RBI Governor Rajan asks banks to refrain from taking majority stake in stressed-debt funds

Posted on by CovenantMonitor

According to Reserve Bank of India’s Governor Raghuram Rajan, banks should refrain from taking a majority stake in planned stressed-asset funds, and prefers external investors and funds to take up that role.

His words came amid the Indian government’s plans to find ways to lower bank’s distressed debt pile of $120bn, or 11.5% of all loans.

However, bankers have said talks are on for two kinds of stressed-asset funds: one that would buy bad loans from the banks and the other that can invest in companies needing more capital.

Rajan also stressed that pricing would be a key issue for a stressed fund if it wanted to buy bad loans from the banks.

The government, as part of its plan of implementing new bankruptcy laws, is considering setting up an external panel to decide on the quantum of ‘haircuts’ taken on the bad loans, mainly due to disagreements between companies and banks at the time of transacting on such loans.

Source: Reuters

Nomura lowers India’s GDP growth to 7.7% for FY17

Posted on by CovenantMonitor
Nomura marginally lowered India’s GDP growth for FY’17 to 7.7% from its earlier forecast of 7.8% on identifying no concrete signs a turnaround in the nation’s exports or private capex.
 
Underlying recovery in India’s economy continued at a gradual pace, driven primarily by private consumption. 
 
Nomura stated that, going forward, there were three positive catalysts to India’s growth, which comprised of the seventh pay commission hikes, a normal monsoon and ongoing public capex. 
 
However, India’s leading indicators suggested that there was still no sign of a turnaround in export volumes or increased private capex. 
 
Regarding the Reserve Bank of India’s (RBI) monetary policy stance, the report said the central bank is expected to be on hold this year.