to provide for the restructuring,” said
GK Kansal, Chief General Manager, State Bank of India.Restructuring leads to
renewal of loans by extending the tenure for the borrower, usually with a lower
instalment amount. While this avoids immediate default of loans, lower returns
hurt the lender.
