Skip to main content

Banks get $7.6 billion boost from India bankruptcy recovery

India’s banks are set for a $7.6 billion earnings windfall this month as the country’s bankruptcy court has made sudden progress in clearing a backlog of large cases.
The lenders are expected to benefit from the recovery process from four failed companies - Essar Steel India Ltd., Prayagraj Power Generation Co., Ruchi Soya Industries Ltd. and RattanIndia Power Ltd. - which should be completed in December, according to people familiar with the matter.
The gains will be welcome news for banks, which are facing a further increase in their $130 billion pile of bad loans thanks to India’s shadow banking crisis and the slowdown in the economy. Many lenders are expected to set aside additional provisions in their earnings reports for this quarter.
The total proceeds from the bankruptcy cases should total Rs 54,000 crore ($7.6 billion), according to Karthik Srinivasan, group head of financial sector at ICRA Ratings, the local arm for Moody’s Investors Service. The banks should be able to use a large part of it “to step up provisioning as bad loans continue to rise,” Srinivasan added.
Big Four resolution
India has seen slow progress since the bankruptcy court was set up in 2016 to get to grips with the bad loan crisis. Only 15% of cases admitted to the court had produced a resolution plan as of September, according to data published by the insolvency board.
However, some of the logjam was broken with the Supreme Court decision last month to clear the way for ArcelorMittal SA’s $5.9 billion takeover of Essar Steel. The court allowed Arcelor to pay creditors and scrapped a bankruptcy appellate tribunal’s order that gave secured and unsecured lenders equal rights over the proceeds.
Banks are expected to recover Rs 41,500 crore from Essar, having received a Rs 5,400 crore payment from the Prayagraj bankruptcy on Friday, the people said, asking not to be identified as the information remains private. Another Rs 4,350 crore is expected from Ruchi Soya on Monday and Rs 2,700 crore from RattanIndia later this week, the people added.
Among the largest beneficiaries are State Bank of India, IDBI BankNSE -1.58 % Ltd., Bank of India, Canara BankNSE 0.68 % and Bank of Baroda. State Bank of India rose 0.8% as of 9:47 a.m. in Mumbai on Tuesday, compared with a 0.5% gain for the main equity index.
However, the December bonanza will be shortlived as India’s prolonged economic downturn continues to push up overall bad loans, said Suresh Ganapathy, who oversees financial research at Macquarie Capital Securities. The soured debt ratio in India’s banking system will rise above 11% by the end of March, from 9.3% some 12 months earlier, according to a Credit Suisse note in August.

Comments

Post a Comment

Popular posts from this blog

Investing in Gold: Bridging Tradition with Modern Strategies in India

Follow us on -  LinkedIn  - https://www.linkedin.com/in/aseem-aggarwal-1b365549/ Youtube  -  https://www.youtube.com/user/aseemaggarwal92 Twitter  -  https://twitter.com/aseem252 Blog  -  https://aseemconsult.blogspot.com/     Gold holds a special place in the hearts of Indians, deeply rooted in tradition and culture. For generations, it has been a symbol of prosperity, a hedge against economic uncertainties, and an integral part of auspicious occasions. As we step into the modern era, the allure of gold remains, but the ways we invest in it have evolved. Let's delve into the world where tradition meets contemporary investment strategies in the context of gold in India. The Timeless Appeal of Gold For centuries, Indians have revered gold not only for its aesthetic appeal but also for its intrinsic value. Traditionally, gold has been acquired in the form of jewelry, coins, or bars, often passed down through generations as a store of wealt...
Post a Comment
Read more

Government is considering GST Relief package to reduce Covid Impact

For More related articles and updates, connect with us -  LinkedIn- https://www.linkedin.com/in/aseem-aggarwal-1b365549/ Youtube  -  https://www.youtube.com/user/aseemaggarwal92 Twitter  -  https://twitter.com/aseem252 India is considering a goods and services tax (GST) relief package to counter the impact of Covid-19 and help prop up the economy, said people with knowledge of the matter. The package being considered could include a six-month suspension of GST payments for the worst-hit sectors such as restaurants, aviation and hospitality as well as a lower rate for the real estate sector. Other proposals include a switch to a cash-based principle of levying tax from the current invoice-based system and providing GST relief on sales for which payment is not received due to the lockdown by treating those as bad debts. These measures are expected to ease the liquidity pressure on businesses that are strapped for cash, said the people cited abov...
1 comment
Read more

GST officers to be soon armed with real-time data on vehicles moving without e-way bills

  Follow us on -  LinkedIn  - https://www.linkedin.com/in/aseem-aggarwal-1b365549/ Youtube  -  https://www.youtube.com/user/aseemaggarwal92 Twitter  -  https://twitter.com/aseem252 Blog  -  https://aseemconsult.blogspot.com/ The government is working on a system to soon provide report to GST officers on a real-time basis for those vehicles which are moving without e-way bills, to help intercept stuck trucks at toll plazas and check GST evasion. The tax officers would also be provided analysis reports on identifying e-way bill EWB with no movement of goods as it would help officials identifying cases of circular trading.  It would also provide reports on recycling of e-way bills for tax evasion prone commodities to help officers in identifying tax evaders. Under the Goods and Services Tax (GST) regime, e-way bills have been made mandatory for inter-state transportation of goods valued over Rs 50,000 from April 2018. However, gold is exemp...
2 comments
Read more