Sinha tells banks to hound loan defaulters
IDBI agrees to subscribe to Haldia Petro issue
RBI eases inspection norms of banks, FIs
Production houses in IPO rush

Calcutta, April 2 
Finance minister Yashwant Sinha today gave banks and financial institutions the freedom to attach the assets of wilful defaulters but asked them bring down their transactions costs to face global competition.

Addressing the members of The Bankers’ Club here today, Sinha said the financial sector as the backbone of an economy should function in a much better way.

He said the government has charted a five-point strategy to tackle the festering problem of non performing assets (NPAs): prevention of fresh NPAs, reaching compromise settlements, writing off unrecoverable loans and attaching the assets of wilful defaulters.

“Chase the wilful defaulters like a ‘kaal-doot’ and attach their assets for the recovery of loans. With the new Debt Recovery Tribunal Act in place, you can do so without having to wait for a court order. It is now a question of will. If the government has the will in changing laws, why can’t banks do it?” he exhorted a congregation of the city’s bankers and finance professionals.

On the reduction of transaction costs, Sinha said the Reserve Bank of India has done its part by reducing the Bank Rate and the cash-reserve ratio in a clear effort aimed at signalling lower interest rates.

Earlier, trade and industry were uncompetitive because of the cost of money. “We had to bring down the cost of money to international levels to revive the industry. But we cannot afford to have a 2-3 per cent transaction cost in the financial sector at a time when we face stiff competition from foreign institutions,” the minister said.

The only way to reduce transaction costs, he said, is by expanding the volume of business and urged banks to take concrete measures in this direction.

Making it clear there was no way but for the financial sector to be more efficient and competitive, he said the demands of global competition require banks and FIs come up with fresh ideas and cutting-edge innovations to face the heat. The minister singled out banks in the rural areas as those that were not functioning properly. Often, he said messages from the headquarters fail to reach them in the remote parts of the country. Sinha said banks should distribute more Kisan Credit Cards, and set for them a target to be achieved in the current financial year.

He called upon banks to offer effective training and motivation programmes for their employees, and asked the top-brass to make surprise visits to the branches to streamline operations.

On the issue of Prime Minister’s Gramodyog Yojana, the minister said funds will be provided to states which will be implement the projects under this scheme. “However, the Centre will monitor these projects closely to ensure that the funds are utilised properly,” he said.

Indian trade and industry faced a number of impediments like lack of infrastructure, productivity, work culture and mindset.Now under globalisation, competition has reached even the remotest corners of the country, he said. “We have to ensure all aspects of the Indian economy to international level. If we don’t prepare for the competition, we will lose out this race,” he said.

Sinha lamented the the lack of political consensus on the economic reforms.He said it was ridiculous that Congress-I, which initiated reforms during its regime, is now opposed to it.    

Haldia, April 2 
The Industrial Development Bank of India (IDBI) has expressed its willingness to participate in the public issue of Haldia Petrochemicals Limited (HPL), S.K. Chakrabarti, whole-time director of the financial institution, told The Telegraph.

“We are keen to participate in HPL’s public issue. We feel that the project is viable and our investment will be a judicious one,’’ Chakrabarti said at the dedication ceremony of HPL here today.

Chakrabarti said IDBI has already given HPL short-term loans and subscribed to its optionally convertible debentures (OCDs). He said: “In November, when we gave HPL a short term loan it was decided that the company would float a public issue within 18 months time.

“Already five months have gone by. But if HPL fails to come out with a public issue within 18 months time we may consider to extend the time limit,” he added.

The HPL promoters — West Bengal Industrial Development Corporation (WBIDC), Chatterjee Petrochem Mauritus and the Tatas — have already subscribed to their share, a sum of Rs 1,101 crore for the three, in the equity capital

However, the equity capital of Rs 969 crore to be raised from sources other than promoters for the Rs 5170-crore project is yet to be fulfilled.

The company hopes to mop up Rs 250 crore through OCDs, while Rs 200 crore is being tied up as deferred credit from suppliers and advances from customers.

“The balance amount is proposed to be raised through issue of equity/quasi equity instruments by way of public issue/private placement for which discussions are in advanced stages with institutional investors,” HPL sources said.

Financial institutions will give term loans of Rs 1,017 crore of which 80 per cent has been disbursed. Another Rs 1,154 crore will come from banks as term loans and debentures of which 89 per cent have been disbursed.

Mitsubishi/J-Exim have given a suppliers credit of Rs 457 crore to HPL.

HPL has also received permission to raise Rs 563 crore from overseas, of which the company has already mopped up Rs 186 crore.

Vijay Chaudhri, vice-president (finance) of HPL, said the size of the issue has not yet been decided.

Chaudhri said: “We have to examine all the pros and cons of the project before deciding the size of the issue. We would not like to float a public issue which will not receive a good response..”

Chakrabarti said IDBI is also keen to participate in downstream projects.

He said: “IDBI is willing to participate in the downstream projects. But till date we have not received any project proposals.

“We have enough funds at our disposal and if we get good project proposals we can finance it. Not only this we are also ready to participate in the knowledge-based industries in West Bengal,” he added.

It may be mentioned here that G.P. Gupta chairman of IDBI while addressing the Ficci committee meeting last year had categorically stated that his organisation was upbeat about the viability of Haldia Petrochemicals.    

Calcutta, March 31 
The Reserve Bank of India (RBI) has decided to streamline the inspection procedure of financial institutions (FIs), reducing the time between the start of inspection and placing of report before the Board for Financial Supervision. (BFS).

RBI has also decided to abolish the system of submitting statutory auditors’ certificates on different financial parameters by the nationalised banks to the central office of the apex bank. The banks will now be required to submit these certificates to the RBI’s regional offices.

RBI has asked its officials to submit their inspection reports of FIs within a month of starting work. “This will enable RBI to quickly take steps against the FIs,” a senior RBI official said.

To speed up the process, RBI has asked its regional offices to appoint a principal inspecting officer (PIO) who will have a pre-inspection dialogue with the central office.

The PIO should inform the chief general manager handling the supervision of financial institutions the date of submission of the report by the last date of inspection.

The inspection report should be forwarded to the concerned FIs within 15 days of the receipt of the final report from the central office.

“It has also been observed that some of the regional offices are not regular and prompt in submitting the quarterly progress reports of the FIs to the central office. They have also been asked to take prompt actions,” the RBI official said.

Banks reports at regional office

The RBI has asked banks to submit statutory auditors’ certificates to regional offices.

Banks can now submit to the regional offices certificates relating to income recognition, asset classification and provisioning, reconciliation of bank accounts, treasury operations, and compliance of statutory liquidity ratio.

The statutory auditors can also give certificates on authentication of bank’s assessment of capital adequacy ratio and few other ratios.

“These certificates when received should be examined and if there are observations indicating violation of bank’s instructions, these should be taken up with the banks at the highest level under advice of the central office,” the RBI official said.    

New Delhi, April 2 
The market may be nervous, but firms producing television software are not. A host of them are planning to raise money from the market in the months ahead, but much of the cash will be raised through book-building. Only 25 per cent in each of these offerings — the minimum mandated by Sebi — is likely to be set aside for the public.

Nimbus Communications, taking the big leap from being a software production house to a multimedia company with a channel of its own, will go public in the second week of this month. Book-building for its Rs 204-crore issue, with 25 per cent meant for the public, will start soon. It is being managed by an army of institutions like SBI Capital Markets, Industrial Development of India (IDBI), ABN-Amro Bank, Khanwala Securities and Centrum Finance. Roadshows have already taken off in Mumbai, London and New York.

The strong performance of Cinevista and TV 18 in the stock markets is seen as one of the reasons that are encouraging TV companies to raise funds from the public. Cinevista, which opted for the book-building mechanism, saw its issue oversubscribed 300 times at a price of Rs 300, even though investors were asked to pick up not less than 5,000 shares in a lot.

There is another batch of companies that is waiting in the wings. One of them, Rathikant Basu’s Broadcast Worldwide, which intends to launch its regional channels and portals with a regional focus soon, will start book-building by June. Ambit, a company headed by Ashok Wadhwa, has already conducted a due diligence on this startup.

In June, UTV, a firm trying to diversify into a one-stop media shop with business interests in Singapore and Malaysia, will hit the market with its initial public offer (IPO) — first through book-building and later, via a public offer for 25 per cent of the issue.

One of the biggest TV software companies in the country, UTV will finalise the size and pricing of its issue by the end of this month. The lead managers will be Kotak Mahindra and SSKI. Already, Star TV has taken a 12 per cent stake in UTV, and forged an alliance to procure content for television and internet.

According to Rajish Dhall, a dealer based in the capital, companies are preferring book-building because it is faster and is less of a rigmarole. Also, they obtain a better profile of investors, and minimise the risks of failure.

He says the market’s appetite for shares of TV software houses is good primarily because of the incredibly high demand for content. The picture will become clearer in three years, when public interest in media companies is tempered with reality.

Officials of NDTV, another software major, are stonewalling all queries about their plans to go public, even though Kotak Mahindra is tipped to manage any issue planned by the company in future. The software production house, now producing news and current affairs programmes for News Television of India, is expanding into other areas as well.

The Delhi-based TV Today of the Living Media group is also believed to be gearing up for an expansion, but the management is cagey about its plans for an IPO.

Sources say the company will step up the production of software, and industry is awash with speculation about the launch of a channel. A well-known foreign merchant banker is reported to be conducting the due diligence process for valuation.    


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